ADMINISTRATOR, NATAL v TRUST BANK OF AFRICA LTD. (Appellate Division)

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1 SAFLII Note: This case was originally published by Juta and Company (Pty) Ltd. Juta retains copyright as far as it subsists. ADMINISTRATOR, NATAL v TRUST BANK OF AFRICA LTD (Appellate Division) 1979 March 5; May 25 Rumpff CJ, Jansen JA, Trollip JA, Joubert JA and Trengove JA 825 Case information: Appeal against a decision in the Natal Provincial Division (MOSTERT J). The facts appear from the judgment of RUMPFF CJ and from the report in 1978 (2) SA 256 (N). M L Mitchell for the appellant: A David Gordon SC for the respondent: B Mitchell in reply. Cur adv vult. Postea (May 25). Rumpff C J: In the present case the respondent in the Court a quo and in this Court could have argued that in our law negligent misrepresenta- tion does not exist as a delictual ground for action. That is what the exci- pient did in Suid-Afrikaanse Bantoetrust v Ross en Jacobz 1977 (3) SA 184 (T). Obviously under the influence of, inter alia, academical initial steps after the decisions in Perlman v Zoutendyk 1934 CPD 151 and Herschel v Mrupe 1954 (3) SA 464 (A) the Court in the Bantoetrust case at the exception stage pertinently decided that such a ground of action in- deed exists. The Court then also says: I doubt whether there is a single academical commentator who is opposed to

2 such an action. The (Afrikaans) expression nalatige wanvoorstelling, which is a translation of negligent misrepresentation, does not reflect, in con- nection with negligent misrepresentation as a delictual ground of action, the essential problem in our law and creates the impression of a represen- tation in a contractual content. In a contractual context misrepresenta- tion has a somewhat legal-technical meaning. It must be, eg, a represen- tation of an existing fact and therefore does not normally embrace the expression of an opinion or the giving of advice. This requirement is not necessarily applicable to a negligent misrepresentation. Perhaps the expression nalatige wanbewering ( negligent misstatement ) should rather be used, but, if the expression negligent misrepresentation is re- tained, the above-mentioned caveat should be borne in mind. The respondent in the present case not only accepted the decision in the Bantoetrust case but expressly submitted that such a ground of action in fact exists in our law and, inter alia, referred to a decision of the Natal Court in Greenfield Engineering Works (Pty) Ltd v NKR Construction (Pty) Ltd 1978 (4) SA 901 (N) in which the decision in the Bantoetrust case was followed. In the GreenfieldEngineering case reference is, inter alia, made to an article by Prof McKerron at 1 of the 1973 South African Law Journal ( Liability for Mere Pecuniary Loss in an Action under SOUTH AFRICAN LAW REPORTS (1979) (3) the lex Aquilia ) and an article by Prof Boberg in the 1972 Annual Survey o f South African Law at in which certain decided cases are discussed. In the judgment reference is also made to the following at 916 : B

3 As in the Bantoetrust case, we are not dealing in the present case, as far as the facts are concerned, with the concept of liability in general for pure patrimonial loss, but with the specific problem of patrimonial loss caused by negligent misstatement. In the present case a number of facts were placed before the Court a quo by means of a stated case and in the stated case it is not denied that negligent misstatement (outside contractual context) can lead to recoverable patrimonial loss. In the judgment of the Court a quo against which the appellant appeals, it was then also found that there is indeed a ground of action based on negligent misstatement, but it was found that the plaintiff could not succeed on the facts. The plaintiff in the case is now the appellant and there was in essence only one defendant, the pre- sent respondent. The judgment of the Court a quo can be found under Administrator, Natal v Bijo and Another 1978 (2) SA 256 (N). Bijo was the first defendant but because judgment by default had already been given against Bijo, the Court a quo referred to the respondent as defen- dant. Obviously the appellant relies on the averment that in our law com- pensation of patrimonial loss can be claimed for negligent misstatement. As far as the law is concerned this Court is, therefore, placed in a somewhat strange position. In effect both parties request this Court to approve what was said with little or no motivation in the Bantoetrust case. I think it can be accepted, from what different writers have written on the subject, that the right to compensation for pure patrimonial loss was recognized in the Roman law in certain limited cases but that this right was still relative to a thing or a corpus. It can also be accepted that in the Roman-Dutch law compensation for pure patrimonial loss was awarded in certain cases which indicates that Aquilian liability was extended beyond the Roman law boundary of damage to property. In this regard mention can be made of the judgment in Cape o f Good Hope Bank v Fischer 4 SC 368 in which reference is made to Voet and Matthaeus De Auctionibus ; Van Bynkershoek Obs Tumult 11, 195; Pieter Pauw Aanspreeklikheid vir Suiwer Vermoënskade in die Suid- Afrikaanse Reg in De Jure vol 1 at 23; J C van der Walt Risiko Aanspreeklikheid uit Onregmatige Daad at 309 (unpublished thesis); Prof Price Patrimonial Loss and Aquilian Liability 1950 THRHR 87. In whatever way the judgments of the different Judges in the Appellate Division in Herschel v Mrupe 1954 (3) SA 464 (A) are interpreted, it ap- pears to be clear that the existence of such a right in the South African

4 law was not rejected by the Appellate Division: Rather the right was 982 SOUTH AFRICAN LAW REPORTS (1979) (3) recognized. The unsatisfactory state which has existed in our law since 831 the Herschel case, the differing judgments in Provincial Divisions subse- quent thereto and the attitude of both the appellant and the respondent in this Court are sound reasons as to why a judgment should now be given recognizing or rejecting the existence of such a right in our com- mon law. I am aware of the following which appears in the 1974 SALJ at 408: B The birthpangs of such a right of action have endured so long that the time has arrived, perhaps even with a Ceasarean section, that the child should be brought into the world. It should immediately be added that it can be foretold that this child will be a problem child. With the necessary love, and especially discipline, it can however play a useful role in legal life. In the investigation of this problem one can refer extensively to the Anglo-American legal systems. Indeed, Susan Scott mentions in her article on Nalatige Wanvoorstelling as Aksiegrond in die Suid- Afrikaanse Reg in THRHR 1977 at 176: The position is clearly very unsatisfactory and it is to be regretted that our Courts did not take more notice of the developments in the Anglo-American legal systems. This creates a problem however. In his article " Aquilian Liability for Negligent Statements in the 1950 SALJ at 139 Prof Price declares: "

5 831E For those who are fond of looking to the English law without any reser- vation it will also be useful to read the article of Prof Price in the 1959 Acta Juridica Aquilian Liability and the Duty of Care: A return to the Charge at 120. At 138 the following, inter alia, appears: ".." 831H In para 5 of his heads of argument appellant submitted with reference to the decisions in Minister van Polisie v Ewels 1975 (3) SA 590 (A) at 597 and Minister o f Police v Skosana 1977 (1) SA 31 (A) at 34 that the social and economic development has reached the stage which makes it desirable that this Court, subject to the conditions mentioned in para 4 of the heads of argument, finally decides that a claim based on negligent misstatement which causes patrimonial loss, is recognized. Then para 6 reads as follows: SOUTH AFRICAN LAW REPORTS (1979) (3) 832B In a discussion of the judgment in the Bantoetrust case supra in TSAR 1977 (3) Prof J C van der Walt declares as follows at 273: The second factor which is of particular importance in the case of liability on the ground of negligent misrepresentation, is the fact that pure financial loss ie patrimonial loss which does not arise from injury to person or property is frequently in question. Especially in the Anglo-American law the recoverability of

6 such patrimonial loss was denied in principle for legal political reasons. The breaking down of this deep-seated English law approach and principle takes place very slowly. The original ground for this scepticism in regard to the fundamental protection of pure economical interests is again the liberalisticindividualistic in- spired fear for a too wide and arduous liability. Fleming (The Law o f Torts (1971) at 164) correctly writes: E The judgment in the Hedley Byrne case (above) apparently destroyed this prin- ciple, especially if one reads Lord Devlin s rejection thereof ( ): 832F The Hedley Byrne case did, however, not, as far as the English law is concerned, terminate the said nonsense. It thrives in the English law and ensures that still more nice distinctions are made (cf Weller & Co v Foot and Mouth Disease Research Institute (1965) 3 All ER 560; Electrochrome L td v Welsh Plastics L td (1968) 2 All ER 205; British Celanese L td v A H Hunt (Capacitors) L td (1969) 2 All ER 1252; SCM (UK) L td v Whittal and Son L td (1970) 2 All ER 417). I refer to the English law in this manner because in so far as the defini- tion of the principle is concerned, it will not assist much, in my opinion, to rely on the English law, especially in view of the difference between our law and the English law in respect of the origin of the ground of ac- tion. That in the solution of the problem of the limitation of the action certain factors in the English law may be taken into account which could also be considered in our law, can obviously not be denied. In my opinion the ground of action can and ought to be placed in the extended range of application of the lex Acuilia. From this it would follow that, according to our current norms, unlawfulness is required and a guilty mind. The fear of the so-called limitless liability can then

7 833 only be allayed if in every given case it is the task of the Court to decide whether in the particular circumstances there was a legal duty resting on the defendant not to make a misstatement to the plaintiff, and also whether the defendant, in the light of all the circumstances, exercised 984 SOUTH AFRICAN LAW REPORTS (1979) (3) reasonable care, inter alia, in determining the correctness of his represen- tation. In the absence of a legal duty there is no unlawfulness. The Court will also keep the ground of action within reasonable limits by giving proper attention to the nature of the misstatement and the interpretation thereof and also by giving proper attention to the problem of causation. In any case it happens quite frequently that the Court is requested to solve similar problems which arise from misrepresentation in a contrac- tual context or from estoppel. It is a known judicial task. Because in practice, as in the present case, reference will be made to English decisions in regard to certain situations which may lead to what we regard as a legal duty, it is essential to indicate how basic the English concept of duty of care, although a monstrosity in our law, in this particular instance, link up with the concept of a legal duty as it should exist in our law, because policy considerations are also in question here. Millner in his Negligence in Modern Law (1967) refers at 24 e tseq to two elements of the duty of care concept, viz: (1) the negligence issue and (2) the duty issue. At 26 the following appears: H This last paragraph naturally also reflects the position in our common law,

8 notwithstanding the numerous references to the concept of " duty of care in our decided cases. The view of this writer that the un- foreseeable plaintiff rode home with rest must be seen in the light of the meaning of that expression in the English law. Fleming declares in The Law o f Torts 4th ed at 136: A In conclusion useful reference can also be made to the minority judg- ment of Lord Reid and Lord Morris of Borth-Y-Gest in Mutual Life & Citizens Assurance Co Ltd and Another v Evatt (1971) 1 All ER 150 at 612 where the following was, inter alia, said: C Naturally, by way of elimination basic circumstances can in anticipation be excluded as grounds for a claim for damages as a result of a negligent misstatement. So the abovementioned minority judgment proceeds in regard to the facts of that case, and says: E What must, however, be kept in mind, is that in our law the liability SOUTH AFRICAN LAW REPORTS (1979) (3) flowing from negligent misstatement arises as delictual liability, outside the contractual context. It is unnecessary to decide whether there can be delictual liability within a contractual context, cf Hamman v Moolman 1968 (4) SA 340 (A) at 348.

9 As regards the facts of the present case, it is unnecessary to repeat the stated case fully, because that has already been done in 1978 (2) SA 256 (N). Section 9 (1) of Ord 19 of 1945 (N) provides that, if the Ad- ministrator (the plaintiff) decides to expropriate any land, he must cause a notice of expropriation to be served on the owner of such land. Sub- section (2) of s 19 provides that: "Every notice of this nature must either be served on the owner personally or be sent to him by registered post provided that the place where he is can be readily ascertained. It must be accepted in the present case, that the Administrator, through his officials, determined that Bijo, colonial born Indian No 8536/8537 of Ottowa, Natal became the registered owner of the land in It must also be accepted that the officials of the Administrator without pro- per investigation found that Mr Bijo, 50/52 Russom Street, Verulam was the Mr Bijo who was the. registered owner. As a result of this negligence a letter was sent to Mr Bijo who resided in Russom Street, Verulam and in that it was stated that he was the registered owner of 835 the land. Armed with this letter Bijo (in fact P Bijo) went to the defen- dant and identified himself as P Bijo of Russom Street, Verulam. Defen- dant is described as a company who carries on business, inter alia, as bankers and financial advisers and which also through its property divi- sion carries on business in property transactions. According to the stated case the function of the property division is to act as estate agents but usually not to give advice to clients in regard to compensation for ex- propriation. The defendant, however, admits that a certain Nel who acted on behalf of defendant, acted in the course of his service. As already said, the plaintiff himself, through his officials, gave out in the letter to Bijo that Bijo was the registered owner. Defendant, after having consulted with Bijo, wrote a letter to plaintiff and. said: " " 835C

10 At that stage, it can be accepted, that defendant foresaw that as a result of its representations and mediation an amount could eventually be paid out to Bijo. The first question which arises is whether there was a legal duty which placed the burden on the defendant not to refer in its letter to plaintiff to P Bijo as the registered owner of the land: It is clear that Bijo 986 SOUTH AFRICAN LAW REPORTS (1979) (3) used the defendant as agent for the negotiations. In the present case plaintiff himself stated in writing that Bijo to whom the registered letter was posted, was the registered owner. Defendant must obviously have seen this letter and, therefore, accepted that plaintiff admitted that Bijo, who received the letter, was the registered owner. W hat defendant did was merely to identify his client and to repeat what plaintiff himself had declared in writing. Even if defendant, however, did not see the letter from plaintiff to Bijo and merely acted on the oral presentation of Bijo, the statement in his letter that P Bijo was the registered owner would still only be a statement to identify his client. Defendant could never have dreamt (leave alone reasonably expected) that plaintiff, on whom the statutory duty rested to pay compensation to the registered owner, would not have determined properly who the registered owner was. It appears clearly to me that defendant only acted as agent for the purposes of negotiation and in no other capacity whatever. It is naturally true that defendant committed an error but, in the particular circumstances of the present case, there was, in my opinion, no legal duty on defendant not to furnish an incorrect allegation regarding who the registered owner was, to the plaintiff. Even if it could be expected that defendant should have taken resonable steps to determine whether its statement was correct, it is, in my opinion, unrealistic of plaintiff to expect that the Court should find that defendant should have gone to the Deeds office (and in this case also should have taken further steps) to determine whether his client

11 was in fact the registered owner. In the present case any reasonable person in the position of the defendant could certainly have expected that plaintiff would not have made a mistake in offering compensation to a person who was not the registered owner and any reasonable steps which the defendant should have taken must be judged in the light of this fact. There is also still an obvious omission in the stated case. One looks in vain for an averment (which should have been an admission) that plain- tiff paid the amount to P Bijo as a result of the statement which defen- 836 dant made in his letter to plaintiff. Obviously the payment was not made as, a result of what appeared in defendant s letter, but on account of the error which plaintiff originally committed regarding Mr Bijo of 50/52 Russom Street, Verulam, as the registered owner. The appeal is dismis- sed with costs. Jansen JA, Trollip JA, Joubert JA and Trengove JA concurred. Appellant s Attorneys: Deputy State Attorneys, Natal and Bloemfontein. Respondent s Attorneys: Wartski, Greenberg & Partners, Durban; E G Cooper & Sons, Bloemfontein. SAFLII Note: This case was originally published by Juta and Company (Pty) Ltd. Juta retains copyright as far as it subsists.

SOUTH AFRICAN LAW REPORTS (1975) (3) (Translation) 590. MINISTER OF POLICE v. EWELS.

590-594 SOUTH AFRICAN LAW REPORTS (1975) (3) 590 MINISTER OF POLICE v. EWELS. ( A ppellate D iv isio n.) 1975. March 17; May 23. R u m pff, C.J., Ja n se n, J.A., T rollep, J.A., M u ller, J.A. a n d V