dendy v university of the witwatersrand and...

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DENDY v UNIVERSITY OF THE WITWATERSRAND AND OTHERS 2005 (5) SA 357 (W)

2005 (5) SA p357

Citation 2005 (5) SA 357 (W)

Case No 03/2015

Court Witwatersrand Local Division

Judge Boruchowitz J

Heard August 26, 2003; September 15, 2003

Judgment April 5, 2005

Counsel R G Cohen for the plaintiff.G J Marcus SC (with him G Malindi) for the defendants.

Annotations Link to Case Annotations

Flynote : Sleutelwoorde

Constitutional law - Common law - Development of - Duty of Courts to develop common law 'inaccordance with spirit, purport and objects of the Bill of Rights' as intended in s 39(2) of theConstitution - Courts under general obligation to develop common law appropriately, where law, asit stands, deficient in promoting s 39(2) objectives - Overzealous judicial reform to be avoided -Judiciary to confine itself to incremental changes necessary to keep common law in step withdynamic and evolving fabric of society.

Constitutional law - Common law - Development of - Duty of Courts to develop common law 'inaccordance with spirit, purport and objects of the Bill of Rights' as intended in s 39(2) of theConstitution - Common law of injuria - Inappropriate to develop the common law of injuria byrecognising all violations of fundamental rights, enshrined in ch 2 of Constitution, as actionableinfringements of dignitas - Objective criterion of reasonableness ('algemene redelikheidsmaatstaf'),applied according to

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existing law to determine wrongfulness of conduct complained of, being sufficiently flexible to permitrecognition of new forms of injury to dignity, including those arising from violations of fundamentalrights - Existing law not requiring development in terms of s 39(2) of Constitution.

Delict - Injuria - Infringement of dignitas - Wrongfulness of conduct - Objective criterion ofreasonableness ('algemene redelikheidsmaatstaf') to be applied to determine whether, accordingto prevailing norms of society, conduct complained of to be classified as wrongful - Conductsubjectively wounding self-esteem of claimant, but not being objectively insulting according tocriterion of reasonableness, not giving rise to action for injuria.

Delict - Injuria - Infringement of dignitas - What constitutes - Infringement of fundamental rightsentrenched in ch 2 of Constitution - Conduct complained of consisting of (1) procedurally defectiveadministrative decision by defendant, in violation of plaintiff's right in terms of s 33(1) ofConstitution, and (2) refusal by defendant to furnish reasons for decision, in violation of plaintiff's


rights in terms of ss 9, 10, 23, 32 and 33 of Constitution - However, neither decision nor refusalsubjecting claimant to degrading, insulting or ignominious treatment - Application of the criterion ofreasonableness ('algemene redelikheidsmaatstaf') to conduct of defendant revealing that it notobjectively offensive or insulting to plaintiff - Defendant's conduct thus not constituting wrongfulviolation of the plaintiff's dignitas - Action for injuria not available.

Damages - Constitutional damages - For violations of fundamental rights, enshrined in ch 2 ofConstitution of the Republic of South Africa Act 108 of 1996 - Existence of alternative remedies -Primary object of constitutional relief not compensatory, but to vindicate guaranteed rights and toprevent or deter future infringements - Existence of alternative remedy available to claimant, ie,apart from damages, which would have vindicated infringement of fundamental rights, being criticalfactor militating against award of damages.

Headnote : Kopnota

Section 173 of the Constitution of the Republic of South Africa, 1996 (the Constitution) affordsthe Constitutional Court, the Supreme Court of Appeal and the High Courts the inherent powerto develop the common law, taking into account the interest of justice. According to s 39(2) aCourt, when developing the common law, must promote the spirit, purport and objects of the Billof Rights, ie, the fundamental rights enshrined in ch 2 of the Constitution.

The Courts are under a general obligation to develop the common law appropriately, where thelaw, as it stands, is deficient in promoting s 39(2) objectives. The deficiency enquiry shouldtake place in two stages. The first is to consider whether the existing common law, havingregard to the s 39(2) objectives, requires development in accordance with those objectives. Ifthis enquiry leads to a positive answer, the second stage is to consider how such developmentis to take place in order to meet the s 39(2) objectives. Overzealous judicial reform should beavoided. The Judiciary should confine itself to those incremental changes which are necessaryto keep the common law in step with the dynamic and evolving fabric of our society. (Paragraph[25] at 371D - 372B.)

It is inappropriate to develop the common law of injuria by recognising that all violations offundamental rights, enshrined in ch 2 of the Constitution, are

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actionable infringements of dignitas. It is desirable that a clear distinction be drawn betweendelictual and constitutional wrongs. Conceptual difficulties are bound to arise if one were toequate all infringements of fundamental rights with an ordinary delict. Where the infringement ofa fundamental right overlaps with generally recognised areas of delictual liability, an ordinarydelictual claim will lie at the instance of an aggrieved person. The problem arises with thoseinfringements of fundamental rights which extend beyond the recognised ambit of the law ofdelict and which do not meet the requirements of delictual liability. The protection of humandignity under s 10 of the Constitution encompasses something broader than the Roman lawconcept of dignitas, and to recognise all constitutional violations as infringements of dignitywould be to confuse the wider concept of dignity under the Constitution with the narrowerconcept of dignitas under the actio injuriarum. (Paragraphs [14], [15] and [23] at 367G, 368Dand 370D - 371B.)


The common law of injuria, as stated in Delange v Costa 1989 (2) SA 857 (A), requires nodevelopment to bring it in line with the Constitution. The Court there held that although theconcept of dignitas is a subjective one, ie, requiring proof that the subjective feelings of theindividual claimant were wounded by the act complained of, an antecedent enquiry is whetherthat act was wrongful. In determining whether the act was wrongful, the Court applies thecriterion of reasonableness (the 'algemene redelikheidsmaatstaf'). That is an objective test: Theact complained of must be 'overt', and must be tested against the prevailing norms of society inorder to determine whether such conduct can be classified as wrongful. Thus, conduct whichmight subjectively wound the self-esteem of the claimant, but which is not, objectivelydetermined, insulting (and therefore wrongful), cannot give rise to an action for injuria. Theobjective test of wrongfulness enunciated in Delange v Costa is consistent with the Constitution,and provides a natural point of entry for giving expression to the 'spirit, purport and objects' ofthe Constitution, which reflect, as it were, the new boni mores. It is sufficiently flexible to permitrecognition of new forms of injury to dignity, including those that arise from violations offundamental rights. The test strikes the balance that is necessary to ensure that objectivebounds are set to the action for injury to dignity, in order to keep it within manageableproportions. (Paragraphs [27], [28] and [29] at 372F, 372G - 373B and 373H - 374A,paraphrased.)

The plaintiff in casu sought damages under the actio injuriarum on the basis that his dignitashad been violated by, inter alia, by the following conduct of the first defendant, namely, (1) thatit took a procedurally defective administrative decision, which infringed mainly his fundamentalright, in terms of s 33(1) of the Constitution, to 'administrative action that is lawful, reasonableand procedurally fair', and (2) that it refused to furnish him with the minutes of or reasons for itsdecision, which refusal infringed his fundamental rights in terms of ss 9, 10, 23, 32 and 33 ofthe Constitution. In neither instance was it suggested, however, that the first defendant or anyof its functionaries were guilty of any 'overt' acts which were offensive or insulting, or whichsubjected the plaintiff to degrading, insulting or ignominious treatment. The Court held, uponapplication of the criterion of reasonableness to the 'overt' acts of the first defendant, that theconduct complained of could not, objectively considered, be characterised as offensive orinsulting. In the result that conduct could not be regarded as a wrongful violation of the plaintiff'sdignitas. (Paragraphs [30], [32], [51] and [54] at 374B - D, 374G - 375A, 381C - D and 382H -283B, paraphrased.)

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A further critical factor militating against an award of damages for the alleged violations of theplaintiff's abovementioned fundamental rights was the fact that, in both cases, he had had athis disposal alternative remedies, namely, in the first instance, judicial review under Rule 53 ofthe Uniform Rules of the procedurally defective administrative decision and, in the secondinstance, his right to request reasons for the decision under ss 32(1) and 33(2) of theConstitution, as well the special procedure under Rule 53, which would have required the firstdefendant to furnish the record of its decision and the reasons therefor. The successfulinvocation of those remedies would have gone a long way to assuaging the plaintiff's woundedfeelings, and would, at the same time, have served to vindicate the infringement of hisfundamental rights. It should not be forgotten that the primary object of constitutional relief is


not compensatory, but to vindicate guaranteed rights and to prevent or deter their futureinfringement. In this context an award of damages is a secondary remedy, to be made only inthe most appropriate cases. The test at the end of the day is not what will alleviate the hurtwhich the plaintiff contends for, but what is appropriate relief required to protect the rights thathave been infringed. (Paragraphs [20], [21], [35], [45] and [56] at 369F - 370A, 375F - G, 379I -380B and 383E - F, paraphrased.)

Accordingly, the first defendant's exceptions to the plaintiff's claims, based on the allegedviolations of his abovementioned fundamental rights, had to be upheld, because the plaintiff'sparticulars of claim did not disclose a cause of action. (Paragraphs [48] and [59] at 380G and384A.)

Cases Considered

Annotations

Reported cases

Ackermann v Pasquali and Montagu Divisional Council 1913 CPD 296: referred to

Argus Printing and Publishing Co Ltd and Others v Esselen's Estate 1994 (2) SA 1 (A): followed

Baloro and Others v University of Boputhatswana and Others 1995 (4) SA 197 (B): referred to

Carmichele v Minister of Safety and Security and Another (Centre for Applied Legal StudiesIntervening) 2001 (4) SA 938 (CC) (2002 (1) SACR 79; 2001 (10) BCLR 995): dicta in paras[36], [39], [40], [43] and [55] applied

Dawood and Another v Minister of Home Affairs and Others; Shalabi and Another v Minister ofHome Affairs and Others; Thomas and Another v Minister of Home Affairs and Others 2000 (3)SA 936 (CC) (2000 (8) BCLR 837): dictum in para [35] applied

Delange v Costa 1989 (2) SA 857 (A): dicta at 860I - 861A and 862A - G applied

Demmers v Wyllie and Others 1980 (1) SA 835 (A): dictum at 842A - B applied

Dreyer and Others v Tuckers Land and Development Corporation (Pty) Ltd 1981 (1) SA 1219(T): dictum at 1224F - 1225B applied

Dunlop v Woollahra Municipal Council [1982] AC 158 (PC) ([1981] 1 All ER 1202): referred to

Du Plessis and Others v De Klerk and Another 1996 (3) SA 850 (CC) (1996 (5) BCLR 658):referred to

Gardener v Whitaker 1995 (2) SA 672 (E) (1994 (5) BCLR 19): dictum at 690G - H (SA) applied

Governing Body, Tafelberg School v Head, Western Cape Education Department 2000 (1) SA1209 (C): referred to

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Fose v Minister of Safety and Security 1997 (3) SA 786 (CC) (1997 (7) BCLR 851): dicta inparas [38] and [68] applied

Hoffmann v South African Airways 2001 (1) SA 1 (CC) (2000 (11) BCLR 1211): referred to

Holomisa v Argus Newspapers Ltd 1996 (2) SA 588 (W): distinguished

Jackson v National Institute for Crime Prevention and Rehabilitation of Offenders 1976 (3) SA 1(A): referred to

Jockey Club of South Africa v Forbes 1993 (1) SA 649 (A): dictum at 660E - H applied

Johnson v Rand Daily Mails 1928 AD 190: applied

Judes v District Registrar of Mining Rights, Krugersdorp 1907 TS 1046: referred to

Khumalo and Others v Holomisa 2002 (5) SA 401 (CC) (2002 (8) BCLR 771): applied in part;distinguished in part

Knop v Johannesburg City Council 1995 (2) SA 1 (A): dicta at 31G - H and 33B - E discussedand applied

Lunt v University of Cape Town and Another 1989 (2) SA 438 (C): referred to

Mathipa v Vista University and Others 2000 (1) SA 396 (T): referred to

Mafuya and Others v Mutare City Council 1984 (2) SA 124 (ZH): referred to

Minister of Law and Order v Kadir 1995 (1) SA 303 (A): dictum at 318E - 319A applied

Minister of Police v Mbilini 1983 (3) SA 705 (A): dictum at 715G - 716A applied

Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA) ([2002] 3 All SA741): referred to

Modderfontein Squatters, Greater Benoni City Council v Modderklip Boerdery (Pty) Ltd (Agri SAand Legal Resources Centre, Amici Curiae); President of the Republic of South Africa andOthers v Modderklip Boerdery (Pty) Ltd (Agri SA and Legal Resources Centre, Amici Curiae)2004 (6) SA 40 (SCA) (2004 (8) BCLR 821 [2004] 3 All SA 169): dictum at 62B - D applied

Mohamed and Another v Jassiem 1996 (1) SA 673 (A): dictum at 703H - I applied

Morgan and Another v Salisbury Municipality 1935 AD 167: referred to

National Coalition for Gay and Lesbian Equality and Another v Minister of Justice 1999 (1) SA 6(CC) (1998 (2) SACR 556; 1998 (12) BCLR 1517): dictum in paras [120] and [124] applied

O'Keeffe v Argus Printing and Publishing Co Ltd 1954 (3) SA 244 (C): dictum at 247D applied

Olitzki Property Holdings v State Tender Board and Another 2001 (3) SA 1247 (SCA): dicta inparas [37] and [38] discussed and applied


Premier, Western Cape v Faircape Property Developers (Pty) Ltd 2003 (6) SA 13 (SCA) ([2003]2 All SA 465): dicta in paras [37] and [40] discussed and applied

R v Salituro (1992) 8 CRR (2d) 173 ([1991] 3 SCR 654): referred to

R v Umfaan 1908 TS 62: applied

Rabinowitz and Another NNO v Ned-Equity Insurance Co Ltd and Another 1980 (3) SA 415(W): referred to

Rivett-Carnac v Wiggins 1997 (3) SA 80 (C): dictum at 89H - 90B applied

S v Makwanyane 1995 (3) SA 391 (CC) (1995 (2) SACR 1; 1995 (6) BCLR 665): dictum in para[328] applied

Sokhulu v New Africa Publications Ltd and Others 2001 (4) SA 1357 (W) ([2002] 1 All SA 255):dictum in para [7] applied

Suid-Afrikaanse Uitsaaikorporasie v O'Malley 1977 (3) SA 394 (A): dictum at 408D - E applied

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Toerien en 'n Ander v De Villiers NO en 'n Ander 1995 (2) SA 879 (C): referred to

Transnet Ltd v Goodman Brothers (Pty) Ltd 2001 (1) SA 853 (SCA): dictum at 867D - Greferred to

Van der Merwe v Smith NO en 'n Ander 1999 (1) SA 926 (C): referred to

Walker v Van Wezel 1940 WLD 66: dictum at 69 - 70 applied

X and Others (minors) v Bedfordshire County Council; M (a minor) and Another v NewhamLondon Borough Council and Others; E (a minor) v Dorset County Council and Other Appeals[1995] 3 All ER 353 (HL): referred to.

Statutes Considered

Statutes

The Constitution of the Republic of South Africa, 1996, ss 9, 10, 23, 32, 33(1) and (2), 39(2)and 173: see Juta's Statutes of South Africa 2004/5 vol 5 at 1-137 - 1-139, 1-141, 1-160.

Rules Considered

Rules of Court

The Uniform Rules of Court, Rules 10, 53: see The Supreme Court Act and the Magistrates'Courts Act and Rules (Juta, 2005) at 38, 39 and 79.

Case Information

Exception against the plaintiff's particulars of claim. The facts appear from the reasons for


judgment.

R G Cohen for the plaintiff.

G J Marcus SC (with him G Malindi) for the defendants.

Cur adv vult.

Postea (April 5).

Judgment

Boruchowitz J:

Introduction

[1] The plaintiff, a former associate professor of law, has issued summons against threedefendants (the University of the Witwatersrand, Professor Garrod and Professor Skeen) inwhich he claims general damages totalling R7 600 000 for injury to his dignity and reputation.The defendants have raised an exception against the plaintiff's particulars of claim. A key issuethat arises for consideration is whether an award of damages is an appropriate remedy for theviolation of a fundamental constitutional right.

[2] The damages allegedly flow from five separate causes of action identified as claims A, B, C,D and E in the particulars of claim. The claims are not directed against all three defendants.Claims A and B are against the first defendant only. Claims C and D are against the first andsecond defendants, and claim E is against the first and third defendants.

[3] The causes of action are based upon separate and distinct events. Claim A concerns analleged injury to the plaintiff's dignity by reason of various procedural irregularities in theconsideration of the plaintiff's application for appointment to a chair of law of the firstdefendant. For this the plaintiff claims R2 250 000. Claim B is based upon an alleged failure bythe first defendant or its employees to furnish the plaintiff with reasons why his application for achair of law was unsuccessful. For this

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a sum of R2 million is claimed. Claim C relates to the publication of an allegedly defamatorye-mail by the second defendant to two people (the third defendant and the third defendant'ssecretary) on 4 March 2002. The amount claimed in respect of this cause of action is R500 000.Claim D is based on the publication of an allegedly defamatory letter by the second defendanton 25 March 2002 in respect whereof the plaintiff claims R1,6 million. Claim E concerns thepublication of an allegedly defamatory letter by the third defendant on 17 April 2002 for which asum of R1 250 000 is claimed.

[4] The defendants have taken ten exceptions which may conveniently be divided into twogroups. The first group, comprising the third to seventh exceptions, are based upon misjoinder(the misjoinder exception). The submission is that it is not competent to join the three


defendants in one summons relating to five separate causes of action in respect of which noneof the causes of action is directed against all three defendants and in relation to which there isno suggestion that the five causes of action depend upon substantially the same questions oflaw and fact. And, nor is there any principle of convenience that would justify the joinder. Thesecond group, comprising the eighth to tenth exceptions, are aimed at the validity of claims A, Band C.

Claim A

[5] Claim A is entirely novel in South African law. Damages are claimed for loss of dignityarising from the alleged violation of certain of the plaintiff's fundamental constitutional rights.Under the common law, protection of an individual's right to dignity is provided by the Romanlaw actio injuriarum. In its present undeveloped state the actio injuriarum does not afford theplaintiff a remedy sounding in damages because it has never been held up to now that theconcept of dignity (or dignitas as it is referred to) includes the right to have one's rightsentrenched by ch 2 of the Constitution respected. The meaning and determinacy of dignitas isdealt with more fully hereafter.

[6] The salient facts alleged in support of the claim are the following: On 11 October 1999 theplaintiff, who was at the time eligible for appointment to a chair of law of the first defendant,applied in writing to the first defendant for promotion to one of the chairs of law which had atthat time recently been advertised by the first defendant. On 29 November 1999 the plaintiffwas advised that he had been short-listed for the position and as such would be required tosubmit for assessment by members of the selection committee for chairs of law (the selectioncommittee), several of his publications, present a guest seminar on a topic of his choice in hisfield of legal expertise and present himself for an interview by the committee. The plaintiff dulycomplied with these requirements. On 3 February 2000 the selection committee took a decisionnot to appoint the plaintiff to a chair of law of the first defendant but to appoint three rivalcandidates. No reason for the refusal to appoint the plaintiff was furnished.

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[7] It is alleged that the selection committee was required to assess candidates against variouscriteria and that the plaintiff had a right or legitimate expectation that the members of thecommittee would, only, take the stipulated criteria into account in their assessment; that theywould not act partially or pre-judge his application and that they would assess the application inaccordance with the applicable provisions of the Constitution and the common law.

[8] The essence of the plaintiff's claim is to be found in the following paragraphs of theparticulars of claim:

'2.12 In deciding not to appoint the plaintiff to a chair of law, alternatively in deciding to appoint the rivalcandidates to chairs of law in preference to the plaintiff, one or more or all of the members of theselection committee for chairs of law of the first defendant acted in breach of the rights of the plaintiff,alternatively frustrated and/or violated the legitimate expectations of the plaintiff, by:

2.12.1 failing to take into consideration one or more or all of the criteria adumbrated in subparas 2.10.1 to


2.10.9, and in particular the criteria of:

2.12.1.1 scholarship;

2.12.1.2 teaching ability;

2.12.1.3 research ability;

2.12.1.4 leadership qualities;

2.12.1.5 experience; and/or

2.12.1.6 reputation and standing in the profession or discipline;

2.12.2 taking into account against the plaintiff:

2.12.2.1 a perception that the plaintiff had improperly and/or unreasonably involved himself infactionalism within the School of Law of the first defendant;

2.12.2.2 adverse criticism expressed by the plaintiff in the past of the conduct of individualmembers of the academic staff in relation to the management of the School of Law ofthe first defendant, and in particular past and present members of the GoverningCommittee of the School of Law;

2.12.3 acting towards the plaintiff in a biased or partial manner;

2.12.4 allowing themselves to be influenced against the plaintiff by personal dislike and antipathy on thepart of former senior members of the academic staff of the Faculty of Law of the first defendant (as itthen was), towards the plaintiff;

2.12.5 prejudging the plaintiff's application, by deciding prior to the conclusion of the series of guestseminars and the series of interviews by the selection committee for chairs of law that the plaintiffshould not be

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appointed to a chair of law of the first defendant, alternatively that one or more or all of the rivalcandidates should be appointed to a chair, or chairs, of law of the first defendant in preference to theplaintiff;

2.12.6 having no legally valid reason or reasons for failing, alternatively refusing, to appoint the plaintiff to achair of law in preference to one or more of all of the rival candidates;

2.12.7 appointing different referees to assess and to report to the selection committee on the sixpublications submitted for assessment by the plaintiff and the six publications submitted by each ofthe rival candidates, with the result that no one person assessed the publications of the plaintiff andof each of the rival candidates, and no one person was therefore in a position to furnish theselection committee for chairs of law with a comparative assessment of the merits of the plaintiff'ssix publications against the merits of the six publications submitted by each of the rival candidates.

2.13 The conduct of one or more or all of the members of the selection committee for chairs of law of the firstdefendant as set out in para 2.12 constituted a wrongful violation of one or more or all of the plaintiff'srights:

2.13.1 to equality in terms of s 9 of the Constitution of the Republic of South Africa Act 108 of 1996;


2.13.2 to dignity in terms of s 10 of the Constitution of the Republic of South Africa Act 108 of 1996;

2.13.3 to freedom of conscience, thought, belief and/or opinion in terms of s 15 of the Constitution of theRepublic of South Africa Act 108 of 1996;

2.13.4 to freedom of expression in terms of s 16 of the Constitution of the Republic of South Africa Act 108of 1996;

2.13.5 to freedom of association in terms of s 18 of the Constitution of the Republic of South Africa Act 108of 1996;

2.13.6 to fair labour practices in terms of s 23 of the Constitution of the Republic of South Africa Act 108 of1996;

2.13.7 to just administrative action in terms of s 33 of the Constitution of the Republic of South Africa Act108 of 1996, alternatively in terms of common law;

and consequently constituted a wrongful injury to the plaintiff's right to dignity in terms of s 10 of theConstitution of the Republic of South Africa Act 108 of 1996, alternatively a wrongful injury to theplaintiff's right to dignity at common law, further alternatively a wrongful injury to the plaintiff's right todignity both in terms of s 10 of the Constitution of the Republic of South Africa Act 108 of 1996 and atcommon law.

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2.14 The plaintiff felt insulted and humiliated by the conduct of one or more or all of the members of theselection committee for chairs of law as described in para 2.12, and a reasonable person in the positionof the plaintiff would have felt so insulted and humiliated.

2.15 The conduct of one or more or all of members of the selection committee for chairs of law of the firstdefendant adumbrated in para 2.12 was intended to injure the plaintiff in his right to dignity in terms of s10 of the Constitution of the Republic of South Africa Act 108 of 1996, alternatively to injure the plaintiff inhis right to dignity at common law, further alternatively to injure the plaintiff in his right to dignity both interms of s 10 of the Constitution of the Republic of South Africa Act 108 of 1996 and in terms of commonlaw.

2.16 Alternatively to para 2.15

The conduct of one or more or all of the members of the selection committee for chairs of law of the firstdefendant adumbrated in para 2.12 was unreasonable and therefore negligent.'

[9] The defendants except to the particulars of claim on the ground that the facts pleaded insupport of the claim and its alternative are insufficient to disclose a cause of action. Theirsubmission is that the conduct complained of is not reasonably capable of injuring the plaintiff'sdignity or causing him insult or humiliation, and is therefore not sufficient to justify a remedy indamages.

[10] For the sake of conceptual clarity it is necessary to understand the meaning that theplaintiff ascribes to the term 'dignity'. He avers (in para 2.13 of the particulars of claim) that theconduct of the selection committee constituted a violation of his constitutional rights andconsequently amounted to an injury to his dignity in terms of s 10 of the Constitution or atcommon law.

[11] There is a difference in scope and content between the concept of dignity under the


Constitution and the common law. Under the actio injuriarum the concept of dignitas has a welldefined meaning. In its narrow sense the term encompasses only the subjective feeling ofdignity, self-respect or a person's sense of self-worth and is not concerned with personalityrights such as the right to physical integrity (corpus) and the right to a good name (fama).When used in this sense it is infringed by conduct that is insulting, humiliating or degrading.1(1) In certain cases dignitas has been interpreted more broadly, treating it as a collective term

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for all personality rights and interests with the exception of the right to a good name (fama) andbodily integrity (corpus). 2(2)

[12] Under the Constitution no sharp lines are drawn between the trilogy of fama, corpus anddignitas. 3(3) Section 10 of the Constitution provides that 'everyone has inherent dignity and theright to have their dignity respected and protected'. The section provides no definition of dignity;however, its role and importance as a foundational constitutional value has been emphasisedin a number of cases. In S v Makwanyane and Another 4(4) O'Regan J stated:

'The importance of dignity as a founding value of the new Constitution cannot be overemphasised. Recognising aright to dignity is an acknowledgement of the intrinsic worth of human beings: human beings are entitled to betreated as worthy of respect and concern. This right therefore is the foundation of many of the other rights thatare specifically entrenched in ch 3.'

[13] In Dawood and Another v Minister of Home Affairs and Others; Shalabi and Another vMinister of Home Affairs and Others; Thomas and Another v Minister of Home Affairs andOthers 5(5) O'Regan J drew attention to the centrality of human dignity as a constitutionalvalue:

'Human dignity . . . informs constitutional adjudication and interpretation at a range of levels. It is a value thatinforms the interpretation of many, possibly all, other rights. This Court has already acknowledged the importanceof the constitutional value of dignity in interpreting rights such as the right to equality, the right not to be punishedin a cruel, inhuman or degrading way, and the right to life. Human dignity is also a constitutional value that is ofcentral significance in the limitations analysis. Section 10, however, makes it plain that dignity is not only a valuefundamental to our Constitution, it is a justiciable and enforceable right that must be respected and protected. Inmany cases, however, where the value of human dignity is offended, the primary constitutional breachoccasioned may be of a more specific right such as the right to bodily integrity, the right to equality or the rightnot to be subjected to slavery, servitude or forced labour.'

[14] Whatever its exact scope, there is consensus that the protection of human dignity under s10 of the Constitution encompasses something broader than the Roman law concept ofdignitas. 6(6) For present purposes however, there is little difference between the right todignity as it is comprehended under the Constitution and its common-law counterpart. What theplaintiff claims are damages of a compensatory nature for breach of his fundamental rights.Their purpose is to assuage his wounded feelings. He describes the damages claimed as beingof a

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non-patrimonial nature in respect of 'hurt, insult and humiliation suffered by him through hisnon-appointment to a chair of law'. 7(7) The plaintiff clearly uses the term 'dignity' in its narrowsense referred to above. 8(8)

[15] The plaintiff submits that the common law in its present undeveloped state, is deficient inpromoting constitutional objectives and is in need of development. He accordingly asks that theCourt, in the exercise of its inherent powers and constitutional duty, develop the common lawso as to afford him a remedy sounding in damages. First, by extending the common-law right todignity, so as to include within its ambit not only the right to be protected against those forms ofinsulting conduct which have already been recognised as legally actionable but also the right tobe protected against violations of entrenched constitutional (ch 2) rights. 9(9) Second, byrecognising a new personality right under the actio injuriarum standing alongside the traditionaltrilogy of corpus, fama and dignitas. (He suggests that such a new personality right bedescribed as 'the right to respect for constitutionally entrenched rights'.) 10(10) A third approachadvocated by the plaintiff is that the Court recognise all violations of constitutional rights asactionable infringements of dignity.

[16] As the damages claimed by the plaintiff are said to be derived from an infringement ofrights entrenched in the Bill of Rights the position is regulated by s 38 of the Constitution. Thesection provides that where a right in the Bill of Rights has been infringed or threatened 'thecourt may grant appropriate relief'. With the exception of a declaration of rights, the section issilent as to the specific remedies that are available. What this Court must determine is whetherthe conduct complained of is capable of amounting to a wrongful violation of the plaintiff'sconstitutional rights and, if so, whether an award of damages is an appropriate remedy.

[17] The meaning of 'appropriate relief' was discussed by the Constitutional Court in Fose vMinister of Safety and Security 11(11) and more recently in Hoffmann v South African Airways.12(12) In Fose, Ackermann J writing for the majority stated:

'Appropriate relief will in essence be relief that is required to protect and enforce the Constitution. Depending onthe circumstances of each particular case the relief may be a declaration of rights, an interdict, a mandamus orsuch other relief as may be required to ensure that the rights enshrined in the Constitution are protected andenforced. If it is necessary to do so, the courts may even have to fashion new remedies to secure the protectionand enforcement of these all-important rights.' 13(13)

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[18] In a concurring judgment Kriegler J explained:

'Once the object of the relief in s 7(4)(a) has been determined, the meaning of ''appropriate relief'' follows as amatter of course. When something is appropriate it is ''specially fitted or suitable''. Suitability, in this context, ismeasured by the extent to which a particular form of relief vindicates the Constitution and acts as a deterrentagainst further violation of rights enshrined in ch 3. In pursuing this enquiry one should consider the nature of theinfringement and the probable impact of a particular remedy. One cannot be more specific. The factssurrounding a violation of rights will determine what form of relief is appropriate.' 14(14)


[19] And in Hoffmann Ngcobo J summarised the position thus:

'The determination of appropriate relief, . . . calls for the balancing of the various interests that might be affectedby the remedy. The balancing process must at least be guided by the objective, first to address the wrongoccasioned by the infringement of the constitutional right; second, to deter future violations; third to make anorder that can be complied with; and fourth, of fairness to all those who might be affected by the relief. Invariably,the nature of the right infringed and the nature of the infringement will provide guidance as to the appropriaterelief in the particular case. Therefore, in determining appropriate relief, ''we must carefully analyse the nature of[the] constitutional infringement, and strike effectively at its source''.' 15(15)

[20] It is apparent from the above dicta that the nature of an appropriate remedy is determinedby its object and its ability effectively to deal with the wrong occasioned by the infringement ofthe constitutional right. This immediately brings into focus the distinction between delictual andconstitutional remedies. In delict, an award of damages is the primary remedy, its aim being toafford compensation in respect of the legal right or interest that has been infringed. Thepurpose of a constitutional remedy is to vindicate guaranteed rights and prevent or deter futureinfringements. In this context an award of damages is a secondary remedy to be made in onlythe most appropriate cases. 16(16)

[21] In Fose the Constitutional Court did not exclude the possibility of 'appropriate relief'including damages where such an award was necessary to protect and enforce fundamentalrights, but expressed doubt as to the appropriateness of constitutional damages especiallywhere other

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effective remedies would be sufficient to vindicate the infringed rights. 17(17) The Courtemphasised, however, that common-law remedies, and particularly delictual remedies would incertain cases be sufficient to redress constitutional wrongs; the primary purpose ofconstitutional relief which is to vindicate the Constitution and deter its further infringement couldeffectively be achieved by invoking delictual remedies and particularly those that had beenspecifically designed to protect personality interests, such as dignity. 18(18)

[22] Academic writers are also of the view that the expansion of the right to dignity under theactio injuriarum is an appropriate method of granting a remedy sounding in damages to victimsof violations of constitutionally entrenched rights which do not fall within the ambit of the rightsof corpus (bodily integrity) and/or fama (reputation). The actio injuriarum appears to be flexibleenough to accommodate new claims for damages including, where appropriate, claims arisingfrom violations of fundamental constitutional rights. 19(19)

[23] The plaintiff has proposed three methods whereby the common law should be developed inorder to afford him the remedy that he seeks. It is as well to immediately dispose of the thirdapproach advocated by the plaintiff, namely, that the Court recognise all violations ofconstitutional rights as actionable infringements of dignity. In effect, what is contended for is thecreation of a constitutional delict. 20(20) There are substantial reasons not to afford recognitionto such a delict. It is desirable that a clear distinction be drawn between delictual andconstitutional wrongs. 21(21) Conceptual difficulties are bound to arise if one were to equate all


infringements of fundamental rights with an ordinary delict. There is the problem of overlappingand possible conflict between fundamental rights entrenched in the Constitution and privatesubjective rights protected by, or legal duties imposed by, the law of delict. Where theinfringement of a fundamental right overlaps with generally recognised areas of delictualliability, an ordinary delictual claim will lie at the instance of an aggrieved person. The problemlies with those infringements of fundamental rights that extend beyond the recognised ambit ofthe law of delict and which do not meet the requirements of delictual

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liability. 22(22) These difficulties are highlighted by Annél van Aswegen in an article entitled'The Implications of a Bill of Rights for the Law of Contract and Delict'. 23(23) To recognise allconstitutional violations as infringements of dignity as suggested by the plaintiff would be toconfuse the wider concept of dignity under the Constitution with the narrower concept ofdignitas.

[24] Yet a further reason why all violations of fundamental rights ought not to be regarded asactionable infringements of dignity, is that in many instances where the violation of humandignity is offended the primary constitutional breach may be of a more specific right in respectof which the Constitution affords a particular remedy or specific protection. 24(24) In thesecircumstances dignity serves merely as a flexible and residual right. 25(25)

[25] The manner in which the common law is to be developed received attention in the seminaldecision of Carmichele v Minister of Safety and Security and Another (Centre for Applied LegalStudies Intervening). 26(26) It was held there that courts are under a general obligation todevelop the common law appropriately, where the law, as it stands is deficient in promoting s39(2) objectives. 27(27) (Section 39(2) of the Constitution provides that when developing thecommon law, every court must promote the 'spirit, purport and objects' of the Bill of Rights. Thismust be read with s 173 of the Constitution which gives to all higher Courts, the inherent powerto develop the common law, taking into account the interests of justice.) The deficiency enquiryshould take place in two stages. The first, is to consider whether the existing common law,having regard to the s 39(2) objectives, requires development in accordance with theseobjectives. If this enquiry leads to a positive answer, the second stage is to consider how suchdevelopment is to take place in

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order to meet s 39(2) objectives. 28(28) In Carmichele the Court cautioned against 'overzealousjudicial reform' and repeated the dictum of Iacobucci J in R v Salituro (1992) 8 CRR (2d) 173([1991] 3 SCR 654), (which was cited by Kentridge AJ in Du Plessis and Others v De Klerk andAnother 1996 (3) SA 850 (CC) (1996 (5) BCLR 658)) to the effect that '(t)he judiciary shouldconfine itself to those incremental changes which are necessary to keep the common law instep with the dynamic and evolving fabric of our society'. 29(29)


[26] Delictual remedies are particularly well suited to constitutional development. The lens ofwrongfulness that is central to any delictual action provides an appropriate mechanism forgiving expression to the s 39(2) objectives to the Constitution. The common-law test fordetermining wrongfulness is a proportionality exercise that depends upon the interplay ofvarious factors. 30(30) It was held in Carmichele that proportionality is consistent with the Bill ofRights but that exercise must now be carried out in accordance with the 'spirit, purport andobjects' of the Bill of Rights. 31(31) The Court also stressed that not only must the common lawbe developed in a way which meets s 39(2) objectives, but it must be done in a way mostappropriate for the development of the common law, within its own paradigm. 32(32)

[27] The common-law position has been authoritatively laid down by Melius de Villiers in TheRoman and Roman-Dutch Law of Injuries (1899) at 27. A person may recover compensation forinjury to his dignity only if three elements are present: (1) An intention on the part of theoffender to produce the effect of his act (animus injuriandi); (2) an overt act which the persondoing it is not legally competent to do; and which at the same time is (3) an aggression uponthe right of another, by which aggression the other is aggrieved and which constitutes animpairment of the person, dignity or reputation of the other. These requirements were affirmedby the Appellate Division in Delange v Costa. 33(33)

[28] Prior to Delange there was judicial controversy as to whether injury to dignity must betested subjectively or objectively. Compare Walker v Van Wezel 34(34) and Jackson v NationalInstitute for Crime Prevention and Rehabilitation of Offenders. 35(35) In Delange the Courtrecognised the need for objective limits to be placed on the action for injury to dignity in order tokeep it within manageable proportions. It accepted that an entirely subjective test of dignity hadthe potential for opening the floodgates to successful actions by hypersensitive persons whofelt insulted by statements or conduct which would not insult a person of ordinary sensibilities.And so it fashioned what is in effect a hybrid test, one that is both

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subjective and objective in nature. To be considered a wrongful infringement of dignity, theobjectionable behaviour must be insulting from both a subjective and objective point of view,that is, not only must the plaintiff feel subjectively insulted but the behaviour, seen objectively,must also be of an insulting nature. In the assessment of the latter, the legal convictions of thecommunity (boni mores) or the notional understanding and reaction of a person of ordinaryintelligence and sensibilities are of importance. 36(36) In Delange Smalberger JA summarisedthe position as follows: 37(37)

'(B)ecause proof that the subjective feelings of an individual have been wounded, and his dignitas therebyimpaired, is necessary before an action for damages for injuria can succeed, the concept of dignitas is asubjective one. But before that stage is reached it is necessary to establish that there was a wrongful act. Unlessthere was such an act intention becomes irrelevant as does the question whether subjectively the aggrievedperson's dignity was impaired. I do not understand the judgment of Jansen JA to suggest that all that is requiredfor a successful action for damages for injuria are words uttered animo injuriandi towards another which offendsuch person's subjective sensitivities, and in that sense impair his dignitas. If this were so it could lead to thecourts being inundated with a multiplicity of trivial actions by hypersensitive persons. (See Burchell 1977 SALJ at


7 - 8; Neethling Persoonlikheidsreg 2nd ed at 193.) According to Melius de Villiers op cit at 37,

''(s)o long as an act is outwardly lawful it cannot be an injury, with whatever intention or motive it mayhave been committed. Even when a person entertaining an injurious intention believes an act which hecommits to be injurious when it really is not such, his intention will not affect the character of the act.''

Likewise the character of the act cannot alter because it is subjectively perceived to be injurious by the personaffected thereby.

In determining whether or not the act complained of is wrongful the Court applies the criterion of reasonableness- the ''algemene redelikheidsmaatstaf'' (Marais v Richard en 'n Ander 1981 (1) SA 1157 (A) at 1168C). This is anobjective test. It requires the conduct complained of to be tested against the prevailing norms of society (ie thecurrent values and thinking of the community) in order to determine whether such conduct can be classified aswrongful. To address the words to another which might wound his self-esteem but which are not, objectivelydetermined, insulting (and therefore wrongful) cannot give rise to an action for injuria. (Walker v Van Wezel(supra) at 68.)'

[29] The test enunciated in Delange is, in my view, consistent with the Constitution. Theobjective test of wrongfulness (the criterion of reasonableness) provides a natural point of entryfor giving expression to the 'spirit, purport and objects' of the Constitution which reflect, as itwere, the new boni mores. It is sufficiently flexible to permit recognition of new forms of injury todignity including those that arise from violations of fundamental rights. The test strikes thebalance that is necessary to ensure that objective bounds are set to the action for injury todignity, in

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order to keep it within manageable proportions. 38(38) Delange needs no adaptation to bring itinto harmony with the Constitution.

[30] Although the plaintiff complains of a number of constitutional violations the core of hiscomplaint relates to defects of a procedural nature. Section 33(1) of the Constitution providesthat 'everyone has the right to administrative action that is lawful, reasonable and procedurallyfair'. Lawful administrative action entails, inter alia, the absence of a failure of the wielder ofpublic power to apply his or her mind, the taking into account of irrelevant considerations, theleaving out of account of relevant considerations, and the absence of arbitrary and capriciousdecision-making. 39(39) In the present case lawful, reasonable and procedurally fairadministrative action cannot have taken place if the selection committee failed to take intoconsideration one or more relevant criteria; or improperly took into consideration factors beyondthe relevant criteria, or acted in a manner which was biased or partial or allowed itself to beinfluenced against the plaintiff by personal dislike and antipathy, or prejudged the issue as towho would be appointed to chairs of law prior to the completion of the selection process.

[31] It is settled law that for the purpose of deciding an exception the court takes the factsalleged in the pleading excepted to as being correct. This Court must therefore assume ascorrect, the allegation in para 2.12 of the particulars of claim that the plaintiff's subjectivefeelings were violated by the conduct of the selection committee. What cannot be assumed ascorrect is the plaintiff's allegation that a reasonable person in his position would have feltinsulted and humiliated; the enquiry that must be made is whether the conduct complained of


can be characterised as offensive when tested against the objective criterion ofreasonableness. 40(40)

[32] Following the approach laid down in Delange, an analysis of the cause of action as pleadedreveals the following: The only 'overt' act complained of is the decision not to appoint theplaintiff to a chair of law. There is no suggestion that during the interview (or at any other stage)any member of the selection committee conducted him or herself in an offensive manner orthat the plaintiff was subject to degrading, insulting or ignominious treatment. 41(41) There is inmy view nothing inherent in the decision not to appoint the plaintiff which could conceivably becharacterised as being of an offensive or insulting character. Objectively considered the defectsof a procedural nature about which he complains cannot be characterised as offensive orinsulting when tested against the

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objective criterion of reasonableness. Moreover, the decision in question was 'outwardly lawful'.The very task of the selection committee was to decide whether or not to appoint the plaintiff toa chair of law. Accordingly, their motivation for not appointing the plaintiff is irrelevant. (See inthis regard the passage from Melius de Villiers quoted in Delange (supra).)

[33] The plaintiff contends that if the above reasoning were correct, it would mean thatviolations of constitutional rights, no matter how numerous or how flagrant, could not constituteactionable invasions of the right to dignity as long as the violations occur in a non-offensivemanner. In short, what this means is that polite violations of constitutional rights cannot amountto breaches of a victim's right to dignity, whereas rude or offensive violations can. The plaintiff'sargument overlooks the principle which has been affirmed in Delange that only conduct that isoffensive or insulting can form the basis of an action for injuria.

[34] A further argument advanced is that it is the violation of the constitutional right itself whichamounts to the overt wrongful act and not any gratuitous rudeness or offensivenessaccompanying the violation. Here too, I do not agree with the plaintiff's submission. The only'overt act' complained of is the decision not to appoint the plaintiff to a chair of law. Whilst theconstitutional violations contended for may be wrongful, the conduct upon which such violationsare premised is not of an overt character.

[35] A critical factor militating against an award of damages is the fact that the plaintiff had athis disposal the remedy of review. The conduct of the selection committee, if proved, wouldhave been reviewable under the common law and the Constitution. 42(42) The setting aside ofthe decision of the selection committee would, in my view, have constituted sufficient vindicationof the rights that had been infringed, and would in large measure have assuaged the plaintiff'swounded feelings.

[36] Issues analogous to the present have been considered by the Supreme Court of Appeal inKnop v Johannesburg City Council; 43(43) Olitzki Property Holdings v State Tender Board andAnother 44(44) and Premier, Western Cape v Faircape Property Developers (Pty) Ltd. 45(45)


[37] In Knop the appellant had claimed damages from the Johannesburg City Council on thegrounds that the latter had been negligent in approving his application for the subdivision of anerf where the

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subdivision was in conflict with the provisions of the respondent's town-planning scheme. Theappellant had incurred expenditure in proceeding with the development after the application forsubdivision had been approved and sought to recover the loss resulting therefrom. Anexception to the particulars of claim as disclosing no cause of action was upheld. In holding thatan action for damages would not lie, the court was particularly influenced by the fact that a partyaggrieved at the local authority's decision had a right to appeal to the Townships Board interms of s 139 of the Town-Planning and Townships Ordinance 15 of 1986. In this regard BothaJA made the following observation: 46(46)

'If the application is refused, the applicant is entitled in terms of s 139(1)(a) to appeal to the Townships Boardwithin a period of 28 days. He thus has available and at his disposal the procedure of an appeal in terms of ss(4) and (5) and the opportunity of a full hearing for the consideration of any representations he might wish tomake. In my judgment it could not have been in the contemplation of the Legislature that, apart from the appealprocedure, the refusal of the application was to be regarded as a wrong to the applicant entitling him to bring anaction for damages against the local authority.'

Botha JA also referred 47(47) to certain policy considerations which in his view militated againstallowing a claim for damages:

'As to the broader considerations of policy, on the one hand an aggrieved applicant does not need an action fordamages to protect his interests; he has readily at hand the appeal procedure provided within the legislativeframework. On the other hand, considerations of convenience militate strongly against allowing an action fordamages; the threat of such an action would unduly hamper the expeditious consideration and disposal ofapplications by the local authority in the first instance. That is not to say that the local authority need not exercisedue care in dealing with applications; of course it must, but the point is that it would be contrary to the objectivecriterion of reasonableness to hold the local authority liable for damages if it should turn out that it actednegligently in refusing an application, when the applicant has a convenient remedy at hand to obtain the approvalhe is seeking. To allow an action for damages in these circumstances would, I am convinced, offend the legalconvictions of the community.'

[38] In Olitzki the plaintiff claimed constitutional damages for loss of profit from the State TenderBoard in the Province of Gauteng. The plaintiff which had an option to purchase a buildingtendered to provide office space in it to the Provincial Government. When its tender was notaccepted it instituted a claim for damages in which it alleged that the defendants hadmisconducted themselves during the tender process. The Court was not prepared to recognisean award of damages for loss of profit as an appropriate remedy for breach of theadministrative justice provisions of the interim Constitution. In so holding, the Court wasinfluenced by the fact that the plaintiff had another remedy in the form of an interdict availableto it. Cameron JA reasoned thus: 48(48)

'Counsel correctly conceded that in these circumstances and on the assumptions made the plaintiff would havebeen entitled to an interdict prohibiting the


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defendants from continuing the tender process and indeed from allocating the award elsewhere at all.

This in my view has acute consequences for the plaintiff's task in seeking to convince the Court that an award ofthe profit lost through the non-award of the tender could constitute ''appropriate relief''. An interdict would not onlyhave eliminated the source of loss the plaintiff invokes. This no doubt reflects the wisdom of hindsight, and offersstony comfort to a plaintiff who, as Mr Ginsburg was at pains to emphasise, has never manifested an intention toabandon its rights. Yet, as Ngcobo J emphasised on behalf of the Constitutional Court in Hoffmann v SouthAfrican Airways, what constitutes ''appropriate relief'' depends on the facts of each case. The plaintiff relies on itsspecial circumstances to found a constitutional entitlement. Fair scrutiny must encompass all aspects of itsposition, and the alternative remedies available to it, at all stages of the dispute, must be a critical factor in thatassessment.'

[39] A factor that also militated against an award of damages in Olitzki was what Cameron JAdescribed as the 'conceptual and practical difficulties' flowing from the omission to challengethe decision in question by means of judicial review. These are outlined in the followingquotation from De Smith, Woolf and Jowell Judicial Review of Administrative Action 5th ed(1995) at para 19-033: 49(49)

'The causation of damage also creates particular problems in respect of the imposition of tortious liability onpublic authorities for unlawful administrative action. It is trite law that judicial review is not concerned with themerits of administrative decisions and the court should ordinarily avoid substituting its own opinion for that of thepublic body as to how precisely a discretion should be exercised. How, then, is a court to approach a casewhere, for example, a plaintiff alleges that a breach of natural justice activated by malice has caused him loss(such as the refusal of a licence to trade) or the decision-maker negligently fails to take into account a relevantconsideration? The court may avoid second-guessing what decision the public authority would have reachedhad the decision not been tainted by illegality by saying that the plaintiff has at most lost an opportunity to obtaina benefit. Probability will be defined by among other facts, the degree of discretion possessed by thedecision-maker. As Harlow points out, whilst in most cases a court may attempt to place a value on a lostchance, special difficulties arise in relation to damages claims associated with judicial review because thisexercise would necessarily involve the court substituting its own discretion for that of the decision-maker. Asolution is to defer the action for damages until the outcome of the application for judicial review is known and thepublic body has complied with the decision. However, even if the court considering the damages claim waits forthe decision-maker to reconsider the decision in accordance with law, conceptual problems may still arise if adecision is characterised as void (rather than voidable); in these circumstances what will have caused theplaintiff's loss?'

[40] The problems alluded to in the abovementioned quotation are well-illustrated by thepresent case. The complaints levelled against the selection committee are essentially of aprocedural nature. Had the plaintiff pursued his obvious remedy of judicial review, the matterwould have gone back to the selection committee for reconsideration. The selection committeemay then have either confirmed its original decision

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or appointed the plaintiff to a chair of law. Where judicial review is bypassed and a remedy indamages is sought, the decision-maker is not given an opportunity to consider the matterafresh and its designated function is effectively usurped. Damages are also difficult to assess


as the court would have to second-guess the outcome of a possible review. Whether, and towhat extent, the decision of the selection committee would have been vitiated by the proceduralirregularities contended for has an important bearing on the plaintiff's entitlement to damagesand the extent of any award that may be made.

[41] Faircape concerned an action for damages against a provincial government flowing fromthe allegedly improper consideration of an application for planning permission. The conductcomplained of was considered not to be actionable. The Court (per Lewis JA) after consideringthe dictum in Knop at 33A - F made the following observation: 50(50)

'This dictum must be qualified in the light, now, of the duties imposed on all organs of government by theConstitution, and in particular in the light of the positive obligations imposed by s 7 (the State must ''respect,protect, promote and fulfil the rights in the Bill of Rights''); and s 41(1) (all spheres of government and organs ofState must provide ''effective, transparent, accountable and coherent government''). In determining theaccountability of an official or member of government towards a plaintiff, it is necessary to have regard to his orher specific statutory duties, and to the nature of the function involved. It will seldom be that the merely incorrectexercise of a discretion will be considered to be wrongful. The enquiry as to wrongfulness should also include aconsideration of whether the legislation in question, expressly or by implication, precludes an action for damagesagainst an official or member of government, since the conclusion that accountability may take the form of anaward in damages may be negatived by a construction of the legislation in question. This approach is in my viewconsonant with the Promotion of Administrative Justice Act 3 of 2000 (of no application to this matter because itwas passed and promulgated after the events giving rise to the dispute had occurred) which confers on a courtthe power, in exceptional circumstances, to order an administrator or any other party to the proceedings to paycompensation where administrative action is set aside. It must be emphasised that each case should beconsidered in its own context. And of course, the other elements of the delict must still be proved in order for anyact or omission to be actionable.'

[42] In Faircape the Court cited with approval 51(51) the following passage from Minister ofSafety and Security v Van Duivenboden: 52(52)

'When determining whether the law should recognise the existence of a legal duty in any particularcircumstances what is called for is not an intuitive reaction to a collection of arbitrary factors but rather abalancing against one another of identifiable norms. Where the conduct of the State, as represented by thepersons who perform functions on its behalf, is in conflict with its constitutional duty to protect rights in the Bill ofRights, in my view, the norm of accountability must necessarily assume an important role in determining whethera legal duty ought to be recognised in any particular case. The norm of accountability, however,

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need not always translate constitutional duties into private law duties enforceable by an action for damages, forthere will be cases in which other appropriate remedies are available for holding the State to account. Where theconduct in issue relates to questions of State policy, or where it affects a broad and indeterminate segment ofsociety, constitutional accountability might at times be appropriately secured through the political process orthrough one of the variety of other remedies that the courts are capable of granting. No doubt it is forconsiderations of this nature that the Canadian jurisprudence in this field differentiates between matters of policyand matters that fall within what is called the ''operational'' sphere of government though the distinction is notalways clear. There are also cases in which non-judicial remedies, or remedies by way of review and mandamusor interdict, allow for accountability in an appropriate form and that might also provide proper grounds upon whichto deny an action for damages. However, where the State's failure occurs in circumstances that offer no effectiveremedy other than an action for damages the norm of accountability will, in my view, ordinarily demand therecognition of a legal duty unless there are other considerations affecting the public interest that outweigh thatnorm.'


[43] The approach of the South African Courts in the above-mentioned cases is consistent withthat adopted in Commonwealth jurisdictions. See in this regard X and Others (minors) vBedfordshire County Council; M (a minor) and Another v Newham London Borough Council andOthers; E (a minor) v Dorset County Council and Other Appeals; 53(53) and Dunlop vWoollahra Municipal Council. 54(54)

[44] The plaintiff has sought to distinguish the facts in Knop, Olitzki and Faircape from those inthe present matter. Whilst they are indeed distinguishable, the underlying principle enunciatedtherein is not. In each of these decisions the Court considered the existence of an alternativeremedy and public policy considerations as militating against an award of damages.

[45] A point forcefully made by the plaintiff is that none of the alternative remedies suggestedwould eliminate entirely the harm suffered by him. Even if he were somehow to be appointed toa chair of law of the first defendant that could never wipe out the past hurt, insult andhumiliation meted out to him by the selection committee in violating his constitutional rights, andin not furnishing him with reasons for his non-appointment after he had asked for such reasons.The remedy of review would do no more than eliminate, from the time when the relief affordedby that remedy became operational, the effect of the decision of the selection committee butcould not erase the hurt, humiliation and insult. Damages are the only possible remedy thatwould assuage the plaintiff's wounded feelings. I do not agree with the plaintiff's submission. Asuccessful review or the grant of interdictory relief obliging the first defendant to furnish reasonswould go a long way to assuage his wounded feelings and at the same time serve to vindicatethe infringement of his fundamental rights. It should not be forgotten that the

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primary object of constitutional relief is not compensatory but to vindicate the fundamentalrights infringement and to deter their future infringement. The test at the end of the day is notwhat will alleviate the hurt which plaintiff contends for but what is appropriate relief required toprotect the rights that have been infringed.

[46] Public policy considerations also play a significant role. It is not only the interests of theplaintiff, but the interests of society as a whole that ought, as far as possible, to be servedwhen considering an appropriate remedy. 55(55) This aspect is emphasised by Pilkington in herarticle entitled 'Damages as a Remedy for Infringement of the Canadian Charter of Rights andFreedoms' 56(56) where the following observation is made:

'. . . The governing standard in providing remedies ought to be three-fold: What remedy or combination ofremedies will (1) most effectively redress the wrong suffered by the plaintiff, (2) foster the implementation of theConstitution by deterring future infringements and ensuring future compliance, and (3) interfere as little aspossible with the exercise of legislative and executive responsibilities.'

(My emphasis.)

[47] State officials are every day involved in thousands of discretionary decisions. It may safelybe assumed that a substantial number of these will be attended by one or other form ofprocedural irregularity. The consequence of these irregularities is that persons will be refused


licences or dispensations for which they have applied. The legal convictions of the communitydo not demand that disappointed applicants be afforded a right of action in damages by reasonof such irregularities. The administration would be potentially paralysed if actions for damageswere permitted. It is for this reason that actions of the sort presently under consideration are notgenerally recognised save in exceptional circumstances.

[48] And so, it is my conclusion that the facts pleaded are not sufficient to justify a remedy indamages. There is nothing in the Constitution that would require the development of thecommon law to recognise the cause of action contended for by the plaintiff. The exception toclaim A (the eighth exception) must accordingly succeed.

Claim B

[49] This claim is also novel in South African law. The plaintiff claims damages for the loss ofdignity based upon the contention that he had a right or legitimate expectation to be furnishedwith the reasons for the decision of the selection committee not to appoint him to a chair of lawand to appoint rival candidates in preference to him.

[50] The particulars of claim detail the attempts by the plaintiff to obtain the reasons and certainminutes. The plaintiff avers that on 11 February 2000 he requested the third defendant, in histhen capacity as Dean of

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the Faculty of Law of the first defendant to furnish him with inter alia: detailed reasons in writingwhy his application for a chair of law of the first defendant dated 11 October 1999 wasunsuccessful; detailed reasons in writing why the applications of each of the rival candidateswas considered by the selection committee for chairs of law of the first defendant to be moremeritorious than his. And a copy of the minutes of the meeting of the selection committee forchairs of law held on 2 and 3 February 2000. The third defendant failed or declined to furnishthe plaintiff with the information specified. The plaintiff renewed his attempts to obtain reasonsby addressing letters to the then Vice-Chancellor of the first defendant, Prof Bundy, and to hissuccessor, Prof Norma Reid; however, the information requested was not forthcoming.

[51] The plaintiff's allegation is that the refusal to furnish him with the reasons and the minutesconstitutes a wrongful violation of his rights in terms of ss 9, 10, 23, 32 and 33 of theConstitution and consequently amounted to an injury to his dignity. The manner in which this ispleaded is as follows:

'3.24 The aforesaid conduct of the third defendant, Professor Bundy, Professor Reid and/or any other personon behalf of the first defendant in failing and/or declining to furnish the plaintiff with the informationspecified in subparas 3.3.1 and 3.3.2 above and/or a copy of the minutes referred to in subpara 3.3.3above constituted a wrongful violation of one or more or all of the plaintiff's rights:

3.24.1 to dignity in terms of s 10 of the Constitution of the Republic of South Africa Act 108 of 1996;

3.24.2 to equality in terms of s 9 of the Constitution of the Republic of South Africa Act 108 of 1996;

3.24.3 to fair labour practices in terms of s 23 of the Constitution of the Republic of South Africa Act 108 of


1996;

3.24.4 to access to information in terms of s 32 of the Constitution of the Republic of South Africa Act 108of 1996, further alternatively in terms of common law;

3.24.5 to just administrative action in terms of s 33 of the Constitution of the Republic of South Africa Act108 of 1996, alternatively in terms of common law;

and consequently constituted a wrongful injury to the plaintiff's right to dignity in terms of s 10 of theConstitution of the Republic of South Africa Act 108 of 1996, alternatively a wrongful injury to theplaintiff's right to dignity at common law, further alternatively a wrongful injury to the plaintiff's right todignity both in terms of s 10 of the Constitution of the Republic of South Africa Act 108 of 1996 and atcommon law.

3.25 The plaintiff felt insulted and humiliated by the conduct of the third defendant, of Professor Bundy, ofProfessor Reid, and/or of any other member of staff (alternatively agent), of the first defendant who wasresponsible in law for furnishing to the plaintiff the information specified in subparas 3.3.1 and 3.3.2

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above and/or a copy of the minutes referred to in subpara 3.3.3 above, in failing to furnish suchinformation and/or a copy of the aforesaid minutes, and a reasonable person in the position of the plaintiffwould have felt so insulted and humiliated.

3.26 The aforesaid conduct of one or more or all of the employees, alternatively agents, of the first defendantreferred to in para 3.24 above was intended to injure the plaintiff in his right to dignity both in terms of s10 of the Constitution of the Republic of South Africa Act 108 of 1996 and in terms of common law.

3.27 Alternatively to para 3.26:

The aforesaid conduct of one or more or all of the employees, alternatively agents, of the first defendantreferred to in para 3.24 above was unreasonable and therefore negligent.

3.28 As a result of the aforesaid conduct of one or more or all of the persons referred to in para 3.24 above, allof whom acted within the course and scope of their employment as members of staff of the firstdefendant, alternatively in their capacity as agents of the first defendant, the plaintiff has been injured inhis dignity, and has suffered damage in the amount of R2 000 000.'

[52] The defendants except to claim B on the ground that the conduct complained of is notreasonably capable of injuring the plaintiff's dignity and that the facts pleaded are not sufficientto justify a remedy in damages.

[53] Section 33(2) of the Constitution provides that 'everyone whose rights have been adverselyaffected by administrative action has the right to be given written reasons'. It is well establishedthat the failure to give written reasons has an important bearing on the question whether thedecision-maker or makers acted in good faith or had been influenced by ulterior or impropermotives. In Judes v District Registrar of Mining Rights, Krugersdorp 57(57) Innes CJ said: '(A)refusal to give reasons might be an important element in deciding whether the decision hadbeen bona fide, or whether it had not been influenced by ulterior or improper motives.' Similarsentiments were expressed in Mafuya and Others v Mutare City Council 58(58) where it wassaid: 'The refusal to give reasons is in itself evidence of bad faith.' See also Transnet Ltd vGoodman Brothers (Pty) Ltd. 59(59)


[54] Whether the conduct complained of is reasonably capable of injuring the plaintiff's dignitymust be assessed in the light of the principles enunciated in Delange. Applying that test thecause of action reveals the following: The only 'overt act(s)' complained of is the refusal tofurnish the plaintiff with the reasons for his non-appointment and copies of the minutes. There isno suggestion that any of the letters of refusal contained any language of an offensive orinsulting nature. So far as the failure to respond to the plaintiff's letters constitutes an 'overt act'

2005 (5) SA p383

BORUCHOWITZ J

there is no suggestion that such failure was accompanied by any other conduct of an insultingor offensive character. Objectively viewed, (that is applying the criterion of reasonableness)there is nothing inherent in the mere refusal to capitulate to the plaintiff's demands or the failureto answer his demands which could be characterised as being of an offensive or insultingcharacter.

[55] The legal convictions of the community do not demand that the plaintiff be afforded a rightof action in damages by reason of the irregularity complained of. To recognise such claimwould open the floodgates to litigation. The likelihood is that state officials and those whoexercise public power will be faced with a deluge of unmeritorious claims. The plaintiff submitsthat the fear of an adverse costs order, the application of the de minimis principle and theplacing of the onus of proof upon the plaintiff or applicant would serve to deter those who seekto institute trivial and unmeritorious claims. Regrettably, I do not share the plaintiff's optimism.One's experience sitting in this court proves otherwise.

[56] The plaintiff had several effective alternative remedies at his disposal. The plaintiff'srequest for reasons for his non-appointment to a chair of law was initially made on 11 February2000. At that date the plaintiff's right of access to information was governed by ss 32(1) and33(2) of the Constitution. 60(60) He could have applied under the Constitution for reasons forthe decision. Moreover, had the plaintiff sought to review the decision not to appoint him to achair of law he had the special procedure of Rule 53 at his disposal, which would have requiredthe first defendant to furnish the record of the decision in question, as well as reasons. 61(61)

[57] My views in relation to claim B are essentially the same as those expressed in relation toclaim A. The authorities to which I have referred in relation to the question of the availability of aremedy in damages in relation to claim A are of equal application to the exception to claim B,and do not bear repeating.

[58] Given these considerations, I remain unpersuaded that anything in the Constitution wouldrequire the development of the common law to recognise a cause of action on the factspleaded. I do not consider an award of damages to be an appropriate remedy in respect of thealleged infringement of the plaintiff's constitutional right or legitimate expectation to be furnishedwith the reasons for the decision of the selection committee not to appoint him to a chair of law.And nor do I consider the first defendant's conduct to be unreasonable and negligent.

2005 (5) SA p384


BORUCHOWITZ J

[59] In the result I hold that no cause of action is disclosed. The exception to claim B (the ninthexception) must accordingly be upheld.

Claim C

[60] Claim C is based upon the publication of a letter by the second defendant and two otherson 4 March 2002. The letter, written by way of e-mail, reads:

'Dear Andrew

I have just had a Professor Boraine from the University of Pretoria who has been trying to trace Mervyn Dendy.He claims to have asked in the Law School for telephone numbers etc. but not had much success. He claims thatDendy never answers his Wits number. Could we please supply him with a contact number/address? His cellnumber is 082 7748 960.

On a related issue I have still received nothing from Dendy re the research report for the School of Law 7 yet. Iam concerned that I have not received it because of failure of my email. If however, it is due to his non provisionthen I must tell you, and thereby him, that I find this a most unsatisfactory state of affairs for a senior member ofthe School's staff and that I would like the report by the end of the week.

Thanks,

Neil'

[61] The plaintiff alleges that this letter is defamatory in that, among other things, it implies thathe was generally culpably neglectful of his duties as a member of the academic staff of the firstdefendant, and of the legitimate needs of academic colleagues at other universities to liaise orinteract with him in relation to academic matters. It is further alleged that the passage impliesthat the plaintiff was in breach of his contract of employment in not spending a sufficientamount of his working time in his university office and that he neglected his duties by notsubmitting a research report for the School of Law timeously. It is also to be implied therefromthat the plaintiff acted in breach of his contract of employment in neglecting his administrativeduties generally. 62(62)

[62] The defendant's submission is that the letter in question is simply not reasonably capableof bearing out the defamatory meanings alleged.

[63] The test on exception is whether a reasonable person of ordinary intelligence mightreasonably understand the words of the letter to convey a meaning defamatory of the plaintiff.63(63) A defamatory statement is one which tends to lower the plaintiff in the estimation ofright-thinking members of society generally. 64(64)

[64] No innuendo or secondary defamatory meaning is alleged. Accordingly, the reasonableperson of ordinary intelligence is taken to understand the words alleged to be defamatory intheir natural and ordinary meaning; this would include not only what the words expressly say,but

2005 (5) SA p385


BORUCHOWITZ J

also what they imply. The test is an objective one. 65(65)

[65] What constitutes the ordinary reasonable reader has been variously described in thecases. In Johnson v Rand Daily Mails 66(66) it was held that a reasonable reader is not 'anastute lawyer or a supercritical reader'. In Suid-Afrikaanse Uitsaaikorporasie v O'Malley 67(67)the reasonable reader was described as the fictitious, normal, balanced, right-thinking andreasonable person who is neither hyper-critical nor over-sensitive. More recently it has beenheld that the Constitution now also informs the characterisation of the reasonable person andthe manner in which defamatory matter must be assessed. This is because the Constitutionprotects freedom of expression as well as dignity. See in this regard Rivett-Carnac v Wiggins.68(68)

[66] It is submitted on behalf of the defendants that only a hypersensitive person, not willing toattribute to words their ordinary meaning, could attach a defamatory meaning to the letter. Thehypothetical reasonable reader would view the letter as conveying no more than a request toassist a Pretoria colleague to get in touch with the plaintiff and an enquiry about thesubmission of a research report. I do not agree with this contention. The letter clearly impliesthat the plaintiff may have been neglectful of his duties by not submitting a research report forthe School of Law. The letter was addressed to the third defendant, who was then the plaintiff'ssuperior and attributes to the plaintiff an egregious breach of duty. That the allegation must beviewed in a serious light emerges from the letter itself in which the third defendant states: 'Ifhowever, it is due to his non-provision then I must tell you, and thereby him, that I find this amost unsatisfactory state of affairs for a senior member of the School's staff. . . .' Theattribution to the plaintiff that he was neglectful of his duties is a statement which tends to lowerhim in the estimation of right-thinking members of society generally and is defamatory.

[67] Counsel for the defendants drew my attention to cases that emphasise the right to freedomof expression. 69(69) These cases are distinguishable. In each instance the party defamed wasa politician and the right to freedom of expression arose in the context of ensuring open,responsive and accountable government. No public purpose is served by denigrating theplaintiff in the eyes of his peers as is being done in the present case.

[68] I consider the offending letter to be prima facie defamatory of the

2005 (5) SA p386

BORUCHOWITZ J

plaintiff and would accordingly dismiss the exception to claim C (the tenth exception).

Misjoinder

[69] This exception can be readily disposed of. What falls to be considered is whether it iscompetent for the plaintiff to join claims C, D and E.

[70] The matter is regulated by Rule 10, the relevant portion of which provides:


'10(3) Several defendants may be sued in one action either jointly, jointly and severally, separately or anyalternative, whenever the question arising between them or any of them and the plaintiff or any of the plaintiffsdepends upon the determination of substantially the same question of law or fact which, if such defendants weresued separately, would arise in each separate action.'

[71] An objection of misjoinder of causes of action will be well founded only where all three ofthe following requirements are satisfied: (1) The defendants are separate and distinct (meaningthat there are no common defendants); (2) each cause of action is separate and distinct and (3)there is no question of law or fact that is common to the separate causes of action. 70(70) Rule10(3) requires that the questions of law and fact upon which the right to relief depends must be'substantially' the same. This means that the questions of law and fact must 'in the main' or intheir 'principal essentials' be 'essentially' the same. 71(71)

[72] All of the claims have a common defendant in the form of the first defendant. 72(72) Thefirst defendant is alleged to be vicariously liable for the actions of the second and thirddefendants. There can be no objection to the joinder of claims C and D, which are against thesame defendants. Although each of the causes of action is separate and distinct, there may becommon questions of law or fact. The third defendant features in both claims C and E. Theallegation in claim C is that on 4 March 2002 the second defendant published the e-mailmessage marked 'MD1' to the third defendant, who was at the time the head of the School ofLaw of the first defendant and to Mrs Moshina Cassim, who was at the time the secretary tothe third defendant. The question whether the defamatory e-mail was published to the thirddefendant is a matter that will probably arise for consideration at a trial in due course. A furtheraspect which, according to the plaintiff, might arise is whether there was a similarity betweenthe malicious motives ascribed to the second defendant and those that are ascribed to the thirddefendant. 73(73) There is also a suggestion that the second and third defendants might havebeen acting in cahoots or might have been part of a conspiracy against the plaintiff.

2005 (5) SA p387

BORUCHOWITZ J

[73] Convenience is a further relevant consideration. At common law a number of defendantsmay be joined whenever convenience so requires. 74(74) There is a reasonable prospect of anoverlap of factual issues. Convenience dictates that it would be inappropriate to run the risk ofconflicting judgments by different Judges in different trials on issues that are common to allthree actions.

[74] For these reasons there can be no objection to the joinder of claims C, D and E. Themisjoinder exception (the third to seventh exceptions) must accordingly be dismissed.

Costs

[75] The general rule is that where the issues are separate and distinct each carries its owncosts; however, the rule is not invariably applied. 75(75) The following considerations compelme to depart from the general rule. Each of the parties has achieved a measure of success.Although the defendants raised 10 exceptions to the plaintiff's particulars of claim, they haveonly succeeded in respect of two. In the circumstances it would be fair that each party be


directed to pay its own costs.

Order

[76] It is ordered as follows:

76.1 The exception to claims A and B is upheld. These claims are set aside. The plaintiff isgiven leave, if so advised, to file amended particulars of claim within one month.

76.2 The exception to claims C, D and E is dismissed.

76.3 Each party is to pay its own costs.

Plaintiff's Attorney: Mervyn Dendy Attorney. Defendants' Attorneys: Webber Wentzel Bowens.

DURR v ABSA BANK LTD AND ANOTHER 1997 (3) SA 448 (SCA)

1997 (3) SA p448

Citation 1997 (3) SA 448 (SCA)

Case No 424/96

Court Supreme Court of Appeal

Judge Schutz JA, SMALBERGER JA, NIENABER JA, MARAIS JA, and STREICHER AJA

Heard May 2, 1997

Judgment May 20, 1997

Counsel C Edeling for the appellantZ F Joubert (with him H Van Eden) for the respondents

Annotations Link to Case Annotations

Flynote : Sleutelwoorde

Negligence - What constitutes - Duties of investment advisor recommending investment indebt-financing instruments - Test for requisite level of skill - General level of skill and diligencepossessed and exercised at time by members of branch of profession to which practitionerbelonging - Where advisor the regional manager of broking division of major financial institutionprofessing investment skills and offering expert financial advice, that setting standard against whichadvisor's skills and knowledge to

1997 (3) SA p449

be judged - Standard not that of 'ordinary or typical' broker - Whether advisor negligent inrecommending investment in debt-financing instruments as sound investments - General rule -Negligent to engage in dangerous activity without skills and knowledge usually associated with


proper discharge of duties connected with such activity - Investment in debt-financing instrumentspotentially dangerous - Investor, receiving assurance that investigation of debtor undertaken andrecommendation of soundness of investment, entitled to see advisor as man skilled to advise onsuch matters and as one backed by major financial institution - Advisor under duty to investigatecreditworthiness of debtor - Not entitled to recommend investment without such investigation -Negligence established where advisor failing to undertake independent investigation of debtor'screditworthiness, in fact lacking skills to undertake such investigation and failing to seek help, butnonetheless recommending investment - Financial institution vicariously liable.

Headnote : Kopnota

The appellant sought to recover from the respondents the sum of R595 000 which she andother members of her family had invested in debentures and preference shares issued bySupreme Holdings Ltd ('Holdings') and Supreme Investment Holdings (Pty) Ltd ('Investment')between 1989 and 1992. These investments had been brought to her attention by the secondrespondent ('S'), the regional manager of the first respondent financial institution's brokingdivision, and strongly recommended by him as, variously, 'safe', 'very solid', 'very secure', 'verysound' investments. It was the appellant's case that, owing to the respondents' negligent failureto exercise the degree of care and skill which she was entitled to expect of someone in S'sposition, and for which failure the first respondent as S's employer should be held vicariouslyliable, she had lost this investment when Holdings and Investment had been liquidated in 1992.Her claim was dismissed in a Provincial Division.

The appellant had first sought S's assistance with her investments in 1985. She had told himthat she had no need of the highest return available; that what she wanted were secureinvestments. She had followed his recommendations and had confidence in him. Her evidencewas that she would never have thought of approaching S had he not been connected with abank or building society. It was her belief, one shared by the members of her family who hadinvested in the Supreme companies, that a big company like the first respondent would havefinancial experts who would examine prospective investments. Neither she nor her relatives hadany clear idea of what debentures and preference shares were.

Holdings had been formed in 1986. In 1988 it was converted into a public company. Investmenthad been formed in 1989. It, too, had been converted into a public company in 1990, butreverted to a private company during 1991. The companies were represented in publicitymaterial as having a sound financial base in a selection of manufacturing and tradingcompanies, with particular emphasis placed on three companies listed on the JohannesburgStock Exchange.

Brokers were offered commission at a rate substantially higher than that for comparableinvestments; and the return on debentures was offered at 11/2 - 2% above the fixed depositrate. Brokers were invited to marketing conferences; and were given glossy brochures anddossiers containing laudatory press cuttings. No prospectuses or financial statements wereprovided. The names of the two individual companies were played down. It

1997 (3) SA p450

was the 'Supreme Group' which was emphasised as having control over the operating


companies, and especially the three listed companies. The investments in the Supreme Groupwere offered as an alternative to investment in a participation bond company, Supreme Bond(Pty) Ltd. This latter company, though controlled by the same shareholder who controlled theGroup companies, was not in fact part of the Supreme Group at all.

The relationship between Holdings and Investment and the operating companies over whichthey were said to have control was never made clear. Neither company had the auditedfinancial statements required by law; neither company had issued the prospectuses required bylaw for each new issue of debentures or preference shares; Holdings had filed no financialstatements with the Registrar of Companies which, as a public company, it had been obliged todo; no financial statements were made available to brokers; and none had been sent topreference share- and debenture holders as required by law.

The truth of the matter was that Holdings had been insolvent since 1990; that Investment hadbeen insolvent since its inception in 1989; that the 'secured debentures' issued to investorswere not secured, while the 'secured debenture' certificates said nothing about how and to whatextent the security had been effected; and that the moneys raised from the sale of debenturesand preference shares had not been invested in the operating companies they were said tohave been. Instead, the proceeds of the debenture and preference share sales were beinginvested in three unlisted companies, the first of which was an intermediary financing companyin trouble with the Financial Services Board, the second of which ran a 'loan sharking' business,and the third of which repossessed properties not generating income from the participationbond company and put them together in property portfolios. At the time of their liquidation in1992 Investment and Holdings together owed some R280 million to debenture holders and R40million to preference shareholders.

S had first heard of Supreme in 1989 from colleagues and associates. His enquiries consistedof his periodically discussing Supreme with the director of its local office, of examining itsmarketing material and of attending its marketing conferences when invited to do so. Theseenquiries and the assurances given to him from time to time by Supreme's director hadconvinced him of the soundness of the investment. When he had taken the appellant's finalinvestment of R80 000 to Supreme's local office mere days before its collapse, he had drawnadditional assurance from the news that Supreme was in negotiation to raise capital with hisemployer, the first respondent, and that the first respondent 'would have had their own set ofrisk assessment criteria before they would even consider lending any organisation funds'.Although, on his evidence, S's real skills were confined to advising clients on planning theiraffairs having regard to income tax, estate duty, returns, capital growth, liquidity, duration ofinvestment, various forms of investment such as endowments, retirement annuities, unit trusts,fixed deposits, life assurances and the like, he at no stage sought information or advice fromthe same skilled people upon whose expertise the first respondent would have drawn for a riskassessment of Supreme, though they were readily available to him.

In their pleas the respondents made the following statements: that they 'offered expert financialplanning and investment advice to the public'; that '[the first respondent] invited the public tomake use of such services'; that 'the investors made use of the services offered by [the firstrespondent] and asked for and received advice from [S]'; that '[S] gave investors expert


1997 (3) SA p451

financial planning and investment advice'; and that '[the respondents] would exercise thedegree of skill and care which [was] required of a reasonably competent and careful advisorgiving advice to clients'. While giving evidence S had affirmed that he was content that hisconduct be measured against the standard of an expert financial and investment advisor.

Nothwithstanding these statements, the expert evidence presented in Court for the respondentswas directed at showing a 'typical broker', characterised as having modest accomplishments,who would be competent to assess the risks associated with the 'products' which constitutedsuch broker's stock in trade, such as endowment policies or fixed deposits. A 'typical broker',according to the evidence, would not ask for financial statements and, if provided with them,would not be able to read them; would not know that a prospectus was required for a publicoffer of shares or debentures or how a prospectus differed from marketing material; would takea 'secured debenture' certificate at face value; would be misled by misleading brochures andadvertisements; and, above all, would not be able to assess 'institutional risk', ie the soundnessor creditworthiness of a prospective debtor.

Expert evidence led on the appellant's behalf was to the effect that if someone held himself outto be an expert, and a financial institution confirmed that he was an expert, then any persondealing with him should be entitled to expert advice. Furthermore, that if an advisor were torecommend forms of investment less well used by financial institutions, such as unlistedpreference shares and debentures, then it was imperative that the advisor make at least apreliminary investigation of the solvency of the debtor and, if the advisor did not have thepersonal competence to make such enquiries, it was incumbent upon him to use whateverresources were available to him or, if necessary, to seek professional advice before committinghis client's funds to such investment.

In an appeal the Court held that two issues arose, namely (a) in general, what was the level ofskill and knowledge required; and (b) whether the standard against which that skill andknowledge should be judged was that of an ordinary or average broker or that of a regionalmanager of the broking division of a bank professing investment skill and offering expertinvestment advice. (At 460G--H.)

Held, as to (a), adopting the dicta in Van Wyk v Lewis 1924 AD 438 at 444 and 448, that 'indeciding what is reasonable the Court will have regard to the general level of skill and diligencepossessed and exercised at the time by the members of the branch of the profession to whichthe practitioner belongs', but that 'the decision of what is reasonable under the circumstances isfor the Court; it will pay high regard to the views of the profession, but it is not bound to adoptthem'. (At 460H--461A/B.)

Held, further, as to (b), that, as a matter of law set in the factual context of the case, therelevant standard in this instance was not that of the average or typical broker of modestaccomplishments, as described by the respondents' expert witness: acceptance of suchstandard would allow a definition chosen by a witness for his own purposes to dictate the result,making the enquiry of what was required of a particular kind of broker pointless. (At463G/H--H/I.)


Held, further, that what was actually needed was first to determine what skills the particular kindof broker should exhibit, which in turn would depend upon what skills he had been held out topossess. (At 463I.)

Held, therefore, that the appropriate standard was that of the regional manager of the brokingdivision of a financial institution professing investment skills

1997 (3) SA p452

and offering expert investment advice. (At 464A.) On the basis of this characterisation, therespondents' expert evidence concerning the 'average or typical broker' was irrelevant. (At464D/E.)

Held, further, as to whether S had been negligent, that the basic rule was as follows: '(L)ack ofskill or knowledge is not per se negligent. It is, however, negligent to engage voluntarily in anypotentially dangerous activity unless one has the skill and knowledge usually associated withthe proper discharge of the duties connected with such an activity.' (Joubert (ed) The Law ofSouth Africa vol 8 First Reissue para 94.) (At 468E--F.)

Held, further, that, in bringing the 'Supreme' investment to the appellant's attention andassuring her that he had investigated it and strongly recommended it as a 'very solid', 'verysecure', investment, he had advised the appellant to embark upon what was, in effect, thepotentially dangerous activity of money lending. (At 468G/H--I.)

Held, further, that, given that the respondents had accepted that an investment advisor requiredspecial skill and that in a case such as this he would be under a duty to make enquiries aboutSupreme, and given that the respondents had held themselves out as expert investmentadvisors, without qualification, they could not argue that they had not been under a duty toinvestigate the creditworthiness of Supreme (at 468F/G--G/H): S had told the appellant that hehad investigated Supreme and strongly recommended it for investment; the appellant hadaccepted his advice and had relied upon it, as indeed he had intended that she should. Theappellant had been entitled to see S as a man skilled to advise her on such matters and as onebacked by a major financial institution, not as someone devoid of skills in assessingcreditworthiness and unready to seek help. (At 468H--I/J.)

Held, accordingly, that the respondents' duty to investigate the creditworthiness of the Supremecompanies had been established. (At 468I/J.)

Held, further, as to whether the duty to investigate had been performed, that, in relying forinformation on the subject of the investigation instead of performing an independentinvestigation, S had not established a single objective fact about the two companies. (At468I/J--469B.)

Held, further, as to the respondents' argument that S had been under no duty to pursue furtherenquiries unless there had been something to alert him, that S had had no right to recommendthe investment until he had satisfied himself by sufficient means that the investments in thoseparticular companies were safe. (At 469B.)


Held, further, that, in any event, there had indeed been warning signs: (a) the fact that both highcommissions and high returns were offered was reason for the exercise of caution right fromthe start (at 465H); (b) Supreme did not have a well-established track record when he had firstmade his recommendation to the appellant in 1990 - Holdings had been issuing debenturessince 1986 and Investment had only been formed in 1989 (at 469E--F); and (c) S should alsohave wondered whether Supreme's local manager's explanation for its ability to offer highreturns (that money was saved by not advertising and by minimising administration costs) waspossibly too good to be true. (At 469G.)

Held, further, in view of the rule of law concerning the undertaking of activity requiring skill, thatS should either have forewarned the appellant and her family where his skills ended so as toenable them to appreciate the dangers of accepting his advice without further ado, or he shouldnot have recommended the investment. (At 469G/H--H/I.)

Held, further, that what S had not been entitled to do was to venture into a field in which heprofessed skills which he did not possess and to give the appellant assurances about thesoundness of the investments which he had

1997 (3) SA p453

SCHUTZ J A

not been qualified to give. Given the limits of the enquiries he had made himself, he had beenunder a duty to seek help, which had readily been available to him, before recommending theinvestment. (At 469H/I--I/J.)

Held, accordingly, that, on the facts, S had not performed his duty and had consequently beennegligent. The first respondent's liability followed as it had accepted vicarious liability. (At 470A.)The appeal was allowed.

The decision in the Cape Provincial Division in Durr v ABSA Bank Ltd and Another reversed.

Cases Considered

The following cases were cited in the judgment of the Court:

Mahon v Osborne [1939] 1 All ER 535 (CA)

Van Wyk v Lewis 1924 AD 438.

Appeal from a decision in the Cape Provincial Division (Van Zyl J). The facts appear from thejudgment of Schutz JA.

C Edeling for the appellant.

Z F Joubert SC (with him H van Eeden) for the respondents.

Cur adv vult.

Postea (May 20).


Judgment

Schutz JA: Hindsight is not vouchsafed the common man as he picks his course through life.This must be kept constantly in mind in a case like this one, where all is so obvious now. It is acase in which members of a family took investment advice from a bank's investment advisor.That advice has proved to be lamentably bad. Almost all that was invested was lost. The bankand the person in its employ who gave the advice have been sued. The broad issue isnegligence. There is no question that the bank offered investment advice, that the advice wasaccepted and acted upon, that it was bad advice, and that it caused loss. There is no imputationof dishonesty. The particular aspect of negligence that is in contention is the degree of skill andcare to have been expected of the respondents. They accept that they had to act with skill andcare. The question is, with how much skill and care? The claim pleaded relied upon contract,alternatively delict, but as the case was presented as one in delict, and as nothing turns uponthe precise cause of action, I shall treat it as such.

How the Durrs saw things

At 65 Mrs Durr decided that attending to her investments herself was becoming burdensome. Afriend suggested she approach Mr Myles Stuart of the United Building Society for assistance.She did so in 1985, and out of this flowed the various investments by herself and members ofher family which gave rise to this case. I shall refer to the family collectively, if somewhatinaccurately, as the Durrs. They were her husband Mr Durr, her daughter Mrs Stanley and hergranddaughter Miss Ashburner. All of these people gave evidence and all have suffered loss.The only plaintiff is Mrs Durr. She has taken cession of the other claims. Having lost before VanZyl J in the Cape Provincial Division, she is the appellant.

In 1985 Stuart was the regional manager of the United Building Society's broking division inCape Town. He was to become the second

1997 (3) SA p454

SCHUTZ J A

defendant, and the second respondent on appeal. In time the building society metamorphosedinto United Bank. Later it was absorbed as a division in the first respondent, ABSA Bank Ltd,which was the first defendant in the trial.

Pursuant to her approach Stuart visited Mrs Durr at her home and this became the scene forintermittent business during succeeding years, until 1992. She was in no need of the highestreturn available and was looking for secure investments. This she told Stuart. On his advice sheinvested on fixed deposit at United Building Society and in an annuity with Old Mutual. Shefound him charming and polite and he gained her confidence - so much so that at a later stageshe appointed him her executor.

In 1989 a company called Supreme was mentioned by Stuart for the first time. This was a verygood company, he told her. She asked him if it was safe for investment. He gave the answer,which according to her was repeated on later occasions, that his own and his mother's moneywas invested with Supreme. (In his evidence Stuart stated that his mother's money was so


invested on his recommendation and that he told the Durrs as much. But he disputed that hehad said that any of his own money was invested in Supreme. Nor was that the fact. The othermembers of the family supported Mrs Durr. No finding was made by the Court below. Hotthough the dispute was on this point, I do not think that it is of much moment, as I would expectthat for a son to vaunt a company by saying that he has persuaded his mother to invest in it isat least as strong as saying that he had done so himself.) Other expressions attributed to Stuartare that Supreme was a very solid company and that he strongly recommended investment init. That such was the tenor of his commendation is not in dispute. In fact this was what Stuartbelieved. The first investment in Supreme, of R30 000, was in the form of secured debentures.That was in November 1989. These had been offered by him as an alternative to fixed deposits.In February 1990 another R10 000 followed. The debentures were redeemable after 12 months,but were re-invested on maturity. It is unnecessary to detail all her investments andre-investments in debentures, all of which were recommended by Stuart with re-affirmation ofhis original endorsement.

In 1990 he proposed a new form of investment, preference shares in Supreme, redeemablewithin three years. Again Mrs Durr sought assurance as to risk and was given it. By now MrDurr had become interested, due to his wife's persuasions. He received the same assurancefrom Stuart as she had received. After discussion with him, Stuart worked out how an availableone and a half million rands should be invested. At the top of the list was R300 000 forSupreme preference shares. Mr Durr accepted all the recommendations. At the same time,November 1990, Mrs Durr committed R100 000 of hers to the same shares.

Next, it was Mrs Stanley's turn. In November 1991 she invested R20 000 in preference shares.She had met Stuart at her mother's home. He made an appointment to visit her. During the visithe told her that she would do better if she withdrew money invested with Syfrets and placed it inSupreme. He told her also that it would be a very secure investment.

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She consulted her husband, who was not happy with the proposal. However, he phoned Stuart,and upon receiving assurance from him, suggested that she proceed if that was her wish. Thatis what she did.

For her 21st birthday Mr and Mrs Durr gave their granddaughter, Miss Ashburner, R10 000.She also met Stuart at their home. He advised her what to do with the money. In February 1992she invested it in Supreme debentures.

Mrs Durr's last investment was on 5 November 1992, 13 days before the two Supremecompanies that were the ones that mattered (as it later turned out) were provisionally liquidated.This last investment was R80 000 in secured debentures. Of this R1 000 was for an elderlygardener. Once again assurance as to risk was sought and given. When the music stopped MrsDurr was owed R115 000 on secured debentures and R150 000 on preference shares; Mr Durrwas owed R300 000 on preference shares; Mrs Stanley was owed R20 000 on the same; andMiss Ashburner R10 000 on secured debentures - a total of R595 000.


What were the Durrs' expectations and beliefs? Mrs Durr said that she would never havethought of approaching Stuart had he not been connected with a bank or building society. Thepicture that she had in her mind was that in a big company like United or ABSA there would befinancial experts who would examine prospective investments - 'men who were really in theknow'. It is clear that she has no clear idea of what a preference share is other than that itconfers some sort of priority. She seems to think that it ranks prior to a debenture (which it doesnot), a belief which Stuart also appeared at that time to hold. Mr Durr does not know what apreference share is. But Stuart assured him that Supreme preference shares were an entirelysafe investment. Nor does Mr Durr know what a debenture is. Miss Ashburner was not asked,but there is no reason to suppose that her state of knowledge on these matters exceeded thatof her elders, or that her expectations were any different. As to Mrs Stanley, she also does notknow what preference shares are and, referring to United, her comment was 'a big companylike that you take - those are the people that you take the advice from'. Her husband, it will berecalled, took the trouble to phone Stuart. According to him Stuart said that 'our people' (ie atABSA - I use this name to include United in its two manifestations) had thoroughly investigatedthe operation, Supreme, and that he was confident that it was a sound investment. Stanley wasemphatic about this. Stuart disputed any reference to 'our people'. His version is: 'That wasnever contained, conveyed to him, what I recall probably having said to him was that I hadinvestigated Supreme and that I had satisfied myself that Supreme was in order.' The Courtbelow made no finding on this important dispute.

The truth about 'Supreme'

Just about everything that Stuart told the Durrs about Supreme was wrong, not that he knew it,but because he had allowed himself to be misled, as many others also had been, by a series ofdeceits.

In order to sort out the tangle it is necessary to establish some corporate identities. The twocompanies which had issued 'secured

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debentures' and 'preference shares' were, at the time of liquidation, Supreme Holdings Ltd andSupreme Investment Holdings (Pty) Ltd. I shall refer to them respectively as 'Holdings' and'Investment'. Holdings had been formed in 1986. By 1990 it was insolvent. When registered in1986 it was named Supremebond Trust (Pty) Ltd. (There was a purpose in this name, with itsinclusion of the word 'bond'.) In 1988 it was converted to a public company and the namebecame Supremebond Trust Ltd. In May 1990 its name was changed to Supreme Holdings Ltd,the appellation under which, being unable to pay its debts, it was liquidated in November 1992.Investment was formed in 1989. It was insolvent from its inception. Its fortunes never improved.The original name was Supremebond Investment Holdings (Pty) Ltd. (Notice again the 'bond'.)Later in the year it was converted to a public company and the name became SupremebondInvestment Holdings Ltd. In 1991 it became Supreme Investment Holdings Ltd, and after somemonths it reverted to being a private company with the name Supreme Investment Holdings(Pty) Ltd. It was provisionally liquidated together with Holdings, similarly unable to pay its debts.


The affairs of Holdings and Investment were inextricably interwoven. Neither was a listedcompany. The moving spirits behind them were one Ronbeck, an attorney, and one Hafner, anaccountant. In 1985, that is before either of the companies so far mentioned was registered,Supreme Bond (Pty) Ltd had been formed. This was a participation bond company, whichsurvived the collapse in November 1992. It did not form part of the 'Supreme Group' at all. Theshares in it were held by Ronbeck. I shall refer to it as 'the participation bond company'. Therewere numerous further companies which did form part of the group. Some of them will bementioned later.

Between them Holdings and Investment (to which I shall refer collectively as 'the twocompanies') raised large sums of money from the public. At the time of liquidation they oweddebenture holders some R280 million (on what was described in the debenture certificates assecured debentures, but which were in fact not secured). So-called preference shareholderswere owed another R40 million. Two of the means employed in raising money were to paybrokers commission some three times more than the going rate for comparable investmentsand to offer a return on debentures some one and a half to two per cent above the fixed depositrate. The higher rate of return was not only attractive to investors but would encourage brokerswishing to remain competitive to offer the 'product' as one of the commodities in their stock intrade.

What was held out to the world was that 'Supreme' had a sound financial base in a selection ofmanufacturing and trading companies, with particular emphasis placed upon three that werelisted on the Johannesburg Stock Exchange (which last was one of the true statements). Thelisted companies were Supreme Industrial Holdings, Protea Furnishers and SupremeManufacturing Holdings. What was lacking in respect of the two companies (which were theones that mattered as they were issuing the debentures and preference shares) was any clearstatement as to their relationship with the other companies; and any audited financialdocuments of the kind that the law requires, which, if

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they had been available, would have allowed some assessment of the activities, profitability andsoundness of the two companies. No financial statements were filed with the Registrar ofCompanies by Holdings which, as a public company, it was required to do so. No financialstatements were made available to any broker by either company. ('Supreme' marketed throughbrokers.) None were sent to debenture holders or preference shareholders, as was by lawrequired. Even for internal consumption they were late. For instance, the statements for theyear ended 31 December 1990 were not signed by the auditors until May 1992. There was areason for that. During the course of the 1990 audit the auditors realised that Investment wasinsolvent at the end of 1990. In order to prevent this being reported, an increase of capital ofR19 950 000 in December 1990 was fabricated retrospectively. That amount was supposed tohave been paid by Holdings to Investment for new shares, but it never was.

After January 1989 not a single prospectus was issued, although money was being raised fromthe public wholesale. Section 145 of the Companies Act 61 of 1973 ('the Companies Act')


requires an offer to the public for subscription for shares to be accompanied by a prospectus. Aprospectus may be used for only three months after its registration (s 156). It must contain afair presentation of the state of affairs of the company (s 148); and many informative details,including an auditor's report, are required to be included. For purposes of a public subscriptiondebentures are equated to shares (definition of 'share' in s 1). The reason advanced for notissuing prospectuses was supposed to be, relying on s 144, that because shares anddebentures were made available to a limited class consisting of brokers, the offer was notcalculated to become available to other persons. This contention was advanced despite the factthat brokers were issued with wads of application forms!

The 'secured debentures' were in fact unsecured, for a variety of reasons that need not be setout. Again deceit was involved, but mainly of a kind that only a detailed investigation wouldreveal. What was apparent to the outsider, however, was that the debenture certificates,although calling themselves secured debentures, said nothing about how and to what extent thesecurity had been effected. Also, for the enquirer with longer vision, the publicly availabledocuments of the three listed companies in the group, upon which much emphasis was placed,would have shown that they had not issued debentures or preference shares.

For reasons that need also not be stated the 'preference shares' were irregularly allotted andthe claims of those who subscribed for them are those of concurrent creditors.

Rather than documents in a form which past experience has embedded in the statutes as arequirement, brokers were edified with glossy brochures, dossiers containing laudatory butlargely irrelevant press cuttings, and they were exhorted to invest at marketing conferences.The two companies' names were played down. Rather the 'Supreme Group' was put forward asdisposing over the operational companies and their assets, and particularly the three quotedcompanies. Completely spuriously, the 'Supreme Group' was dated back to 1923, whereasHoldings had been formed in 1986 and Investment in 1989. The actual facts

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concerning the two companies themselves were suppressed. What was also suppressed waswhere the major investments were being made by the 'Supreme Group', not in the operationalcompanies, but in a trio called Insulated Structures (Pty) Ltd ('Insulated'), Sandton Finance (Pty)Ltd ('Sandton') and Pier Investments (Pty) Ltd ('Pier'). Insulated was an intermediary financingcompany which was having problems with the Financial Services Board. Sandton was involvedin what the witness Goldhawk called the 'loan-sharking business', lending small amounts to theman in the street at high rates, a business, according to him, 'which involves unusual collectiontactics whereby letters are not necessarily used but large people knocking on the door go tocollect money very often'. Pier bought repossessed properties from the participation bondcompany, properties that did not generate income, and put them together in property portfolios.

The broad substance was that the two companies were running an illegal bank, taking depositsfrom the public, and, through their intermediaries, lending to other members of the public at arate higher than that paid to the depositors. Of course, they had no licence to conduct a bank,so that they could not openly solicit deposits from the public. Becoming a bank would have


entailed rigorous regulation. Openly raising capital by offering shares or debentures would haverequired a prospectus with no room to quibble. That would have entailed a scrutiny which theycould not bear. So it was also no good. The expedient that was devised was to use theparticipation bond company as a stalking horse. It was a registered financial institution and wasentitled to solicit funds. What was done, as explained by Goldhawk, was to advertiseparticipation bonds and then to add that, by the way, secured debentures and preferenceshares were also on offer. That no doubt explains the 'bond' in the earlier names of the twocompanies, and the suggestion contained in a widely distributed brochure, to wit:

'The Supreme Investment.

By law, all investments in Supreme Bond are placed in Participation Mortgage Bonds or Secured Debentures.Supreme Bond grants mortgages only over income producing immovable property and investors participate inthe high returns that result. Each Participation Bond is secured by the property on which it is granted, making thisone of the safest possible investment avenues.

. . .

In order to accommodate investors with different periods of investment, Supreme Bond offers you ParticipationBonds for 60 months with a floating rate and a "floor rate" guaranteed for this period.

In addition, Supreme Bond offers investment opportunities in "Secured Debentures" for 6, 12, 18, 24 and 36months respectively with fixed interest rates of interest guaranteed for these periods.'

Had the Durrs heard only a fraction of the preceding recital they would not have invested inSupreme.

I would add that those who are stigmatised in my judgment for dishonesty are not parties to thelitigation. The three persons who are parties are content that the facts are broadly as I describethem, and they dictate what facts are presented to the Court.

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What Stuart did

Stuart, of course, did not know nor suspect these things at the time. He first heard of Supremein 1989 from colleagues and associates and decided to investigate. He telephoned Mannheim,the director of Supreme's Cape Town branch. Upon enquiry as to how Supreme managed tooffer such high rates Mannheim told him that money was saved by not advertising, marketingbeing confined to brokers and accountants, and by minimising administration costs. After thisconversation he received marketing material through the post from time to time, including thebrochure already mentioned. Stuart read the brochure and, having regard to its contents, whatMannheim had told him, and discussions with other brokers, he concluded that he could offerSupreme as an investment with confidence. Neither at this time nor at any other time did he askfor financial statements or a prospectus. At no stage before liquidation did he hear or seeanything negative about 'Supreme', whether in newspapers or elsewhere.

He decided that he wished to meet Mannheim personally, so he went to see him, in order toassess the man and his environment. The man he found credible, plausible and confident, the


premises professional but not opulent. He took the opportunity to ask Mannheim how Supremeinvested the money it collected. Participation bonds and secured debentures were mentioned.The latter were said to be secured through assets in the company, assets such as fixedproperty. Returns were said to be obtained from investments in retailing, property andmanufacturing companies. Two of the names mentioned were well known to him, ProteaFurnishers, and Mewa, a manufacturer of steel products. Mannheim told him that Ronbeck hadbeen a director of Johannesburg Building Society, later Allied Building Society, and he said thatSupreme had been in existence since 1923. Stuart came away with total confidence inSupreme. There had been no mention of loan sharking. Stuart had worked for Allied before andconsidered that if Ronbeck had been a director he would have the skill and integrity to run aprofitable business.

Stuart twice evaded a question whether he had asked Mannheim squarely what the securitybehind the debentures was. When he was pressed on this subject in cross-examination heappealed again to the generalities expressed by Mannheim, but was forced to concede that hedid not know what the precise nature of the security was, or whether it was adequate.According to him the fact that the certificate said 'secured' was enough.

Consistently with his version that he had not said to Mr Stanley that 'our people' hadinvestigated Supreme, he claimed that when he spoke to Mrs Durr he told her that he (theemphasis was he personally) had done investigations and that the result was that the companywas sound, with a 'risk profile (that) was not excessive'.

When he took the final R80 000 to Mannheim in November 1992 (days before the collapse)'once again (he) gave me assurances . . . that all was in order'. This message, thus curiouslyphrased, reconfirmed his confidence. His evidence proceeded:

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'And my understanding from that conversation was, if Supreme had gone into negotiations with United and weregoing to raise capital and United was going to lend them capital [this is a reference back to a part of theconversation he had already described] obviously they [meaning United] would have had their own set of riskassessment criteria before they would even consider lending any organisation funds.'

This is a strange remark. It sounds very much like what Mrs Durr thought. It also reflects thatStuart drew solace from a second or third hand account of investigations which his employermight make. Yet his evidence was that although that same employer had skilled people whocould investigate Supreme, and they were available to him on a direct approach, he never oncesought any information or advice from them.

After the crash he went to see Mannheim again. Mannheim assured him that there was nothingmuch to worry about. There had been an adverse article in Finansies en Tegniek, there hadbeen a 'little bit of a scare' and a 'run on funds', but things would stabilise. This sanguine viewseems to have made some impression on Stuart, particularly as he said that it was confirmedby the managers of some of the subsidiaries. Mr Durr deposed that on hearing of the liquidationhe had phoned Stuart, whose response was: 'Don't worry, it is not another Masterbond.' (So hewas alive to the travails of Masterbond.) Miss Ashburner also phoned him and she also was told


not to worry. Mrs Durr, in her turn, was given assurance, but on a different if equally erroneousbasis, that preference shares offer greater security than secured debentures.

What did the law expect of Stuart and ABSA?

Imperitia culpae adnumeratur, says D 50.17.132 - lack of skill is regarded as culpable. Thatmuch is accepted by the respondents. But how much skill, they say. We have shown all the skillthat an 'ordinary' or 'average' broker, or a bank employing such a one, need show. What morecan be asked of us?

Two questions arise in this case. (1) In general, what is the level of skill and knowledgerequired? (2) Is the standard required in judging that level that of the ordinary or average brokerat large, or is it that of the regional manager of the broking division of a bank professinginvestment skills and offering expert investment advice?

The answer to the first question is found in the judgment of Innes CJ in Van Wyk v Lewis 1924AD 438 at 444 with reference, as it happens, to medical practitioners:

'It was pointed out by this Court, in Mitchell v Dixon (1914 AD at 525), that "a medical practitioner is not expectedto bring to bear upon the case entrusted to him the highest possible degree of professional skill, but he is boundto employ reasonable skill and care". And in deciding what is reasonable the Court will have regard to thegeneral level of skill and diligence possessed and exercised at the time by the members of the branch of theprofession to which the practitioner belongs. The evidence of qualified surgeons or physicians is of the greatestassistance in estimating that level.'

(Own emphasis.)

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'But the decision of what is reasonable under the circumstances is for the Court; it will pay high regard to theviews of the profession, but it is not bound to adopt them.'

(At 448.)

For the purposes of this case I do not think that anything need be added to this statement.(Scott LJ in Mahon v Osborne [1939] 1 All ER 535 (CA) at 549D--E was to say of Innes CJ'sjudgment that it was one 'of which I should like humbly to express my admiration'.)

However, the second question is less easy - whether the standard is set by the brokingcommunity at large or by a much smaller group of which Stuart is a representative. The Courtbelow opted for the wider and therefore less strict test, accepting a submission that

'[Stuart] was at all relevant times a member of the broking profession and as such his conduct should beevaluated on the basis of the general level of care, skill and diligence which might reasonably be expected of atypical, ordinary or average broker'.

This conclusion was reached notwithstanding that the respondents had made the followingstatements in their plea:'[ABSA and Stuart] offered expert financial planning and investmentadvice to the public.''[ABSA] invited the public to make use of such services.''The investorsmade use of the services offered by [ABSA] and asked for and received investment advice from


[Stuart].''[Stuart] gave the investors expert financial planning and investment advice.''[ABSA andStuart] would exercise the degree of skill and care which is required of a reasonably competentand careful investment advisor when giving advice to clients.'

In his evidence Stuart affirmed that he was content that his conduct be measured against thestandard of an expert financial and investment advisor.

The respondents' case was not, therefore, that they be measured by the standards of any oldbroker, but that of an expert of the kind stated. However, the evidence was rather differentlypresented, and the Court below acted on that evidence. The only expert witness that therespondents called was one Wessels, the executive director of the Life Offices Association ofSouth Africa ('LOA'), a trade association of all the major life insurance companies. He wascalled to give evidence of the knowledge and skills of the 'average or typical broker', of whichthere are some 27 000 in South Africa, of whom 16 000 of 17 000 are linked to insurancecompanies. The definition of a broker that he used in establishing the number of 27 000 wasone that had been proposed for the purposes of his own evidence by Goldhawk, an expertwitness for Mrs Durr, namely '. . . any person (whatever his designation or job description mightbe) who offers information and advice on financial planning and/or investments or solicits orprocures investments, for reward by way of commission or otherwise'. These 27 000 brokers,and I say it in a non-pejorative sense, must be a motley lot.

Wessels expressed the view that Goldhawk's expectations of them were too high. Wessels's'typical broker' is a man of modest accomplishment.

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He would not ask for financial statements, and if provided with them would not be able to readthem; he would not know that a prospectus is required for a public offer, or how a prospectusdiffers from glossy marketing material; he would take a 'secured debenture' certificate at facevalue; he would be misled by misleading brochures and advertisements such as were issued bySupreme; and, critically for this case, he would not have the skills to analyse or assess'institutional risk'. This expression is used to denote the soundness or creditworthiness of aprospective debtor. It is used by Wessels in contrast to 'product risk'. A 'product' is part of abroker's stock in trade, like an endowment policy or a fixed deposit. That falls within the 'typicalbroker's' sphere of competence. But institutional risk is quite beyond him. This means, in plainEnglish, that if he is advising a client to lend money to a new debtor, he lacks the skill to assessthe debtor's creditworthiness. That provokes the immediate question whether he shouldrecommend the debtor, without warning his client of his own incapacity.

A reading of Stuart's evidence delineates him as one of Wessels's typical brokers. The list ofthings relevant to this case of which he is ignorant is a long one. He seems to have animprecise understanding of separate corporate personality, of the possible natures of a 'group',and of possible relationships within a group. He does not understand the character of thesecurity offered by either preference shares or debentures, of the range of varieties of either, orof the order of ranking of preference shares and debentures. He does not know what aprospectus is, what its purpose is, or what may be learned from one. He is unfamiliar with the


Companies Act. He does not know what financial statements comprise, nor would he know howto interpret them if given to him. Even less does he know that a public company must file themwith the Registrar of Companies, after which they are matter of public record. Nor does heknow that deposits may not be solicited from the public indiscriminately except by registeredbanking institutions. (I put this last matter loosely.) I do not say these things in disparagement ofStuart. It is not negligent not to be a lawyer. But those who undertake to advise clients onmatters including an important legal component do so at their peril if they have not informedthemselves sufficiently on the law.

Not only did the Judge below adopt the 'typical broker' test, but he held that Mrs Durr tenderedno evidence as to the duties and functions of bankers under circumstances such as exist in thiscase. That is not entirely correct. Mr Goldhawk had said:

'If a person holds himself out as an expert and there is support, such as a financial institution confirming that he'san expert, then any person dealing with him should be entitled to expert advice. There's the analogy of if you getinto a taxi and the taxi driver is a bad driver, does that remove any negligence claim you may have against him?'

Mr Goldhawk is a chartered accountant and a specialist investigating accountant. He wasappointed as such by the liquidators of 'Supreme' and gained a deep insight into the group andits penumbra.

Mr Nieuwoudt was also called as an expert by Mrs Durr. He is a fellow and currentvice-president of the Institute of Life and Pension Advisors ('ILPA') and chairman of that body'sprofessional standards institute. Its

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members are drawn from the cream of the life and pensions industry. This was made a groundof criticism of his evidence. His standards were impossibly high, it was said.

Nieuwoudt joined issue with Wessels on the question of 'institutional risk'. The main basis of hisopinion that the respondents had acted negligently was that they were concerned withrecommending forms of investment less well used by financial institutions, namely unlistedpreference shares and unlisted debentures. (Stuart does not seem to have encountered thesephenomena before.) Both amounted to debt financing and it was imperative to make at least apreliminary investigation of the solvency of the debtor. Among other things, he would at leastexpect that the broker find out who exactly the debtor is to be, what the security offered is, andseek to obtain financial information by asking for a prospectus and audited financial statements.Of course, everything would depend upon the particular circumstances. But, he added,

'the important issue is that even if the advisor himself does not have the personal competence to make theenquiries, I believe it's incumbent upon him to harness whatever resources are available to him, or if necessaryto ask for professional, legal or accounting opinion before committing his client's funds to such an investment'.

These opinions of Messrs Goldhawk and Nieuwoudt are of assistance, but the case remainsone where the Court will, in the end, have to form its own opinion, having regard to thereasoning advanced by the experts.


By contrast, the respondents called no expert evidence from the banking sector to explain whatthey contended was meant or was to be understood by ABSA's public professions of skill, orwhat Stuart would have been told if he had asked for help. It would have been interesting tohear whether indeed they contended that the 'average or typical broker' of Wessels'sdescription met their public claim to expertise. It may be added that when an attempt was madeto cross-examine Wessels as to what he thought was to be expected of ABSA, he, notsurprisingly, shied away from the subject.

In dealing with the question whose standard is the relevant one, I have dealt with the opinionsof the experts and some of the facts at some length. That is because in real life negligence isnot a mere legal abstraction, but must be related to particular facts. However, as a matter of lawset in the present factual context, I am of the opinion that the relevant standard is not that of the'average or typical broker' as he has been defined. To accept that standard would be to allow adefinition chosen by a witness for his own purposes to dictate the result, making the enquiry asto what is required of a particular kind of broker pointless. What is actually needed is first todetermine what skills the particular kind of broker needs to exhibit, which must depend in largepart on what skills he is held out to possess. If this were not so, then the reasoning advancedby the respondents would justify the neurosurgeon being judged by the standards of thegeneral practitioner. That would be contrary to the reference by Innes CJ in Van Wyk v Lewis(above) at 444 to 'the branch of the profession to which the practitioner belongs'.

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I conclude that the appropriate standard is that of the regional manager of the broking divisionof a bank professing investment skills and offering expert investment advice.

Before dealing with the issue of negligence it is necessary to underline the manner in which therespondents have chosen to present their case. Goldhawk directed his attention to a widegroup of brokers, but focused more specifically upon those who offered information or advicefor investment purposes or who solicited or procured investments. The members of that class ofbroker would then have to exhibit the particular skill that they professed. The respondents havesimply ignored this vital qualification, chosen to use Goldhawk's broad group as the source ofthe relevant benchmark of skill, and proceeded to establish that most of that group do not infact have all the skills needed to give comprehensive investment advice. Therefore they cannotbe expected to exhibit the necessary expertise, it is sought to be argued. This is a completeperversion of Goldhawk's classification. He did not select a group without the requisite skills.Once the correct categorisation has been made, it is apparent that Wessels's evidenceconcerns a type of broker who is irrelevant to the setting of standards in this case. There is noother expert evidence on the respondents' side. So Stuart enters the arena all on his own.

Were Stuart and ABSA negligent?

It remains to enquire whether Stuart and ABSA have been negligent. It should be mentionedthat ABSA has been sought to be held liable in delict on one or other of two bases: asvicariously liable for Stuart's conduct, or as negligent in its own right for exposing the public toStuart without supervising or training him properly. To my mind it is clear that if Stuart was


negligent, that negligence is vicariously attributable to ABSA, and it was so conceded inargument. Accordingly, if Stuart was negligent the alternative need not be explored.

In dealing with what standard is to be applied to Stuart, I have already given some preliminaryindications of what I think was expected of him. I shall now examine this question more closely.

On his own evidence Stuart's real skills lie in advising clients on different kinds of products.Thus he can advise them to plan their affairs having regard to the incidence of income tax andestate duty, to returns, capital growth, liquidity, duration of investment, various forms ofinvestment such as endowments, retirement annuities, unit trusts, fixed deposits, lifeinsurances, and a variety of other matters. This is in itself a valuable service and on theevidence Stuart was able to provide it.

But whether he was qualified to advise investments in preference shares and debentures in'Supreme' is a more questionable matter. That his advice was bad is now clear. But, as I said atthe outset of this judgment, one must be careful not to use hindsight to impute foresight to him.And it must be remembered that many other brokers, institutions and various regulatingauthorities were fooled as well.

It is now clear that a little persistence in just a few enquiries would have led to the Durrsinvesting their money elsewhere. Were there

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warning signs visible to Stuart which should have led him to make at least some of thoseenquiries? Goldhawk says that there were. Now I think I should make it clear that Goldhawk,although speaking out of much experience and deep insight into the affairs of 'Supreme', triedto be fair, and not expect of others his own standards and skills. So that there were many thingsthat would have alerted him, had he been in Stuart's position, that he thought it unlikely wouldhave alerted a competent broker in a bank's investment division. There were others that he wasdoubtful about. Perhaps they should have alerted that broker, perhaps not. He was notdogmatic about those. But there was a residue which, taken collectively, should have alertedthe broker. That was his opinion.

The first warning signs, according to Goldhawk, were the high returns and high commissionsoffered by 'Supreme'. Whilst placing less emphasis on these two factors, Nieuwoudt agreed ontheir relevance. As far as high commission is concerned (about an extra one per cent fordebentures in this case), it imposes an additional burden upon profit margins. If the return isalso higher than normal, that burden is further increased. In order to cover these burdens thereis pressure to lend at higher rates than normal, possibly to persons who cannot obtain lowerrates from banks. And so the vicious circle may be created.

High commission also creates temptation. It may influence the broker to promote somethingthat is not, objectively speaking, best for his client. A broker with any knowledge of the worldmust know that that is sometimes the very object. And even if he is beyond temptation, hemight well ask himself whether the person offering the high commission does not anticipate that


some other brokers might be less upright. As far as high returns are concerned, Nieuwoudt putit succinctly: the basic rule of investment is that there is an inverse relationship between riskand return. This is no hard and fast rule, of course, but it is a rule nonetheless. Over thecenturies people, sometimes almost whole peoples, have ignored it, usually with the sameresult. Stuart was mindful of the rule, because he asked Mannheim how the unusually highreturns were achieved. The explanation about saving advertising and other costs should, Ithink, have been taken with a grain of salt, particularly when he was invited to marketingconferences (which he attended). Marketing conferences cost money. High returns and highcommissions should not be overemphasised, but they were, to my mind, reasons for somecaution at the very threshold, particularly when both were present in a marked degree.

Nieuwoudt's main emphasis was not on these two factors, but on a failure to make preliminaryenquiries into the would-be debtor. I have set out his views above. Goldhawk, also, was of theview that, whatever allowance one makes for a broker in Stuart's position, he should haveobtained better information, more particularly by calling for a prospectus and/or financialstatements. I must say that I find it astonishing that when the Legislature and the administrationhas gone to trouble to allow people to protect themselves and their clients, to allow them tohave easy access to audited figures, as in the case of Holdings, that these facilities should beignored in favour of glossy pamphlets and press cuttings

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selected by the debtor. And if it be complained that the standard I postulate is too high, then Iwould suggest that banks and similar institutions refrain from claiming an expertise that they donot have. If a prospectus had been sought it would soon have become apparent that there wasnone. And if the reason for its absence was given as being that there was no offer to the public,common sense should have raised a query, whatever some lawyer was supposed to have said.Similarly, if financial statements had been asked for, they would not have been given. Thatalone should have been enough. And had the excuse been offered that they were late, thatshould have led to further enquiry. If, on the other hand, they had been provided, even anunskilled person might have asked, but how is it that in such a well managed company there isa loss?

The answer raised to all this is - but Stuart was so unskilled that he did not even know that heought to ask. One of the first requirements of a professional is to know when he may be gettingout of his depth, so that I do not think that that is a sufficient excuse. I am not able to sayexactly what Stuart should have done. But I would suggest that there was a point at which heshould have walked down the passage or across the street, or lifted the telephone, or activatedthe fax, and said to a lawyer, or accountant, or banker (none of which he was) in the employ ofABSA something like this: 'Look, I have been introduced to some attractive debentures(preference shares) in a group called Supreme. Would you please tell me quite whatdebentures (preference shares) are, and how secure they are. And also, please tell me how Ifind out who and what Supreme is and what risk attaches to investing in it.'

When questioned about his failure to seek advice Stuart justified himself by saying that a


certain responsibility was placed on his own shoulders as a broker and that it was simply notpractical to ask for an investigation of 'every single investment opportunity or insuranceopportunity or business opportunity'. This despite the fact that he had not marketed debenturesor preference shares before and despite the fact (as he acknowledged in the light of retrospect)that he had not verified a single fact about the two companies. He sought to explain his conductby saying that he looked to the Registrar of Financial Institutions to keep a watch oncompanies. Wessels also had said that the 'average or typical broker' would largely rely on theofficial regulators rather than make his own investigations.

Similarly, he drew solace from the fact that 'Supreme' was listed. In fact the two companieswere not listed. The same question may be asked. In this case it would have been quite easy tofind out, simply by looking at the daily stock exchange lists published in the press. But thatwould have required knowledge of the names of the two companies, knowledge that Stuart didnot have at once to hand. Should he not have had? One sees the victim of an insidious and wellthought out fraud ready to be ensnared because of his own ignorance and too ready to trust inhis fellows. Frauds play upon these qualities. To have a trusting nature is not in itself to benegligent. But to be naïve may be. Stuart, in my opinion, was naïve. To have gone to Mannheimin the first instance as an initial step was reasonable, but to go to him again after news of thecollapse and

1997 (3) SA p467

SCHUTZ J A

be talked into a sense of some security seems to me to lack that edge of suspicion andalertness to possible evil that an investment advisor should have as part of his weaponry.

I would say something about reliance on the various regulatory bodies and officials. They doperform valuable functions in protecting the public against fraud. But for an investment advisorto assume that they have shot out all the predators is ingenuous. New ones always creep inunder the wire. Those responsible for lending other people's money must be ever alert to thisand, sometimes helped by the regulatory powers, make their own investigations to the extentreasonably necessary. These powers are not there, after all, to give individual and dailyattention to particular lenders, and the grindings of their mills are sometimes slow. Individualattention falls to be given by individual advisors. And then there are also other aids to theinvestor and his advisor which the State has made available. To what extent did Stuart availhimself of them?

When asked why he had not sought audited financial statements Stuart's answer was:'Because I didn't believe it was appropriate. When I started to market Supreme through secureddebentures, the document that I read indicated that the investment was secured, and I believedthat to be the case at the time and nothing was ever conveyed to me to challenge that' (ownemphasis). He was cross-examined about the analogy of a bank manager (which the Judgebelow did not consider to be an analogy at all - 'bank managers are terrible people . . . theytrust nobody' - said in jest). It was put to him that if a representative of company A wishing toborrow money was asked by the hypothetical bank manager to produce financial statementsand he produced those of company B, he would not be taken seriously. He conceded that B


company's statements would not advance the application. Upon being asked if the analogy wasunfair, he answered: 'Except that the name "Supreme" was always prevalent and that was whatgave the impression that what you were looking at was the same as what was being offered toclients.' As an example it was pointed out to him that whereas certain results that were putforward in a published profit announcement related to Supreme Industrial Holdings Limited, adebenture certificate was issued in the name of Holdings. He was asked whether it was notapparent that different companies were involved. His answer was: 'No, because I see the same- the name "Supreme" appearing on both documents. . . . My understanding was that byinvesting in Supreme one is investing in a group of companies. . . .' This is tantamount tolending to a nebula. Stuart was asked whether if the hypothetical bank manager had been toldby the supplicant that financial statements (presumably of the correct company this time) werenot needed, and that a brochure was quite good enough to establish that debentures beingproffered as security were in fact secured, the bank manager was likely to accept thatproposition. He agreed that it was unlikely that he would. When pressed as to why the Durrsshould be expected to receive less protection than the bank, Stuart answered: 'Because of theresearch that I had done myself, and the Durrs obviously trusted my evaluation.' It is difficult toknow what to make of this answer when one has regard to the fact that Stuart's researches hadconsisted of asking Mannheim a few superficial questions, casting his eye

1997 (3) SA p468

SCHUTZ J A

over the marketing hand-outs and attuning his ear to the gossip of the market. Later he wasasked again: 'Is there any reason why you think it's reasonable to expose pensioners to greaterrisks than the bank would be prepared to expose its money to?' and he answered 'No'.

Stuart fared no better on the question why he did not ask for a prospectus. 'Because I didn'tbelieve it was appropriate or necessary', was the answer. He had addressed his mind to thequestion of a prospectus. He had come across prospectuses before. But, he concluded, aprospectus was needed only for a 'new placing'. There was no doubt in his mind that aprospectus was not needed. This conclusion was reached without his being informed on thesubject, without reference to the Companies Act and without seeking any help or advice. Inhindsight, he conceded, he was now much wiser. He made a similar reluctant concession withregard to taking 'secured debentures' at face value.

I do not think that Stuart can be blamed for not having realised that the two companies wererunning an illegal bank. Goldhawk said that as an outsider he could not be expected to haveguessed what was going on inside. Nor should he have realised how the participation bondcompany was being misused. Goldhawk furthermore conceded that he did not think a brokerwould read anything sinister into the advertising material standing alone, which a more skilledperson probably would have done.

I come towards my conclusion on the subject of negligence. The basic rule is stated by Joubert(ed) The Law of South Africa First Reissue vol 8.1 para 94, as follows:

'The reasonable person has no special skills and lack of skill or knowledge is not per se negligence. It is,however, negligent to engage voluntarily in any potentially dangerous activity unless one has the skill and


knowledge usually associated with the proper discharge of the duties connected with such an activity.'

The respondents accept that an investment advisor requires special skill and that in a casesuch as the present he would be under a duty to make enquiries concerning 'Supreme'. But,argued Mr Joubert for the respondents, they were not under a duty to investigate 'institutionalrisk', that is the creditworthiness of 'Supreme'. This cannot be. They held themselves out asexpert investment advisors, without qualification. Even more to the point is what Stuart said tothe Durrs after he had chosen to bring 'Supreme' to their attention. He used expressionsconcerning it such as 'safe', 'very solid', 'very secure' and 'very sound'. He said that he hadinvestigated it and strongly recommended it for investment. The Durrs accepted his advice andrelied on it. He knew that. It was what he had intended should happen. This, to my mind,defined his duty to the Durrs. He had advised them to embark upon what was in effectmoneylending. Lending money is a potentially dangerous activity. He had investigated thedebtor and found it sound, he said. Mrs Durr was entitled to see him as a man skilled to adviseher on such matters and as one backed by a major bank: not as one devoid of skill in assessingcreditworthiness and unready to seek help. The duty is established.

Was that duty performed? I have set out what Stuart did. What it amounts to is that he went tothe subject of the investigation, instead of performing an independent investigation (save forsome conversations

1997 (3) SA p469

SHUTZ J A

with colleagues and reading some of the journals). Mr Joubert has argued that he was under noduty to go further unless there was something to alert him, and there was nothing. I havedifficulty with this submission too. He had told his clients that he had investigated Supreme, butwas driven to concede that he had not established a single fact about the two companies, theborrowers. To my mind he had no right to make the recommendation until he had satisfiedhimself by sufficient means that the investments in those particular companies were safe.

This is an even stronger case than that decided by Thirion J in Nathan and Others v ABSABank Ltd and Another (unreported D & CLD 30.11.1995). There the second defendant, afinancial advisor employed by the first, had recommended investment in secured debentures in'Supreme'. The learned Judge said (at 35):

'[The recommendation] carried the further implication that Allied had reason to believe, based on its knowledge ofthe business affairs of Supreme or reliable information about its affairs, that an investment in Supreme secureddebentures would be reasonably safe, . . . and that plaintiffs would in the ordinary course of the business ofSupreme and barring unforeseen events be repaid the amount of their investment. . . .'

What was implied in that case was express in this one.

Returning to Stuart's conduct, there were in my opinion warning signs, if not flashing lights.First, there is the matter of the high commissions and high interest rates, which I havediscussed already. Second, there is the fact that 'Supreme' did not have a well-establishedtrack record when he made his first recommendation to the Durrs in 1990. Holdings had beenissuing debentures since 1986 and Investment was formed only in 1989. The first preference


shares were issued in 1990. To my mind it is idle to equate these forms of investment in thissort of institution with placing a fixed deposit with an established bank. No doubt Stuart wasright in saying that he did not have to seek assistance each time he was to recommend adeposit in such a bank. But in doing so he was really evading the question as to why he did notmake more pertinent enquiries about 'Supreme'. Also, I think he should have wondered whetherMannheim's explanations as to the rediscovery of the cornucopia were not possibly too good tobe true. All of these things taken collectively did, I think, constitute warning signals.

Given the rule of law concerning the undertaking of activity requiring skill, Stuart was in aconstant dilemma. Either he had to forewarn the Durrs where his skills ended, so as to enablethem to appreciate the dangers of accepting his advice without more ado, or he should not haverecommended Supreme. What he was not entitled to do was to venture into a field in which heprofessed skills which he did not have and to give them assurances about the soundness of theinvestments which he was not properly qualified to give. Before he recommended Supreme heshould first have sought help, which was readily available to him. Given the limits of theenquiries he had made himself he was under a duty to do so. I do not suggest that theprofessionals at ABSA would at once have brought down the house of cards, but a fewpertinent requests for the likes of audited statements and prospectuses should have led tomore questions or simply a loss of interest in 'Supreme'.

1997 (3) SA p470

Accordingly I am of the view that on the facts of this case Stuart did not perform his duty andwas consequently negligent. ABSA's negligence follows, as it is accepted that it is vicariouslyliable for his actions.

I have constantly kept in mind my own warning about the dangers of hindsight, but in the end Iam persuaded that there should have been more foresight. I have also borne in mind that aninvestment advisor is not as such the guarantor of what he recommends and nothing that Ihave said should be read as indicating the contrary.

The parties have reached agreement on amounts and interest rates should the appeal succeed.

In the result the appeal is upheld with costs.

Paragraph 1 of the order made below is set aside and replaced with the following:

'(a) The defendants are ordered, jointly and severally, to pay the plaintiff:

(i) the sum of R772 845,50;

(ii) interest thereon at the rate of 14 per cent per annum from 1 November 1995 to date ofpayment;

(iii) the costs of suit.

(b) Messrs Goldhawk and Nieuwoudt are declared necessary witnesses.'

Smalberger JA, Nienaber JA, Marais JA and Streicher AJA concurred.


Appellant's Attorney: S Kriger, Cape Town; E G Cooper & Sons, Bloemfontein. Respondents'Attorneys: Ince, Wood & Raubenheimer, Cape Town; Webbers, Bloemfontein.


Endnotes

1 (Popup - Popup)

See R v Umfaan 1908 TS 62 at 68; Walker v Van Wezel 1940 WLD 66 at 69 - 70; Minister ofPolice v Mbilini 1983 (3) SA 705 (A) at 715G - 716A; Sokhulu v New Africa Publications Ltd andOthers 2001 (4) SA 1357 (W) ([2002] 1 All SA 255) in para [10]. Also see Neethling's Law ofPersonality 2nd ed at 28 and 192. Some writers suggest that dignitas is not confined to casesinvolving insult but any impairment of subjective feelings of dignity. Burchell Personality Rightsand Freedom of Expression: The Modern Actio Injuriarum at 331 - 2.

2 (Popup - Popup)

O'Keeffe v Argus Printing and Publishing Co Ltd 1954 (3) SA 244 (C) at 247D. Also Neethling'sLaw of Personality at 50 - 1.

3 (Popup - Popup)

Khumalo and Others v Holomisa 2002 (5) SA 401 (CC) (2002 (8) BCLR 771) in para [27].

4 (Popup - Popup)

1995 (3) SA 391 (CC) (1995 (2) SACR 1; 1995 (6) BCLR 665) in para [328].

5 (Popup - Popup)

2000 (3) SA 936 (CC) (2000 (8) BCLR 837) in para [35].

6 (Popup - Popup)

Gardener v Whitaker 1995 (2) SA 672 (E) (1954 (5) BCLR 19) at 690G - H (SA); Cachalia et alFundamental Rights in the New Constitution at 33 - 4. See also National Coalition for Gay andLesbian Equality and Another v Minister of Justice and Others 1999 (1) SA 6 (CC) (1998 (2)SACR 556; 1998 (12) BCLR 1517) in paras [120] and [124].

7 (Popup - Popup)

Plaintiff's supplementary heads of argument para 13.1.

8 (Popup - Popup)

See para [11] supra.

9 (Popup - Popup)

For examples of recognised categories of impairments to dignity see Burchell PersonalityRights ch 27.

10 (Popup - Popup)


Plaintiff's main heads of argument para 51.

11 (Popup - Popup)

1997 (3) SA 786 (CC) (1997 (7) BCLR 851).

12 (Popup - Popup)

2001 (1) SA 1 (CC) (2000 (11) BCLR 1211).

13 (Popup - Popup)

Fose para [19].

14 (Popup - Popup)

Id para [97].

15 (Popup - Popup)

Hoffmann para [45].

16 (Popup - Popup)

See Van der Walt and Midgley Delict Principles and Cases vol 1 2nd ed para 5; Marilyn LPilkington 'Damages as a remedy for infringement of the Canadian Charter of Rights andFreedoms' (1984) 62 The Canadian Bar Review 517 at 535. An award of compensatorydamages may be considered in exceptional circumstances when other remedies would not beeffective and if there is no other compensatory remedy available in law. For an example wheredamages were awarded see Modderfontein Squatters, Greater Benoni City Council vModderklip Boerdery (Pty) Ltd (Agri SA and Legal Resources Centre, Amici Curiae); Presidentof the Republic of South Africa and Others v Modderklip Boerdery (Pty) Ltd (Agri SA and LegalResources Centre, Amici Curiae) 2004 (6) SA 40 (SCA) (2004 (8) BCLR 821; [2004] 3 All SA169) at 62B - D (SA). See further De Waal et al The Bill of Rights Handbook 4th ed at 188 - 9.

17 (Popup - Popup)

Fose in para [68]; see also De Waal et al The Bill of Rights Handbook 4th ed at 191; Van derWalt and Midgley para 5 at 7.

18 (Popup - Popup)

Fose in paras [98] and [100] (per Kriegler J).

19 (Popup - Popup)

See Burchell 'Beyond the Glass Bead Game: Human Dignity in the Law of Delict' (1988) 14SAJHR 1; Principles of Delict at 13 - 14; Personality Rights at 343; Neethling's Law ofPersonality at 73 - 8; De Waal et al The Bill of Rights Handbook at 188 - 91.


20 (Popup - Popup)

The possibility of a constitutional delict or tort has been mooted by certain academic writers.See Burchell 'Delict in a Bill-of-Rights Era' (1991) 20 Businessman's Law at 155 and 175;Principles of Delict at 13 - 14; Pilkington 'Damages as a remedy for infringement of theCanadian Charter of Rights and Freedoms' (1984) 62 The Canadian Bar Review 517. CompareNeethling at 76ff, 415.

21 (Popup - Popup)

Van der Walt and Midgley (supra) at para 5.

22 (Popup - Popup)

Such as for example the rights to equality, religion, belief and opinion, assembly,demonstration, freedom of expression, association and movement, access to information andadministrative justice rights.

23 (Popup - Popup)

(1995) 11 SAJHR at 61 - 5.

24 (Popup - Popup)

See in this regard the dictum of O'Regan J in Dawood (supra) para [14].

25 (Popup - Popup)

The residual nature of the right to dignity is emphasised by Susie Cowen in an article entitled'Can ''dignity'' guide South Africa's equality jurisprudence?' (2001) 17 SAJHR 34 where thefollowing is stated at 47:

'Dignity as a right is ''elevated'' in relation to other rights, but only in the sense that it is seen to embrace andinform other rights. Other rights may be seen as incidences of dignity itself, or, put less strongly, the meaning ofother rights can also be located in the idea of protecting human worth. The implication of this is that one would seethe protection of bodily and psychological integrity, for example, as a component of protecting human worth - ordignity - and thus embraced also in the right to dignity. But a legal claim that fits the right to bodily and psychologicalintegrity would more likely be dealt with under that right, even though it is also embraced by the broader right todignity. Sometimes the choice of right will be determined by whether there are internal limitations on those rights.The dignity right then for practical purposes serves as a flexible and residual right.'

26 (Popup - Popup)

2001 (4) SA 938 (CC) (2002 (1) SACR 79; 2001 (10) BCLR 995).

27 (Popup - Popup)

Id para [39].

28 (Popup - Popup)


Id para [40].

29 (Popup - Popup)

Id para [36].

30 (Popup - Popup)

Minister of Law and Order v Kadir 1995 (1) SA 303 (A) at 318E - H.

31 (Popup - Popup)

Carmichele in para [43].

32 (Popup - Popup)

Id para [55].

33 (Popup - Popup)

1989 (2) SA 857 (A) at 860I - 861A.

34 (Popup - Popup)

1940 WLD 66 at 71.

35 (Popup - Popup)

1976 (3) SA 1 (A) at 12.

36 (Popup - Popup)

Neethling's Law of Personality at 194 - 5.

37 (Popup - Popup)

At 862A - G.

38 (Popup - Popup)

Burchell 'Beyond the Glass Bead Game: Human Dignity in the Law of Delict' (supra) at 3 and18; Dendy 'Criticism without contumely - injuria and the hypersensitive employee' (1990) 19Businessman's Law 123.

39 (Popup - Popup)

Cora Hoexter The New Constitutional and Administrative Law vol 2 (2002) at 161.

40 (Popup - Popup)

This question can be decided on exception as the facts on which the plaintiff relies have beenfully pleaded. See in this regard the reasoning of Hefer JA in Minister of Law and Order v Kadir


(supra) at 318H - 319A.

41 (Popup - Popup)

See cases cited in para [11] (supra) fn 1.

42 (Popup - Popup)

See Lunt v University of Cape Town and Another 1989 (2) SA 438 (C); Toerien en 'n Ander vDe Villiers NO en 'n Ander 1995 (2) SA 879 (C); Baloro and Others v University ofBophuthatswana and Others 1995 (4) SA 197 (B); Van der Merwe v Smith NO en 'n Ander1999 (1) SA 926 (C); Mathipa v Vista University and Others 2000 (1) SA 396 (T); GoverningBody, Tafelberg School v Head, Western Cape Education Department 2000 (1) SA 1209 (C).

43 (Popup - Popup)

1995 (2) SA 1 (A).

44 (Popup - Popup)

2001 (3) SA 1247 (SCA).

45 (Popup - Popup)

2003 (6) SA 13 (SCA) ([2003] 2 All SA 465).

46 (Popup - Popup)

Knop at 31G - H.

47 (Popup - Popup)

Id 33B - E.

48 (Popup - Popup)

At paras [37] and [38].

49 (Popup - Popup)

Olitzki fn 39 in para [41].

50 (Popup - Popup)

Faircape in para [37].

51 (Popup - Popup)

Id para [40].

52 (Popup - Popup)


2002 (6) SA 431 (SCA) ([2002] 3 All SA 741) (per Nugent JA).

53 (Popup - Popup)

[1995] 3 All ER 353 (HL).

54 (Popup - Popup)

[1982] AC 158 (PC) ([1981] 1 All ER 1202 (PC)).

55 (Popup - Popup)

Fose at para [38] (per Ackermann J).

56 (Popup - Popup)

(1984) 62 The Canadian Bar Review 517 at 519.

57 (Popup - Popup)

1907 TS 1046 at 1052.

58 (Popup - Popup)

1984 (2) SA 124 (ZH) (per Dumbutshena JP).

59 (Popup - Popup)

2001 (1) SA 853 (SCA) at 867D - G.

60 (Popup - Popup)

These provisions must be read subject to the transitional arrangements set out in Schedule 6.On 11 February 2000 neither the Promotion of Access to Information Act 2 of 2000 nor thePromotion of Administrative Justice Act 3 of 2000 had come into effect.

61 (Popup - Popup)

Jockey Club of South Africa v Forbes 1993 (1) SA 649 (A) at 660E - H.

62 (Popup - Popup)

Particulars of claim para 4.5.

63 (Popup - Popup)

Argus Printing and Publishing Co Ltd and Others v Esselen's Estate 1994 (2) SA 1 (A) at 20F.

64 (Popup - Popup)

Mohamed and Another v Jassiem 1996 (1) SA 673 (A) at 703H - I.


65 (Popup - Popup)

Demmers v Wyllie and Others 1980 (1) SA 835 (A) at 842A - B; Argus (supra) at 20F - G.

66 (Popup - Popup)

1928 AD 190 at 204.

67 (Popup - Popup)

1977 (3) SA 394 (A) at 408D - E.

68 (Popup - Popup)

1997 (3) SA 80 (C) at 89H - 90B; see also Sokhulu v New Africa Publications (supra) in para[7].

69 (Popup - Popup)

Holomisa v Argus Newspapers Ltd 1996 (2) SA 588 (W) at 608G - 609A; Khumalo and Othersv Holomisa 2002 (5) SA 401 (CC) (2002 (8) BCLR 771) in para [21].

70 (Popup - Popup)

Herbstein and Van Winsen The Civil Practice of the Superior Courts in South Africa 4th ed at189 and the reference therein to Ackermann v Pasquali and Montagu Divisional Council 1913CPD 296.

71 (Popup - Popup)

Dreyer and Others v Tuckers Land and Development Corporation (Pty) Ltd 1981 (1) SA 1219(T) at 1224F - 1225B.

72 (Popup - Popup)

Particulars of claim paras 5.11.2 and 6.11.2.

73 (Popup - Popup)

Particulars of claim paras 5.11.2 and 6.11.2.

74 (Popup - Popup)

Morgan and Another v Salisbury Municipality 1935 AD 167 at 171; Rabinowitz and AnotherNNO v Ned-Equity Insurance Co Ltd and Another 1980 (3) SA 415 (W) at 419E - F.

75 (Popup - Popup)

See the discussion in A C Cilliers Law of Costs 3rd ed at paras 2.14 - 2.16.

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