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[2014] ZAGPPHC 17
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Bader and Others v Wentzel and Another (57810/11) [2014] ZAGPPHC 17 (29 January 2014)
IN THE GAUTENG DIVISION OF THE HIGH COURT
PRETORIA, REPUBLIC OF SOUTH AFRICA
CASE
NO: 57810/11
DATE:
29 JANUARY 2014
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:
VALERIE ANN
BADER
………………………………………………….
First
Plaintiff
CHARLES MICHAEL
BADER NO
…………………………………
Second
Plaintiff
ANGELA
LEE BADER (in her personal and
representative
capacity)
)………………………………………………
Third
Plaintiff
JOHANNES PETRUS
BARNARD NO
………………………………
Fourth
Plaintiff
A
nd
JAN PETRUS
WENTZEL
……………………………………………..
First
Defendant
DELRU MAKELAARS CC
…………………………………………….
Second
Defendant
and
MAN
WOOD
UNDERWRITERS (PTY) LIMITED
………………………
First
Third Party
CE
NTRIC INSURANCE COMPANY
LIMITED
…………………….
Second
Third Party
JUDGMENT
Tuchten J
:
1
The
plaintiffs are Mrs Bader senior, the CM Bader Family Trust and Mrs
Angela Bader. Mr C M Bader himself is the son of Mrs Bader
snr and
the husband of Mrs Angela Bader.
2
The
plaintiffs each mandated the second defendant (Mr Wentzel’s
close corporation) to give them financial advice. Wentzel
himself was
financial adviser to each of the plaintiffs, who each had cash to
invest and sought Wentzel’s advice on where
to place their
money. They wanted an investment that would be similar to that
offered by a bank, free of risks other than those
attendant on an
investment with a bank and where their money would be available on 24
hour call. Such an investment is and was
at the material times
available in the market. The kind of fund which suited the
plaintiffs’ needs is called a money market
fund. Wentzel
recommended Corporate Money Managers, Cash Managed Fund (CMM ). From
time to time the plaintiffs each provided funds
to CMM and withdrew
amounts from the same source.
3
It was common cause on the pleadings
that the second defendant was obliged to exercise the care and skill
of an expert financial
adviser in advising each of the plaintiffs
where to place their cash.
4
CMM
offered an interest rate on monies placed with it which was a percent
or so above the rates offered by banks on equivalent investments
and
none of the plaintiffs saw any risk in their investments above those
risks attendant upon investing with a bank.
5
But
in 2009 it emerged that CMM was not operating a money market fund but
one in which the investment risks were substantially higher.
Indeed,
CMM did not even hold itself out as operating a money market fund.
CMM was unable to meet its obligations and on 28 April
2009 its
business was provisionally placed under curatorship under
s 5
of the
Financial Institutions (Protection of Funds) Act, 2001
. The
curatorship took its course and the plaintiffs were only able to
recover a small part of their investments from CMM.
6
On
26 February 2010 the plaintiffs, through their attorney, wrote to
Wentzel and the second defendant, stating that the plaintiffs
would
hold them liable for their damages sustained arising from Wentzel’s
conduct in putting them into a fund which was not
in the money market
but invested in highly speculative and risky projects. At that time,
the plaintiffs said, they were unable
to quantify their damages.
7
The first attempt by the plaintiffs to
quantify their damages was made in their summons, which was served on
Wentzel as first defendant
and the second defendant on 11 October
2011.
8
The defendants defended the action and
in addition instituted third party proceedings against their
underwriter and insurer as first
and second 3rd parties. These third
parties defended the third party proceedings. But by notice dated 26
November 2013 the second
defendant’s attorneys withdrew as its
attorneys and the second defendant is presently in default. By notice
dated 13 December
2013 the plaintiffs withdrew their action against
the first defendant, with each party to pay their own costs.
9
Accordingly, when the trial of the
action was called before me, only the plaintiffs and the third
parties appeared. All of their
counsel accepted that there was no lis
between the plaintiff and the third parties. The third parties asked
for, and were granted,
the dismissal of the third party proceedings
brought against them by the defendants, with an appropriate costs
order. I dealt with
this in a separate ex tempore judgment. The
present judgment thus deals only with the lis between the plaintiffs
and the second
defendant.
10
The plaintiffs then sought default
judgment against the second defendant under
rule 39(1)
which reads:
If, when a trial is called, the plaintiff
appears and the defendant does not appear, the plaintiff may prove
his claim so far as
the burden of proof lies upon him and judgment
shall be given accordingly, in so far as he has discharged such
burden. Provided
that where the claim is for a debt or liquidated
demand no evidence shall be necessary unless the court otherwise
orders.
11
Counsel for the plaintiff presented a
detailed opening address. The address was designed not only to
acquaint the court with the
case to be presented but also to give
notice to counsel for the third parties, who consented to remain
present for this purpose,
that in an action which the plaintiffs
contemplated instituting against the third parties directly, under s
156 of the Insolvency
Act, the plaintiffs would contend that any
judgment which I gave as to the second defendant’s liability to
the plaintiffs
would be binding on the third parties. As I was not
asked to make any ruling in this regard I need not express any view
on the
proposition advanced by counsel for the plaintiffs. I should
mention, however, that counsel for the third parties did not accept
its correctness.
12
Although
the practice of this court where judgment by default for unliquidated
damages is sought is to require evidence only in
regard to quantum,
the plaintiffs led evidence on the merits as well. The plaintiffs
were in my view entitled under rule 39(1)
to do so because the rule
in its terms entitles them to lead evidence on all those issues upon
which they bear the burden of proof.
The first plaintiffs health did
not permit her to give evidence viva voce and her testimony was
presented by affidavit. In addition,
I allowed an affidavit by Mr
Theo Vorster, for the limited purpose of establishing that he had
been proposed by the plaintiffs
as an expert witness.
13
The evidence adduced showed that Wentzel
had not told any of the plaintiffs that CMM operated in a speculative
and risky market.
This fact gives rise, inexorably in my view, to one
of two propositions. Either Wentzel did not know the true ambit of
CMM’s
investment policy or he knew but did not tell the
plaintiffs what he knew. The evidence showed that the true ambit of
CMM’s
investment policy was readily ascertainable: indeed it
could largely be determined from public documents. There was a
simpler way
in which Wentzel could have established the facts: he
could have asked CMM. Wentzel did not suggest in any document before
the
court that he was misled as to the true position. I have no doubt
that if he had asked, he would have been told the true position.
14
On any of these propositions, in my
view, the second defendant is liable to the plaintiffs for the
negligent conduct of the mandates
entrusted to it by them. Either he
negligently failed to establish the true ambit of CMM’s
investment policy or he knew it
but negligently failed to tell the
plaintiffs what he knew. This finding is in accordance with the
evidence of Mr Goldhawk, who
testified as an expert. The second
defendant accordingly failed to exercise the care and skill of an
expert financial adviser in
advising each of the plaintiffs where to
place their cash and thus breached the mandates given to it.
15
All of the plaintiffs said in evidence
that if they had known the true position they would either not have
invested through CMM
or would, on finding out the true position,
promptly have withdrawn all their money and invested it elsewhere. I
believe them.
The negligence execution by the second defendant of its
mandate therefore caused the plaintiffs’ damages.
16
I turn to the quantum of damages.
Evidence was given by Mr Goldhawk of the returns which the plaintiffs
would probably have enjoyed
if Wentzel had done his job properly. The
thrust of this evidence is that if the plaintiffs had been put into a
money market fund
properly so called, they would have received back,
when they asked for it, their capital together with interest
slightly
lower than that offered by CMM. I accept this evidence. The plaintiff
assessed their damages as at the end of April 2009,
the month in
which CMM’s business was placed under curatorship. Although the
damages cannot be assessed with mathematical
accuracy, the plaintiff
has presented all relevant evidence and I am thus at large to do the
best I can on what is before me. While
there does not appear to be
any reason in principle to perform the assessment exercise as at the
end of April 2009, the selection
of this date does not appear to be
unfair to the second defendant. There is no reason to select an
earlier date and a later date
would inevitably increase the damages
payable.
17
Calculated in this way, the damages
proved by each of the plaintiffs are as follows: for Mrs Bader snr
(the first plaintiff) R1
663 843; for the Trust R2 232 531; for Mrs
Angela Bader (the third plaintiff in her personal capacity) R48 500.
18
As to mora interest on the judgment
debts: in their particulars of claim the plaintiffs ask for interest
from 30 April 2009. Where
the claim is, as in the present case, for
unliquidated damages, s 2A(2)(a) read with
s 2A(5)
of the
Prescribed
Rate of Interest Act, 1975
confer upon the court a discretion to make
such order as appears just in respect of the date upon which interest
on such a debt
should run.
19
It weighs significantly with me that
the commercial purpose (
known to the defendants) of the
plaintiffs’ investments was to obtain
interest on their surplus cash assets which they entrusted to CMM, I
think it would
be unfair if the plaintiffs were denied interest
during the period from the date they chose for the assessment of
their damages
until they served their summons. There is nothing
before me to suggest that the plaintiffs culpably delayed in the
prosecution
of a somewhat complex case. I shall therefore order mora
interest from the date upon which damages were assessed.
20 I
accordingly make the following order.
1
There
will be judgment against the second defendant and in favour of:
1.1
the first plaintiff for R1 663 843;
1.2
the CM Bader Family Trust (“the
Trust”) for R2 232 531; and
1.3
the third plaintiff in her personal
capacity for R48 500.
2
Each
of the judgment debts in paragraph 1 of this order will carry mora
interest at 15,5% per annum from 30 April 2009 to date of
payment.
3
The
second defendant must pay the costs of suit of all the plaintiffs,
including the qualifying fees of Messrs Goldhawk and Vorster.
NB Tuchten
Judge of the High Court
28 January 2014
BaderDelru57810
11