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[2020] ZASCA 8
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Global & Local Investments Advisors (Pty) Ltd v Fouche (71/2019) [2020] ZASCA 8; 2021 (1) SA 371 (SCA) (18 March 2020)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 71/2019
In
the matter between:
GLOBAL
& LOCAL INVESTMENTS
ADVISORS
(PTY)
LTD APPELLANT
and
NICKOLAUS
LUDICK
FOUCH
É
RESPONDENT
Neutral
citation:
Global & Local Investments Advisors (Pty)
Ltd v Nickolaus Ludick Fouch
é (71/2019)
[2019] ZASCA 08
(18 March 2020)
Coram:
NAVSA, SALDULKER, MAKGOKA and NICHOLLS
JJA and MOJAPELO AJA
Heard:
24 February 2020
Delivered:
18 March 2020
Summary:
Whether a financial services provider
acted in breach of client’s mandate by releasing funds upon
receiving fraudulent email
instruction – applicability of
section 13(3)
of the
Electronic Communications and Transactions Act
25 of 2002
ORDER
On
appeal from:
Gauteng Division of the
High Court, Johannesburg (Vorster AJ sitting as court of first
instance):
1
The appeal is dismissed with costs.
JUDGMENT
Mojapelo
AJA (Navsa, Saldulker, Makgoka and Nicholls JJA concurring)
[1]
The issue for determination is whether the appellant, Global &
Local Investments Advisors (Pty) Ltd (Global), a financial
services
provider, breached a mandate in terms of which it was authorised to
invest and manage money entrusted to it by the respondent,
Mr
Nickolaus Ludick Fouché, by releasing funds in response to
fraudulent emails, ostensibly sent by the latter. The Gauteng
Division of the High Court, Johannesburg (Vorster AJ) found that
there had been a breach of the mandate and that consequently the
appellant was liable to be reimbursed in the amount of R804 000.
The high court ordered Global to pay Mr Fouché’s
costs.
It is against that conclusion and the resultant order that the
present appeal is directed. The appeal is before us with
the leave of
the high court.
[2]
The facts
are largely common cause. On 23 November 2015 Mr Fouché, a
mining consultant, gave a written mandate to Global
to act as his
agent and invest money with Investec Bank on his behalf. The written
mandate stipulated that ‘All instructions
must be sent by fax
to 011 486 2915 or by email to monique@globallocal.co.za with
client’s signature.’ The money
was to be invested
in a Corporate Cash Manager (CCM) account in the name of Mr Fouché.
Global opened the CCM accounts for
its clients at Investec and then
managed the accounts for a fee expressed as a percentage of the funds
invested for the client
in such accounts.
[3]
In August 2016 fraudsters hacked the gmail account of Mr Fouché
and utilising his authentic email credentials, sent three
emails to
Global on 15, 18 and 24 August 2016. In the emails Global was
instructed to transfer specified amounts to accounts of
named third
parties at First National Bank (FNB). Two of the three emails
containing the instructions to transfer money, ended
with the words:
‘Regards, Nick’ while the third ended with ‘Thanks,
Nick’. None of them had attachments.
In response, Global paid
out a total of R804 000 from Mr Fouché’s CCM
account to unknown third parties in three
tranches as follows:
R100 000 on 15 August 2016, R375 000 on 18 August 2016 and
R329 000 on 24 August 2016. Subsequently,
Mr Fouché
became aware of this and notified Global that the emails had not been
sent by him. Mr Fouché claimed payment
of the amounts
transferred to third party accounts on the basis that Global had paid
out contrary to the written mandate.
[4]
Global’s main submission and defence to the claim is that it
acted within the terms of the mandate, on instructions that
emanated
from the legitimate email address of Mr Fouché and that the
typewritten name ‘Nick’ at the foot of
the emails
satisfied the signature requirement, when considered in the light of
s 13(3) of the Electronic Communications and Transactions
Act 25 of
2002 (the ECT Act). At its core, the submission is that the
instructions should be regarded as valid by virtue of the
ECT Act
because of the word ‘Nick’, which Global argues, is his
electronic signature as it is the manner in which Mr
Fouché
‘ordinarily’ ended his emails.
[5]
Section 13(3) of the ECT Act reads as follows:
‘
Where an
electronic
signature is required by the parties to an
electronic transaction and the parties have not agreed on the type of
electronic signature
to be used, that requirement is met in relation
to a data message if -
(
a
)
A method is used to identify the person as to indicate the person’s
approval of the information communication; and
(
b
)
Having regard to all the relevant circumstances at the time the
method was used, the method was as reliable as was appropriate
for
the purposes for which the information was communicated.’
[6]
Mr Fouché, on the other hand, submits that the instructions
did not bear his signature, whether manuscript or electronic.
It is
common cause that the instructions did not bear the former.
[7]
As stated earlier the high court found in favour of Mr Fouché.
Vorster AJ stated that the mandate ‘specifically
required the
signature of the plaintiff [Mr Fouché] for a valid instruction
and not merely an email or fax message purporting
to be sent. . .’
The court below stated that this is not a case where the parties
agreed to accept an electronic signature
as envisaged by s 13(3) of
the ECT Act. It went on to say ‘it is a case where the parties
required a signature. No more and
no less.’ Vorster AJ
continued and said the following:
‘
A simple mechanism
to achieve that requirement would simply be to reduce the request to
writing, to sign it and to forward it by
e-mail or fax to the
defendant as the recipient. That agreed mechanism is in my view in
line with a purposive and practical interpretation
of the provisions
of the mandate in line with the probable common intention of the
parties and aimed at avoiding precisely the
unlawful activity which
caused the damage to the plaintiff.’
[8]
The court below held as follows:
‘
It is common cause
that no signed instruction has been given to the defendant empowering
it to transfer the amounts totalling R804 000.00
from the
plaintiff’s CCM account. Consequently, I find that such
transfer was made unlawfully being in conflict with the
terms of the
mandate which required an instruction bearing the signature of the
plaintiff. In the result the action of the plaintiff
must succeed.’
[9]
The appeal turns on a proper interpretation of the written mandate
and whether Global acted in breach thereof. In construing
the
mandate, the context must be taken into account. In the commercial
and legal world signatures serve established purposes. Signatures
are
used as a basis to determine authority and can be checked for
authenticity. When money is paid out on a cheque it is done on
the
basis of an authorised signatory whose signature can be verified.
[10]
The Concise English Oxford Dictionary
[1]
defines ‘signature’ as ‘a person’s name
written in a distinctive way as a form of identification or
authorization.’
Black’s Law Dictionary (5th ed 1239)
gives the definition of ‘sign’ and ‘signature’,
which read together
bring us close to the legal meaning of signature.
‘To ‘sign’, it explains, is 'to affix one's name to
a writing
or instrument, for the purpose of authenticating or
executing it, or to give it effect as one's act; To attach a name or
cause
it to be attached to a writing by any of the known methods of
impressing a name on paper; To affix a signature to . . . To make
any
mark, as upon a document, in token of knowledge, approval,
acceptance, or obligation'. ‘Signature’ is defined as
‘the act of putting one's name at the end of an instrument to
attest its validity; the name thus written . . . And whatever
mark,
symbol or device one may choose to employ as representative of
himself is sufficient.’
[11]
Lord Denning stated the following in
Goodman v J Eban Ltd
[1954]
1 QB 550
(CA) at 561 where the question was whether a signature by
means of a rubber stamp was a good signature:
‘
In modern English
usage, when a document is required to be "signed by"
someone, that means that he must write his name
with his own hand
upon it. It is said that he can in law "sign" the document
by using a rubber stamp with a facsimile
signature. I do not think
this is correct . . . [A facsimile] is the verisimilitude of his
signature but it is not his signature
in fact.
If a man cannot write his
own name, then he can "sign" the document by making his
mark, which is usually the sign of a
cross’.
[12]
In
Van Vuuren v Van Vuuren
(1854) 2 Searle 116
at 121, the
court held that: To sign a document means to authenticate that which
stands for or is intended to represent the name
of the person who is
to authenticate. If an illiterate person is to sign, he would put a
cross. If a person cannot use his hands
as normal due to some
disability, it will suffice to put the initial, in capital letters,
of his name and surname.
[13]
In
Da Silva v Janowsky
1982 (3) SA 205
(A) at 218F-219C
[1982]
All SA 43
(A) and
Harpur NO v Givindamall and Another
[1993] ZASCA 110
;
1993 (4)
SA 751
(A) at 756–759 this Court gave extensive and
authoritative definitions of ‘signature’. In
Da Silva
,
Diemont JA put it thus:
‘
Mr Jacobs,
placed great reliance on the fact that in his plea the defendant had,
not once but twice, made a clear and unequivocal
admission that he
had signed the mandate. But that is not enough. A signature does not
refer merely to the written characters appearing
on a document; it
refers to the fact of signature in relation to the contents of the
document on which it appears. The words of
ROPER J reported in
Sonfred (Pty) Ltd v Papert
1962
(2) SA 140
(W)
at 145 are apposite:
‘‘
It
is axiomatic that a person is not bound by the mere fact that his
signature appears upon a document of debt. The chief significance
of
a signature to a document of obligation is that it is evidence of the
fact of consent by the signatory, and in order that he
may be bound
it is necessary that he shall have affixed his signature with the
intention of binding himself. When a defendant is
sued upon a
document, therefore, the cause of action is not his signature, but
the acceptance of liability, of which the signature
is evidence, and
the cause of action must be proved by the plaintiff, as it is the
foundation of the whole claim. When a man is
called upon in a summons
for provisional sentence to admit or deny his signature, therefore,
there appears to be no reason in principle
why he should be
restricted to a denial that the written characters are his,
and should not be entitled, while admitting that
they are his,
to deny that they were affixed to the particular document - why he
should not say 'the signature is mine, but I never
signed this
document and never undertook the liability contained in
it.’’
’
(Emphasis
added.)
[14]
What is set out in the preceding paragraphs is especially pertinent
in relation to instructions relating to transfers of money
in the
financial services sector. Turning to the mandate itself, it is
significant that all instructions had to be sent by fax
or by email
to a specified fax number and email address but that there is no
specified dispatching fax number or email that could
serve as an
authenticated source. The contention that the gmail dispatching
address of Mr Fouché together with his name
at the end of the
email served an authentication purpose appears contrived. This is
especially so since the mandate requires a
‘signature’
which in every day and commercial context serves an authentication
and verification purpose. In order to
be able to resort to s 13(3) of
the ECT Act Global would have had to show that in terms of the
mandate an electronic signature
was required. The word ‘electronic’
is conspicuously absent from the mandate. The court below cannot be
faulted for
concluding that what was required was a signature in the
ordinary course, namely in manuscript form, even if transmitted
electronically,
for purposes of authentication and verification. The
instruction was not accompanied by such a signature and the court
below correctly
held that the funds were transferred without proper
instructions and contrary to the mandate.
[15]
Global placed reliance on
Spring Forest Trading 599 CC v Wilberry
(Pty) Ltd t/a Ecowash and Another
2015 (2) SA 118
(SCA. That case
concerned the validity of the cancellation of agreements by way of
exchange of emails. Each of the agreements in
question contained a
non-variation clause, which required consensual cancellation to be
reduced to writing and signed by both parties.
The real dispute
between the parties in that case was whether or not the names of the
parties at the bottom or foot of each email
constituted the required
consensual cancellation of the agreement.
[16]
Spring Forest
is distinguishable for the following reasons:
The authority of the persons who had actually written and sent the
emails was not
an issue in that case as it is in the present case.
The issue in that case was whether an exchange of emails between the
contracting
parties could satisfy the requirement imposed by them in
the contract that ‘consensual cancellation’ of their
contract
be ‘in writing and signed’ by the parties. There
was no dispute regarding the reliability of the emails, accuracy of
the information communicated or the identities of the persons who
appended their names to the emails. In the present case the emails
in
issue were in fact fraudulent. They were not written nor sent by the
person they purported to originate from. They are fraudulent
as they
were written and dispatched by person or persons without the
authority to do so. They are not binding on Mr Fouché.
[17]
For the reasons set out above the appeal must fail. The following
order is made:
The
appeal is dismissed with costs.
______________________
P
MOJAPELO
ACTING
JUDGE OF APPEAL
APPEARANCES
For
appellant:
C Bester
Instructed
by:
Andrew
Miller & Associates, Bryanston
Symington
& De Kok, Bloemfontein
For
respondent:
C T Picas
Instructed
by:
Webber
Wentzel, Johannesburg
Noordman
Attorneys, Bloemfontein
[1]
Concise English Oxford Dictionary 12 ed (2012) Oxford University
Press.