First National Bank of Southern Africa Ltd v Duvenhage (188/05) [2006] ZASCA 48; [2006] 4 All SA 541 (SCA); 2006 (5) SA 319 (SCA) (30 March 2006)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2006
>>
[2006] ZASCA 48
|

|

First National Bank of Southern Africa Ltd v Duvenhage (188/05) [2006] ZASCA 48; [2006] 4 All SA 541 (SCA); 2006 (5) SA 319 (SCA) (30 March 2006)

THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Case No:
188/05
REPORTABLE
In the
matter between
FIRST NATIONAL BANK
OF SOUTHERN AFRICA
LTD APPELLANT
and
KAREN ELEANORE
DUVENHAGE RESPONDENT
___________________________________________________________________
Coram: HARMS, CAMERON, NAVSA, BRAND AND NUGENT JJA
Heard: 17
MARCH 2006
Delivered: 30 MARCH 2006
Summary: Claim in delict – causal connection of the loss – value
of enquiring into its existence before embarking on the remaining
enquiries.
Neutral citation: This judgment may be referred to as First National
Bank v Duvenhage [2006] SCA 47 (RSA).
___________________________________________________________________
JUDGMENT
___________________________________________________________________
NUGENT JA
NUGENT JA
[1] Of the three elements that combine to constitute a delict founded
on negligence – a legal duty in the circumstances to conform
with
the standard of the reasonable person,
1
conduct that falls short of that standard,
2
and loss consequent upon that conduct – the last often receives the
least attention. Yet it is as essential as the others for without
it
there is no delictual liability. Indeed, in a recent illuminating
note J C Knobel suggests, on doctrinal grounds, that loss, and
its
causal connection, might even be the proper starting point for the
enquiry.
3
[2] But whatever
sequence doctrinal logic dictates
4
the human mind is sufficiently flexible to be capable of enquiring
into each element separately, in any order, with appropriate
assumptions
being made in relation to the others, and that is often
done in practice to avoid prolonging litigation.
5
For though the elements are naturally interrelated each involves a
distinct enquiry. The first element (in the sequence I have
described)
is directed to whether in the circumstances the law should
recognise an action for the recovery of loss caused negligently. That
is a question of legal policy in relation to which, in the
often-quoted words of Fleming
The Law of Torts
,
6
‘the hand of history, our ideals of morals and justice, the
convenience of administering the rule and our social ideas as to
where
the loss should fall’, interplay, and is often capable of
being disposed of on exception.
7
The second is directed to whether the defendant’s conduct conforms
with the standard expected of the reasonable person in the
circumstances,
8
which (and this is often overlooked) might not require the defendant
to have taken any steps at all.
9
That question is quite capable of being asked on the assumption that
the defendant was legally bound to conform with that standard.
And
the third is directed to whether there were causally-connected
consequences, which is a factual enquiry initially (though the
outcome will sometimes need to be tempered so as to contain liability
within reasonable bounds)
10
that is also capable of being asked on the assumption that the
conduct that is complained of was both wrongful and negligent.
[3] The present appeal
demonstrates why in practice it is useful at times to consider
whether the loss for which damages are claimed
is causally connected
to the allegedly unlawful conduct before addressing the more abstract
normative questions. It concerns a farming
venture that was embarked
upon by Mrs Duvenhage and her husband, which they intended conducting
through the medium of a close corporation
in which they had the sole
interest. (It is not necessary for present purposes to determine
which of those parties was properly vested
with the claim.)
[4] The Duvenhages
hired a farm in the KwaZulu-Natal midlands intending to cultivate
cash crops. They soon discovered, in about the
middle of 1996, that
two permits had been issued in terms of s 7(2) of the Forest Act 122
of 1984 for the afforestation of 288 hectares
of the farm.
11
After making enquiries they also established that SAPPI (a company
with timber interests) would be willing to provide financial
assistance
– free seedlings and a loan of up to R1 200 per hectare
– to establish plantations on the farm.
[5] The Duvenhages
decided to embark upon that venture but time was against them. The
two permits (one permitting the afforestation
of 200 hectares and the
other 88 hectares) were due to expire on 15 May 1997 and 28 August
1997 respectively, and enquiries they
made of the forestry department
revealed that it was unlikely that the periods would be extended. But
planting is possible only during
the summer rainfall months
commencing in about September or October and ending in February.
There was no prospect of preparing the
land and completing the
planting before the season ended in February 1997. But what was
required at least, as the Duvenhages understood
the terms of the
permits, was that the land should be prepared before the permits
expired, whereupon planting would then be permissible
during the next
season.
[6] The owner of the
farm was willing to extend the period of the lease for the period
required for the timber to mature. The Duvenhages
commenced
immediately to prepare the land so as to complete the preparation
before the permits expired, financing the work with money
advanced to
Mrs Duvenhage on overdraft by the appellant bank. In the course of
preparing the land they also planted a relatively
small number of
seedlings that they obtained from SAPPI on credit.
[7] In about November
1996 the owner of the farm offered to sell it to the Duvenhages on
favourable terms. At that time the Land Bank
held a mortgage bond
over the farm as security for a loan that had been advanced to the
owner. Mr Duvenhage enquired of the Land
Bank whether it would be
willing to transfer the loan, which would enable the Duvenhages to
acquire the farm, but the Land Bank was
unwilling to do so. The Land
Bank suggested instead that the Duvenhages obtain finance from a
commercial bank to acquire the farm,
that they then establish the
plantation with the financial assistance of SAPPI, and that therefore
it would consider extending a
loan with which the commercial bank
could be repaid. This appealed to the Duvenhages and they approached
Mr Roux, the manager of
the appellant’s Greytown branch, where Mrs
Duvenhage had an account.
[8] They met with Roux
on 9 December 1996. The evidence as to what occurred at the meeting
is contentious. What was found by the full
court in that regard
(those findings are not on appeal before us) is not altogether clear
but I have accepted for present purposes
the submission by Mrs
Duvenhage’s counsel that Roux undertook to submit an application
for a loan to the relevant department of
the bank, but told them that
that was a mere formality, and assured them that the loan would be
advanced. He also suggested that
the Duvenhages should in any event
establish whether SAPPI might be willing to grant a loan for the
acquisition of the farm because
they would then benefit from a lower
rate of interest.
[9] During January 1997
Mr Duvenhage discussed the matter with SAPPI but was told that SAPPI
was not interested in financing the acquisition
of land. What he did
secure from SAPPI, however, was an undertaking to provide the
assistance that had been discussed earlier, if
the Duvenhages
acquired the property, permitted a second bond to be registered as
security for repayment of the loan, and completed
the planting by the
end of January 1998.
[10] Meanwhile the
Duvenhages continued preparing the land, with money that Roux
continued to advance to Mrs Duvenhage on overdraft,
in the
expectation that they would receive a loan from the bank and acquire
the farm, which would in turn give them access to the
loan from SAPPI
with which the overdraft would be repaid.
[11] So matters
continued through the winter. Enquiries were made of Roux from time
to time, who assured them that the formalities
for the advance of a
loan were in hand, but when summer arrived it had not materialised.
By then Mrs Duvenhage was in debt to the
bank, SAPPI was unwilling to
supply the seedlings that needed to be planted until it had the
security of a second bond, and Roux
was fobbing off enquiries. In
January 1998 Mrs Duvenhage insisted on seeing somebody at the bank’s
head office. Before Roux could
arrange a meeting he was removed from
his post. In early February 1998 Mrs Duvenhage made contact with the
regional office and ultimately
she met with the credit manager at the
bank’s head office in Johannesburg. There she learned for the first
time that Roux had never
submitted the request for a loan in the
first place. (Roux’s explanation for not having done so is not now
material but the bank
did nothing to defend his conduct, which both
the trial court and the full court subjected to well-justified
criticism.)
[12] But by then the
planting season was almost over, the permission to plant had all but
lapsed (on the Duvenhage’s understanding
of its terms), SAPPI’s
undertaking to provide assistance had lapsed, and SAPPI was demanding
payment for the seedlings that had
been advanced on credit. The
venture was at an end and the stage was set for the present
litigation. (An attempt was made the following
year to have the
permits extended but that was unsuccessful.)
[13] The bank sued Mrs
Duvenhage for repayment of the money that had been advanced on
overdraft. To that claim she had no defence.
But she responded with a
counterclaim for damages for breach of contract. Mrs Duvenhage
alleged that Roux, on behalf of the bank,
had agreed to advance a
loan with which to acquire the farm, and that the bank had breached
the agreement. In consequence, so Mrs
Duvenhage alleged, she had lost
the opportunity to make profits, both from the sale of timber and
from other farming activities,
and to recover the expenditure she had
incurred in preparing the land. Later her pleadings were amended to
introduce an alternative
claim in delict in which it was alleged that
the losses were caused by Roux’s negligence and that the bank was
vicariously liable
for the consequent damages. The bank pleaded,
amongst other things, that the counterclaims had prescribed.
[14] The action was
tried by P C Combrinck J in the High Court at Pietermaritzburg. At
the outset of the trial he ruled that ‘the
issue of liability on
the counterclaim will be decided as a first issue and all the other
issues will stand over.’ Ultimately he
found that the evidence did
not establish the agreement upon which the main counterclaim was
founded (that finding is not contentious
and nothing more need be
said about it) and that the alternative claim had prescribed. The
counterclaim was dismissed and judgment
was entered for the money
that was owed to the bank.
[15] On appeal to the
full court (J Combrink, Magid and Nicholson JJ) the finding on
prescription was reversed and the delictual claim
succeeded. (The
judgment is reported as
Duvenhage v Eerste Nasionale Bank van SA
Bpk
[2005] 4 All SA 41
(N).) It was held that Roux, acting in the
course and scope of his employment, had conducted himself wrongfully
and negligently and
that his conduct was the cause of the losses for
which the damages were sought. The orders of the trial court were set
aside and
substituted with a declaration that the bank was liable for
such damages as might have been suffered. (What remained was only for
a court in due course to determine the amount of the damages, if they
could not be agreed upon, by assessing the extent of the losses
and
attaching to them a monetary value, in accordance with the trial
court’s ruling.) This appeal against that declaratory order
is
before us with the special leave of this court, which was limited to
the question whether the losses that Mrs Duvenhage suffered
were
caused by Roux’s unlawful conduct.
[16] On that issue the
conclusions of the full court were perfunctory:
‘
Applied
to the present facts factual causality presents little problem. If it
had not been for Roux’s wrongful and negligent conduct
the purchase
of the farm would not have fallen through and the SAPPI financing
would not have lapsed and [Duvenhage] would not have
suffered any
loss of profit and the expenditure … would not have been needlessly
incurred.’
[17] The approach to
causation, both in contract and in delict, is well established. In
both cases the wronged party is entitled to
be compensated for the
consequences of the unlawful conduct. In the former case the unlawful
conduct lies in the breach and the wronged
party is to be placed in
the position that he or she would have been in had it not occurred
and the promise had instead been fulfilled.
In the latter case the
wronged party is to be placed in the position that he or she would
have been in had the wrongful and negligent
conduct not occurred.
12
And in determining that question
‘…
one
must make a hypothetical enquiry as to what probably would have
happened but for the wrongful conduct of the defendant. This enquiry
may involve the mental elimination of the wrongful conduct and the
substitution of a hypothetical course of lawful conduct and the
posing of the question as to whether upon such an hypothesis
plaintiff’s loss would have ensued or not. If it would in any event
have ensued, then the wrongful conduct was not a cause of the
plaintiff’s loss;
aliter,
if it would not so have ensued. If
the wrongful act is shown in this way not to be a
causa sine qua
non
of the loss suffered, then no legal liability can arise.’
13
[18] It goes without
saying that when the venture was abandoned in January 1998 Mrs
Duvenhage lost the opportunity to make profits
from the venture and
the opportunity to recover the expenditure she had incurred. But it
was not because Roux failed to submit the
application for a loan (as
he ought to have done), nor because he assured the Duvenhages that a
loan would be advanced (which he
ought not to have done), that the
venture failed. It failed because a loan was not secured, and the
farm was not thereby acquired,
before time ran out. There is no
direct evidence that the Duvenhages would indeed have secured a loan
from the bank had the application
been submitted, and thereby
acquired the farm. Nor is there direct evidence that they would have
secured a loan from an alternative
source had the bank refused to
grant a loan. Despite the efforts of Mrs Duvenhage’s counsel to
persuade us to the contrary the
evidence also does not permit of the
inference that a loan would have been forthcoming from either source.
And without a loan to
acquire the farm in time for the 1997 planting
season the project would necessarily have failed, irrespective of
Roux’s conduct,
with consequent loss of the opportunity to profit
and to recover the expenditure.
[19] It was also
submitted on behalf of Mrs Duvenhage that she would not have expended
the money in the first place if not for the
assurance that was given
by Roux and that at least that portion of the loss was recoverable
irrespective of whether they would have
secured a loan and acquired
the farm. But that, too, was not established by the evidence. On the
contrary, the evidence suggests
that they would have incurred the
expenditure in any event. For Mrs Duvenhage said that even if Roux
had positively refused a loan
(had he told her that he did not intend
to submit her application that would have come to the same thing) she
would not have abandoned
the project but would have sought finance
elsewhere. Bearing in mind that they had only until 15 May 1997 to
prepare the land before
the expiry of the permit to plant 200
hectares, and then until 28 August 1997 to prepare the land for the
remaining 88 hectares,
which was essential to the success of the
project (on their understanding of the permits) it is most unlikely
that preparations would
have stopped while alternative finance was
sought. Indeed, they had commenced incurring the expenditure in about
November 1996, before
Roux had uttered a word, and there is no reason
to think that they would not have continued to do so.
[20] Yet even had it
been established that a loan would have been secured there is a
further insuperable hurdle to establishing the
causal connection
between the negligent conduct and the loss, which is that the venture
was in any event doomed from the start, although
the Duvenhages did
not know it at the time. Clearly it was not possible to acquire the
farm and complete planting by the end of February
1997, which was
when that planting season ended, even if the bank had immediately
advanced a loan. And on a proper construction of
the permits – the
undisputed evidence of an official of the Department of Water Affairs
and Forestry was to the same effect –
it would have been illegal to
plant once the permits expired on 15 May 1997 and 28 August 1997
respectively, which was before the
next planting season commenced.
The project was thus always bound to fail.
[21] The true cause of
the expenditure of the money, and the loss of the opportunity to
recover it and to profit, was that the Duvenhages
embarked upon the
venture when, unbeknown to them because they misunderstood the terms
of the permits, it was not capable of being
completed before the
permits expired. Even the contractual claim was bound to fail for
want of a causal connection between the breach
and the loss. And if
the contractual claim was bound to fail the claim in delict was bound
to follow.
[22] At times it is
worth giving thought to causation at the outset, as suggested by
Knobel, even if not on doctrinal grounds, because
in practice claims
often fail for want of a causal connection between the unlawful
conduct and the loss.
[23] The appeal is
upheld with costs. The order of the court below is set aside and
substituted with an order dismissing the appeal
with costs.
________________________
R.W. NUGENT
JUDGE OF APPEAL
CONCUR
:
HARMS JA)
CAMERON JA)
NAVSA JA)
BRAND JA)
1
Indac
Electronics (Pty) Ltd v Volkskas Bank Ltd
[1991] ZASCA 190
;
1992
(1) SA 783
(A) 797E;
Knop v Johannesburg City Council
1995
(2) SA 1
(A) 27J-28A;
Cape Metropolitan Council v Graham
2001
(1) SA 1197
(SCA) para 6;
Minister of Safety and Security v van
Duivenboden
2002 (6) SA 431
(SCA) para 12;
Gouda Boerdery BK
v Transnet
2005 (5) SA 490
(SCA) para 12;
Local Transitional
Council of Delmas v Boshoff
2005 (5) SA 514
(SCA) para 19;
Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising
Standards Authority SA
2006 (1) SA 461
(SCA) para 13.
2
Kruger v Coetzee
1966 (2) SA 428
(A) 430E-G, which has been applied by this court in
countless cases.
3
JC
Knobel ‘Die Samehang Tussen Onregmatigheid en Skade’
2005 (68)
THRHR
645.
4
For
example, Millner
Negligence in Modern Law
230, points out
that ‘[u]ntil the law acknowledges that a particular interest or
relationship is capable in principle of supporting
a negligence
claim, enquiries as to what was reasonably foreseeable are
premature.’
5
But
see the criticisms by J Neethling and JM Potgieter ‘Die Toets vir
Deliktuele Nalatigheid Onder die Soeklig’
2001 (64)
THRHR
476
;
6
4
th
ed 136.
7
Indac Electronics (Pty) Ltd v
Volkskas Bank Ltd
[1991] ZASCA 190
;
1992 (1) SA
783
(A) 797E-801D;
Telematrix
, above, para 16.
8
Kruger v Coetzee
1966 (2) SA 428
(A) 430E-G.
9
Despite
the remarks of Holmes JA in
Kruger v Coetzee,
above, at 430G,
it continues often to be overlooked .
10
International Shipping Co (Pty)
Ltd v Bentley
1990 (1) SA 680
(A) 700E-701F.
11
‘
7(1)
Without the prior written approval of the director-general no
land…may be used for the planting of trees to produce timber
for
commercial or industrial purposes.
(2) An owner who
intends to establish a commercial timber plantation on any land,
shall apply in the prescribed manner for the approval
required in
terms of subsection (1), and the director-general may in his
discretion grant the approval on such conditions as he
may deem
fit.’
12
Trotman
v Edwick
1951 (1) SA 443
(A)
449B-C.
13
International
Shipping Co (Pty) Ltd v Bentley,
above,
700F-H.