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[2015] ZAWCHC 33
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Paymate (Pty) Ltd v Louis and Another (13927/2009) [2015] ZAWCHC 33 (27 March 2015)
Republic of South
Africa
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case no: 13927/2009
DATE: 27 MARCH 2015
PAYMATE (PTY)
LTD
................................................................................................................
Plaintiff
v
LOUIS JOSEPH
HERBERT
...................................................................................................
Defendant
DESMOND ALEXANDER
SOMERVILLE
.......................................................................
Third
Party
Court: Judge J I Cloete
Heard: 5 and 6 November 2014, 23 –
25 February 2015
Delivered: 27 March 2015
JUDGMENT
CLOETE J:
Introduction
[1] The plaintiff company, represented
at all material times by Mr Adriano Vernetti (‘Vernetti’),
claims damages from
the defendant, a practicing attorney, of R630
000, arising out of an alleged breach of their agreement of mandate
(‘the mandate
agreement’) concluded on 16 October 2008;
alternatively, breach of the defendant’s legal duty towards the
plaintiff
in his capacity as a practicing attorney. The third party,
Mr Desmond Somerville (‘Somerville’), was joined at the
instance of the defendant, and indemnifies him in the event of the
plaintiff proving its claim.
[2] In his plea the defendant admitted
the existence of the mandate agreement but disputed its terms. He
further denied having breached
any legal duty towards the plaintiff.
Background
[3] On 16 October 2008 the plaintiff
represented by Vernetti, and The Window Guys (Pty) Ltd (‘TWG’)
represented by Somerville,
concluded a written agreement in terms
whereof TWG sold a SSLD PH 32 outdoor LED electronic screen (‘the
screen’) to
the plaintiff for the sum of R1 880 000.
[4] Clause 1 of the written agreement
contains the following terms:
4.1 The plaintiff was to pay a deposit
of R630 000 on account of the purchase price to TWG;
4.2 Such payment was to be made into
the defendant’s trust account;
4.3 The deposit was to be released to
TWG only on sight by the defendant of a bill of lading (the screen
was to be manufactured
in China); and
4.4 The balance of the purchase price
was to be paid in the manner set out in clauses 18 to 22 thereof.
[5] The plaintiff alleged that the
express, alternatively implied, alternatively tacit material terms of
the mandate agreement were
as follows:
5.1 The defendant would accept payment
of the deposit into his trust account;
5.2 Pending payment of the deposit to
TWG, the defendant would retain same in his trust account and would
not deal with it in any
manner unless expressly instructed to do so
by the plaintiff;
5.3 The defendant would only pay the
deposit to TWG once it became due and payable and when he had been
furnished with the bill
of lading;
5.4 The defendant would immediately
repay the deposit to the plaintiff in the event that the written
agreement was cancelled and/or
if he was instructed to do so by the
plaintiff; and
5.5 The defendant would deal with and
administer the deposit without negligence and with the proficiency,
care and prudence that
one could expect of the average practicing
attorney.
[6] On 16 October 2008 and upon
conclusion of the written agreement between the plaintiff and TWG,
Vernetti handed over a bank guaranteed
cheque to the defendant in the
sum of R630 000. The defendant deposited it into his trust account on
17 October 2008, marked “special
clearance”.
[7] The defendant did not retain the
deposit, but paid it out in various instalments either to Somerville
personally or to third
parties or himself on Somerville’s
express instructions. Most of the deposit was paid out over the
period 17 October 2008
to 23 October 2008. The balance of R25 000 was
appropriated by the defendant on Somerville’s instructions as
part payment
of outstanding fees apparently due to him by another
entity controlled by Somerville, the Rose Trust, on 1 December 2008.
[8] On 24 March 2009, at a meeting held
between himself and Hugo Van Bilsen (the sole director of TWG),
Vernetti came to understand
that the screen was not going to be
manufactured and/or delivered. The circumstances relating to how this
came about, and whether
what Vernetti was told was correct, were
disputed on the pleadings, as was the plaintiff’s allegation
that Vernetti thereupon
orally cancelled the written agreement.
However, the plaintiff’s version on these aspects (which was
confirmed by Vernetti
in his testimony) must stand unchallenged,
given that: (a) in his evidence the defendant admitted having no
personal knowledge
thereof; and (b) Somerville, who was present
throughout the trial, closed his case without testifying or calling
any witnesses.
[9] By letter dated 25 March 2009
Vernetti instructed the defendant to repay the deposit to the
plaintiff together with interest
accrued thereon. In a letter dated
30 March 2009 the defendant advised Vernetti inter alia that:
‘In the event that [the
plaintiff] does not wish to proceed with the transaction, then we
would certainly suggest that the
deposit be returned, though we were
not party to this [written] agreement or the terms thereof. Further,
as you are aware, the
funds deposited were released to Mr Desmond
Somerville and we hold no funds from the deposit in our trust
account.
To the best of our knowledge the
deposit is still held by Mr Desmond Somerville. We do not know how
the parties have arranged their
affairs, and it may be that the
contract is still in place.
We suggest you take this issue up
directly with Mr Somerville, who is the person most involved.’
[10] In a letter dated 18 May 2009 the
defendant informed the plaintiff’s attorneys inter alia that:
‘We finally got instructions this
weekend from client [sic], and further to your query:
1. The money was deposited into Trust
under file reference U23 (Unitex/Paymate) towards the purchase of an
electronic LED Billboard.
2. The Billboard would only be
assembled in China once the full deposit is paid over to the
manufacturer in China, and only thereafter
delivered.
3. There was thus absolutely no
question of the money being held in Trust pending delivery of the
Billboard.
4. It was your client’s earnest
wish that the money be transferred to Hong Kong as soon as possible.
Mr Vernetti may recall
he was upset by the delays caused by Nedbank
[sic] in transferring the money from his account into Trust against
the backdrop of
an accelerating slide of the Rand last year.
5. The writer paid Mr Des Somerville
the deposit paid in by Mr Vernetti on the express instructions inter
alia of Mr Somerville,
a director of Unitex and he being duly
authorised thereto.’
Issues in dispute
[11] The issues in dispute at the trial
were thus:
11.1 The terms of the defendant’s
mandate;
11.2 Whether the defendant breached his
mandate; alternatively, his legal duty towards the plaintiff, in
paying out the deposit.
[12] The parties accepted that the
plaintiff bore the onus.
The evidence
[13] Vernetti testified on behalf of
the plaintiff. The defendant also testified and called one witness,
Mr Benjamin Trabelsi (‘Trabelsi’).
[14] The salient aspects of Vernetti’s
evidence may be summarised as follows. He and Somerville had been
introduced to each
other by a mutual friend during 1996 or 1997. They
became business associates and over time, friends. Vernetti had
various companies,
one of which, Parkshade (Pty) Ltd, owned a factory
in Airport Industria outside Cape Town on which it had erected a
static advertising
billboard. By 2008 this billboard was generating
an average income of R65 000 per month net.
[15] At the time Somerville, who
similarly had various business interests, became involved with a
company based in Hong Kong, namely
Unitex (H.K.) Ltd, which in turn
represented a company in China that manufactured electronic
advertising screens. Somerville wanted
to introduce these to the
South African market. Vernetti was very interested in purchasing one
of these screens which he intended
to install at the factory in
Airport Industria. The most attractive feature of the screen was that
it would generate at least four
times the income of the static
advertising billboard, thus increasing Vernetti’s income
(through his company or companies)
from a monthly average net income
of R65 000 to R260 000.
[16] Negotiations started; however the
quoted price for the screen was $253 567.40 which was beyond
Vernetti’s means. Somerville’s
response was to offer him
a special deal on payment terms so as to make it affordable to
Vernetti.
[17] In the first draft agreement
presented to Vernetti during August 2008 the seller was reflected as
Unitex (H.K.) Ltd (represented
by Somerville and Omar Chui) and the
purchaser Parkshade (Pty) Ltd. The purchase price was reduced to $235
000 payable by way of
a deposit of $60 000 in the form of an
irrevocable letter of credit to be paid bank to bank upon
presentation of a bill of lading;
$20 000 by 30 September 2008; and
the balance in monthly instalments over a period of 18 months
following upon an initial ‘payment-free’
period of 6
months from date of installation of the screen. It was recorded that
Parkshade (Pty) Ltd (and related entities) earned
R65 000 per month
net from the site, including rental income, and that:
‘The instalment shall be equal to
the sum of all moneys [sic] accruing from the site during the month
in excess of such amount
[i.e. R65 000], for the month, less
reasonable accounting expenses also as set out above.’
[18] This proposal was also not
acceptable to Vernetti, who knew that Parkshade’s ability to
meet the monthly instalments
was directly dependent upon the income
which it would generate from the screen. He did not want to place
Parkshade’s asset
(the factory) at risk if the instalments
could not be met. He also had concerns about the breach clause in the
draft. He advised
Somerville of his concerns.
[19] A second draft agreement was
presented to Vernetti. The payment terms (including those pertaining
to the deposit being payable
by way of letter of credit) were largely
identical, but the manner in which the subsequent instalments were
to be calculated was
amended to read as follows:
‘The instalment shall be equal to
the sum of all moneys [sic] accruing from the L.E.D. board rental
during the month in excess
of such amount [i.e. R65 000] for the
month, less all expenses related to the above installation.’
[20] In addition the 18 month period
stipulated for payment of these instalments had been deleted; and the
breach clause had also
been amended. It was Vernetti’s
testimony that this proposal was acceptable to him, in particular
because payment of the
instalments was now clearly dependent upon
income generated by the screen itself – without any specific
period being prescribed
for payment. He informed Somerville
accordingly and he, Somerville and Chui signed the agreement on 15
September 2008.
[21] Vernetti then approached Standard
Bank to obtain the letter of credit but his request was declined.
Vernetti communicated this
to Somerville. The following portion of
his testimony is relevant:
‘’ Okay and what did you do
then when you established that Park Shade could not get a letter of
credit? --- I went back,
advised Mr Somerville that the deal couldn’t
be done because the letter of credit wasn’t available.
And what was his response? What
happened then? --- Well his response was that to try to find a way
and we had a meeting, try to
find a way to – to go around it,
the problem of the letter of credit and that’s why we had a
meeting at – in
his offices.’
[22] Present at the meeting (which it
turned out was held at Somerville’s office on 16 October 2008)
were Vernetti, Somerville
and Van Bilsen. Vernetti could not recall
whether the defendant, who had an office in the same building, was
also present. Three
specific issues were discussed and addressed.
First, Vernetti’s concern that the rand at that stage was under
pressure against
the US dollar. Second, a suitable alternative had to
be found for Vernetti’s inability to obtain a letter of credit
from
Standard Bank. Third, because of Vernetti’s concerns about
the exchange rate, what entities should be substituted as the seller
and purchaser respectively.
[23] Vernetti told Somerville that he
was not prepared to assume the fluctuation risk of the rand against
the dollar; and that the
seller would have to become a South African
company so that the purchase price could be fixed in rands in order
to avert that risk.
Somerville agreed, and TWG was substituted as
seller, with the plaintiff (instead of Parkshade) being substituted
as purchaser,
the latter being Vernetti’s ‘operating
company’ in his advertising business, which, by all accounts,
did not
own any fixed assets.
[24] What was also agreed was that,
instead of providing a letter of credit, Vernetti would furnish the
defendant (Somerville’s
attorney) with a bank guaranteed cheque
which would be deposited and held in trust by the defendant, to only
be released to TWG
once the screen had been loaded in China for
shipment to South Africa and the bill of lading issued. Vernetti was
adamant –
and he was consistent in this throughout his
testimony – that it was never his intention to allow any funds
to be released
before the screen was on its way to South Africa. In
his mind there was no difference between the letter of credit and the
new
arrangement for the bank guaranteed cheque and funds being held
in trust because ‘the funds would not leave the trust fund
[i.e. account] until the – a bill of lading was produced’.
[25] After the meeting Vernetti left to
attend to the agreed amendments and to obtain the bank guaranteed
cheque. He returned to
Somerville’s office later that day; he
presented the agreement to Somerville (he could not recall whether
Van Bilsen was
present on that occasion) and Vernetti and Somerville
signed it. (Vernetti was cross-examined about other changes that he
made
to the agreement, allegedly without informing Somerville
thereof. Nothing turns on this for present purposes). Vernetti could
not
recall exactly when the defendant arrived at the meeting; all
that he remembered was that the defendant made his appearance at some
point, signed the agreement as a witness, and took the cheque which
Vernetti handed over to him.
[26] During his evidence in chief
Vernetti was asked to explain his instruction to the defendant. He
replied:
‘My instruction, it was clearly
stated on the [written] agreement that the funds, they were supposed
to be only released once
there was sight of the bill of lading and
the equipment was on the way.’
[27] Vernetti denied the defendant’s
version contained in his letter of 18 May 2009 to which I have
already referred. His
evidence was that:
‘That’s completely untrue,
because it’s been specified over and over again on all the
[written] agreements that
the money was not going to be released
until there was a shipment of the billboard, and a proper bill of
lading…My contract
was with a local company. The funds, they
were only supposed to be released once the shipment was on the way.
How they found the
funding – they knew that the cash was
available. The fund, how they fund the Hong Kong situation was not
part of my problem.’
[28] During cross-examination Vernetti
was asked if he remembered that Trabelsi had also been present when
‘the meeting’
took place. Vernetti had no recollection
thereof; and maintained that he did not even know Trabelsi.
[29] In respect of his mandate to the
defendant (which it was common cause could only have been given to
the defendant at one or
other of the meetings on 16 October 2008) the
following portions of Vernetti’s testimony are instructive:
‘ Then, Mr Vernetti, you accept
that Mr Herbert didn’t read this agreement at the meeting on 16
October, or can you
not remember? --- I can’t accept one thing
or the other. I don’t know what he did. I know that the
agreement was there,
they all signed it, and I would have expected
somebody to read it…
So you can’t contest, from your
memory, from the circumstances, that Mr Herbert never read this
agreement. --- I can’t
contest that.
So you can’t contest that Mr
Herbert didn’t have any knowledge of what was contained in this
agreement. --- I can’t
comment on that.
Ok. And if I can understand then what
your case is then, and I think now it’s making your evidence in
chief a bit clearer,
is that what you are saying, is, well, if there
is a document sitting there that I’ve prepared that says X, and
I pay money
into the attorney’s trust account, well, then I
expect the attorney to find out what’s in the document, and
then to
pay according to the document. --- That’s correct.
Ok. It’s not that you’re
saying, I instructed him; my mandate to him was, hold this money
until the bill of lading happens.
--- No…
Well, just for the record, Mr Herbert
will testify that he had never read that agreement, he wasn’t
aware of what was contained
in the agreement, he was never asked to
read the agreement, and he wasn’t aware of the terms contained
in it. You can’t
contest that, can you? --- I can’t
contest that, but I know that he received my cheque, he accepted my
cheque on the trust
fund, and before disposing of [the money] should
have sent me a little note: I am disposing X,Y to Joe Soap or to
whoever, whatever,
is that ok, or advise me. You know? I never had
that…
What I understand happened at that
meeting is that you, essentially what was happening is you arrived
with a cheque, you arrived
with this document, you said you managed
to put things together. … You gave the cheque to Mr Herbert to
be deposited into
his trust account. You asked for the agreement to
be signed. The agreement was signed. Mr Herbert was asked to witness
the agreement
as well. Is that all correct? --- That is correct…
Do you confirm that you never
instructed Mr Herbert to read this agreement, to understand the
agreement and to act in terms of the
agreement? You never
specifically said that to him? --- I don’t, I don’t
specifically recall that I did say to mister,
I did expect Mr Herbert
to look at the agreement or to ask me what do I do with this money…
Ok, now we have already established
that you never, it seems that you never ever explained anything to Mr
Herbert. You were relying
on your belief that he would read the
agreement. Is that correct? --- Correct.’
[30] Vernetti’s evidence was also
that he had not given any mandate to the defendant as the plaintiff’s
attorney ‘because
he was not my attorney’ but rather
Somerville’s company attorney.
[31] The defendant’s testimony on
the issues in dispute may be summarised as follows. On 16 October
2008 he was working in
his office when he was interrupted (he could
not recall by whom or in what manner) and asked to go down
immediately to Somerville’s
office.
[32] When he arrived there he was told
that there was a payment to be made by cheque, and asked if he could
deposit it into his
trust account. The payment was from Vernetti and
the defendant was given to understand that Somerville and Vernetti
(who was also
known to him through Somerville) had signed an
agreement. They asked him to witness the agreement. After initialling
the pages
of the agreement he realised that they had already signed
on the last page and asked them to identify and confirm their
signatures
thereon, which they did. His evidence was that:
‘Before I left all the parties
there agreed that time was of the essence, the exchange rate was
volatile, they wanted the
money transferred to Hong Kong as soon as
possible and Des was appointed…as the person who would do that
and I must follow
his instructions…Mr Vernetti actually said
it does not matter what you do, I don’t care. He used a swear
word I think
… Just make it happen, just get it there, words
to that effect. The people in the room were Mr Vernetti, Mr Van
Bilsen,
Des Somerville and Benny Trabelsi, who is an associate of Mr
Somerville.’
[33] Vernetti himself handed the cheque
to the defendant. Those present did not mention the terms of the
agreement to the defendant
or point out that it was in any way linked
to the cheque that was being handed over. No-one at the meeting
informed the defendant
that he should ‘operate’ in terms
of that agreement. The defendant accepted that logically there must
have been some
connection, but he had not paid any attention to the
terms of the agreement because he was not asked to do so. His work
had been
interrupted and he wanted to get back to it as soon as
possible. The defendant maintained that he had not been furnished
with a
copy of the agreement at the meeting or thereafter. The first
time he saw a copy was after Vernetti demanded repayment of the
deposit.
He had been in Somerville’s office for two to three
minutes, and certainly no longer than four minutes.
[34] His evidence was further that:
‘I might just add I was, I viewed
it as I was doing them a favour, they asked for this.
Okay, so if you can just reiterate
then, what was the specific instruction to you? --- Take the cheque,
put it into your trust account,
the money must get to China as soon
as possible no matter what way. Listen, take instructions from Des.
Did you accept that instruction? --- I
said sure.
Did you take the cheque? --- Yes. I do
recall that I just handed the cheque to my secretary. I said to her
deposit that today, special
clearance.’
[35] The defendant testified that, had
he been made aware that the deposit was to remain in trust for any
significant period, he
would have obtained an instruction to invest
it (in accordance with s 78(2) of the Attorneys Act 53 of 1979). Had
he been instructed
to deal with the deposit as Vernetti alleged, he
would have insisted on charging a fee (which it is common cause he
did not). He
explained:
‘I do sometimes do things for
nothing if it is a good case, but here this is a commercial, …
I would have insisted
on payment. The management of funds in that
context would be quite responsible. Each transaction would have to be
verified in writing
with a formal instruction or something because it
is quite easy for business partners to fall out. It has been known to
happen.
I knew that both parties were friends here. I gave no account
to Mr Vernetti…I did not bill Mr Vernetti…or Paymate.’
[36] The defendant conceded that he had
been aware of ongoing discussions between Vernetti and Somerville
about the purchase of
a billboard and that Vernetti had been unable
to obtain a letter of credit; however his testimony (which was not
materially disputed)
was that he had not been personally involved in
any aspect thereof. In hindsight he accepted that the arrangement
about the cheque
reflected in the written agreement would have been
an eminently suitable substitute for the letter of credit; but was
consistent
in his evidence that in the few minutes he was at the
meeting, this had not occurred to him, particularly given the express
instruction
to the contrary.
[37] During cross-examination the
defendant was consistent on these essential aspects. When asked why,
if his version was to be
accepted, he had admitted the existence of
any mandate at all, his evidence was as follows:
‘ So why did you need a mandate
from him? --- Well, he handed me the cheque and he said pay this. He
was not my, my. He could
have said, he could have said there was not
a mandate or, if he wanted to, but I think the way it was pleaded is
that I was instructed
to do something and that is a mandate…
All the people were there. I did not
think, I really did not think that Mr Vernetti was my client, but I
got an instruction from
him just as Des is not actually director of
The Window Guys, but he was the guy who was, who was making the
decisions on behalf
of them. He was the person who signed the
agreement although the director was right there, the sole director
[i.e. Van Bilsen].
So I thought all these gentlemen were ad idem and
they wanted this please to be done and for some reason they
instructed me that
way.’
[38] The defendant was cross-examined
at length; much of this was directed at the careless manner in which
he had presented his
defence on the pleadings and his conduct
subsequent to receiving the “mandate”. I will deal with
the relevance thereof
hereunder.
[39] Trabelsi, the only independent
witness, testified that he knew Vernetti, Somerville and Van Bilsen
as well as the defendant.
Trabelsi could not understand how Vernetti
claimed not to know him, given that they had met and interacted with
each other on more
than 20 occasions during the period of Trabelsi’s
association with Somerville from 2007 to 2009. Over that period
Trabelsi
had shared an office with Somerville and Van Bilsen, and had
worked in that office on an almost daily basis.
[40] Trabelsi was able to remember
details of certain occasions that he had interacted with Vernetti,
including a meeting at the
latter’s home when he recalled
workmen having been present repairing tiling outside. Trabelsi’s
unchallenged evidence
was that he had not had any contact with
Somerville since starting an independent business venture in 2009.
[41] Trabelsi recalled the events at
the meeting on 16 October 2008 as follows. He happened to be in the
office with Somerville
and Van Bilsen, working on his computer. He
was aware that Somerville and Van Bilsen were involved in a deal with
Vernetti about
a billboard. Vernetti came into the office with a
written agreement which Vernetti and Somerville signed. They then
called the
defendant down from his office two floors above.
[42] When the defendant arrived he was
distracted as he had been interrupted in the middle of something that
he was doing. Trabelsi
remembered that the defendant ‘was very
restless, he wanted to go back to his office’. Vernetti and
Somerville asked
the defendant to witness the agreement. The
defendant initialled the pages thereof and after confirming the
identity of the signatories,
signed as a witness.
[43] Vernetti handed the defendant a
cheque to deposit into his trust account. The defendant agreed to do
so. The stated purpose
was to move the funds as soon as possible to
Hong Kong. Trabelsi understood the reason to be a problem with the
exchange rate.
The defendant was told that Somerville was in charge
of the transaction and that the money would be withdrawn from the
account
by Somerville as and when required. The defendant accepted
this arrangement, took the cheque and left. He did not leave with a
copy of the agreement. Trabelsi recalled that the only agreement at
the meeting was the original, and that no copies had been made
available. The defendant had been there for no longer than three to
four minutes before he left to return to his office.
[44] During cross-examination Trabelsi
testified that no discussions had taken place about the terms of the
agreement itself, and
that ‘this [meeting] was for the final
signature; there were no discussions, Mr Vernetti came with the final
agreement’.
Vernetti had been very clear in his instruction to
the defendant. Trabelsi’s evidence was that ‘he said
something like
I don’t give a [expletive] how you get it there,
just get it there as soon as possible’. Trabelsi was a good
witness
whose evidence was not challenged in any material respect.
Evaluation
[45] It appeared from much of the
defendant’s cross-examination that the plaintiff had lost sight
of the fact that it bore
the onus to prove the terms of the mandate
agreement and that, only if it did so, would any question of a breach
thereof (in the
context of the defendant’s subsequent conduct)
arise. Although Vernetti remained adamant throughout his testimony
that his
intention was for the defendant to hold the deposit in trust
until presentation of a bill of lading, on his own version he had
never conveyed that intention to the defendant. In addition, he could
not even recall what, if anything, he had specifically told
the
defendant to do. Vernetti had merely acted on the assumption that the
defendant would take it upon himself to ensure that he
was familiar
with the terms of a written agreement which he had not drafted or
negotiated and to which he was not a party, and
act in accordance
therewith.
[46] On the other hand, the defendant’s
version about his express instruction at the meeting was supported by
Trabelsi’s
testimony; and, to a certain extent, by the contents
of his letter of 30 March 2009 which was sent in response to
Vernetti’s
initial letter of demand.
[47] I found Vernetti to be generally a
good witness, although his poor recall of events was clear and was in
fact conceded by him.
He was candid about his failure to convey his
intention about the cheque to the defendant. He was similarly candid
about his failure
to recollect what (if anything) he had told the
defendant at the meeting. The high-water mark of the plaintiff’s
case thus
crystallised into the following, namely that Vernetti had
only assumed that he had given the defendant a mandate. In these
circumstances
it would be too far a stretch to find that the
contradictions in certain aspects of the defendant’s testimony
on issues unrelated
to the terms of the mandate somehow proved the
plaintiff’s case for it. To do so would also ignore Trabelsi’s
version
which was essentially unchallenged.
[48] I thus cannot find that the
plaintiff succeeded in discharging the onus which it bore to prove
the terms of the mandate agreement
as alleged.
[49] Because the plaintiff failed to
discharge its onus, a consideration of the evidence relating to any
breach becomes redundant.
However two further issues need to be
addressed.
[50] First, the plaintiff pleaded
breach of the defendant’s legal duty in the alternative as
follows:
‘15 The defendant accordingly,
negligently breached his legal duty to the plaintiff in that he:
15.1 paid the deposit to Somerville,
despite the fact that the plaintiff never instructed the defendant to
make such payment; and/or
15.2 paid the deposit to Somerville,
despite the fact that he never received a bill of lading and knew
alternatively, should have
known with the exercise of reasonable
care, that the bill of lading had never been issued;
15.3 failed to take any steps
whatsoever to obtain the plaintiff’s instructions as to whether
the deposit may be paid to Somerville
or not; and/or
15.4 failed to take any steps
whatsoever to prevent loss to the plaintiff by, inter alia, obtaining
the plaintiff’s instructions
as to how the deposit should be
dealt with and/or
15.5 acted unreasonably or
irresponsibly with the deposit by paying it to Somerville; and/or
15.6 paid the deposit to Somerville
despite the fact that the risk existed that the plaintiff would
suffer damages as a result thereof;
and/or
15.7 failed to deal with the deposit
with the expertise, trustworthiness and prudence as can be expected
of the average practicing
attorney.’
[51] From the aforegoing and the
evidence adduced at the trial it appeared that the claim based on
breach of a legal duty was underpinned
by the defendant’s
alleged failure to follow Vernetti’s instructions (whatever
they might have been). Put differently,
the claim was premised on the
defendant having known, because of an instruction given, what he was
required to do, but failing
to do it. Again, on the plaintiff’s
own version, Vernetti never told the defendant what to do.
[52] During argument the plaintiff
relied on Hirschowitz Flionis v Bartlett and Another
[2006] ZASCA 23
;
2006 (3) SA 575
(SCA) and Du Preez and Others v Zwiegers
[2008] ZASCA 42
;
2008 (4) SA 627
(SCA) in
support of its claim based on breach of a legal duty. In my view both
of these decisions are distinguishable on the facts,
given that in
both of these cases the attorneys concerned had acted without
instructions, and not contrary to the instruction given.
[53] In Hirschowitz an attorneys firm
had received a deposit of R3.1 million into its trust account without
information as to the
identity of the depositor or the purpose for
which the deposit was intended.
[54] The Supreme Court of Appeal
pointed out that the incidence of a legal duty to act without
negligence is a matter of legal policy;
and that the attorneys should
have taken reasonable steps to enquire about the depositor and the
purpose of the deposit, and to
safeguard it, particularly where, on
the facts of that case, the instruction from a third party to pay it
out had been patently
suspicious. In casu the evidence showed that
the defendant received the deposit both with knowledge of the
depositor’s identity
and the purpose for which it was intended.
The defendant’s version (supported by Trabelsi) that,
irrespective of the terms
of a written agreement of which he had no
knowledge, he was to pay out the deposit on Somerville’s
instruction; and that
he acted in accordance with that instruction,
does not translate into acting without an instruction.
[55] In Du Preez the attorney paid out
monies held in trust to the designated payee of a client who claimed
to be entitled to the
monies, without first making contact with the
depositor. The court found that even though the depositor had not
given the attorney
a mandate, the latter’s error lay in failing
to establish whether the depositor intended giving him a mandate and,
if so,
what it was. The court held that a reasonable attorney would
have done so and that the attorney concerned was thus negligent. The
distinction between the facts in Du Preez and those in the present
matter is self-evident. I am accordingly compelled to find that
the
plaintiff has failed to discharge this onus as well.
[56] The second issue relates to legal
causation, and I deal with it on the assumption that my finding of a
failure to prove breach
of a legal duty is wrong.
[57] In International Shipping Co
(Pty) Ltd v Bentley
1990 (1) SA 680
(AD) the court explained the test
for legal causation at 700H-701C as follows:
‘On the other hand, demonstration
that the wrongful act was a causa sine qua non of the loss does not
necessarily result in
legal liability. The second enquiry then
arises, viz whether the wrongful act is linked sufficiently closely
or directly to the
loss for legal liability to ensue or whether, as
it is said, the loss is too remote. This is basically a juridical
problem in the
solution of which considerations of policy may play a
part. This is sometimes called “legal causation”. (See
generally
Minister of Police v Skosana
1977 (1) SA 31
(A) at 34E -
35A, 43E - 44B; Standard Bank of South Africa Ltd v Coetsee
1981 (1)
SA 1131
(A) at 1138H - 1139C; S v Daniëls en 'n Ander
1983 (3)
SA 275
(A) at 331B - 332A; Siman & Co (Pty) Ltd v Barclays
National Bank Ltd
1984 (2) SA 888
(A) at 914F - 915H; S v Mokgethi en
Andere, a recent and hitherto unreported judgment of this Court, at
pp 18 - 24.) Fleming The
Law of Torts 7th ed at 173 sums up this
second enquiry as follows:
'The second problem involves the
question whether, or to what extent, the defendant should have to
answer for the consequences which
his conduct has actually helped to
produce. As a matter of practical politics, some limitation must be
placed upon legal responsibility,
because the consequences of an act
theoretically stretch into infinity. There must be a reasonable
connection between the harm
threatened and the harm done. This
inquiry, unlike the first, presents a much larger area of choice in
which legal policy and accepted
value judgments must be the final
arbiter of what balance to strike between the claim to full
reparation for the loss suffered
by an innocent victim of another's
culpable conduct and the excessive burden that would be imposed on
human activity if a wrongdoer
were held to answer for all the
consequences of his default.'
[58] In his letter of 30 March 2009,
the defendant had stated that, to the best of his knowledge, the
deposit was still held by
Somerville. He invited the plaintiff to
take up the matter directly with Somerville. In Somerville’s
affidavit of 2 September
2009 in the summary judgment proceedings,
the following allegation was made:
‘13. The Vernetti deposit of
Seventy Thousand United States Dollars (USD 70 000) is at present
secured in a Unitex-controlled
account in Hong Kong for purposes of
payment to the various manufacturers of the LED billboard.’
[59] However, the plaintiff failed to
adduce any evidence about whether it had taken steps to recover the
deposit from Somerville,
and if so, the outcome thereof. The court is
thus left in the dark, and has no factual matrix from which it could
conclude that
any wrongful act on the part of the defendant is linked
sufficiently closely or directly to the loss which the plaintiff
contends
it has suffered. Put differently, this court is unable to
determine whether, or to what extent, the defendant (if his conduct
was
indeed wrongful) should have to answer for the consequences which
his conduct helped to produce.
Conclusion
[60] In the result the following order
is made:
‘The plaintiff’s claim is
dismissed with costs, including any reserved costs orders.’
J I CLOETE