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[2014] ZAWCHC 81
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Absa Bank Limited v Eagle Creek Investments 490 (Pty) Limited and Others (7798/2012) [2014] ZAWCHC 81 (28 May 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
REPORTABLE
Case No.:
7798/2012
In
the matter between:
ABSA
BANK
LIMITED
..............................................................................................................
Plaintiff
and
EAGLE
CREEK INVESTMENTS 490 (PTY)
LIMITED
...........................................
First
Defendant
HENDRIK
JOHANNES
GREYLING
......................................................................
Second Defendant
and
SYDNEY
REBE
..............................................................................................................
First
Third Party
N
NKOPANE
.............................................................................................................
Second Third Party
P
J
McKAY
....................................................................................................................
Third
Third Party
N
McKAY
.....................................................................................................................
Fourth
Third Party
M
F
BARDIEN
...............................................................................................................
Fifth
Third Party
M
I
HIGGENS
...............................................................................................................
Sixth
Third Party
ANTONY
DERBY
....................................................................................................
Seventh Third Party
JUDGMENT: 28 MAY
2014
GAMBLE
J
INTRODUCTION
1.
In April 2012 Absa Bank Limited (“
the
bank
”) issued summons against
Eagle Creek Investments 490 (Pty) Limited (“
Eagle
Creek
”) and Hendrik Johannes
Greyling (“
Greyling
”)
for repayment of a loan in the amount of R3.2 million, together with
interest and costs. The amount in question had
been advanced by
the bank against the security of a mortgage bond passed by Eagle
Creek in favour of the bank over certain immovable
property that
Eagle Creek owned at the Arabella Golf Estate near Kleinmond in the
Western Cape. Greyling stood surety for
Eagle Creek’s
obligation to the bank under this loan.
2.
When Eagle Creek entered an appearance to
defend the claim, the bank applied for summary judgment against only
the First Defendant
in May 2012. The application was opposed
and an affidavit (with annexures) running to some 130 pages was made
by Mr Ari Fonarov,
a chartered accountant, who is a director of Eagle
Creek. I shall revert to the content of that affidavit shortly.
3.
The opposition to the application for
summary judgment raised significant points of law and was postponed
on 19 June 2012 by the
Motion Court Judge for hearing on the
semi-urgent roll on 11 September 2012. The parties thereafter
filed detailed heads
of argument. On 11 September 2012 an order
was taken by agreement in terms whereof Eagle Creek was granted leave
to defend
the action with costs to stand over for later
determination.
4.
Eagle Creek has not yet filed a plea in
this matter, nor has a plea been demanded by the bank. Rather,
the bank took the somewhat
unusual step in February 2013 of issuing a
series of Third Party Notices directed at seven of the shareholders
of Eagle Creek,
in consequence whereof the First to Seventh Third
Parties were joined as parties in these proceedings.
5.
The notice given to the First Third Party
is accompanied by an annexure in which the bank purports to set out
its case against that
Third Party. Attached to that annexure is
a copy of the bank’s Combined Summons and Particulars of Claim
herein, together
with the annexures thereto.
6.
No Third Party Notice has been given to the
Second Third Party whose name appears as such in the heading to the
various documents
filed in this matter. In the index filed on
27 August 2013 it is recorded (as item 17) that pages 297-300 of the
Court papers
are “
Notice to Third
Party: Third and Fourth Third Parties
”.
No such documents are to be found in the Court file, the pagination
running directly from p 296 to p 301.
7.
The bank has further filed a document
entitled “
Notice to Third Party:
Fifth and Sixth Third-Parties
[
sic
]”.
The Notice contained in this document is identical to the Notice
given to the First Third Party, save that there
is no annexure
thereto. The bank has done precisely the same in respect of the
Seventh Third Party.
8.
Save for the Notice to the First Third
Party, the remaining Notices are irregular and do not comply with the
provisions of Rule
13. The irregularity in these Notices was
not attacked but on 26 March 2013 the First and Seventh Third Parties
filed a Notice
of Exception in which the bank’s Third Party
Notices were attacked on the basis that they lacked averments
necessary to sustain
the Plaintiff’s action.
9.
That exception was set down for hearing on
10 September 2013 on the semi-urgent roll. The bank was
represented by Mr Amm from
the Johannesburg Bar and the First and
Seventh Third Parties were represented by Ms Holderness from the Cape
Bar, both of whom
filed detailed heads of argument prior to the
hearing. During the course of the hearing, I queried,
inter
alia
, the appropriateness of issuing
Third Party Notices before the Defendants had filed their Pleas and
of taking exception to such
a potentially defective pleading.
Subsequent to the hearing, counsel each filed a further note in
November 2013 addressing
these concerns and confirming that neither
party took the point that the exception was premature. Ms
Holderness said that
the same legal team represented the First
Defendant and the First and Seventh Third Parties, and that to insist
on formalism at
this stage would unnecessarily protract the matter
and result in wasted costs. Mr Amm adopted a similar approach:
both
counsel urging the Court to determine the substance of the
points raised in the annexure to the First Third Party’s
Notice.
THE
DEFENCES RAISED IN THE AFFIDAVIT OPPOSING SUMMARY JUDGMENT
10.
Mr Fonarov’s affidavit contains a
long narrative explaining the background to the legal relationship
between the bank and
Eagle Creek, and the circumstances giving rise
to the bank’s claim against it. I shall endeavour to
summarise the salient
points.
11.
The immovable property involved is
evidently a house on the Arabella Golf Estate which is owned by Eagle
Creek. The company
has 13 shareholders and by arrangement each
shareholder has the use of the property for four weeks in a year.
The form of
ownership and the derivative use of the property is
dubbed “
fractional ownership
”,
a marketing device developed by a company which traded as “
Seeff
Fractional Ownership
” (“
SFO
”).
This company was the brainchild of the Second Defendant, Greyling,
both of whom have subsequently been declared
insolvent.
12.
The first law point taken by Fonarov in the
summary judgment affidavit is that the bank has failed to allege that
Greyling, who
was sued jointly and severally by the bank under a deed
of suretyship executed in favour of the bank on behalf of Eagle
Creek,
and who signed the loan agreement with the bank on behalf of
Eagle Creek, was duly authorised to represent Eagle Creek. It
is suggested that “
this may render
the particulars of claim excipiable
”.
However, nothing further is said in the First and Seventh Third
Parties’ Notice of Exception in this regard.
13.
The affidavit proceeds to set out in the
minutest of detail a defence under the Share Blocks Control Act, 59
of 1980 (“
the SBCA
”),
read with the 1973 Companies Act. It is claimed that the bond
and its underlying agreement fall within the definition
of a “
loan
obligation
” as contemplated in
section 1 of the SBCA. It is said that such an agreement must
comply with sections 14(1) and (6)
of that Act which require a
resolution passed by 75% of the shareholders of Eagle Creek.
Absent such compliance, it is said
that in terms of section 8(1)(d)
of the SBCA, the company acted
ultra
vires
in concluding the loan with the
bank.
14.
Fonarov says, further, that the bank’s
remedy lies against Greyling personally and that Eagle Creek is
absolved from liability.
He goes on to allege a potential
counterclaim against the bank by Eagle Creek. A further
complaint that is raised relates
to the unauthorised transfer of
funds from Eagle Creek’s bond account by the bank and the
potential misappropriation by Greyling
of some R2.4 million which
will also be considered in the formulation of Eagle Creek’s
counterclaim. However, nothing
is said about the attitude of
Eagle Creek’s liquidators to these alleged counterclaims and so
one does not know whether they
will ever see the light of day.
15.
Finally, Fonarov alludes to the substantial
losses incurred in a number of share block schemes in other exclusive
resorts throughout
South Africa as a consequence of SFO’s
demise and says that “
the present
matter before the Court is one of a multitude of matters, which have
or will in due course become litigious as a direct
result of
substantial public involvement in the various share block offerings
made to the public and marketed by SFO under the
Seeff umbrella
”.
THE
BANK’S RESPONSE
16.
Since Eagle Creek’s plethora of
allegations of both fact and law have not been formulated in a Plea
and Counterclaim, we do
not know which of those contentions are
disputed by the bank: there is at this stage no Plea to a
Counterclaim nor a Replication
filed by the bank. Instead, the
bank considered it prudent to respond by way of a melange of Third
Party Notices, one procedurally
valid and the others apparently not.
Those Notices seek to draw into this litigation some of the
shareholders in Eagle Creek,
although no substantial relief is sought
against any of them.
17.
In the Third Party Notice to the First
Third Party, the following preamble appears:
“
TAKE
FURTHER NOTICE
that
the above-named Plaintiff contends that questions of fact and law
that have arisen (and are anticipated to arise) from the
pleadings in
the action between the Plaintiff and the Defendants are substantially
the same as some of the questions of fact which
will arise between
the Defendants and you, and should properly be determined not only as
between the Plaintiff and the Defendants,
and/or also between the
Defendants and yourself, the grounds hereof appear from the annexure
hereto.
”
18.
After reciting the facts and cause of
action relating to the claim against Eagle Creek, the bank sets out
in the annexure to the
Third Party Notice directed at the First Third
Party what it terms “
The First
Defendant’s (Anticipated) Defence
”
and proceed to summarise its understanding of part of that defence
thus:
“
16.
The first defendant has yet to plead to the particulars of claim, but
in summary judgment proceedings, the first defendant contended
as
follows:
16.1
that the first defendant carried on the business of a share block
scheme as contemplated by the definition of ‘share
block
scheme’, and furthermore was a ‘share block company’,
as contemplated by the relevant definitions under
the Share Block
Control Act, no. 59 of 1980 (‘the Act’);
16.2
the first defendant was not duly authorised to be represented by one
Hendrik Johannes Greyling (‘Greyling’), its
sole
director, in concluding the loan agreement and mortgage bond;
16.3
the loan agreement and mortgage bond were concluded in breach of the
provisions of sections 14(1) of the Act; and
16.4
as a consequence thereof, and/or under section 8(1)(d) of the Act,
the mortgage bond and loan agreement are void and/or unenforceable.
”
19.
Then the bank purports to set out what it
terms its “
claims as against the
third parties
” as follows:
“
17.
The plaintiff proceeds as against the third parties in the event of
the first defendant’s contentions in paragraph 17
[
sic
]
above being found to be correct.
18.
At all material times hereto, the third parties owed the plaintiff a
duty of care (properly a duty not to act negligently).
”
It
proceeds to set out the circumstances under which the duty of care
allegedly arose and lists the respects in which the Third
Parties are
alleged to have breached that duty.
20.
The consequences of such breaches are then
articulated as follows:
“
21.
As a consequence of the third parties’ aforesaid breach(es) of
their respective duties of care, the plaintiff concluded
the loan
agreement with the first defendant and registered the mortgage bond.
22.
As a consequence of the aforesaid and only inasmuch as the first
defendant’s contentions in paragraph 17 above may be
found
and/or held to be correct, the plaintiff has suffered damages in an
amount of R3 219 930,15 as at 6 January 2012 together
with interest
thereon at a rate of 7% per annum from 6 January 2012 to date of
payment, calculated daily and compounded monthly
both days
inclusive.
”
21.
Nowhere in any of its Third Party Notices
does the bank formulate any claim against any of the Third Parties.
It does not
say either why it has only purported to give notice to
seven shareholders whereas Fonarov claims that there are 13
shareholders,
nor does it suggest whether the shareholders to whom it
has purported to give notice should be held to be liable jointly and
severally,
if at all.
THE
NOTICE OF EXCEPTION
22.
For the sake of convenience I shall recite
the Notice of Exception filed on behalf of the First and Seventh
Third Parties in full:
“
BE
PLEASED TO TAKE NOTICE
that
the First and Seventh Third Parties hereby except to the Plaintiff’s
third party notices, on the ground that they lack
averments necessary
to sustain the Plaintiff’s action, as follows:
1. The Plaintiff
conditionally claims against the First and Seventh Third Parties ex
delicto. As such the Plaintiff alleges
a duty of care by the
First and Seventh Third Parties against it qua shareholder, which it
alleges the First and Seventh Third
Parties have breached.
2. The Plaintiff
alleges inter alia that the First and Seventh Third Parties, as
shareholders in the First Defendant, knew or ought
to have known that
the First Defendant was carrying on the business of a share block
scheme as defined in terms of the Share Blocks
Control Act 59 of 1980
(‘the Act’), the provisions of sections 4, 7, 8, 9, 14
and 16 of the Act and that third party
financiers, such as the
Plaintiff in conducting business with the First Defendant would have
due regard to the identity of its
director/s, its main object and
business and its name in determining the capacities or authorities of
the sole director purporting
to represent or contract on behalf of
the First Defendant.
3. The Plaintiff
alleges further that the third parties knew, alternatively ought
reasonably to have known that the failure of the
First Defendant to
comply with the provisions of the Act referred to in paragraph 2
above, could result in any agreements concluded
by the First
Defendant in breach thereof being found to be void and/or voidable
and/or unenforceable.
4. The Plaintiff
further alleges that the First and Seventh Third Parties negligently
and wrongfully breached the aforesaid duty
in inter alia the
following respects:
4.1
they failed to ensure that its object and business were recorded as
being in respect of the operation of a share block scheme
in respect
of immovable property owned by it;
4.2
they failed to ensure that the articles of the First Defendant
provided that a member would be entitled to use a specific part
of
the immovable property in respect of which the company operated the
share block scheme, on the terms and conditions contained
in the use
agreement entered into between the company and such member;
4.3
they failed to ensure that the First Defendant included in its name
the expression ‘share block’; and
4.4
they failed to ensure, or to reasonably and adequately take steps to
ensure that the Second Defendant did contract on behalf
of the First
Defendant (in respect of the loan agreement and mortgage bond)
alternatively that the third party financiers such
as the Plaintiff
were informed that the Second Defendant was not duly authorised to
represent the First Defendant.
5. The Plaintiff
pleads that as a consequence of the third parties’ aforesaid
breaches of their alleged duties of care, the
Plaintiff concluded the
loan agreement with the First Defendant registered the mortgage bond,
and as a consequence thereof and
if the defence raised by the First
Defendant in the summary judgment application is upheld, the
Plaintiff has suffered damages
in an amount of R3 219 930,15,
as set forth in the annexure to the third party notice.
6. The Plaintiff
alleges that in their capacities as shareholders the First and
Seventh Third Parties owed the aforesaid duties,
that is the duty not
to act negligently, to the Plaintiff.
7. The
Plaintiff’s claim is bad in law and does not sustain a cause of
action against the First and Seventh Third Parties
for the following
reasons:
7.1
a shareholder does not in law owe any duty of care to the company (in
this case the First Defendant) in which the shares are
held, or to
the creditors of the company, or to future or potential creditors of
the company, or to other third parties with whom
the company may have
had dealings, due to the fundamental principle that a company is a
legal entity separate and distinct from
its shareholders;
7.2
the facts upon which the Plaintiff relies in paragraphs 19.1 to 19.5
of the annexure to the third party notice in any event
did not in law
give rise to the alleged duties;
7.3
even if the First and Seventh Third Parties owed the alleged duties
to the Plaintiff, the duties did not in law extend to a
duty to
protect the Plaintiff as a creditor or future/potential creditor of
the First Defendant against losses of the kind suffered
in the
present case, which losses were caused solely by the conduct of the
Second Defendant;
7.4
even if the First and Seventh Third Parties owed the alleged duties
to third parties, its breach of those duties could not in
law render
third parties liable to the Plaintiff for its loss; and
7.5
furthermore the Plaintiff has not alleged that the First and Seventh
Third Parties had a legal duty to prevent the loss aforesaid
alternatively the facts pleaded are insufficient to support the
existence of the legal duty contended for, as the loss alleged
to
have been suffered amounts to pure economic loss negligently caused,
which is not prima facie wrongful.
8. Accordingly
the conduct or omission by First and Seventh Third Parties and the
remaining shareholders cited by the Applicant/
Plaintiff as third
parties is not legally actionable and the extension of delictual
liability is not warranted in the circumstances.
9. Furthermore
the facts as pleaded by the Plaintiff do not demonstrate a sufficient
nexus between the conduct of the First and
Seventh Third Parties and
the loss alleged to be suffered by the Plaintiff.
WHEREFORE
the First and Seventh Third Parties pray that
their exception be upheld and that the Plaintiff’s case be
dismissed with costs.
”
23.
In summary then the bank’s case as
set out in the Third Party Notices seems to be to the following
effect:
23.1.
the bank lent money to a company which
owned an immovable property;
23.2.
that loan was secured by a mortgage bond
over the property in favour of the bank;
23.3.
the company to which the bank lent the
money conducted a share block scheme in respect of the property and
the provisions of the
SBCA were applicable to the transaction;
23.4.
the SBCA has onerous provisions (including section 14) which require
that a loan of the sort advanced by the bank is supported
by a
resolution approved by 75% of the members of such a share block
company;
23.5.
such a resolution was not passed in terms
of section 14(1) of the SBCA;
23.6.
the loan is therefore void and
unenforceable in terms of section 8(1) of the SBCA;
23.7.
the bank did not know it was dealing with a
share block company and advanced the loan oblivious of the
requirement that it needed
the support of 75% of the shareholders, or
that there was in fact a valid resolution to that effect passed by
75% of the members;
23.8.
the general description of the name of the
company does not include the words “
share
block
” which would ordinarily
alert a party doing business with it to its corporate status as such;
23.9.
further, the description of the main object
of the company in its Memorandum of Association does not refer to its
status as a share
block company but rather “
investments
in movable and immovable property
”;
23.10.
the mis-description of the company in its
Memorandum of Association is in breach of the peremptory provisions
of section 7(1) of
the SBCA;
23.11.
the members of the company are responsible
for the aforesaid mis-description in the Memorandum of Association,
in that, in attending
to the registration of the company, the members
were duty bound to ensure that the company’s Memorandum
accurately reflected
its main object;
23.12.
the members breached that duty (a legal
duty owed to third parties dealing and contracting with the company),
and as a consequence
of that breach the bank suffered damages.
THE
APPROACH ON EXCEPTION
24.
The
general principles applicable to an exception were recently usefully
summarised by Makgoka J in
Living
Hands
[1]
with reference to a number of earlier decisions:
“
[15]
…
(a)
In considering an exception that a
pleading does not sustain a cause of action, the court will accept,
as true, the allegations
pleaded by the plaintiff to assess whether
they disclose a cause of action.
(b)
The object of an exception is not to
embarrass one’s opponent or to take advantage of a technical
flaw, but to dispose of
the case or a portion thereof in an
expeditious manner, or to protect oneself against an embarrassment
which is so serious as to
merit the costs even of an exception.
(c)
The purpose of an exception is to
raise a substantive question of law which may have the effect of
settling the dispute between
the parties. If the exception is
not taken for that purpose, an excipient should make out a very clear
case before it would
be allowed to succeed.
(d)
An excipient who alleges that a
summons does not disclose a cause of action must establish that, upon
any construction of the particulars
of claim, no cause of action is
disclosed.
(e)
An over-technical approach should be
avoided because it destroys the usefulness of the exception
procedure, which is to weed out
cases without legal merit.
(f)
Pleadings must be read as a whole
and an exception cannot be taken to a paragraph or a part of a
pleading that is not self-contained.
(g)
Minor blemishes and unradical
embarrassments caused by a pleading can and should be cured by
further particulars.
”
THE
DUTY OWED BY SHAREHOLDERS
25.
In
Living
Hands
the Court was confronted, albeit on significantly different facts,
with the question as to what duties shareholders owed to a company
in
which they held shares. The Court answered the question before
it thus
[2]
“
[21]
… In our jurisprudence and common-law jurisdictions such
as England, Australia and New Zealand it is settled that
a
shareholder owes no fiduciary duty to the company in which he is a
shareholder, and has no duty of care to the company in his
capacity
as such. See Kuwait Asia Bank EC v National Mutual Life
Nominees Ltd,
[1991] 1 AC 187
(PC), where the position was neatly
summed up as follows:
‘
With
regard to the alleged cause of action based on negligence, the law
does not recognise any duty of care owed by shareholders
of a company
to creditors of the company, or to other third parties with whom the
company may have dealings. This is a consequence
of the
fundamental principle that a company is a legal entity separate and
distinct from its shareholders. The courts in
England have
refused to recognise any such duty … (T)he idea that
shareholders owe any such duty has also not found
favour with those
directly concerned with law reform in the United Kingdom or in New
Zealand.’
”
26.
Mr Amm accepted the correctness of this
principle and acknowledged that, at first blush, there was merit in
the Exception.
However, he contended that the provisions of,
inter alia
,
sections 5, 7, 8, 9 and 10 of the SBCA placed the members of a share
block company in a different position to members of ordinary
companies. The reason for this, so the argument ran, is that a
share block company is a different
species
of corporate entity with a number of in-built rights and protections
afforded by a piece of legislation quite distinct from the
Companies
Act. An important aspect of this distinction is, for example,
section 14 of the SBCA which will entitle it to avoid
the
consequences of a loan procured without the support of 75% of its
members.
27.
Mr Amm argued then that because of these
provisions , which are intended to protect and benefit members of a
share block company,
there is a greater degree of vigilance and care
required on the part of the members when the company engages in
commercial dealings
with third parties.
UNLAWFULNESS
28.
Given that it is common cause that the
company was not properly described in its Memorandum or in relation
to its name, the question
that follows is whether any liability can
attach in respect of potentially negligent conduct on the part of the
parties responsible
for this. Such liability will arise in
circumstances where:
28.1.
the conduct (or as in this case, the
omission) on the part of the members complained of was unlawful;
and
28.2.
the conduct (or omission) on the part of
the members caused damages to the bank, both factually and legally.
29.
In
determining whether the omission was unlawful a Court must enquire
whether there was a legal duty on the part of the members
to conform
with the standard of a reasonable person, and then whether the
omission falls short of that standard.
[3]
30.
In
recent years there has been a plethora of cases relating to the
so-called “
duty
of care
”
principle.
[4]
The point of
departure is undoubtedly
Ewels
[5]
(a claim for patrimonial damages) in which Rumpff CJ observed that
our law had developed to the point where an omission was to
be
regarded as unlawful when the circumstances of the case at hand were
such that the alleged omission not only incited moral indignation,
but also the legal convictions of the community demanded that the
omission was to be considered as unlawful, and that the damage
suffered was to be made good by the person who neglected to perform a
positive act.
31.
Some
four years later the Chief Justice approved the extension of such
liability to cases involving pure economic loss in the milestone
judgment in
Administrateur,
Natal v Trust Bank van Afrika Bpk
[6]
.
32.
In
the constitutional era the test for pure economic loss is evaluated
against the norms and values enshrined in the Constitution.
[7]
It is therefore a concept which is liable to change and “
continues
to develop incrementally as the expectations and needs of society
evolve
”.
[8]
33.
In
relation to claims for pure economic loss, as we have here, the
approach was summarised thus by Harms JA in
Telematrix
[9]
:
“
[13]
When dealing with the negligent causation of pure economic loss it is
well to remember that the act or omission is not prima
facie wrongful
(‘unlawful’ is the synonym and is less of a euphemism)
and that more is needed. Policy considerations
must dictate
that the plaintiff should be entitled to be recompensed by the
defendant for the loss suffered (and not the converse
as Goldstone J
once implied unless there is a case of prima facie wrongfulness, such
as where the loss was due to damage caused
to the person or property
of the plaintiff). In other words, conduct is wrongful if
public policy considerations demand that
in the circumstances the
plaintiff has to be compensated for the loss caused by the negligent
act or omission of the defendant.
It is then that it can be
said that the legal convictions of society regard the conduct as
wrongful, something akin to and perhaps
derived from the modern Dutch
test ‘’n strijd … met hetgeen volgens ongeschreven
recht in ‘n maatschappelijk
verkeer betaamt’ (contrary to
what is acceptable in social relations according to unwritten law).
…
[15]
Stating that there are no general rules determining wrongfulness and
that it always depends on ‘the facts of the particular
case’
is accordingly somewhat of an overstatement because there are also
some ‘categories fixed by the law’.
For example,
since the judgment in [Indac Electronics (Pty) Limited v Volkskas
Bank Limited
[1991] ZASCA 190
;
1992 (1) SA 783
(A)], which held that a collecting bank
owes a legal duty to the owner of a cheque, it is well-nigh
impossible to argue that a
collecting bank has no such duty, and all
that may remain is to consider whether vis-à-vis the
particular plaintiff the
duty existed. However, as public
policy considerations change, these categories may change, whether by
expansion or contraction.
”
[Footnotes
otherwise omitted]
34.
In
Fourway
Haulage
[10]
Brand JA dealt with a claim for an extension of liability for pure
economic loss on the part of the SA Roads Agency which claimed
lost
toll fees on a toll road operated by it and which was closed after a
collision caused by a truck belonging to Fourway.
The learned
Judge of Appeal stressed the importance of a party wishing to make
such a claim to properly plead its case:
“
[13]
In this light, so Fourway contended on appeal, the Agency was obliged
to allege in its pleadings not only that the negligent
conduct relied
upon was wrongful, but that it also had to allege and prove the facts
relied upon to substantiate the considerations
of policy giving rise
to a legal duty on the part of Fourway’s employee. As a
result of the Agency’s failure
to adhere to these rules of
litigation, so the argument went, neither the policy considerations
relevant to the question of wrongfulness,
nor the factual basis
underlying such policy considerations, was identified and
investigated during the trial. In consequence,
so the argument
concluded, it would be prejudiced if the issue of wrongfulness were
to be summarily disposed of at the appeal.
Fourway therefore
suggested that, unless this court upholds its contention that the
damages claimed are too remote – to which
I shall presently
return – the issue of wrongfulness should be postponed and
decided with the rest of the issues concerning
the quantum of the
Agency’s damages which are standing over in any event.
[14]
The proposition that a plaintiff claiming pure economic loss must
allege wrongfulness, and plead the facts relied upon to support
that
essential allegation, is in principle well founded. In fact,
the absence of such allegations may render the particulars
of claim
excipiable on the basis that no cause of action has been disclosed.
”
35.
Brand JA observed that
Fourway
had not filed an exception and that the matter had proceeded to trial
regardless. The Court then grappled with the problem
on appeal
of the sufficiency of evidence:
“
[14]
… The trial proceeded without any objection on [Fourway’s]
part. In the circumstances it would be futile
to investigate
whether an exception, if properly and timeously taken, would have
been successful. As I see it, the question
is rather whether,
despite the lack of necessary allegations in the Agency’s
pleadings, Fourway had sufficient opportunity
to produce the facts it
would seek to rely on for the determination of the policy
considerations pertaining to wrongfulness in
its favour.
Conversely stated, the question is whether Fourway has shown
prejudice, in the sense that it would have conducted
its case in a
materially different way if the Agency’s claim for pure
economic loss had been properly pleaded.
”
THE
CASE AS PRESENTLY PLEADED
36.
The case before the Court at this juncture
consists of a variety of documents – Particulars of Claim,
Third Party Notices
and a voluminous affidavit filed in reply to an
application for Summary Judgment. The pleadings have not yet
closed –
the Defendants and the Third Parties have not yet
articulated their defences to the various claims brought against them
without
anything approximating the requisite degree of accuracy.
37.
No trial particulars have been sought by
either party and no discovery has been called for. The matter
therefore has a considerable
procedural distance to run before it can
be said to be trial ready.
38.
Given that the bank’s claims against
the shareholders call for an extension of the grounds for delictual
liability in respect
of wrongfulness (and I have not even begun to
consider the question of causation), and given that the claim flies
in the face of
the accepted case law which absolves shareholders from
any duty towards the company or parties dealing with it, I believe
that
the matter is not ripe for determination at the stage of
exception. Unlike the case as pleaded in
Living
Hands
, I cannot conclude that it is
appropriate to consider the exception on the factual matrix before
me. To that extent then
the noting of an exception is
premature.
39.
In
Fourway
Brand JA stressed the importance of legal certainty being striven
for:
“
[16]
The enquiry,
whether as a matter of policy Fourway should be held liable for the
pure economic loss suffered by the Agency, raises
a question which is
logically anterior: what are the considerations of policy that should
be taken into account for purposes of
the enquiry? In accordance with
what criteria should the relevant considerations of policy be
identified? Must we accept that policy
considerations are by their
very nature incapable of pre-determination and that the
identification of the policy considerations
that should find
application in a particular case are to be left to the discretion of
the individual judge? Does this mean that
in the context of pure
economic loss the imposition of liability will depend on what every
individual judge regards as fair and
reasonable? I believe the answer
to the last two questions must be ‘no’. Liability cannot
depend on the idiosyncratic
views of an individual judge. That would
cloud the outcome of every case in uncertainty. In matters of
contract, for example, this
court has turned its face against the
notion that judges can refuse to enforce a contractual provision
purely on the basis that
it offends their personal sense of fairness
and equity. Because, so it was said, that notion will give rise to
legal and commercial
uncertainty … I can see no reason
why the same principle should not apply with equal force in matters
of delict.
A legal system in which the outcome of litigation
cannot be predicted with some measure of certainty would fail in its
purpose.
”
40.
In
National
Chemsearch
[11]
Botha J enjoined judges not to be hesitant, in appropriate cases, to
seize the nettle (as it were) and to move the law forward
when moral
convictions warranted it. But he sounded a word of caution that
in the process a judge:
“…
must
guard carefully against being over-bold in substituting his own
opinion for those of others, lest there be two much chopping
and
changing and uncertainty in the law
.”
41.
I am of the firm view that the matter
should proceed via thorough trial preparation to a hearing of
viva
voce
evidence. If at the
commencement of the trial the issues have been sufficiently
delineated through the pleadings and discovery
process, it will be
open to the Defendants and/or the Third Parties to ask the trial
court to determine the point of law raised
in the exception by way of
a separate issue under rule 33(4), possibly even by way of a stated
case if the parties are able to
agree on the relevant factual matrix.
COSTS
42.
In view of that which I have set out above,
the Exception cannot be upheld at this stage. It therefore
falls to be dismissed.
However, it may be that the legal points
raised by the Defendants and the Third Parties are ultimately found
to be successful and
that the substance of the Exception was good.
For that reason it seems to me to be fair to reserve the question of
the costs
of this exception for determination by the Court hearing
the trial in this matter. That Court will ultimately be in the
best
position to determine whether the points of law were properly
raised.
ORDER
OF COURT
43.
In the circumstances, the Exception is
dismissed. The costs of the Exception are to stand over for
determination at the trial
of this matter.
GAMBLE
J
[1]
Living
Hands (Pty) Limited and Another v Ditz and Others
2013 (2) SA 368
(GSJ) at 374G.
[2]
Page
377D, para [21].
[3]
First
National Bank of SA Limited v Duvenhage
2006 (5) SA 319
(SCA) at 320F.
[4]
The
relevant cases are usefully collected in, for example,
Fourway
Haulage SA (Pty) Ltd v SA National Roads Agency Ltd
[2008] ZASCA 134
;
2009 (2) SA 150
(SCA), and
Lee
v Minister for Correctional Services
2013 (2) SA 144 (CC).
[5]
Minister
van Polisie v Ewels
1975 (3) SA 590 (A).
[6]
1979
(3) SA 824 (A).
[7]
Minister
of Safety and Security v Van Duivenboden
2002 (6) SA 431 (SCA).
[8]
AB
Ventures Ltd v Siemens Ltd
2011 (4) SA 614
(SCA) at 616F.
[9]
Telematrix
(Pty) Ltd v Advertising Standards Authority SA
2006 (1) SA 461
(SCA) at 468C.
[10]
See
paragraphs [13]-[15].
[11]
National
Chemsearch (SA) (Pty) Ltd v Borrowman and Another
1979 (3) SA 1092
(T) at 1101B-F.