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[2001] ZASCA 44
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Stellenbosch Farmers' Winery Ltd v Apostolos Vlachos t/a Liquor Den (117/99) [2001] ZASCA 44; [2001] 3 All SA 577 (A); 2001 (3) SA 597 (SCA) (27 March 2001)
IN
THE SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Case
number : 117/99
In the
matter between :
STELLENBOSCH
FARMERS’ WINERY LIMITED Appellant
and
APOSTOLOS
VLACHOS t/a LIQUOR DEN Respondent
CORAM : NIENABER, MARAIS, OLIVIER JJA, MELUNSKY and
NUGENT AJJA
HEARD : 8 MARCH 2001
DELIVERED : 27 MARCH 2001
Sale of business - estoppel - assisted misrepresentation
- causation
________________________________________________________________
JUDGMENT
________________________________________________________________
NIENABER JA
/
NIENABER JA
:
[1] The appellant, plaintiff in the
court below, is a supplier of alcoholic and other beverages to the
retail trade. The respondent,
defendant in the court below, owned
and operated a bottle store under the name of “The Liquor Den”
at the corner of
Harrison and Wolmarans Streets, Braamfontein,
Johannesburg. During the period 1990-1996 the defendant was a
long-standing, regular
and creditworthy customer of the plaintiff.
In December 1995 he was approached by one Greg da Silva to sell the
business to
a close corporation, Baron Products CC (“BPCC”).
The sale for R120 000 was eventually finalised in January 1996.
What the defendant neglected to do was to notify the plaintiff (and
other suppliers to The Liquor Den) that the business had been
taken
over by BPCC. BPCC was running it from the same premises and under
the same name. It continued to order and the plaintiff
continued to
supply it with goods on credit. The plaintiff’s
representative, Cockroft, visited the premises on a more
or less
regular basis. He was led to believe that Da Silva was the
defendant’s son or son-in-law and that he was placed
in charge
of this business to manage it on the defendant’s behalf. That
was untrue. For a variety of reasons, (the change
to the premises,
the change in personnel and changes in the pattern of purchases and
payments) the plaintiff’s credit controller,
Mrs Van Rooyen,
suspected that the business may have changed hands. When she spoke
to Da Silva on the telephone he identified
himself to her under the
defendant’s name. He reassured her that no change in ownership
had taken place. That, strictly
speaking, was true since ownership
had been reserved to the defendant until the full purchase price had
been paid, which had not
yet happened. But the implication (that the
defendant remained in charge of the business and contractually liable
for its debts)
was not true. The plaintiff, instead of insisting on
either payment on delivery or a new arrangement for extending credit
(which,
but for Da Silva’s reassurances it would have done),
continued to supply goods to BPCC on the same grounds as before,
until
Da Silva in February 1996 claimed a credit of R50 000 which was
not due to BPCC and two of its cheques for R30 000 and R29 000
respectively were dishonoured. By then the outstanding debt had
ballooned to a figure later agreed to be R205 485,88. Da Silva
stripped the premises. He disappeared without trace and without
fully paying either the plaintiff (for the sale of the goods)
or the
defendant (for the sale of the business). The plaintiff thereupon
looked to the defendant for payment. To the defendant’s
plea
that the debt was not his the plaintiff raised an estoppel. The
Court
a quo
(Solomon AJ sitting in the Witwatersrand Local Division of the High
Court) found that the defendant had been under a duty to the
plaintiff to disclose the fact that he was no longer responsible for
the debts of the business, but that the plaintiff was induced
by Da
Silva’s deception rather than by the defendant’s silence
to continue to do business with The Liquor Den on the
same basis as
before. He said:
“
In all the circumstances I have come to the
conclusion that there was not a sufficient causal link between the
defendant’s
failure to disclose the sale of the business and
the plaintiff acting to its detriment by extending credit to the
business after
the sale, but that the plaintiff’s loss was the
result of the fact that, when Mrs van Rooyen assumed that there had
been
a change of ownership, Mr Greg da Silva represented that the
business had not been sold, and the plaintiff’s own negligence
in continuing to supply goods on credit despite the numerous warning
signs which it received.”
The plaintiff’s claim was
accordingly dismissed with costs. This is an appeal, with the leave
of the Court
a quo,
against that judgment.
[2] The defendant purchased the business in 1989 for
R230 000. In 1990, at the behest of the plaintiff, he completed and
signed
a credit application form. It contained a wealth of detail
about the business and the defendant’s own trading history. Of
particular importance is clause (b) which read that the debtor,
applying for credit facilities with the creditor:
“
b) Warrant that the above information is true and
correct, and undertake to notify the Creditor in writing of any
change of details
shown above including change of ownership, name or
address, and that if I fail to do so I will be responsible for all
amounts owing
to the Creditor by the new owner;”
This clause formed the basis of the
plaintiff’s alternative cause of action. According to the
plaintiff’s particulars
of claim the clause incorporated an
indemnification which entitled it to hold the defendant liable for
the debts of the business
incurred after the sale thereof. The
defendant’s response was that he never read the document or, if
he did, that he never
appreciated its full legal significance. The
Court
a quo
rejected both the plaintiff’s reliance on the clause and the
defendant’s response thereto. Because ownership had been
reserved to the defendant in the deed of sale of the business and had
not yet passed, the clause, as it stood, did not import liability
for
the defendant; nor could it be interpreted or rectified as the
plaintiff sought to do to give it the wider meaning of “a
parting with possession and/or control and/or change of the running
of the business”. The Court
a
quo
likewise
rejected the defendant’s explanation that he neither read nor
understood the document in general or the clause in
particular. The
correctness of the decision of the Court
a
quo
in both
directions was not challenged in this Court by either the plaintiff
or the defendant and no more need be said about it.
[3] The plaintiff’s main cause of action was one
for goods sold and delivered. The defendant denied that he ordered
the goods
or that they were supplied to him. The plaintiff
replicated that the defendant was
“
estopped from denying that the liquor and other
beverages were delivered to him or that he did not order and/or
receive the goods
...”.
The allegations relied on by the plaintiff in support of
its replication were that the defendant, by failing to inform the
plaintiff
of the sale and by allowing BPCC to take possession of the
business and to trade under the business name and liquor licence of
the defendant
“
held out to the Plaintiff that he was still the
owner of the business and/or still in possession and/or control
and/or running the
business and the Plaintiff continued to believe
the same resulting in the Plaintiff continuing to supply goods to the
business
known as Liquor Den. But for this belief, the Plaintiff
would not have continued to supply goods to the business known as
Liquor
Den on the basis that it did and would have entered into an
agreement with the new owner and/or possessor and/or controller
and/or
operator of the said business on such terms and conditions and
with such security as to protect its interests.”
The
defendant, according to the replication, in effect represented - and
was thus precluded from denying - that all goods purchased
for The
Liquor Den on credit were purchased by or on behalf of the defendant
and delivered to him or on his behalf and that the
defendant as a
consequence remained liable for the payment thereof.
[4] The onus rested on the plaintiff
to establish,
au
fond,
a
misrepresentation by the defendant and reliance thereon by the
plaintiff, which reliance was “the cause of his acting to
his
detriment” (cf
Oakland
Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd
1976
(1) SA 441
(A) 452G;
Quenty’s
Motors (Pty) Ltd v Standard Credit Corporation Ltd
[1994] ZASCA 41
;
1994 (3) SA 188
(A) 198G-199G). Such proof would, in my opinion,
include proof that the reliance was not actuated by some external
influence or
factor other than the defendant’s
misrepresentation.
[5] As to the misrepresentation
itself the Court
a
quo
rightly held
that the defendant, knowing that the plaintiff was routinely
extending credit to The Liquor Den on the strength of
his own credit
rating, was under a duty to disclose to the plaintiff that he had
sold the business and that he was no longer in
control thereof:
“
He knew, or should reasonably have known, that if
he did not disclose to the plaintiff that he had sold the business,
the plaintiff
might be unaware of the sale and might continue to
supply and deliver goods to the purchaser on credit, believing that
it was supplying
and delivering such goods to the defendant. In
other words he knew, or should have known, that there was a
reasonable prospect
that the plaintiff would continue to give credit
to the business upon the faith that the defendant was still the
proprietor and
in possession of that business and in ignorance of his
having ceased to be such. The plaintiff’s failure to inform
the defendant
of the sale of the business constituted a breach of
that duty and, in the result, a misrepresentation that the plaintiff
was still
the proprietor of the business.”
[6] An
ancillary point which arises is whether the defendant’s
misrepresentation did not in truth extend beyond mere silence
(pursuant to a duty to speak): more especially, whether the
defendant had not connived with Da Silva to create a particular
perception
which enabled Da Silva to represent himself to the outside
world, including the plaintiff, as entitled to trade lawfully under
his (the defendant’s) liquor licence; a deception to that
effect was thus implicit in their transaction; consequently the
defendant was himself guilty, like Da Silva, of perpetuating a fraud
for which the defendant must assume equal responsibility vis-à-vis
the plaintiff.
[7] There
are, I think, several answers to this line of thought. Clause 24(a)
of the Addendum to the Deed of Sale requires the
purchaser to apply
for and obtain the necessary consents to trade pending an application
for the transfer of the liquor licence
and clause 25 provides:
“
The
PURCHASER
shall at its own cost apply for and do all things necessary to obtain
the necessary Trading Licences and other Authorities required
by the
PURCHASER
to conduct the business.”
These
clauses in my opinion dispose of the suggestion, not pursued in
cross-examination of the defendant, that the defendant acted
improperly or with criminal intent in regard to the transfer of his
liquor licence. The onus to prove duplicity on the part of
the
defendant rested on the plaintiff; and the evidence falls far short
of establishing it. And, finally, none of the plaintiff’s
witnesses testified that this was the reason why credit continued to
be granted to the business.
[8] The matter must accordingly be
approached, as did the Court
a
quo
, on the footing
that the defendant, by his silence, was responsible for the
impression that he remained in control of The Liquor
Den and that all
purchases by the business on credit were made as if the business had
never been sold. This finding was not challenged
on appeal and may
therefore, like the defendant’s negligence, be taken for
granted (cf Rabie and Sonnekus,
The
Law of Estoppel in South Africa
2
nd
ed 83 85).
[9] It
follows that if matters had carried on more or less evenly as before
and the plaintiff had continued to grant credit to The
Liquor Den
after BPCC had effectively taken charge of the business, the
plaintiff would have been entitled to hold the defendant
liable for
the full amount owing if BPCC were afterwards unable to foot the
bill.
[10] A similar result would on a
similar postulate have followed if the matter had been approached as
it was in
Michna
(t/a Grecian Pool Health Studio) v Argus Printing and Publishing Co
Ltd
1981(2) SA 848
(T), a decision of Nicholas J (with whom Grosskopf J agreed), and to
which the Court
a
quo
referred in its
judgment. That was also a case like the present where the
defendant, under the trade name of the business of
which he was the
owner, signed an application for credit (in that case for the
placing of advertisements in the plaintiff’s
newspaper) which
was duly granted to him: a year later he sold the business without
advising the plaintiff of the sale. The new
owner of the business
continued to deal with the plaintiff on the same basis as before.
Nicholas J extrapolated a principle of
the law of partnership (that
an ex-partner remains liable to a party who, not having been given
notice of its dissolution, continues
to do business with the
partnership as if the erstwhile partner was still associated with it)
to the situation then under discussion.
He said at 851F-G:
“
In my opinion there is no difference in principle
between the case such as the present and a case of an ex-partner. By
the defendant’s
conduct in continuing, after the sale to
Coleman, to represent himself as the owner of the business, the
plaintiff incurred loss
and it would be unfair that the plaintiff’s
just ignorance should be a source of loss to it.
I am therefore of the view that both under the
principles of estoppel and under the principles of the common law the
defendant was
liable to the plaintiff.”
Nicholas J sought to contrast
liability under the common law and liability via the operation of
estoppel. Whether such a distinction
is meaningful, whether such a
cognate cause of action exists outside the law of partnership and
exactly what practical differences
there may be between these two
manifestations of liability, are matters on which it is not necessary
in this case to express any
views. The reason is that
Michna
’s
case is not in point. It is not in point because there was absent
from that case the very complication which is present
in this one:
namely, the role which Da Silva played in shaping the state of mind
of the plaintiff. Once Da Silva had taken over
the business matters
did
not
continue evenly as before. The crucial question in this case, which
did not arise in
Michna
’s
case, is whether it was the defendant’s initial
misrepresentation or Da Silva’s later fraud which induced the
plaintiff to act to its detriment by extending credit to BPCC in a
manner and to an extent it would not otherwise have done and
which,
in the event, it was unable to recoup from the business.
[11] To
resolve that question it is necessary to look a little more closely
at the evidence. Cockroft, the plaintiff’s representative
(referred to by one of the plaintiff’s witnesses as the “rep”)
met Da Silva in December 1995 even before the
sale was finalised.
Cockroft was unaware that BPCC was purchasing the business. He was
led to believe that Da Silva was merely
managing it on the
defendant’s behalf. Da Silva told him in December 1995 that
the premises, in anticipation of the business
being expanded, would
be enlarged and when he returned during the middle of January 1996
Cockroft noticed that extensive renovations
had in the meantime been
done. It was during this period that The Liquor Den’s
purchases from the plaintiff increased dramatically.
Whereas the
defendant’s purchases during the period 1990-1995 were in the
order or R5 000 per month, in January 1996 alone
R46 000's worth of
liquor was ordered from the plaintiff. It was also then, shortly
after the middle of January 1996, that Da
Silva enquired about a
discount on a bulk order on Hunter’s Gold which he said was
destined for the export market. Cockroft
conveyed this information
to Mrs Van Rooyen. (She testified that the defendant’s credit
limit was pegged at R17 500, a
fact never conveyed to the defendant.)
The large orders placed with the plaintiff together with the fact
that Cockroft reported
to her that extensive renovations had been
effected to the premises, caused her to wonder whether there had been
a change in the
ownership of the business. If so, it might have a
bearing on the plaintiff’s own exposure. She discussed the
matter with
her immediate superior, Mr Pretorius, the plaintiff’s
credit manager of what was then the Transvaal area. He instructed
her to satisfy herself that the business had not undergone a change
of ownership or control. This was confirmed by Pretorius in
evidence. In the presence of Cockroft Mrs Van Rooyen thereupon
telephoned the business. She spoke to someone she believed was
the
defendant:
“
HOF
: Mevrou, verskoon my. Mevrou, het u gevra vir mnr Vlachos en toe
het iemand na die telefoon toe gekom? -- Nee, mnr Vlachos
het die
foon ...(tussenbei)
Of het die persoon gesê dat hy mnr Vlachos is? --
Hy het gesê hy is mnr Vlachos. Hy het die foon geantwoord en
ek
het gevra om met mnr Vlachos te praat en hy het gesê dit is
Vlachos wat praat.”
And
again:
“Wat het die persoon vir u gesê of ek is
jammer. Wat het u vir hom gevra? -- Ek het vir hom gevra die feit
dat hy
‘n groter bestel wil neem as gewoonlik, het daar enige
eienaarsverandering gebeur. Toe sê hy nee, hulle het net die
bottelstoor vergroot en hy het ‘n persoon wat ‘n
uitvoerkontrak met hom het vir wie hy die goedere wil verskaf.
Die veranderings waarvan hy gepraat het, het u geweet
waarvan hy praat? -- Op daardie stadium ja, want die verteenwoordiger
wat
self uitgaan na die bottelstoor was by my toe ek die oproep
gemaak het en hy het my vertel van die veranderings.”
She
reported this conversation to Pretorius. Although the proposed
purchases would exceed the limit which the plaintiff had placed
on
the defendant’s credit, a deliberate decision was taken to
confirm the proposed transaction. The reason was that the
plaintiff,
at that time, was more lenient in its approach to the furnishing of
credit. She explained:
“
Dit is korrek, maar in 1995/1996 het ons nie
dieselfde maatskappy beleid gehad om soos ek reeds gesê het op
daardie stadium
was ons baie “lenient” met kliënte
waar ons dit nie vandag is nie.”
[12] I
interrupt this résumé of the facts at this point to
deal briefly with a submission raised for the first time
in argument
before this Court by counsel for the defendant, based on the evidence
that the plaintiff’s attitude at the time
was more lenient than
later. It was that the plaintiff for purely commercial reasons
deliberately closed its eyes to the real
chance that the business had
in the meantime been sold to Da Silva; and that such knowledge must
be imputed to the plaintiff on
the basis that a man must be taken to
know something if he
“
consciously abstains from doing that which as a
matter of business he would do, and abstains because he would rather
not know the
truth.”
(
In
re Building Estates Brickfields Company (Parbury’s case)
[1896] 1 Ch D 100
, 106;
Hartogh
v National Bank Ltd
1907
(2) TS 207
, 212;
Grant
and Another v Stonestreet and Others
1968 (4) SA 1
(A) 20F-G). If the plaintiff knew of the sale when as
a matter of policy it extended credit to the business, so it was
contended,
it was relying on that knowledge and not on the
defendant’s earlier misrepresentation; consequently there was
no room for
the invocation of estoppel (cf Rabie and Sonnekus,
op
cit
59 61). I
cannot agree. In my opinion there is no justification whatsoever
for saying that the plaintiff deliberately closed
its eyes to the
true state of affairs, namely that Da Silva had to all intents and
purposes taken over control of The Liquor Den.
This was patently not
a case where the plaintiff studiously refrained from learning the
truth. The accommodating attitude which
the plaintiff exhibited at
the time was not a factor which in itself changed the course of
events; it merely rendered the plaintiff
more susceptible to Da
Silva’s campaign of misinformation.
[13] To
return to the evidence, it is apparent from the analysis of purchases
and payments placed before the trial Court that during
the period
January to February 1996 purchases were made in the sum of R234
724,68. Some payments were also made. But whereas
the payments in
the past were made timeously this was no longer the case. In
particular the payments in respect of the large export
order of 14
February 1996 was not made within the agreed time, which prompted Mrs
Van Rooyen to telephone The Liquor Den once again,
on which occasion
she was fobbed off by Da Silva with a somewhat implausible
excuse. A payment of R40 000 (incidentally
by BPCC) was, however,
made on 26 February 1996 whereupon a further large order for R100 812
was executed. On 27 February 1996
The Liquor Den’s account
was erroneously credited with an amount of R50 000 which Da Silva
afterwards falsely claimed enured
to the business. Because of the
problem with the R50 000 The Liquor Den was placed on a COD basis as
from 14 March. Two BPCC
cheques of R30 000 and R29 003, respectively
dated 18 and 22 March 1996, were both returned as dishonoured in
early April 1996.
No further deliveries were made thereafter. The
outstanding debt was eventually calculated to be in excess of R200
000.
[14] To
sum up this portion of the evidence: the telephone conversation
between Van Rooyen and Da Silva took place after Da Silva
mentioned
the possibility of the large export order to Cockroft (between the
middle of January and early February) but before the
order was
eventually executed on 14 February 1996. Up to the moment of the
telephone conversation the defendant would rightly
have been held
liable for purchases made by The Liquor Den because the plaintiff was
clearly still acting on the faith of the defendant’s
own
misrepresentation in not informing the plaintiff of the change of
responsibility for the account. But even though the defendant
may in
principle have been liable for debts incurred prior to that
conversation, it happens to be of no relevance in this case.
The
reason is that if payments subsequently made by The Liquor Den to the
plaintiff are appropriated to the earlier debts, as
in law they must
be, nothing remains owing in respect of purchases made prior to 14
February 1996. The payments made on 26 February
(R40 000), 18
March (R30 000) and 22 March (R30 000) far exceeded the sum of the
purchases made before 14 February 1996.
[15] The
real issue is whether the defendant can be held liable for orders
placed and executed after the first telephone call between
Van Rooyen
and Da Silva had taken place. That call was the watershed for the
following reasons:
1. Because
of the manner in which the business was conducted after January 1996
the plaintiff became apprehensive that it may have
changed hands
which, if true, might affect its own ability to recover payments for
goods supplied by it on credit.
2. The
plaintiff thereupon instituted its own enquiries. Because of Da
Silva’s impersonation of the defendant these enquiries
were
deflected to him rather than directed to the defendant.
3. As
a result of the false reassurance by Da Silva the plaintiff decided,
also as a matter of policy, to continue supplying goods
to the
business on credit.
4. If
it had not been for Da Silva’s reassurances given to Mrs Van
Rooyen on the telephone some time during late January
or early
February 1996 the plaintiff would either have imposed its “stop
supply” procedure or it would have insisted
on a fresh credit
application. In that event it would either have agreed new terms or
it would have insisted on payment on delivery.
5. Subsequent
supplies were accordingly made on the strength of its own assessment
of the situation based primarily on Da Silva’s
misinformation.
[16] It
has been suggested in favour of the plaintiff that Da Silva’s
own later misrepresentations, enlarging on the defendant’s
earlier one, could not serve to relieve the defendant of liability;
that the defendant’s initial misrepresentation remained
concurrent and operative throughout and was not overreached by Da
Silva’s later fraud; in short, that the defendant could
not be
better off and his accountability not be lessened because Da Silva,
exploiting the situation, perpetrated a later and more
potent
deception on the plaintiff. The defendant’s initial
misrepresentation, far from being dissipated, therefore remained,
so
it was said, a concomitant cause which induced the plaintiff to act
to its detriment.
[17] I cannot agree. In the first
place the so-called “facilitation theory”, absent a
calculated deception (cf Rabie
and Sonnekus,
op
cit
65), has long
been discredited in this country (cf, for instance,
Union
Government v National Bank of South Africa Ltd
1921 AD 121
131 138; and
Grosvenor
Motors (Potchefstroom) Ltd v Douglas
1956 (3) SA 420
(A) 425F-H). Thus it was declared by Corbett J in
O
K Bazaars (1929) Ltd v Universal Stores Ltd
1973 (2) SA 281
(C) at 287H-288B:
“
As in the present instance,
cases of estoppel by negligence often involve the fraudulent conduct
of a third party and the complaint
against the person sought to be
estopped is that his negligence permitted or facilitated the fraud.
In this situation our Courts
have rejected, as being too broadly
stated, the so-called “facilitation theory”, viz. that
where-ever one of two innocent
parties must suffer by the acts of a
third, he who has enabled such third person to occasion the loss must
sustain it (see
Grosvenor
Motors’
case,
supra
at p.425; see also
Connock’s
(S.A.) Motor Co. Ltd v Sentraal Westelike Ko-operatiewe Maatskappy
Bpk.,
1964 (2) S.A.
47
(T) at p.48). It has, on the contrary, been held that such cases
must be adjudged by the ordinary general principles relating to
estoppel by negligence; and, of course, the fraudulent intervention
of a third party is an important factor in determining whether
the
conduct of the person sought to be estopped proximately caused the
other’s mistaken belief and resultant loss; and whether
this
result was reasonably foreseeable (see, e.g.,
National
Bank
case,
supra
).”
(Cf
Universal
Stores Ltd v OK Bazaars (1929) Ltd
1973 (4) SA 747
(A).)
[18] In the second place the basis
for holding liable someone for holding out something is the image he
conjured up which prompted
the other party to react to his prejudice
(cf
Southern Life
Association Ltd v Beyleveld NO
1989 (1) SA 496
(A) 505F-G); if, due to some new circumstance (here,
the fraud of Da Silva), a new image is superimposed on the old one
and it
is the new image to which the other party responds and on
which he relies, the original party can no longer be held to it, even
if he would otherwise have remained liable (Rabie and Sonnekus,
op
cit
56).
[19] Finally, there is the related
and parallel matter of causation. Instances of this kind are
typified by Rabie and Sonnekus,
op
cit
19 122 as
“cases of assisted misrepresentation”. In a passage
cited at p 18 from
Cross
on Evidence
6 ed (1993) this phenomenon is described as:
“
a type of estoppel ... in which the party in
whose favour it operates is the victim of a fraud of some third
person facilitated
by the careless breach of duty of the other
party.”
Rabie and Sonnekus,
op
cit
122 continue:
“
In cases of this kind
difficult questions can arise as to whether the fraud of the
intervening party, or the negligence of the owner
which facilitated
the commission of the fraud, should be regarded as having
caused
the representee to act to his prejudice.”
In such situations our courts have
chiefly but not exclusively employed the so-called “proximate
cause” test (cf
Grosvernor
Motors (Potchefstroom) Ltd v Douglas
1956 (3) SA 420
(A);
Standard
Bank of South Africa Ltd v Stama (Pty) Ltd
1975 (1) SA 730
(A);
1975 (4) SA 965
(A)) or the “real cause”
test
(Saambou-Nasionale
Bouvereniging v Friedman
1979 (3) SA 978
(A) 1005E-H) or even the test of foreseeability
(
Union Government v
National Bank of South Africa Ltd
1921
AD 121
129 138;
Monzali
v Smith
1929 AD 382
387;
Konstanz
Properties (Pty) Ltd v Wm Spilhaus en Kie (WP) Bpk
[1996] ZASCA 28
;
1996 (3) SA 273
(A) 288F-G), in order to resolve the problem of
whether one party’s misrepresentation caused another party to
act thereon
to his prejudice.
[20] Latterly this Court has on more
than one occasion favoured a more flexible test to determine issues
of legal (as opposed to
factual) causation within the fields of the
criminal law (cf
S v
Mokgethi
en
Andere
1990 (1) SA
32
(A) 39I-41A), the law of delict (
International
Shipping Company (Pty) Ltd v Bentley
1990 (1) SA 680
(A) 700H-701F;
Smit
v Abrahams
1994 (4)
SA 1
(A) 15B-18H) and the law of insurance (
Napier
v Collett and Another
1995 (3) SA140 (A) 143E-144F; 146E-J). In
Standard
Chartered Bank of Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994
(4) SA 747
(A) at 765A-B it was said that:
“
the test to be applied is a
flexible one in which factors such as reasonable foreseeability,
directness, the absence or presence
of a
novus
actus interveniens
,
legal policy, reasonability, fairness and justice all play their
part.”
Quite
plainly this does not mean that the tests previously employed in
matters of this kind are to be disregarded. It simply means
that
they should be viewed not in isolation as before but in the context
of a broader overall picture which would also include
matters of
policy and fairness.
[21] There
can be little doubt that if the plaintiff had chosen to sue the
defendant in delict for the losses it suffered in not
being able to
recover payment from BPCC, the modern flexible test would have been
applicable to determine the issue of legal causation.
It is
difficult to appreciate why a different test is to be applied when
the same liability is to be determined on the same facts
by dint of
delictual action rather than of estoppel.
[22] Even so, it is not necessary in
this case to decide finally whether the traditional tests of
proximate cause, real cause or
foreseeability, hitherto applied, have
in the context of estoppel been superseded by the more flexible test.
It is not necessary
to do so for two reasons. In the first place
the matter was not properly argued and in the second place I am
satisfied that whichever
approach is adopted the end result would be
the same. On the facts of this case, and for the reasons stated in
particular in
para 15 above, I am of the firm view that the plaintiff
was ultimately induced to act by the lies told to it by Da Silva;
that
the defendant could not reasonably have anticipated or foreseen
that Da Silva would impersonate him in order to capitalize on
his
credit; and that there are no considerations of policy and
fairness, on the broader flexible test, that dictate a different
conclusion. In the final analysis the plaintiff relied on and acted
to its detriment on the faith of Da Silva’s deceit rather
than
on the defendant’s default. I arrive at that conclusion
irrespective of the onus. But if the onus is to be considered
it
would
a fortiori
be
decisive against the plaintiff.
[23] The Court
a
quo
was accordingly
right in concluding that the plaintiff failed to establish all the
requirements for a successful riposte of estoppel.
[24] The
following order is made:
The
appeal is dismissed with costs.
...........................
P M NIENABER
Concur
:
Olivier JA
Melunsky
AJA
Nugent
AJA
MARAIS
JA
MARAIS JA
:
[1] Having initially thought otherwise, I agree that the
appeal should be dismissed with costs. I base that conclusion
upon a
narrow finding of fact and so refrain from assenting to all of the
propositions of fact and law in the judgment of Nienaber
JA. In my
view, it is clear that even although defendant’s failure to
fulfil his clear legal duty to apprise plaintiff of
the true facts
was, objectively regarded, reasonably capable of misleading and did
in fact initially mislead plaintiff to believe
that he remained its
customer, the situation changed as time went by. While defendant’s
continuing failure to fulfil his
duty to inform plaintiff of the true
state of affairs remained reasonably capable of so misleading
plaintiff, the fact of the matter
is that a point was reached when
defendant’s mere silence ceased to induce plaintiff to believe
that it was still its customer.
So much was that so that plaintiff
set about seeking positive reassurance in that regard. In short,
defendant’s mere silence
alone (or failure to fulfil his duty
to speak) was no longer regarded by plaintiff as a sufficient
indication that nothing had
changed. Objectively regarded, it was.
Subjectively regarded by plaintiff, it was not. From that moment
onwards the silence
of defendant ceased to have the inducing effect
upon plaintiff which it had thitherto had, namely, a readiness to
supply and extend
credit.
[2] Understandably,
plaintiff sought positive reassurance on that score and, equally
understandably, sought it from defendant
himself. Had defendant
provided that assurance plaintiff would no doubt have continued to
supply as before but the real
1
cause of its renewed belief that defendant was its customer would
have been defendant’s positive assurance that that was
so, not
defendant’s continuing silence. Defendant would of course have
remained liable thereafter. As it happened, plaintiff
was given the
positive assurance which it wanted but, unbeknown to it, the
assurance emanated, not from defendant, but from Da
Silva who
impersonated defendant. It was that false assurance and not
defendant’s continuing silence (which by then had
come to be
regarded as equivocal by plaintiff) which caused plaintiff to
continue supplying and extending credit.
[3]
Unless responsibility for Da Silva’s impersonation of
him can be laid at defendant’s door, the positive
assurance so
given cannot be raised against defendant to found an estoppel. For
the reasons given by Nienaber JA I do not believe
it can.
[4]
In as much as goods supplied prior to the vital telephone
call must be regarded as having been paid for, and liability
for
goods supplied thereafter cannot be attributed to defendant,
plaintiff’s claim against defendant must fail.
[5] The narrow finding of
fact upon which my conclusion rests makes it unnecessary to deal with
the problems which exercised
my mind at a time when it seemed to me
that defendant’s failure to fulfil his duty to inform plaintiff
of the changed circumstances
was a concomitant cause of plaintiff’s
belief that defendant was still its customer. Those problems related
to such questions
as: the validity and appropriateness of attempting
to assign differing weights to the causal effect of two factors each
of which,
objectively regarded, was calculated to mislead (and was
therefore material in the sense in which the law uses that word) and
each
of which did in fact contribute to the erroneous belief
2
;
the causative implications of persistent silence where a duty to
speak continues to exist even after another potent causative
factor
has entered upon the stage and played an inducing role which it would
not have been able to play if the duty to speak had
been discharged
(a problem distinct from, and not to be seen as a mere manifestation
of, the unsustainable breadth of the discredited
“facilitation”
theory); the usefulness or otherwise of the deployment of such
epithets as “proximate”,
“direct” or
“immediate” where the premise is that there
are
concomitant causes both of which have had an inducing effect, either
singly or in combination.
3
[6]
Thankfully, I am spared the necessity of further enquiry by
the finding of fact that defendant’s silence had
ceased to
mislead plaintiff by the time the
telephone call was made. On the rock of that factual
finding plaintiff’s claim must founder.
R M MARAIS
JUDGE OF APPEAL
1
As Jansen JA preferred to call it. See
Saambou-Nasionale Bouvereniging v
Friedman
1979 (3) SA 978
(A) 1005A-F.
For myself, I would say the sole cause.
2
The
problem also arises in the field of contract. In England, in the
7
th
edition (1969) of Cheshire and Fifoot,
Law
of Contract,
the authors state: “The
court
allows
no
post-mortem
examination into the relative importance of the contributory causes,
once it is proved that the representation complained of
was one of
those causes.” (At pages 244-5.) In both that edition and
the 13
th
edition (1996) (Cheshire, Fifoot and Furmston’s) the following
appears:
“It is clear, however, that the right to relief would be
endangered if a defendant were free to evade liability by proof
that
there were contributory causes, other than his misrepresentation,
which induced the plaintiff to make the contract, and
that his
representation was not the decisive cause.
Cranworth LJ asked:
‘Who can say that the untrue statement may not have been
precisely that which turned the scale in the mind of the party
to
whom it was addressed?’
The courts, therefore, although denying relief
to a plaintiff who entirely disregards the misrepresentation, have
consistently
held that the misrepresentation need not be his sole
reason for making the contract. If it was clearly one inducing
cause it
is immaterial that it was not the only inducing cause. In
Edington v Fitzmaurice,
for instance:
‘The plaintiff was induced to take debentures in a company,
partly because of a misstatement in the prospectus and partly
because of his own erroneous belief that debenture holders would
have a charge upon the property of the company.’
Thus he had two inducements, one the false representation, the
other his own mistake, and on this ground it was pleaded -
unsuccessfully - that he was disentitled to rescission.” (At
pages 244 and 281-2 respectively.)
Whether that approach is compatible with our law and whether, if it
is, it is to be confined to the question of the right to
resile from
a contract and not extended to the doctrine of estoppel, need not be
decided.
3
In
Spencer Bower and Turner,
Estoppel by
Representation
3 ed (1977) it is said:
“It has already been pointed out -----
also, that ‘immediate’, ‘direct’, or
‘proximate’
causation, in so far as these epithets
suggest the necessity of establishing anything over and above a real
causal nexus are
misleading and inaccurate. ----- It is not
necessary that the representation should be the sole or exclusive
cause of the representee
altering his position; it is enough that it
is
a
cause
of his doing so, provided that a real causal nexus is established.”
(At pages 102-3. See too pages 74-5.)