ABSA Bank Ltd v Bernert (99/09) [2010] ZASCA 36; 2011 (3) SA 74 (SCA) (29 March 2010)

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[2010] ZASCA 36
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ABSA Bank Ltd v Bernert (99/09) [2010] ZASCA 36; 2011 (3) SA 74 (SCA) (29 March 2010)

THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
JUDGMENT
Case No: 99/09
Not Reportable
In the matter between:
ABSA BANK LIMITED
Appellant
and
ENRICO BERNERT Respondent
Neutral citation:
ABSA
v Bernert
(99/09)
[2010] ZASCA 36
(29 March 2010)
Coram:
NUGENT,
CACHALIA, MALAN and TSHIQI JJA and MAJIEDT AJA
Heard:
18
FEBRUARY 2010
Delivered:
29
MARCH 2010
Summary:
Claim
in delict for damages – negligent misstatement – statement not
made to or relied on by plaintiff – on facts statement
in any event
not false – duty of court when separating issues.
___________________________________________________________
ORDER
___________________________________________________________
On appeal from: North Gauteng
High Court (Pretoria) (Ranchod AJ sitting as court of first instance)
The appeal is upheld with costs
that include the costs of two counsel so far as two counsel were
employed. The order of the court
below is set aside and substituted
with an order dismissing the claim with costs.
___________________________________________________________
JUDGMENT
___________________________________________________________
NUGENT JA (CACHALIA, MALAN and
TSHIQI JJA and MAJIEDT AJA concurring)
[1] In the course of his evidence
the respondent in this appeal, Mr Bernert, said that ‘in life you
take things at face value’,
and the court below seems to have seen
things in the same way. But I have found that the evidence of Mr
Merrett, of whom the trial
court was rather dismissive, serves as a
more useful guide when evaluating this case.
[2] Mr Merrett is the assistant
director of the Financial Investigation Bureau of the International
Chamber of Commerce. The Bureau
investigates suspicious banking and
financial transactions and Mr Merrett has considerable expertise in
that field. The aspect of
his evidence that I have found to be useful
is his explanation of what he called ‘financial mist’. He said
that it is common
for those who engage in financial scams to use
fictitious documents, purporting to emanate from major financial
institutions and
loaded with financial terminology, to create a mist
that blinds their targets to what is in truth occurring. That enables
them to
induce the gullible into believing that they have wealth
available for investment and it also enables them to gauge the level
of
financial sophistication of the target.
[3] This case is about documents,
particularly a document that was produced on a letterhead of the
appellant, a well known financial
institution, which I will refer to
as Absa Bank. Notwithstanding the voluminous evidence the case really
comes down to evaluating
the response of Absa Bank when it discovered
the existence of that document. But while the issue is narrowly
confined I think it
is important to appreciate the context within
which the document came to be created.
[4] There are many curious
features of this case that were left unexplained and there are many
gaps in the narrative of what occurred.
That is because much of the
trial was taken up with arguments between counsel and witnesses on
the meaning of documents and little
interest was shown in
establishing all the facts.
[5] Before turning to the
evidence in more detail I think that a brief description of the
principal characters in the story that unfolded
and a short synopsis
of how this case came about will assist to explain what is in issue
in this appeal.
[6] Early in his life Mr Bernert
received two years’ training as an apprentice motor mechanic. He
then joined his father’s business
restoring motor vehicles. In the
course of this business he came across an interesting design for a
motor vehicle. He acquired the
rights to the design and, after making
various modifications, he began building the vehicles, which he
called the ‘El Macho’.
The events that led to this case arose
from his attempts to find finance to build a production plant.
[7] I have no reason to think
that Mr Bernert is anything but honest or that he was complicit in
anything untoward that might have
occurred. But what emerges plainly
from his evidence is that Mr Bernert was a novice in the financial
world. His evidence demonstrates
that he had little knowledge of the
nature and structure of corporations or of financial transactions in
general and of financial
documents in particular. I think it is clear
that the meaning that he attached to the various transactions to
which he was exposed
was largely repetition of what he had been told
they meant.
[8] Mr Bernert was the sole
member of Rotrax International CC, which was the vehicle through
which he hoped to develop his business.
In his search for finance to
construct his production plant Mr Bernert met three people through
contact with the armaments industry.
[9] First, there was Mr Fanjek.
Mr Fanjek has lived in this country from 1967. He described himself
as a businessman but the nature
of his business was not explored. The
role that Mr Fanjek purported to play was that of Mr Bernert’s
agent for raising investment
finance. In response to a submission
that Mr Fanjek was a liar the court below said that ‘careful
scrutiny of the relevant parts
of [his] evidence shows that they were
common cause or can be inferred from the uncontested facts’. It is
true that at times the
evidence of Mr Fanjek coincided with
incontrovertible facts. But except where his evidence is corroborated
in that way I do not believe
a word that Mr Fanjek said. There was
hardly a question to which he gave a direct answer and for the most
part his evidence was nonsensical
verbiage.
[10] Then there was Mr Dinawi, a
citizen of Syria, whom Mr Bernert met at an armaments exhibition in
Abu Dhabi. Mr Dinawi held himself
out to be the ‘business manager’
of Sheikh Fawaz Bin Abdullah Al-Khalifa. He did not give evidence at
the trial.
[11] And finally there was Sheikh
Fawaz himself. He volunteered at the close of his evidence that he
had come to this country to testify
so as to scotch doubts that had
been expressed by Absa Bank as to his existence. Sheikh Fawaz said
that he was a member of the dynasty
that has ruled Bahrain for almost
three centuries. The documents do not disclose precisely where the
Sheikh conducts business. His
personal letterhead reflects only that
he receives his correspondence at a post office box in Bahrain and at
a ‘hotmail.com’
electronic address.
[12] The court below described
Sheikh Fawaz as an impressive witness but the record of his evidence
does not bear that out. This court
has warned before against being
seduced by the appearance of a witness at the expense of analysing
what the witness has to say.
1
I have found the evidence of the Sheikh to be almost as unimpressive
as that of Mr Fanjek. Most of his answers to questions about
the
transactions that I refer to later in this judgment were incoherent
and attempts to probe them in more detail were brushed aside
on the
basis that those were matters that he left to his advisers.
[13] Another person who played a
prominent role was Mr Els, who was employed as an insurance broker by
Absa Brokers (Pty) Ltd. Mr
Els was deceased by the time of the trial
and we thus have no tested explanation for his unauthorised conduct,
but it certainly seems
to me that he was up to no good.
[14] And then there was Mr
Coetzee, who was employed by Absa Bank as a ‘business manager’.
One of his functions was to solicit
deposits for the bank. Mr Coetzee
was an authorised signatory for a class of bank transactions. The
fact of his authority was reflected
in a manual that is available to
banks internationally. Mr Coetzee was dismissed in consequence of the
events that gave rise to this
case but he was later reinstated.
Though the explanations that he gave for his conduct are
extraordinary it is not material to this
case whether or not they are
true.
[15] Now a brief synopsis of what
the case is about. In his search for finance to build his plant Mr
Bernert became acquainted with
Mr Dinawi and Mr Fanjek and ultimately
with Sheikh Fawaz. The relationship between them developed
splendidly. The Sheikh agreed to
invest millions of dollars to
construct and operate manufacturing plants on five continents within
the following five years. The
precondition for this investment was
that Mr Bernert had to obtain and produce to the Sheikh a particular
document from a reputable
bank. Mr Bernert duly produced the document
through the good offices of Mr Fanjek and Mr Els and Mr Coetzee but
nothing further seems
to have been done on the project. Instead Mr
Bernert was invited by his new acquaintances to join them in a new
project altogether,
which was to establish a company that would deal
in oil, precious metals and stones, and provide financial services
and investments.
Mr Bernert was happy to do so.
[16] But all these plans came to
an end when Absa Bank discovered the document that Mr Bernert had
produced. The document was on the
letterhead of Absa Bank and was
addressed to Emirates Bank International. The document had been
compiled in collaboration between
Mr Fanjek and Mr Els and had been
signed by Mr Coetzee. Volumes of the evidence are taken up with
argument between counsel and witnesses
on the true nature of the
document. One said it was this, another said it was that, and yet
another said it was something else, and
so it went on. The court
below said that the document was ‘strange and confusing’ but felt
that it was nonetheless a document
that a bank might ordinarily
issue. The fact is that it was nothing of the sort. The document,
when read as a whole, was an aggregation
of nonsense, decorated with
financial terminology.
[17] Once having discovered the
existence of the document Absa Bank set about attempting to retrieve
it. Its attorney also wrote to
Emirates Bank informing it that the
document had been issued irregularly and without authority and that
no reliance should be placed
on the document if it had been received.
[18] The Sheikh said that when he
was informed of the letter by Emirates Bank he decided that he would
have nothing more to do with
the project or with Mr Bernert. Thus
ended Mr Bernert’s hopes of building his manufacturing plant –
and of dealing in oil and
precious metal and stones, and providing
financial services and investments.
[19] Mr Bernert sued Absa Bank in
the High Court at Pretoria, as cessionary of a claim of Rotrax. He
said that Absa Bank had acted
unlawfully in causing the letter to be
written to Emirates Bank. He said that if Absa Bank had not done so,
and thereby alienated
the Sheikh, Rotrax would have received the
millions of dollars the Sheikh had promised, it would have built the
proposed manufacturing
plant (at least in South Africa), and it would
have manufactured and sold over 10 000 cars, which would have
earned it R187 million,
and he claimed that amount in damages.
The court below (Ranchod AJ) found that Absa Bank had indeed acted
unlawfully and it issued
a declaratory order, the terms of which I
deal with below. Absa Bank now appeals against that order with the
leave of the court below.
[20] Before turning to the detail
of the evidence there is an observation that I need to make. Before
the trial commenced the parties
agreed to separate some of the issues
in the case as envisaged by Rule 33(4). They recorded their agreement
in a pre-trial minute,
in which they said that they agreed to
separate the ‘merits’ from the ‘quantum’ and went on to
define what they meant by
the ‘merits’ with reference to certain
paragraphs of the particulars of claim. Amongst other things they
said that ‘the merits…consist
of…paragraphs 11 to 18 (excluding
18.1 to 18.3)’. In paragraph 18 of the particulars of claim it was
alleged that ‘[a]s a result
of the [allegedly unlawful acts],
[Rotrax] suffered damages computed as follows’ and the
subparagraphs set out the calculation
of the alleged damages. In the
course of the evidence of the first witness the learned judge
interposed to note that the parties
had agreed to separate the
‘merits’ from the ‘quantum’ and to obtain confirmation that
he was to try only the ‘merits’.
[21] It is imperative at the
start of a trial that there should be clarity on the questions that
the court is being called upon to
answer. Where issues are to be
separated Rule 33(4) requires the court to make an order to that
effect. If for no reason but to clarify
matters for itself a court
that is asked to separate issues must necessarily apply its mind to
whether it is indeed convenient that
they be separated, and if so,
the questions to be determined must be expressed in its order with
clarity and precision.
2
In some cases it might be appropriate to order the separation of the
‘merits’ and the ‘quantum’ of the claim. But to use
that
terminology when the causative link between the wrongful act and the
damage is a contested element of the claim, as it was in
this case,
is bound to create uncertainty.
[22] In this case the court made
no separation order as it was required to do by Rule 33(4) and it
gave no indication at the outset
of the trial of what it understood
the ‘merits’ of the claim to entail. In its judgment it found
that the conduct of Absa Bank
was unlawful and that it was ‘both
factually and legally the cause of the transaction failing’ and it
said in one sentence, without
more, that ‘causality has been
established’. It then made an order declaring ‘that [Absa Bank]
is liable for the proven or
agreed damages suffered by [Mr Bernert]’.
[23] At the outset of the hearing
before us the legal representatives of the parties said that they
understood the court below to
have disposed of the ‘merits’ as
they had been defined in their agreement with reference to the
pleadings. Thus they understood
the order to mean that Absa Bank was
declared to be liable to Mr Bernert for the loss of the anticipated
sales of the cars. All that
remained for determination, they said,
was the monetary value of those sales.
[24] I have difficulty accepting
that that was indeed what the court below intended because an order
to that effect would be breathtaking.
The evidence in this case comes
nowhere near establishing that if Absa Bank had not acted as it did
Rotrax would probably have constructed
its plant and manufactured and
sold the cars. Indeed, the establishment of that causative link was
not even touched upon in the evidence.
[25] It is true that Mr Bernert
had prepared a business plan with that as its objective, but there is
a long and often rocky path
between preparing a business plan and
bringing the plan to fruition. Even if the Sheikh had genuinely made
and carried out the promise
that Mr Bernert understood him to have
made (which I deal with later) there is no evidence at all that even
the first hurdle that
would have then been encountered (which was to
raise a loan to build the factory) would probably have been overcome.
If the causative
link was indeed one of the issues that the court was
called upon to decide then the claim ought to have failed on that
ground alone.
Indeed, that causative link is inherently so
speculative that I think the claim was always doomed from the start.
[26] But in case the court below
meant by its order only that Absa Bank acted unlawfully and that it
is liable for any damage that
might yet be causally linked to its
conduct by adequate evidence I turn to whether Absa Bank indeed acted
unlawfully.
[27] To my mind the most
noteworthy feature of the events that occurred in this case was the
preoccupation of the principal parties
with securing from Absa Bank
the document I have referred to.
[28] The precondition that was
set by the Sheikh for his massive financing of the project was that
the document should first be secured
before anything else was to
happen. Yet the document that was required, according to the Sheikh
and Mr Fanjek, and as they explained
it to Mr Bernert, was really
quite innocuous. What was required, according to their evidence, was
no more than an assurance from
Absa Bank that it would accept moneys
from the Sheikh on fixed deposit, at a specified interest rate, and
that it would return the
moneys when the term of the deposit expired.
[29] One might think that the
Sheikh could have obtained that assurance by having his bank
telephone Absa Bank. But the whole project,
entailing the investment
of millions of dollars and the building of manufacturing plants on
five continents, was all preconditioned
upon such a readily
obtainable assurance.
[30] Yet when Mr Fanjek went
about securing that simple assurance he did not approach the bank and
ask for it, as one might expect
him to have done. Instead he went
about things in a most unconventional way. Moreover, he wanted the
assurance to be worded in a
particular way, entailing the use of
complex language studded with financial terminology. And then when
the assurance was secured
nothing further was done to progress the
transaction.
[31] From the events that
occurred, and also the lack of them, one might almost think that the
sole objective of the transaction was
to secure the document from
Absa Bank. Certainly nothing else was achieved.
[32] I turn now to the evidence
in more detail.
[33] The El Macho vehicle
apparently lends itself to military and para-military uses. In search
of a market for the vehicle Mr Bernert
exhibited it at an armaments
exhibition in Chile, and then again at a similar exhibition in Abu
Dhabi, where he became acquainted
with Mr Dinawi. The exhibition was
held in 1995. The evidence does not fully disclose what occurred
between then and 1999.
[34] But by the middle of 1999 Mr
Bernert had also made contact with Mr Fanjek, who was introduced to
him by an employee of Armscor.
It seems that by then discussions
might already have been underway with Mr Dinawi for the financing of
the project. It also seems
that by then Mr Fanjek was already
assisting Mr Bernert to arrange finance and had been in contact with
Mr Els. He said that he approached
Mr Els because Mr Els had
previously arranged certain ‘offshore’ business for Mr Fanjek’s
wife. But that does not explain why
Mr Fanjek chose to deal with Mr
Els when he knew full well that Mr Els was not employed by Absa Bank
and had no authority to do business
on its behalf.
[35] On 8 July 1999 Mr Els
addressed a letter to Rotrax, for the attention of Mr Fanjek, on a
letterhead of Absa Bank. Mr Els described
himself in the letter as
‘financial advisor’ and wrote as follows (sic):
‘
ROTRAX CARS
INTERNATIONAL
FOR ATTENTION: MR R.
FANJEK
With regard to
Investments within Financial Institutions and Investment Companies,
the following information is required before further
consideration
can be given to your request.
1. A mandate from
overseas investor(s) stating that Mr E. Bernert (MD of Rotrax S.A.)
and Mr R. Fanjek may negotiate with Financial
Institutions for the
financing of the Rotrax Projects.
2. A description of
Rotrax business plans locally and abroad and business plans for the
funds they will be receiving to be duly presented
by Mr R. Fanjek
3. A complete
description and proof of the source of the funds (EG: legality,
transferring bank(s) and countries of origin).
4. The business
proposal (and/or a letter of cooperation between Rotrax Cars
International and the International Investor(s).
Subject to all the
above conditions, financial institutions would consider co-operating
with the investment plan in conjunction with
Rotrax Cars
International. Confidentiality between all parties concerned will be
strictly adhered to at all times.
For reference on any
of the above initiatives please do not hesitate to contact me.’
[36] It is curious that Mr Fanjek
accepted the letter when he knew full well that Mr Els was an
insurance broker, not a financial
adviser, and that he was not
authorised to conduct business on behalf of Absa Bank. The content of
the letter is curious in itself.
But what is even more curious is
that Mr Fanjek had himself composed the content of the letter in a
document that he prepared a week
earlier. Why Mr Fanjek should
himself have drafted what purports to be a response by Absa Bank to a
request that he had made was
not explained.
[37] Meanwhile
Mr
Bernert had prepared a comprehensive business plan, with the
assistance of an accountant, Mr Thornton, which included technical
information, cash flow projections, and related financial
information. Upon receipt of the letter from Mr Els he handed to Mr
Fanjek
various documents, including the business plan, under cover of
a letter that recorded that he had given to Mr Fanjek ‘authority
to
negotiate proposed Investment for the project with Absa Bank’.
[38] Precisely what occurred
immediately thereafter does not appear from the evidence. But in
September 1999 Mr Bernert travelled
to Dubai, in the company of Mr
Thornton, where he met with Mr Dinawi and the Sheikh. On 22 September
1999 a written agreement was
signed by Mr Bernert on behalf of
Rotrax, and by the Sheikh on behalf of the ‘Al Fawaz Group’. The
Sheikh made a considerable
effort in his evidence to explain who the
‘Al Fawaz Group’ was but it has left me none the wiser. But I
will accept for present
purposes that it was the medium through which
the Sheikh conducted business. A letterhead of the ‘Al Fawaz Group’
reflects that
it receives its correspondence at post office boxes in
Bahrain and in Dubai but does not reflect where it carries on
business.
[39] The agreement purported to
record the terms upon which the Group would finance the construction
and operation of manufacturing
plants in South Africa, the Middle
East, Europe, the United States, South America and Australia within
the next five years. For an
agreement of that magnitude it is
decidedly brief. The body of the agreement is recorded in six pages
that contain nine clauses,
four of which deal with formalities. Of
the remaining five clauses, one contains definitions, and one records
the ‘territorial
extent of the agreement’. The substance of the
agreement is in the other three clauses. Clause 2 deals with the
‘obligations
of the Group’, clause 3 deals with the ‘obligations
of the CC’ in eight lines, and clause 4 deals with the sharing of
profits.
[40] Only clause 2 is now
material and the following are its terms in full (sic):
‘
2. OBLIGATIONS OF
THE GROUP
The GROUP agrees to
purchase 51% controlling share interest in the CC (first territory
3
)
including 2
nd
,
3
rd
,
4
th
and 5
th
territories
4
and to finance the manufacturing plants for the manufacturer of the
vehicle in the territories, within a period of 5 years from date
of
signature. The finance required for each territory is to be based on
the attached business plan.
2.1 The CC shall
initially be obliged to obtain a formal undertaking and a guaranteed
interest rate for an amount of 6 (six) million
U.S. Dollars from a
AAA rated South African Banking Institution.
2.2 Once a formal
undertaking and guaranteed interest rate is received in writing from
the South African Banking Institution, the
amount of six million U.S.
Dollars (the loan capital) will be paid from the Group’s bank
account held at Emirates Bank International
in Dubai, into a said
bank account in the name of the Group within South Africa. The Group
then undertakes to lodge loan capital
and interest in the interim, as
security for the erection of the first manufacturing plant.
2.3 On completion of
the erection of the first manufacturing plant, the loan capital will
revert to as “payment” for the controlling
share interest in the
CC of 51%, to Mr. Enrico Bernert authorized representative of the CC.
2.4 The finance
required as per the attached business plan Pg 18, Option 2, 5.5.
Million U.S. Dollars will be transferred to the CC
on completion of
erection of the first manufacturing plant. The U.S. 5.5. Million will
be deposited as additional working capital
and is non repayable by
the CC or Mr. Enrico Bernert.
2.5 The obligations
of the Group (Point 2.1 – 2.5) will also be the procedure for
future funding of the manufacturing plants 2,
3, 4 and 5.’
[41] Clause 2.1 required Rotrax
to obtain a ‘formal undertaking and a guaranteed interest rate’
from a South African Bank but
the nature of the ‘undertaking’
that was required was not identified.
[42] The ‘undertaking’ that
was required, according to the Sheikh and Mr Fanjek, and as it was
explained to Mr Bernert, was a
written assurance by Absa Bank that it
would accept US $6 million on fixed deposit, at the stipulated
interest rate, and that it
would return the money when the deposit
matured. The reason for that, according to the Sheikh, was that he
had not done business
in this country before, and he wanted to be
sure that his money would be in good hands. One might have thought
that in the context
of a project of this magnitude, to be undertaken
at massive cost, the question whether a bank would be willing to
accept a fixed
deposit would be the least of their concerns. But if
the Sheikh was indeed anxious on that score, it seems to me, as I
observed earlier,
that a telephone call from his bank to Absa Bank
might have sufficed.
[43] As for the remaining
provisions of clause 2 both Mr Bernert and the Sheikh said that the
agreement envisaged that the Sheikh
would place US $6 million on
fixed deposit with a South African Bank, and Rotrax would then be
authorised to borrow money for the
construction of the plant on the
security of the deposit. Once the plant had been built the Sheikh
would hand over an additional
US $5.5 million as working capital, and
in the process obtain 51% of the member interest in the corporation.
Questions directed to
the Sheikh concerning the ultimate fate of the
US $6 million, particularly if it had been pledged, elicited vague
and contradictory
answers.
[44] Mr Bernert returned to South
Africa once the agreement was signed and the agreement was given to
Mr Fanjek under cover of a handwritten
letter, addressed to Mr
Fanjek, but for the attention of Mr Els, that read as follows (sic):
‘
After a
successful trip to Dubai, Mr Thornton and myself have received our
j/venture agreement from the Al-Fawaz Group, for your consideration
in issueing Rotrax the undertaking in order for the foreign
investment as per the agreement to be deposited with Absa Bank.
We have been asked
to confirm that interest-rate as well as the period for which the
guarantees will be issued once the funds are
deposited.
Kindly state that
your terms and conditions re: your rights for withdrawal will be
limited or renewable for your initial term of guarantee.
Please return our
original Joint Venture agreement a.s.a.p.’
[45] What was meant by the
penultimate sentence, in the context of what was said to have been
required, is not intelligible. Nonetheless,
steps were then
undertaken to obtain the document from Absa Bank. From this point the
evidence descends into farce.
[46] Mr Fanjek delivered the
agreement to Mr Els and a document was prepared by Mr Els on a
letterhead of Absa Bank. In his evidence
Mr Fanjek distanced himself
from the document, saying that he conveyed to Mr Els only ‘some
indications of what His Excellency
Sheikh Fawaz would be looking for’
but I have little doubt that Mr Fanjek contributed materially to the
content of the letter.
Once the document had been prepared it was
signed by Mr Coetzee at the request of Mr Els. The explanation given
by Mr Coetzee for
signing the document was that Mr Els had approached
him and told him that he had an overseas client who wanted to invest
money with
Absa Bank but that the client wanted an assurance in
writing that the money would be safe. He told Mr Els that he was too
busy to
write the letter but that Mr Els should do so and he would
sign it. Mr Els brought him the letter but he was busy with other
clients
and did not read through it fully. Apart from insisting that
the phrase ‘fixed deposit certificate’ should be inserted in the
document he signed it without amendment.
[47] For a simple assurance that
Absa Bank would accept money on fixed deposit, at a specified
interest rate, and return the money
when the term expired, which is
what the Sheikh said he wanted, the document that was produced was
decidedly complex. In fact, two
documents were produced.
[48] The documents were both
addressed to Emirates Bank International at a post office box in
Dubai. One was addressed to ‘the credit
officer’ for the
attention of Mr Majid Al Yousef. The other was addressed to ‘the
branch manager’ who was said to be Mr Halah
Mohammedd. But for that
difference the two documents were identical. They were dated 12
October 1999 and they read as follows (sic):
‘
VERBIAGE OF BANK
GUARANTEE
ABSA wishes to
certify that Mr Robert Fanjek, an associate of ROTRAX, will be
guaranteed a fixed deposit on an amount of $6 mil USD
(six million
United States Dollar) at our bank. On receipt of funds from EMIRATES
BANK INTERNATIONAL, the following will be applicable:
The $6 mil USD is a
guaranteed Investment where the guarantee is irrevocable and
unconditional.
The guarantee is
renewable after 12 months.
ABSA BANK proposes
an interest rate of libor plus 1% payable to EMIRATES BANK
INTERNATIONAL. ABSA guarantees the money in US Dollars.
ABSA will guarantee
the capital and the first quarter's interest which will be paid in
arrears. The second quarter’s interest
and all quarter’s
thereafter will be paid in advance.
EMIRATES BANK
INTERNATIONAL will approve the loan for a period of 5 years with the
right of early repayment.
The guarantee
(fixed deposit certificate) will only be issued on condition the
money is placed in ABSA BANK.
Simultaneously to
the receipt of funds, ABSA will issue the said guarantee (fixed
deposit certificate) to EMIRATES BANK INTERNATIONAL
in their favour.
Any cheques
received from EMIRATES BANK INTERNATIONAL must be a bank guaranteed
cheque payable to ABSA BANK. Mr Robert Fanjek is
giving the bank
certain guarantees on ROTRAX on behalf to secure the guarantee to
EMIRATES BANK INTERNATIONAL.
The guarantee
(fixed deposit certificate) is legal in terms of international
banking practices.’
[49] Mr Coetzee said that he was
asked by Mr Els for his signature on a number of occasions and that
he was under the impression on
each occasion that he was being asked
to sign amended drafts of the document. In fact he signed not only
the two documents I have
described, but also three other documents,
dated about a month later, which were given to Mr Fanjek. Each of
those documents was
in much the same terms as the documents that were
addressed to Emirates Bank, except that in each case the addressee,
and the amount
of the ‘investment’, differed. One was dated 15
November 1999 and was addressed to ‘The CEO, Bank of Commerce,
Development
and Industry’ and the stated amount of the ‘investment’
was US $12 million. Another was dated 17 November 1999, addressed to
‘BIAC Bank’ in Kinshasa, and the amount was US $20 million. The
third was dated 19 November 1999, addressed to ‘LG International
(UK) Ltd’ in Sandton, and the amount was US $6.8 million.
[50] Mr Bernert was unaware of
the existence of those three documents until much later. What Mr
Fanjek was up to in obtaining those
documents was never adequately
explained. This is the clearest explanation that I have found in the
evidence of Mr Fanjek:
‘
I had some ideas
of also proposing these projects on my behalf, because of the similar
procedures in terms that I did succeed to obtain
such a document from
Mr Rico Bernert. So I thought it would only be logical to do this
myself as well, as everything was on board.’
As I understand that evidence Mr
Fanjek was saying that since documents of this kind were readily
forthcoming he thought that he might
just as well have some for
himself.
[51] Mr Fanjek gave Mr Bernert
the letter addressed to Mr Majid Al Yousuf and Mr Bernert said that
he faxed it to Emirates Bank. I
do not find it surprising that he did
not receive a response from Emirates Bank. Instead he received a
letter from Mr Dinawi, dated
17 November 1999, proclaiming itself to
have emanated from the Al-Fawaz Group. The letter was as follows
(sic):
‘
With reference to
the ABSA Document dated 12/09/1999 – REF NO: A62961. The credit
officer who is also the personal Bank officer
of H.E. Sheikh Fawaz
Bin Abdullah Al-Khalifa at Emirates Bank International, Al Maktoum
Branch, Dubai, Mr Majid Al Yousuf has received
your fax copy of
undertaking by ABSA Bank dated 12/10/1999 - Ref No A62961, which
contains the terms and conditions for issuing of
the fixed deposit
certificate and that the terms set out are within international
Banking practice.
It is therefore my
great pleasure on behalf of H.E. and the Al-Fawaz Group to inform you
of [our] acceptance of the Absa Bank undertaking
Ref No: A62961 and
that you and your colleagues are invited to meet with H.E. personally
in Bahrain, in order for you to present
the original Document as per
our joint venture agreement and to discuss the timing of investment.
Kindly confirm your
travel details of the 1
st
week of February 2000, visas to be collected on arrival at Bahrain
International Airport, cost of travel will be reimbursed and
accommodation
will be provided by the Al-Fawaz Group.’
[52] Once more one might ask why
the ‘timing of the investment’ called for discussion. Clause 2.2
of the agreement was perfectly
clear. Once the ‘undertaking’ had
been received the money would be deposited. And one might ask why the
‘original document’
was required to be presented to the Sheikh.
The document, after all, was not intended to be presented to third
parties, but was there
to satisfy the Sheikh that an assurance had
been given, and it is apparent from the letter that he was perfectly
satisfied that it
had been given.
[53] Mr Bernert nonetheless
travelled to Bahrain in February, apparently to hand over the
original document, in the company of Mr
Thornton and Mr Fanjek. The
Al-Fawaz group seems to have overlooked its offer to pay the expenses
because Mr Bernert said that he
paid most of the travel and
accommodation costs himself.
[54] The evidence does not tell
us whether they talked about the ‘timing of the investment’ but
they certainly must have talked
about branching out into a new line
of business altogether. Because on 14 February, in Bahrain, a further
document was signed by
Mr Bernert and his new acquaintances, as well
as by Mr Thornton. The document was in the following terms (sic):
‘
MEMORANDUM OF
ASSOCIATION
BETWEEN
SHAIKH FAWAZ BIN
ABDULA AL-KHALIFA (Passport No . . .)
5
ENRICO
BERNERT (Passport No: . . .)
GHASSAN
DINAWI (Passport No: . . .)
ROBERT
FANJEK (Passport No: . . .)
ROBERT THORNTON
(Passport No: . . .)
Whereas the above
mentioned parties have agreed to enter a formal business
relationship.
The business will
one established and maintained through the medium of a limited
liability company registered in BAHRAIN under the
name AL FAWAZ
GROUP L.L.C.
The business will
be established with a share capital of BD (N/A) (Establishment
capital) which amount will be reflected as a loan
to the company.
The establishment
capital will be provided by Sheikh Fawaz AL-Khalifa.
The registration
and all costs associated with the registration and establishment of
the company will be borne out of the establishment
capital.
The object of the
business will be to establish a general trading company which will
include but not limited to the following:
Dealing in oil
and/or precious metals and stones,
Financial services
and investments.
Any other business
the shareholders approve.
The shareholders
reserve the right to amend the objectives of the business at any
time.
The shareholding of
the company will be as follows:”
SHAIKH FAWAZ BIN
ABDULA AL-KHALIFA 30%
GHASSAN DINAWI 20%
ENRICO BERNERT 20%
ROBERT FANJEK 15%
ROBERT THORNTON 15%
Shareholders voting
rights will be in proportion to their shareholding.
All matters must be
approved by the shareholders in a general meeting and approval
requires a simple majority of shareholders.
Shareholders may
only dispose of their shareholding on death or retirement to their
immediate family (directly or indirectly). If
a shareholder wishes
to dispose of his holding under any other circumstances he must
first offer it to the existing shareholders
who may purchase the
shares in proportions to their shareholding or as may be agreed by
all existing shareholders. The valuation
will be negotiated or if
deadlocked by the valuation of independent auditors.’
[55] It was soon thereafter that
Absa Bank intervened and set about retrieving the document. That was
the end of the project. By then
all that had been achieved in the
project to manufacture cars was the securing of the Absa Bank
document.
[56] Absa Bank’s intervention
arose from information that it received from a banking official in
December 1999. Absa Bank was informed
of the existence of two of the
documents that Mr Fanjek had obtained from Mr Els. Mr Van Tonder, a
former police detective who was
employed as an investigator in the
forensic services division of Absa Bank, was instructed to look into
the matter.
[57] Mr Van Tonder interviewed Mr
Coetzee and Mr Els and towards the end of January 2000 he met with Mr
Fanjek and asked him to return
the documents. Mr Fanjek declined to
do so. The reason he gave is not material. In February 2000 Absa Bank
instituted proceedings
against Mr Fanjek in the high court, as a
matter of urgency, for an order, amongst other things, compelling him
to return the documents.
On 11 February 2000 an order was issued
calling on Mr Fanjek to show cause why such an order should not be
made, and a final order
compelling him to return the documents was
made on 24 May 2000.
[58] Mr Fanjek was in Bahrain
with Mr Bernert at the time the proceedings were launched, but the
fact that the proceedings had been
instituted was brought to his
attention. Mr Bernert also became aware of the proceedings but felt
that they had nothing to do with
him. The proceedings must also have
come to the Sheikh’s attention because on 21 February 2000 Mr
Dinawi wrote to Mr Bernert as
follows:
‘
Reference to our
telephone conversation concerning the bank document you have issued
us with I regret to inform you, that after consulting
with our bank
H.E. will not continue with the project or the investment until you
or the issuer bank have given us solid confirmation
that there are no
problems with this transaction or documents supplied by you.’
[59] It was when Mr Fanjek handed
over documents in compliance with the order that was made on 24 May
2000 that Absa Bank discovered
the existence of the documents that
had been given to Mr Bernert. Mr Bernert was asked to return the
documents but he refused to
do so, and once more, Absa Bank brought
proceedings compelling their return. I need not deal with those
proceedings. It is sufficient
to say that the documents were
recovered.
[60] On 30 May 2000 Absa Bank’s
attorney, Mr Joubert, wrote a letter to Emirates Bank in the
following terms:
‘
1. We act on
behalf of ABSA Bank Limited.
2. It has come to
our client's attention that a letter dated 12 October 1999 with
reference number A62961 on our client’s letterhead
with the heading
“Verbiage Of Bank Guarantee”, was addressed to you.
3. A copy of this
letter is attached hereto for ease of reference.
4. The purpose of
this letter is to advise you that the letter was issued by a person
not authorized thereto, was issued in irregular
circumstances and
should be disregarded by you.
5. Should you in
fact have received this letter, we shall be pleased to be advised
thereof.’
[61] That is the letter upon
which the claim is founded. Sheikh Fawaz said that when Emirates Bank
brought the letter to his attention
he was shocked because he thought
that something fraudulent might be afoot and he terminated his
relationship with Mr Bernert and
the project. Why he made no
enquiries as to the bona fides of Mr Bernert, and why he did not
resume the project once his bona fides
had been established, was left
unexplained.
[62] Although the letter dated 21
February 2000 indicates that the Sheikh had decided not to proceed
with the transaction until he
had
‘solid confirmation’ from Absa Bank that there were ‘no
problems with ... the documents’, which he never received, I
have
assumed for present purposes that it was indeed the letter written to
Emirates Bank on 30 May 2000 that caused the Sheikh to
withdraw from
the project. It was the sending of that letter that serves as the
basis of the claim.
[63] Three claims were brought by
Mr Bernert, framed in the alternative. The main claim was for breach
of contract but that has been
abandoned. The second alternative claim
was for alleged interference in Rotrax’s contractual relations with
the Sheikh and that
has also been abandoned. I need deal only with
the first alternative claim.
[64] That was a claim that was
framed in delict. It was alleged in the particulars of claim that the
letter written by Absa Bank’s
attorney was written ‘wrongfully’
and ‘intentionally or negligently’ in that Absa Bank or its
representatives
‘
failed to
ascertain the true position and circumstances under which [the
document] was obtained by [Rotrax] from [Absa Bank]; alternatively
were aware of the
circumstances under which [the document] was obtained by [Rotrax]
from [Absa Bank].’
[65] The
court
below dealt with the claim on a rather different basis. It said that
the letter that was
written by the attorney contained misstatements that were wrongfully
and negligently made. The statements that
were false, according to
the court below, were the statements that the document had not been
authorised and that it had been issued
in irregular circumstances.
[66] The court went on to say
that our law recognises liability for a negligent misstatement
resulting in pure economic loss. It relied
in that regard on
Bayer
South Africa (Pty) Ltd v Frost
,
6
and other cases to the same effect.
7
Those cases all concerned misstatements that were relied upon by the
plaintiffs to their prejudice. That is not the case before us.
In
this case the allegedly false statements were not made to Mr Bernert
and his alleged loss did not arise from his reliance on the
statements. The statements were made to Emirates Bank.
[67] When that distinction was
drawn to his attention the learned judge said that the distinction
was ‘irrelevant’. He said that
he was supported in that radical
view by the decided cases that follow. None of those cases provide
that support, whether directly
or by extension.
Aucamp
v Univeristy of Stellenbosch,
8
Perlman v Zoutendyk,
9
and
Standard Chartered
Bank of Canada v Nedperm Bank Ltd,
10
were all concerned with misstatements upon which the respective
plaintiffs relied.
Indac
Electronics (Pty) Ltd v Volkskas Bank Ltd
11
was not concerned with misstatements but with the liability of banks
for negligently collecting cheques. Nor was
Tsimatakopoulos
v Hemingway, Isaacs & Coetzee CC.
12
That case concerned liability to a subsequent owner of property upon
which a wall had been constructed negligently.
[68] But I do not think we should
dispose of this case on the law because it can just as well be
disposed of on the facts.
[69] In the course of its
judgment the court below said that Mr Merrett, who opined that the
document had features of financial ‘mist’,
and Mr Van Tonder, who
was of the same opinion, were delinquent in not ‘looking at the
total picture’ before forming their opinions.
[70] It seems that what the court
had in mind was that if the witnesses had obtained the ‘total
picture’ they would have understood,
which is as the court
understood it, that the document was meant to be an assurance by Absa
Bank to accept a fixed deposit, and to
return the money when the
deposit matured, as the Sheikh and Mr Fanjek had explained. And once
that had been understood they would
have realised that it fell within
the authority of Mr Coetzee to sign the document, because he had
authority to solicit fixed deposits,
which was what the court found.
Thus, the court concluded, the statements in the letter that the
document was issued without authority,
and in irregular
circumstances, were false, and Absa Bank was liable for the
consequences.
[71] I am not altogether sure
that the court below fully appreciated what this case was about. This
was not a claim to enforce the
terms of a contract, in which event
the understanding of the parties to the document might have been
relevant. The claim was that
Absa Bank was not justified in advising
Emirates Bank that the document had been issued without authority and
in irregular circumstances.
In those circumstances the question was
not how the Sheikh or Mr Fanjek or even Mr Bernert understood the
document. The question
was whether Absa Bank was obliged to allow
Emirates Bank, and indeed others to whom it might have been
presented, to rely upon its
authenticity. Clearly it was not obliged
to do so if the document was capable of misleading third parties.
Both Mr Merritt and
Mr Van Tonder believed that the document was
indeed capable of misleading third parties and they were perfectly
correct.
[72] It needs to be borne in mind
that the meaning that was given to the document by the witnesses, and
by the court, was teased out
from selected passages from the
document, while ignoring other passages altogether. And if one
meaning can be teased out of selected
passages, when read in
isolation, then a different meaning is capable of being teased out
from contradicting passages, when they
are also read in isolation. In
my view the court below ought to have directed itself less to what
the witnesses told it that the
document meant, and more to what third
parties might have thought it meant, particularly if they were told
that it had a different
meaning.
[73] I do not intend going
through the document in detail. It is sufficient to say that at the
commencement of argument Mr Bernert’s
attorney was asked to suggest
a coherent meaning of the document when all its terms are read as a
whole. He was not able to do so
and the reason for that is plain.
When all the terms are read together the document is a compendium of
gibberish. I have no doubt
that a document containing gibberish on
the letterhead of a major financial institution is capable of
misleading third parties as
to its meaning, perhaps even more so if
it is presented in the context of documentation indicating that it is
part of a larger transaction,
and that Absa Bank was entitled to
ensure that that did not occur. The fact that the document might not
have been intended to be
used in that way is immaterial. Absa Bank
was not to know where the document might have ended up. I think it
goes without saying
that whatever authority Mr Coetzee might have had
he had no authority to issue gibberish that had the potential to
mislead, and that
the issuing of gibberish that might mislead does
not fall within the regular business of a bank.
[74] What was said to Emirates
Bank by Absa Bank’s attorney was perfectly correct and Absa Bank
cannot be faulted for instructing
him to say it. Indeed, had Absa
Bank done nothing to ensure that the document did not remain in
circulation, and to ensure that no
reliance was placed on it, once it
knew of its existence, I think its failure would have been nothing
short of reckless.
[75] In my view this claim ought
to have failed at every step. I find it surprising that it was
brought at all.
[76] The appeal is upheld with
costs that include the costs of two counsel so far as two counsel
were employed. The order of the court
below is set aside and
substituted with an order dismissing the claim with costs.
___________________
R W NUGENT
JUDGE OF APPEAL
APPEARANCES:
For appellant: S W Burger
Instructed by Routledge Modise
in association with Eversheds
C/o Dyason Attorneys, Pretoria
Symington & De Kok
For respondent: D J L Nel
(attorney)
Instructed by Louis Nel Inc,
Pretoria
Rossouw & Conradie Inc,
Bloemfontein8
1
Body Corporate of Dumbarton Oaks v Faiga
[1998] ZASCA 101
;
1999 (1) SA 975
(SCA) at 979I-J;
Commercial Union Insurance Co of SA Ltd v
Wallace
NO;
2004 (1) SA 326
(SCA) paras 40-42;
Medscheme
Holdings (Pty) Ltd v Bhamjee
2005 (5) SA 339
(SCA) para 13.
2
See
Denel (Edms) Bpk v Vorster
2004 (4) SA 481
(SCA)
.
3
South Africa.
4
2nd: The G.C.C. Dubai / Saudi Arabia; 3rd: Europe / Spain; 4th:
Australia / Adelaide / Perth; 5
th
: U.S.A. / Latin America
/ Oshkosh / Mexico.
5
I have omitted details of the passports.
6
[1991] ZASCA 85
;
1991 (4) SA 559
(A).
7
Mukheiber v Raath & another
1999 (3) SA 1065
(SCA);
OK
Bazaars (1929) Ltd v Standard Bank of South Africa Ltd
2002 (3)
SA 688
(SCA);
Aucamp & others v University of Stellenbosch
2002 (4) SA 544
(C);
Kantey & Templer (Pty) Ltd & another
v Van Zyl NO
2007 (1) SA 610
(C).
8
Cited above.
9
1934 CPD 151.
10
[1994] ZASCA 146
;
1994 (4) SA 747
(A).
11
[1991] ZASCA 190
;
1992 (1) SA 783
(A).
12
1993 (4) SA 428
(C).