1

Ostensible Authority and Estoppel in the

Law of Agency in view of Makate v Vodacom

by

David Akani Sithole

(18291865)

Submitted in partial fulfilment of the requirements for the degree

Master of Laws (Mercantile Law)

In the Faculty of Law,

University of Pretoria

November 2019

Supervisor: Prof R Brits

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Declaration

1. I understand what plagiarism is and am aware of the University’s policy in this

regard.

2. I declare that this thesis is my own original work. Where other people’s work has

been used (either from a printed source, Internet or any other source), this has

been properly acknowledged and referenced in accordance with departmental

requirements.

3. I have not used work previously produced by another student or any other person

to hand in as my own.

4. I have not allowed, and will not allow, anyone, to copy my work with the intention

of passing it off as his or her own work.

David Akani Sithole

November 2019

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Summary

This dissertation examines the place of agency law in the South African context. The

dissertation is premised on the idea that the principles governing agency, such as

binding the principal for the conduct of her agent, are derived from English law. With

that starting point, the paper examines the English law, in order to place the South

African law of agency in context. The dissertation is not a comparative study and the

discussion of English law of agency is limited to providing context to the development

of agency law in South Africa. The dissertation further discusses the differences

between the principles of estoppel and ostensible authority. The theoretical basis for

agency and its practical effects are examined. Both the majority and minority

judgments of the court in Makate v Vodacom are discussed and the rationales thereof

examined. The dissertation recommends the appropriate mechanism to be employed

in holding the principal accountable without the need to evoke the traditional principles

which have been proved problematic by the Makate case.

iii

Acknowledgements

It took me 6 and half hours to pen down this section of the work. The final product is

this: thank you Prof. Brits (supervisor) and Israel (beloved), God bless you!

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Table of content

Declaration ................................................................................................................. i

Summary ................................................................................................................... ii

Acknowledgements ................................................................................................. iii

Table of content....................................................................................................... iv

Chapter 1: General introduction ......................................................................... 1

1.1 Introduction .................................................................................................... 1

1.2 Chapter breakdown ....................................................................................... 1

Chapter 2: Overview of the English law of ostensible authority

and estoppel ...................................................................................... 3

2.1 Introduction .................................................................................................... 3

2.2 Actual authority .............................................................................................. 3

2.3 Ostensible or apparent authority .................................................................... 3

2.4 Estoppel......................................................................................................... 7

2.5 Chapter conclusion ........................................................................................ 9

Chapter 3: Overview of the law of agency before Makate:

Ostensibles authority and estoppel .............................................. 12

3.1 Introduction .................................................................................................. 12

3.2 South African law of agency ........................................................................ 12

3.3 Assessment of the law prior to Makate (not necessarily abrogated) .............. 14

3.4 Chapter conclusion ...................................................................................... 17

Chapter 4: The Makate case ............................................................................. 19

4.1 Introduction .................................................................................................. 19

4.2 Factual background and litigation history of Makate case ........................... 19

4.3 The relevant issues ..................................................................................... 21

4.4 The majority judgment per Jafta J ............................................................... 22

4.5 The concurring judgment ............................................................................. 27

4.6 Chapter conclusion ...................................................................................... 29

Chapter 5: Estoppel and ostensible authority................................................. 31

5.1 Introduction .................................................................................................. 31

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5.2 Motor vehicle cases: Estoppel ..................................................................... 31

5.3 Share dealing transactions .......................................................................... 33

5.4 Vindicatory actions ...................................................................................... 33

5.5 Turquand rule of company law and estoppel ............................................... 34

5.6 Ostensible authority and estoppel ............................................................... 35

5.7 Chapter conclusion ...................................................................................... 37

Chapter 6: Conclusion and recommendations ............................................... 39

6.1 Introduction .................................................................................................. 39

6.2 Ostensible authority ..................................................................................... 39

6.3 Estoppel....................................................................................................... 40

6.4 Recommendations ....................................................................................... 41

Bibliography ........................................................................................................... 42

Case law .............................................................................................................. 42

Journal articles ..................................................................................................... 43

Books ................................................................................................................... 44

Acts and constitutions .......................................................................................... 45

Old authorities ...................................................................................................... 45

Reports and rules ................................................................................................. 45

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Chapter 1:

General introduction

1.1 Introduction

This dissertation shall discuss the South African context of the law of agency.

Particular attention shall be paid to the issues raised in the case of Makate v Vodacom

(Pty) Ltd.1 Authority in relation to the law of agency will be dissected and its forms

expounded. A critical question is whether estoppel and ostensible authority are twin

concepts.

The research is premised on two schools of thought, namely (1) that estoppel

and ostensible authority are synonymous and (2) that the two are distinguishable. Both

schools of thought shall be discussed, and one is countenanced in whole or in part.

Developments of both schools of thought shall be expounded and a preferred

application of the principles recommended.

With an assumption that our courts conflate the principles are which were

designed to preclude certain people who make certain representation, which may be

traced back to the English authorities, the paper shall visit the English authorities to

determine whether there is a conflation and whether it is necessary to separate the

principles.

The dissertation shall further expound on the necessity of clarifying the principles

relating to the law of agency, namely ostensible authority and estoppel. Special

attention shall be given to the practical effect in the procedural law, and particularly in

drafting the pleadings in support of a claim premised on the law of agency.

1.2 Chapter breakdown

This work comprises of six chapters. Chapter 1 introduces the study, while Chapter 2

outlines the position of the English law of agency with particular regard to the concepts

of ostensible authority and estoppel. Chapter 3 assesses the law of agency as it was

prior to the case of Makate, in order to ensure that the Makate dispensation is

understood in light of the historical context. Chapter 4 considers the law of agency

1 Makate v Vodacom (Pty) Ltd 2016 (6) BCLR 709 (CC) (henceforth referred to as “the Makate case”).

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under the authority of the Constitutional Court case of Makate, with particular attention

to ostensible authority and estoppel. Chapter 5 is dedicated to ostensible authority and

estoppel. In Chapter 6, the findings of this work are summarised and

recommendations are made.

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Chapter 2:

Overview of the English law of ostensible authority and

estoppel

2.1 Introduction

In this chapter, an overview of the English law of agency with particular attention will

be given to the otherwise problematic maxims of estoppel and ostensible authority.

This examination is embarked upon in order to secure an understanding of the

concepts of estoppel and ostensible authority and to facilitate an assessment of the

findings in Makate case. In this chapter, agency under English law will equally be

examined to ensure that a complete picture is painted when discussing these

intertwined concepts. Ostensible authority and estoppel are examined both in

substance and form.

2.2 Actual authority

In English law, an agent of a principal may have actual or ostensible authority, and the

former is created by an agreement between the principal and the agent. It is express

if it is given in words and implied if the agent is appointed in a position which has with

it the custom and the trappings of certain authority.2 It must be noted however that

where an agent is specifically prohibited from exercising certain powers that are

ordinarily implied from her employment on a certain position, it will not give rise to an

implied actual authority. In such circumstances, however, the question of ostensible

or apparent authority may arise, as discussed immediately below.

2.3 Ostensible or apparent authority

The English law on the issue of agency, and in particular, an entity with legal

personality as a principal and its employee (or other persons) as an agent can be best

explained with reference to the English case of Houghton and company v Nothard,

2 Collier “Actual and ostensible authority of an agent: a straightforward questions and answer” 1984 CLR 26-27. Also available at JSTOR www.jstor.org/stable/4506596 accessed on 10 November 2018.

4

Lowe and Wills, Limited.3 In this case, the director of the defendant company purported

to bind the defendant company in contract with the plaintiff company without the actual

authority to do so.4 The defendant company’s articles of association provided for the

confirmation of the contract of that nature by the defendant company’s board of

directors or the latter’s delegate(s).5 The secretary of the defendant company, in an

attempt to remedy the want of authority on the part of the director in binding the

defendant company, dispatched correspondence to the plaintiff company confirming

the contract.6 The secretary was equally not authorised to act for or on behalf of the

company in this regard, that is, to confirm the contract.7

The critical question is therefore to what extent, if at all, a company under

comparable circumstances as the defendant company referred to above could be held

liable. The premise is that the person that seeks to represent the principal lacked

actual authority.

The Houghton and Company case espoused the issue of ostensible authority.

The court ruled that in order for one to hold a company liable under ostensible

authority, one “must (a) prove that he relied upon the ostensible authority which he

sets up, and (b) must not have been put upon enquiry as to whether the transaction

was in order”.8 When a contract, which an agent seeks to bind her principal to, seems

to be unreasonable or bearing such terms that a reasonable person would question,

the other person should establish if the agent is indeed authorised.9

The conundrum that the plaintiff company faced in the Houghton and Company

case was that it admitted that it was not aware of the clause in the defendant

company’s articles of association authorising the board of directors to delegate their

powers. With such ignorance, the court found that the plaintiff company was precluded

from relying on such a clause to assume that such power to delegate was exercised

in favour of the director who sought to bind the company.10

3 Houghton and Company v Nothard, Lowe and Wills Limited (1927) 1 K.B 246 (henceforth referred to as “the Houghton and company case”).

4 Houghton and company ibid n 3 at p. 246. 5 Houghton and company ibid n 3 at p. 246. 6 Houghton and company ibid n 3 at p. 246. 7 Houghton and company ibid n 3 at p. 246. 8 Houghton and company n 3 at p. 246 ; See also Underwood v Bank of Liverpool (1924) 1 K.B 775. 9 Cassim & Cassim “The authority of company representatives and the Turquand rule revisited” 2017

SALJ 639-664 at p. 649. 10 Houghton and Company Ibid n 3 at p. 251. This finding is in line with the earlier judgment in the

case of Rama Corporation Ltd v Proved Tin and General Investments Ltd (1952) 1 All E.R 554 at p. 566 (henceforth referred to as “the Rama Corporation Ltd”).

5

The court in Houghton and Company highlighted that the fact that the plaintiff

company had no actual knowledge of the authority of the board of directors to delegate

their powers to a single person was destructive to the plaintiff company’s claim.11

In light of what is discussed above, one who relies on ostensible authority must

prove that in entering into a contract with the representative whose authority is later

impugned by her principal, must establish that he relied on ostensible authority. The

question is, therefore, what is ostensible authority under English law?

In the case of Hely-Hutchinson v Brayhead Ltd, the court observed that

“ostensible or apparent authority is the authority of an agent as it appears to others.”12

This definition is probably too wide to constitute a legal doctrine or a legal definition.

As it stands, the definition suggests that even an intruder into a temporarily closed

company who fraudulently holds himself to be a managing director and thereby

appearing to have the attendant authority to third parties may bind the company.13 As

held in Armagas Ltd, the principal may be held liable, with regard to the fraudulent acts

of persons vested with the ostensible authority to contract on behalf of the principal,

only if the agent that is complicit in such fraud acted within the scope of the ostensible

authority.14 The observation with regard to the nature of ostensible authority referred

to above in the case of Hely-Hutchinson may indeed be construed to encompass all

forms of fraudulent representations, yet it is necessarily absurd and definitely not

intended to be such.15 It is, therefore, necessary to narrow this down and afford it some

context. The case of Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd,

notwithstanding this judgment having been handed down prior to the Hely-Hutchinson

case, sets the definition in its proper context.16 It is noteworthy that the Freeman &

Lockyer case is described as a locus classicus case in the area of ostensible authority

by the highest court in English judicial system.17

11 Houghton and Company ibid n 3 at p. 266. 12 Hely-Hutchinson v Brayhead Ltd (1968) 1 Q.B 549 at p. 583 (henceforth referred to as “the Hely-

Hutchinson case”. 13 See Armagas Ltd v Mundogas S.A (1985) 3 W.L.R. 640 at p. 667(henceforth referred to as “the

Armagas Ltd case”) regarding the consequences of fraudulent representation. It will be noted that fraudulent representations, known to the other party will preclude the said party from claiming from the principal.

14 Armagas Ltd ibid n 13 at p. 658. 15 Hely-Hutchison ibid n 12 at p. 583. 16 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd, (1964) 2 Q.B 480 (henceforth

referred to as “the Freeman & Lockyer case”). 17 Armagus Ltd ibid n 13 at p. 652; See generally Belloff v Pressdram Ltd and another (1973) 1 All

ER 241 (ChD).

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In light of the Freeman & Lockyer case, ostensible authority is found and

established by a legal relationship between the principal and the third party, the latter

being a person with whom the agent contracts with on behalf of the principal, flowing

from:18

a) representation by a person or persons who had authority to contract on the

particular matter on behalf of the principal to a third party that the agent has

authority to bind the principal in the nature of the contact which is eventually

entered into through that agent;

b) the representation was intended to induce the third party to rely on it;

c) the third-party was, in fact, induced and relied on it; and

d) the principal appeared to have been conferred authority on the agent, and

further, the founding documents of the principal did not preclude the delegation

of such authority to the particular principal.19

One that successfully sets up ostensible authority effectively estops or precludes the

other (the principal) from denying liability.20 The Freeman case specifically holds that

properly understood, ostensible authority (also known as apparent authority) is nothing

more than estoppel by representation.21 Estoppel by representation will be discussed

in paragraph 2.4 below in order to determine whether the requirements of estoppel by

representation can be reconciled with those of ostensible authority as discussed

above.

It is important to note the developments with regard to requirement (a) above,

that is, that the representation must have been made by someone who had authority.

In the case of First Energy (UK) v Hungarian International Bank Ltd, the court held that

an agent may be clothed with ostensible authority to represent that she, in fact, has

18 Freeman & Lockyer ibid n 16 at pp. 503 & 506. See also Armagas ibid n 13 at p. 652. 19 See also Rama Corporation ibid n 10 at p. 10. 20 Freeman & Lockyer ibid n 15 at p. 503. 21 Freeman & Lockyer ibid n 15 at p. 498. See also Armagus Ltd ibid n 13 at 667.

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certain authority to bind her principal which in fact she does not have.22 In light of this,

the agent does not authorise herself but instead, the authorisation flows from the

conduct of her principal which engenders ostensible authority.23 This case dealt with

similar questions of law as that of the Armagas case. In the Armagas case, the court

held that it is permissible for an agent who has been clothed with ostensible authority

to represent the principal’s approval of an action that is otherwise outside the scope

of his ostensible authority.24

2.4 Estoppel

As examined by Braithwaite, English law estop persons who make representations of

a certain state of affairs in contract from asserting a different position should the liability

be denied and litigation follows.25 The observation in the Freeman & Lockyer case that

ostensible authority is, in fact, estoppel by representation proves to be problematic to

the South African jurisprudence insofar as the law of agency and the concepts behind

it are concerned.26 This problematic position of English law is also accepted as true in

the concurring judgment of Makate in the judgment’s assessment of English law.27

This conundrum was said to flow from a state of confusion of the English law in the

case of Insurance Trust & Investment v Mudalia.28 Whereas there is indeed confusion

under English law regarding the concepts of estoppel and ostensible authority, there

is also an issue of terminology, as will be established below. Adopting already

confused concepts from an equity-based jurisdiction, like the English judicial system,

into a system, such South Africa, which does not subscribe to the same jurisprudence,

possess a difficulty that may leave some scholars and judges alike bewildered as to

the status of the English law in the area of agency as it pertains to ostensible authority

or estoppel.

22 First Energy (UK) v Hungarian International Bank Ltd (1993) B.C.C 533 at p. 544 (henceforth referred to as “the First Energy case”). See Yap “Apparent authority: doctrinal underpinnings and competing policy goals” 2014 J.Bus.Law 72-82 at p. 72, for the clarification of the application of this finding.

23 Woan “The apparent authority of the unauthorised agent” 2014 SAcLJ 258-268 at p. 263. 24 Armagas ibid n 13 at pp. 652-653. 25 Braithwaite “The origins and implications of contractual estoppel” 2016 LQReview 120-147 at p. 1. 26 Freeman & Lockyer ibid n 14 at p. 498. 27 Makate ibid n 1 at p. 746. 28 Insurance Trust & Investments v Mudaliar 1943 NPD 45 at p. 61 (Henceforth referred to as “the

Insurance Trust & Investment case”).

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By the very nature of the South African legal system, its courts adopt a legalistic

approach in construing concepts which are self-explanatory. Furthermore, the English

law concepts, such as estoppel, are applied in terms of the English law jurisprudence

of equity and as such, applying such concepts rigidly under South African law may

yield absurd results or clear injustice.29 As held in the case of Roebuck v Mungovin,

when estoppel is established, the court will give an order that is equitable under the

circumstances.30

Estoppel means to be stopped, and such preclusion may be based on different

forms of estoppel, including “[e]stoppel per rem judicatam, issue estoppel, estoppel by

deed, estoppel by representation, estoppel by conduct, estoppel by acquiescence,

estoppel by election or waiver, estoppel by negligence, promissory estoppel,

proprietary estoppel…”.31

Estoppel under English cannot be used as a cause of action, that is, a ground for

one to claim a form of relief in court, but only as a defence should one deny the

existence of a cause of action.32 It is important to visit the nature of estoppel by

representation in order to assess whether or not the observation in Freeman & Lockyer

case that ostensible authority is actually estoppel by representation is accurate.33

In the case of Spliethoff’s Bevraschingskantoor BV v Bank of China Limited, the

requirements for estoppel by representation were set out as follows:

“(i) a representation which is in law deemed a representation of fact, (ii) that the

precise representation was in fact made, (iii) that the later position taken

contradicts in substance the original representation, (iv) that the original

representation was of a nature to induce and was made with the intention and

result of inducing the party raising the estoppel to alter his position on the faith of

it and to his detriment, and (v) that the original representation was made by the

party sought to be estopped and was made to the party setting up the estoppels”.34

29 See generally Gillett v Holt (2000) 2 All ER 289. 30 Roebuck v Mungoovin (1994) 2 AC 224 at p. 235. 31 McIlkenny v Chief Constable of the West Midlands (1980) Q.B 283 (henceforth referred to as “the

Mcllkenny case”); See also Cartwright “Protecting legitimate expectations and estoppel in English law” 2006 EJCL, vol.10.3. Available at http://www.ejcl.org accessed on 12 April 2019.

32 See Berezovsky v Abramovich (2011) 1 W.L.R 2290 at p. 71; and Combe v Combe (1951) 2 K.B 215 at p. 224.

33 Freedman & Lockyer ibid n 16 at p. 498. 34 Spliethoff’s Bevraschingskantoor BV v Bank of China Limited (2016) 1 All ER (Comm) 1034 at p.

156 (hereinafter referred to as “the Spliethoff’s Bevraschingskantoor BV case”; See generally Feltham, Hochberg, Leech, & Bower (2004) The law relating to estoppel by representation Bloomsbury Professional. The requirements of estoppel by representation were accepted in the case of Natixis S.A v Marex Financial & Access World Logistics (Singapore) Pte Ltd & MCAP (2019) EWHC 2549 (Comm).

9

The requirements of estoppel by representation are clearly different from those of

ostensible authority and the difficulty arising from this incoherence will be discussed

in the concluding remarks in paragraph 2.5 below.

2.5 Chapter conclusion

The discussion in this chapter establishes the existence under English law of concepts

such as estoppel and ostensible authority. There is no authority under English law that

holds that ostensible authority is a form of actual authority. There is further no authority

that establishes ostensible authority as a legal principle (otherwise known as a

maxim), independent from estoppel.35 What can be said, however, is that it may well

be sound to find that ostensible authority may be an independent maxim, which, once

established, attracts the implications of estoppel. If this finding is correct, it may well

be the justification in English case law that once ostensible authority is established,

the apparent principal will be estopped from denying liability.

It may further be a sound assessment to hold that English case law’s usage of

“estop” or “estoppel” when employed in relation to ostensible or apparent authority is

used to denote the legal implications that flow from establishing such authority. The

implications may well not, under English law, it is submitted, invoke the application of

estoppel as a maxim, but simply preclude the principal from denying the authority of

her agent, therefore rendering the principal “estopped”.

If it is accepted that ostensible authority is a form of estoppel by representation,

it will be difficult to reconcile the requirements of ostensible authority, and estoppel by

representation as set out in the Freedman case, and the Spliethoff’s

Bevraschingskantoor BV case, respectively.36 Clearly, ostensible authority cannot

succeed where in fact the company sought to be precluded from denying liability could

not, by virtue of its founding documents, exercise such authority. This is however

permissible under estoppel by representation, as no such impediment exists in terms

of the requirements to set up estoppel by representation.

From the above one can conclude that ostensible authority is a form of estoppel

which is established by what appears to others, subject to the four requirements in the

Freedman & Lockyer case. It is submitted that the Freedman & Lockyer case reached

35 See the Armagas ibid n 13 at p. 652. 36 See paragraphs 2.3 and 2.4.

10

an erroneous finding that ostensible authority is estoppel by representation. As

discussed, this is impossible bearing in mind the distinct definitional elements of

estoppel by representation and ostensible authority.

Under English law, estoppel is not a technical concept. It is, in fact, a flexible

concept, with its primary objective being to ensure that justice and equity are served

and guaranteed.37 The concept of estoppel boils down to this: A person who leads

another into conceiving and believing that a certain state of affairs exists, will be

precluded from alleging otherwise at a later stage in the event that allowing same will

be unjust and/or inequitable.38 Estoppel may exhibit itself in various forms.39 The

question is, therefore, whether estoppel in its various forms can be considered a

unified doctrine or whether each manifestation of estoppel should be dealt with as a

singular, yet a closely related concept. As will be seen in chapter 5 below, some forms

of estoppel have distinct requirements. Is estoppel a legal doctrine or a consequential

phenomenon? Regardless of terminology, it seems that the English law has

established principles to hold persons who mislead, by the circumstances they create,

other persons who rely on such so created circumstances. In the light of the English

law jurisprudence of equity, estoppel is a legal phenomenon flowing from the creation

by a person whom the dictates of justice and equity entail that they should be held

liable. In terms of the Armagas case, ostensible authority is a form of estoppel.40 The

judgment of the Armagas case is binding on all English courts and as such reflects the

position of English law.41 In determining these, English law employs its established

requirements as guidance because estoppel is a flexible concept.42

It is clear from the foregoing examination that estoppel, whether as a concept, or

estoppel by ostensible authority, regardless of nomenclature and categorisation, all

seek to hold accountable a principal, either by means of established principles or

simply the dictates of equity and justice. There is nothing in reason or law that suggests

that conferring discretion upon the courts to determine whether or not a certain

agreement which purports to have been entered into by an apparent agent with a third

37 See Moorgate Mercantile Co Limited v Twitchings (1976) 1 Q.B 225 CA at p. 24; and Canada and Dominion Sugar Company Limited v Canadian National (West Indies) Steamship Limited (1946) AC 46 PC at p. 55.

38 Cooke (2000) The modern law of estoppel Oxford University Press at p.2. 39 See chapter 5. 40 Armagas ibid n 13 at p. 652. 41 See Makate ibid n 1 at p. 747. 42 See paragraph 2.4.

11

party on behalf of her principal should not be assessed in light of the dictates of equity

and justice. Perhaps the doctrine of estoppel would find better application under the

South African jurisprudence if South Africa subscribed to a comparable system of law,

namely equity.

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Chapter 3:

Overview of the law of agency before Makate: Ostensible

authority and estoppel

3.1 Introduction

In order to understand the law of agency as endorsed in the Constitutional Court

judgment of Makate, it is important to examine the law, or the extent of clarity thereof,

prior to the Makate judgment. Agency itself, as a significant branch of the law of

contract, will also be discussed in order to place the relevant manifestations in context.

As the title of this work suggests, there was a dispensation in the South African

jurisprudence that existed prior to the decision of Makate as it pertains to agency, and

in particular the concepts of ostensible authority and estoppel.

3.2 South African law of agency

South African law of agency is a pivotal branch of the law of contract in the area of

substantive law which recognises the developments in commerce and the third person

method of transacting.43 Indeed, as Kerr observes, an agent is appointed by his

principal to perform such duties as the principal finds meet, on behalf of the principal,

the duties of which “the principal finds … impracticable, inconvenient, or difficult to do

for himself”.44

The rules governing agency necessarily entail the existence of three role players

to find application, namely the principal, the agent, and the third party to whom the

agent represents her principal. As held in Maye Serobe (Pty) Ltd v Lewusa Obo

Members, a relationship of agency between the principal and the agent may be

created by way of contract or operation of law, in terms whereof the agent is granted

authority by her principal to deal with third parties on the principal’s behalf.45

43 See Voet 1.8.28; and generally Morrison v Standard Building Society 1932 (AD) 237. 44 Kerr (1991) The law of agency LexisNexis at p. 3. See also Pothier (1979) Treatise on the contract

of mandate (traité du contrat de contrat de mandate) (translated by Rogers and De Wet) Lex Patricia at p.1.

45 Maye Serobe (Pty) Ltd v Lewusa Obo Members (J 2377/12) [2015] ZALCJHB 116 at p. 5 (henceforth referred to as “the Maye Serobe (Pty) Ltd case”). See also Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd (1984) 3 (A) 155 at pp.164-165.

13

Agents, in the execution of their duties, create rights for their principals and incur,

in the same process, liabilities for their principals.46 De Villiers and Knight set out the

requirements of a contract of agency as follows:47

a) The contract of mandate must relate to a performance that is to be carried

out in the future to the exclusion of the performances previously carried out.

In the event that the principal and an agent contract with regard to a subject

matter that has already been attended to, it is said that such a contract may

be void for, amongst other things, a common mistake between the parties.

b) The contract of mandate must, like any other contract, be legal in order for

it to be valid.48 This requirement is also buttressed by Myburgh; 49

c) Certainty is yet another foundational requirement for a contract of mandate;

d) The contract must be possible to perform for the principal;

e) The contract must equally be possible to perform for the agent; and

f) The contract must not be created to serve solely the interests of the agent;

therefore, such a contract must be entered into primarily for the benefit of

the principal.

It can be safely observed that few difficulties arise in agency under the circumstances

where the agent deals with third parties on behalf of the principal with the actual

authority (whether express or implied) of her principal and within the bounds of such

authority if any. A question may, therefore, arise on the status of a contract which was

purportedly entered into by and between the third party and the principal through the

representation of the apparent yet unauthorised agent.

46 See De Villiers, Macitosh and Knight (1956) The law of agency in South Africa Juta at pp.1 & 3. 47 De Villiers, Macitosh and Knight ibid n 46 at pp. 17&18. 48 Notwithstanding the directory nature of this requirement, consider Kylie v CCMA 2010 (4) SA 383

(LAC) in which the labour court dealt with the right of a sex worker. It should be noted further that trading in sex is a criminal offence under South African law and therefore, a contract for the provision of sexual services is an illegal contract (Sexual Offences Act 23 Of 1957).

49 Myburgh “On constitutive formalities, estoppel and breaking the rules” 2016 Stell LR 254-272 at p. 266.

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3.3 Assessment of the law prior to Makate (not necessarily

abrogated)

Under South African law, the starting point in assessing the nature of ostensible

authority and estoppel is the case of NBS Bank Ltd v Cape Produce Company Pty

Ltd.50 A proper comprehension of the NBS Bank Ltd case and the matters that followed

it will give context to the analysis of this area of law in Chapter 4 of this work.51

The NBS Bank Ltd case concerned the fraudulent acts by the manager (being

the agent) of NBS Bank Ltd (being the principal), in terms of which the manager

conducted business in the name of his principal without the principal’s knowledge and

outside his (the agent’s) ostensible authority.52 The Cape Produce Company Pty Ltd

based, amongst other grounds, its claim that the NBS Bank Ltd was liable on actual

authority.53 Pursuant to such reliance on actual authority, the court adopted the

definition of actual authority in the English case of Hely-Hutchinson.54

In the Hely-Hutchinson case, the court held that actual authority binds the

principal and its agent, and it is equally binding on the third-party with whom the agent

contracts on the principal’s behalf.55 The principal’s agent can be clothed with actual

authority in one of two ways, namely, express or implied, in light of the position that

the agent holds.56

On the one hand, express actual authority speaks for itself. In the case of a

company, the authority may be conveyed to the agent by means of a resolution of the

board of that company.57 Implied actual authority may, on the other hand, be conferred

by the position that such an agent holds. For example, a managing director of a

company has actual authority to contract on behalf of the company absent anything to

the contrary.58

50 NBS Bank Limited v Cape Produce Company Pty Ltd 2002 (1) SA 396 (SCA) (Henceforth referred to as “the NBS Bank Limited case”).

51 The NBS Bank Limited case was followed in Glofinco v Absa Bank Ltd t/a United Bank 2002 (6) SA 470 (SCA); Northern Metropolitan Local Council v Company Unique Finance 2012 (5) SA 323 (SCA), the Coop case ibid n 65, amongst others.

52 NBS Bank Limited ibid n 50 at pp. 1-6 (for the relevant part of the facts of this case). 53 Ibid n 29 pp. 27- 28. 54 Hely-Hutchinson ibid n 12 at p. 583. 55 Hely-Hutchinson ibid n 12 at p. 583. 56 Hely-Hutchinson ibid n 12 at p. 583. 57 Hely-Hutchinson ibid n 12 at p. 583. 58 Hely-Hutchinson ibid n 12 at p. 583.

15

The issue that warrants discussion in relation to the NBS Bank Limited case, is

the question of ostensible authority: its actual ambit prior to Makate. The NBS Bank

case, in defining ostensible authority, lays down the requirements that will entitle the

third party to preclude the principal from denying liability for the contract entered into

by the person clothed with the principal’s ostensible authority. These requirements are

as follows:59

a) There must have been a representation which can be either express (in

words) or implied (by conduct);

b) The representation must have been made by the principal that the agent

has authority to contract on its behalf and not merely the agent’s ipse dixit;

c) In light of the form of the representation, the principal should have

reasonably expected third parties to be induced and rely on such

representation;

d) The reliance by third parties on such representation must have been

reasonable; and

e) The third-party must have been prejudiced by such reliance.

The NBS Bank Limited case did not hold ostensible authority to be synonymous to the

maxim of estoppel as understood under South African law, although it did set out its

requirements as those of estoppel. Equally, ostensible authority was not held to be an

independent legal principle. Further analysis to clarify this submission is required in

view of the observation in Makate case, that this case (NBS Bank Limited) conflated

ostensible authority with estoppel.60 It must be noted however that this clarity-seeking

examination should not be construed as an endorsement of the analysis of the issue

of ostensible authority and estoppel in the NBS Bank Limited case.

Perhaps the right course to explain the analysis in NBS Bank Limited, as a

starting point, is not to assess whether or not the court confused ostensible authority

with estoppel, but to firstly establish what constitutes ostensible authority. Once

ostensible authority has been clearly defined, an assessment of whether the court did

apply the correct principles of ostensible authority should be done.

59 NBS Bank Limited n 50 pp. 30 -31. 60 Makate n 1 at p. 710.

16

Whereas it is accepted that ostensible authority is such authority which appears

to have been vested in the agent insofar as other people are concerned, this

dissertation argues that this one statement singularly is insufficient to constitute a legal

principle in English law.61 It is equally submitted in respect of South African law,

ostensible authority must be defined and boundaries drawn. This may have been the

grounds for the NBS Bank Limited case to set out the requirements to establish

ostensible authority, as referred to above.62

It is submitted that, by setting out the requirements, the NBS Bank Limited case

gave expression to the abstract statement by Lord Denning in the Hely-Hutchinson

case pertaining to what constitutes ostensible authority as discussed above, thereby

adopting the principle subject to the qualifications introduced by the listed

requirements.

In view of the requirements to establish ostensible authority above, it is clear that

the Hely-Hutchinson observation on its own does not suffice to give rise to ostensible

authority.63 Clearly missing from the requirements to establish ostensible authority in

terms of the NBS Bank Limited case is the requirement that the founding documents

of the principal did not preclude the delegation of such authority to the particular

principal, which is part of the English law ostensible authority.64 Therefore, ostensible

authority was adopted from English law with qualifications. Under English law,

ostensible authority is an instance of estoppel, and the NBS Bank Limited case did not

observe otherwise.

What appears evident is that the requirements of ostensible authority as set out

in the NBS Bank Limited case are effectively synonymous with the characteristics of

estoppel. The requirements of estoppel are recorded in the Makate case and do not

bear repeating here.65

As will be seen in chapter 4 below, the majority judgment in the Makate case

holds that the NBS Bank Limited confused ostensible authority with estoppel. It is

submitted that even if the finding in the majority judgment of Makate was to be

accepted that the NBS Bank Limited case and the cases that followed it conflated

61 See chapter 4. 62 NBS Bank Limited ibid n 50 at pp. 30-31. 63 Hely-Hutchison ibid n 12 at p. 583. 64 Freeman & Lockyer ibid n 16 at pp. 503 & 506. See also Armagas n 13 at p. 652. See also Rama

Corporation ibid n 10 at p. 10. 65 Makate ibid n 1 at pp. 774.

17

ostensible authority with estoppel, this would not make a difference with regard to the

end that the concepts seek to achieve. It is submitted that even if ostensible authority

was said to establish a cause of action, therefore being different from estoppel, the

latter would still be indispensable as an enforcement mechanism to hold the principal

liable for the conduct of their agent executed within the agent’s ostensible authority.

This is buttressed by the findings of the trial court as referred to in Makate, to the effect

that once ostensible authority is pleaded and denied, estoppel needs to be pleaded in

replication.66

It must be observed, however, that the NBS Bank Limited case does not

delineate, in readily ascertainable terms, if at all, the issue of ostensible authority and

estoppel. Although there is no explicit finding in this regard, the failure may have been

occasioned by the court’s appreciation that ostensible authority and estoppel are

closely related and interconnected. As discussed above, in both cases there is a

representation.

The failure of the NBS Bank Limited case’s failure to clarify the concept of

ostensible authority has led to subsequent judgments reproducing the same

ambiguity, and in fact, ignoring the differences in form and substance of ostensible

authority and estoppel. The best example is perhaps the Supreme Court of Appeal’s

judgment in South African Broadcasting Corporation v Coop.67 In the Coop case,

Navsa JA complicated the issues further in that he observed that estoppel is

“otherwise described as ostensible authority”.68

3.4 Chapter conclusion

It is clear from the analysis above that conceptual misconstruction is owing not only to

flawed reasoning by current academics and judges but to the foundational findings

that were made in respect of old concepts. It must, therefore, be understood that in

order to correct the difficulties which flow well over decades, there is a need for reform,

for new principles that will uphold equity and justice, principles that will apply across

various factual questions. Indeed, discretion on the part of the judiciary should not be

66 Makate ibid n 1 at p. 721. Makate v Vodacom (Pty) Limited [2015] JOL 34657 (GL) at pp. 84-85 (the trial court).

67 South African Broadcasting Corporation v Coop (570/2004) (2005) ZASCA 118 (Henceforth referred to as “the Coop case”).

68 Coop ibid n 42 at p. 31.

18

so narrowed that judgments that are clearly not in the best interest of the prestige of

the judicial system should not be delivered. This, of course, is not to suggest that the

judiciary be conferred with law-making powers, but to refine principles in line with the

principles of natural justice and the spirit, purport and objects of the Constitution of the

Republic of South Africa.69

The examination in this chapter establishes that ostensible authority under South

African law prior to Makate was nothing but an instance of estoppel. The NBS Bank

Limited case did set out the requirements for ostensible authority, namely, “1 [a]

representation by words or conduct. 2 Made by the [principal] and not merely by [the

agent], that [s]he had the authority to act as [s]he did. 3 A representation in a form

such that the [principal] should reasonably have expected that outsiders would act on

the strength of it. 4 Reliance by [outsiders] on the representation. 5 The

reasonableness of such reliance. 6 Consequent prejudice to [outsiders].”70

It becomes more evident from the judgments that follow the NBS Bank Limited

case that ostensible authority is an instance of estoppel.71 The best example for this

proposition is the Coop case referred to above which held that ostensible authority is

synonymous estoppel.72

69 The Constitution of the Republic of South Africa, 1996, as amended (Henceforth referred to as “the Constitution”).

70 NBS Bank Limited case ibid n 50 at pp. 30-31; and Makate ibid n 1 at p. 723. The quotation has been amended to reflect the feminine gender and to replace name references to accord the requirements the status of general application under the principle of estoppel.

71 See n 51 for cases that followed the NBS Bank Limited case. 72 Coop case ibid n 65 at p. 31.

19

Chapter 4:

The Makate case

4.1 Introduction

It is necessary to discuss the position of the law as per the findings of the majority

court in the case of Makate.73 The jurisprudence relied upon will be assessed to

ascertain whether the court’s findings are tenable. As noted below, there are

inconsistencies in case law pertaining to the issues which the court was called upon

to adjudicate. The court decided upon such questions and its findings were to a certain

extent rejected by some renowned authors.74 In the light of the foregoing, an analysis

of this case is warranted and, the criticism by the concurring judgment of Wallis AJ will

also be examined, and its postulated theory analysed.

4.2 Factual background and litigation history of Makate case

The Makate case was instituted in the Gauteng Local Division of the High Court of

South Africa.75 After the High Court dismissed the plaintiff’s action, the latter

proceeded to petition the Judge President of the Supreme Court of Appeal who in turn

dismissed the petition.76 With no other legal avenue to address the plaintiff’s

grievances, the latter approached the Constitutional Court of South Africa for

assistance. It is the decision of the latter court that this dissertation shall deal within

the light of the High Court judgment.

Makate, while in the employ of Vodacom as a trainee accountant during 2000,

came up with an idea which is now called “please call me”. It is common cause that

the “please call me” product enables a user who is airtime deficient to send a “call me”

message to the user who is presumably in funds, prompting the latter to call the former.

Makate, having envisaged the foregoing in an abstract form and being desirous

of selling the idea, and having been advised by his mentor, Mr Lazarus Muchenje,

73 Makate ibid n 1. 74 Sharrock “Authority by representation – a new form of authority?” 2016 PER 1-21. 75 Trial court ibid n 66; and Makate ibid n 1 at . 712. 76 Trial court ibid n 75 at p. 99.

20

Makate escalated the idea to Mr Philip Geissler being Vodacom’s Director of Product

Development and Management.77

Pursuant to Makate’s escalation of his idea and upon the conclusion of the

negotiations, it was agreed between the parties that Makate’s idea would be utilised

to develop a new product that would be tested for profitability.78 It was further agreed

that should the product prove to be commercially viable, Makate would receive a share

of the profit. It was also agreed that in the event of the parties failing to agree on the

extent of revenue to be paid to Makate, Vodacom’s Chief Executive Officer would

make such determination.79

The “please call me” product was developed and proved successful to the

satisfaction of Vodacom.80 In fact, this product generated billions of Rands in revenue

for Vodacom.81 However, the product was implemented prior to it being approved by

Vodacom’s board, the latter having only approved it on 15 March 2001.82

Notwithstanding the above facts, Vodacom did not commence with the

negotiations for the remuneration of Makate for his idea as agreed. Instead, Vodacom

misappropriated the idea to itself. Vodacom perpetuated the narrative that Mr Alan

Knott-Craig, the Chief Executive Officer of Vodacom, devised the Please Call Me

concept.83

After Vodacom rejected Makate’s demand for compensation, he instructed

attorneys to issue a combined summons on his behalf against the former for the

enforcement of the agreement.84 In order to achieve his quest for remuneration,

Makate not only bases his claim on the validity of the agreement but also sought from

the judiciary the development of common law “and to infuse it with constitutional values

of ubuntu and good faith”.85

Makate’s claim was vigorously defended by Vodacom. The latter took issue with

the delay in the institution of the action.86 For this, Vodacom cited section 11(d) of the

77 Makate ibid n 1 at p. 712. 78 Makate ibid n 1 at p. 712. 79 Makate ibid n 1 at p. 712. 80 Makate ibid n 1 at p. 712. 81 Makate ibid n 1 at p. 713. 82 Makate ibid n 1 at p. 713. 83 Makate ibid n 1 at p. 713. 84 Makate ibid n 1 at p. 714. 85 Makate ibid n 1 at p. 717. 86 Makate ibid n 1 at p. 714.

21

Prescription Act.87 Vodacom further contended that Makate’s idea fell squarely within

the scope of his employment and therefore he was not entitled to compensation other

than his salary.88

Perhaps the most crucial of the facts insofar as this dissertation is concerned is

Vodacom’s plea that Messrs Muchenje and Geissler were not acting on behalf of

Vodacom, because they lacked the requisite authority to represent Vodacom in the

“please call me” idea agreement. Vodacom submitted that Muchenhje and Geisler did

not have either actual or ostensible authority.89

4.3 The relevant issues

The Makate case invoked critical questions of law flowing from an ordinary set of facts.

With regard to the questions of law, this dissertation emphasises the terminology or

nature of concepts, namely estoppel and ostensible authority, instead of the end for

which the concepts were designed.

As noted in the factual background above, Vodacom denied that its senior

employee had the authority to bind it in the purported agreement.90 Therefore, the

court had to determine whether Vodacom was liable in contract or otherwise to honour

its end of the obligations flowing from the alleged contract between it (Vodacom) and

Makate. To this end, the court had to examine the South African jurisprudence to

determine the liability of Vodacom, if any.

In seeking to address the issues raised in the case, the concepts of ostensible

authority, actual authority, and estoppel were examined. Reference was made to

English and South African jurisprudence. In the examination of the jurisprudence, the

South African law of agency was redefined and the difficulties in conceptual

understanding highlighted.

The Constitutional Court in Makate case was divided on the position of the law

on the nature of ostensible authority.91 The majority judgment shall be referred to as

87 Prescription Act 68 of 1969. 88 Makate ibid n 1 at p. 714. 89 Makate ibid n 1 at p. 714. 90 See para. 4.2. 91 The full bench that heard the matter comprised of Mogoeng CJ, Moseneke DCJ (as he then was),

Jafta J, Khampepe J, Matojane AJ, Nkabinde J, Zondo J (as he then was), Wallis AJ, Cameron J, Madlanga J, and Van der Westhuizen.

22

the Jafta judgment, and the concurring judgment shall be referred to as the Wallis AJ’s

judgment.92

The court was therefore seized with the question of whether Makate had duly set

out the grounds which entitled him to obtain a judgment on the premise of ostensible

authority.93 The subsidiary question in this regard was whether there was a need to

develop the common law as it relates to agency and the confusing issues of ostensible

authority and estoppel.94

4.4 The majority judgment per Jafta J

Answering the question of whether or not ostensible authority was properly pleaded

will, in fact, establish the nature of ostensible authority and clarify its practical effects.

Jafta J’s judgment had to examine the judgment of the trial court in this regard as a

starting point, as the matter was before the Constitutional Court as an appeal matter.

Jafta J observed that the trial court assessed the matter as though Makate had raised

estoppel and not whether Makate had established ostensible which was, in fact, the

question before the trial court.95

The relevance of ostensible authority and estoppel becomes apparent where

there is doubt whether or not an agent had actual authority in purporting to conclude

a contract on behalf of his purported principal. Jafta J, therefore, outlined what

constitutes actual authority, which is viewed as significant in order to place ostensible

authority and estoppel in context and their relevance in the application of the law of

agency. Jafta J held that in the event that the principal had clothed her agent with

authority to contract on her behalf, whether expressly or impliedly, the question will be

answered in the positive, that is, the agent did have actual authority to represent that

principal thereby rendering the agent, an agent proper.96 In view of the discussion in

paragraph 2.2 above, it is clear that actual authority under English law is synonymous

to actual authority under South African law.

Jafta J found, in an attempt to distinguish the concept of estoppel from ostensible

authority that, estoppel is not elevated to a status of a substantive form of authority in

92 Justice Jafta scripted the majority judgment with six other justices concurring, and Acting Justice Wallis wrote for the concurring judgment with three other judges concurring.

93 Makate ibid n 1 at p. 718. 94 Makate ibid n 1 at p. 718. 95 Makate ibid n 1 at p. 717. 96 Makate ibid n 1 at p. 721.

23

agency, but a rule of law envisaged and designed to preclude the principal from

denying liability on the basis that her conduct had the effects of misleading the third

party into believing that the unauthorised agent did, in fact, have authority to represent

the principal in that contract.97 This distinction is criticised by Cassim and Cassim on

the basis that even the concept from which Jafta J sought to distinguish estoppel is

not a form of authority.98 Indeed, this criticism is in line with the analysis of this

dissertation, spanning from the English law itself and under South African law for

reasons that are apparent in various parts of this dissertation.

A closer look at the Jafta judgment99 indicates that ostensible authority under

South African law is defined exclusively with reference to the sentence in the English

case of Hely-Hutchinson as indicated above.100 In terms of the Jafta judgment,

ostensible authority is established if it can be proved that there was a representation

by the principal, which can be express or implied to the effect that the agent has

authority to represent the principal.101

This definition of ostensible authority must be closely examined. In terms of the

authority relied upon by Jafta J, ostensible authority is “authority of an agent as it

appears to others”.102 The question that may flow from a principle of the law of this

nature is whether or not there are further requirements for this principle to be

established. As per Jafta J, as intimated above, there is none.103 This finding by Jafta

J has been found to be wanting and having ignored the general application of the

ostensible authority as analysed in the very case of Freeman and Lockyer.104

Jafta J found that English law was adopted in the NBS Bank case, referred to

above.105 However, this finding is probably erroneous for the reasons outlined in

chapter 3 above. As has been noted in chapter 3, the requirements of ostensible

authority under English law are different from the requirements of ostensible authority

as set out in the NBS Bank case.106

97 Makate ibid n 1 p. 721. 98 Cassim & Cassim “The authority of company representatives and the Turquand rule revisited” 2017

SALJ 639-664 at p. 641. 99 Makate ibid n 1 p. 722. 100 Hely-Hutchinson ibid n 11 p. 583. 101 Makate ibid n 1 at p. 722. 102 Hely-Hutchson ibid n 11 p. 583. 103 Makate ibid n 1 at p. 722. 104 Cassim & Cassim ibid n 98 p. 651. 105 Makate ibid n 1 at p. 722. 106 See Freeman & Lockyer ibid n 16 at p.503; and NBS Bank Limited ibid n 50 at pp. 30-31.

24

As concluded in chapter 3, the law relating to ostensible authority was adopted

into South African law with qualifications. As the findings of this paper are that

ostensible authority under English law is an instance of estoppel for the reasons that

are furnished in chapter 2, it is absurd that Jafta J considers English law to emanate

from nothing but a single sentence of a court decision, read in isolation from all other

English cases.107

This difficulty is highlighted by the English case of Freeman & Lockyer, where it

was stated that when a third party relies on a representation made by the principal,

the principal will be estopped from denying that the agent had authority.108

The definition accorded to ostensible authority by Jafta J is probably too wide

and leaves room for erroneous future judgments. By way of example, what will the

status of the agreement be, where, notwithstanding the general representation that an

agent has authority to contract on behalf of the principal, the third party was aware

that the agent did not have the authority to enter into that particular contract? Clearly,

there is a need for a full and complete list of requirements to qualify ostensible authority

as a legal principle.

This dissertation holds that the formulation of principles in an area of law that has

been clouded by a long trail of judicial precedents, which are inconsistent with the

postulated theory should be done with care, and specific attention should be given to

guiding further academic and judicial discourse. Simply put, as noted in the discussion

of NBS Bank Limited in chapter 3 above, ostensible authority was construed under

South African law as an instance of estoppel. Therefore, there was a need to establish

the requirements of estoppel in order to set up ostensible authority.109

With reference to Trust & Investment case,110 Jafta J found that the state of

confusion in the analysis of the concept of ostensible authority and estoppel is

engendered by the state of confusion in English law.111 The question of the state of

confusion under English law was dealt with in chapter 2 above.

107 As is clear in the discussion in paragraphs 2.4 and 2.5, the requirements for ostensible authority and ostopell by representation are distinct.

108 Freeman & Lockyer ibid n 16 at p. 503. 109 Trial court ibid n 66 at p. 84. 110 The Insurance Trust & Investment case ibid n 28 at p. 61 . 111 Makate ibid n 1 at p. 730.

25

Jafta J further adopted the further analysis in the English case of Freeman &

Lockyer.112 The adopted analysis is to the effect that ostensible authority is a

relationship of legal nature as between the principal and the agent which has been

created by the representation made by the principal to a contracting third party that

the agent does have the requisite authority to contract on the principal’s behalf.113

Clearly, this contradicts the learned judge’s findings that no more requirements need

be proved beyond an appearance to others. The further adoption establishes that the

representation needs to have been made to the person raising ostensible authority

and not merely a general representation to third parties.

The Freeman & Lockyer case clearly requires that the representation must have

been directed to a particular person, namely the third party who seeks to hold the

principal liable under ostensible authority. Jafta J, on the other hand, held that: “The

means by which that appearance is represented need not be directed at any person.”

That begs the question, therefore: on what authority is this finding premised?

If it is to be accepted that Jafta J’s judgment effectively contradicted its own

stance on what constitutes the cause of action for ostensible authority, the principle

becomes even more inexplicable both in theory and application. Perhaps a more

generous interpretation of the finding that the representation need not be directed at

anyone should be that the representation need not be directed at the contracting third

party but a general prevailing representation which may be deduced from the

circumstances. Even if this interpretation is, in fact, the envisaged definition, the

difficulty with regard to its implications is not overridden. This difficulty is even more

pronounced by the fact that representation need not be in words but can equally be

implied. This dissertation holds that, once one establishes from circumstances created

by the principal as a representation that the agent does have authority to contract on

behalf of the principal, there is, therefore, a representation directed to someone, that

is, all persons that acquiesce themselves with the circumstances that give rise to the

representation.

Jafta J held that the facts establishing ostensible authority are not exclusive in

nature and the same facts may be relied upon to establish estoppel.114 He further held

that ostensible authority is what appears to others and such appearance may, in fact,

112 Freeman & Lockyer ibid n 15 at p. 503; and Makate ibid n 1 at p. 730. 113 Makate ibid n 1 at p. 730; See also Freeman & Lockyer ibid n 15 at p. 503. 114 Makate ibid n 1 at p. 729.

26

be not reflective of the circumstances, that is, the agent may in fact not have been

clothed with actual authority.115 In finding fault with the requirements of ostensible

authority as set out in NBS Bank Limited, Jafta J, criticised the inclusion of the

requirement that “in light of the form of the representation, the principal should have

reasonably expected third parties to be induced and rely on such representation” as

referred to above. The basis for such criticism is the apparent incoherence with that

statement and the observation that the principal may not have intended to make such

a representation and the representation, in fact, proves to be wrong.116 There is merit

in this challenge and unfortunately, the NBS Bank case cannot be salvaged from this

difficulty.

Another challenge that Jafta J launched is against the observation that the

principal must have expected third parties (outsiders) to act upon it as discussed

above. In challenging this finding, Jafta J referred to the case of Hely-Hutchinson in

which Lord Denning held that the principal will be bound by ostensible authority even

if the contracting third party is, in fact, a director and the unauthorised agent is the

managing director in the circumstances that the new director was oblivious of the fact

that the managing director was in fact not authorised to enter into the contract which

is later impugned for the lack of the managing director’s authority to bind her

principal.117

The proper reading of the example above in Hely-Hutchinson is that even a

director of a company which is being sued is considered an outsider by virtue of her

lack of knowledge of the actual extent of a managing director of the company that is

later sued for the representations made by the managing director. Therefore, such

director who is not apprised with the internal management of the company is no

different from an outsider and should be defined as such for the purposes of ostensible

authority. The requirement laid down in NBS Bank Limited as referred to above,

therefore, is not misplaced. The word “outsiders” seems to encompass all persons

who are not apprised of the limitations of the actual authority of the managing director

or a person who is clothed with ostensible authority. In any event, the example does

not relate to actual authority but to ostensible authority that is implied from the office

of a managing director.

115 Makate n 1 at pp. 721-722. 116 Makate n 1 at p. 724. 117 Hely-Hutchinson ibid n 11 at pp. 583-584.

27

If the foregoing submission is correct that an “outsider” shall refer only to persons

who are not apprised of the fact of the limitation of the agent’s powers notwithstanding

their ordinary ostensible authority to outsiders proper, that is people who may,

however, be at the principal’s employ yet lack the requisite knowledge of the agent

through whom they contract with the principal, therefore, Jafta J’s finding that “it is

clear that, even if the representee is not an outsider, under apparent authority the

principal could still be bound” is misplaced.118 There is nothing in reason or law that

suggests than an “outsider” can be defined with reference to their employment status,

other than the fact of the person’s knowledge or lack thereof of the existence of

limitations of ostensible authority.

Jafta J concluded that ostensible authority is authority as it appears to others and

that estoppel is distinct from ostensible authority and has always been treated as

distinct under South African law.119 He concluded that estoppel is not a form of

authority and also does not appear to be such.120 The court appears to have been

oblivious to the various forms of estoppel, alternatively did not consider it necessary

to discuss these forms of estoppel in order to justify its findings that ostensible authority

is not a form of estoppel. As will be noted in chapter 5, there are various forms of

estoppel, some of which have distinct requirements, though some are overlapping.

4.5 The concurring judgment

The concurring judgment of Wallis AJ in Makate offers a different perspective on the

South African law of agency, and pertinently, a discourse on the rather problematic

issues of ostensible authority and estoppel. It is confessed in the introductory part of

the judgment that the finding that Vodacom was bound in the contract for the

representations of its employee was not in issue.121 The main difference between the

majority and the concurring judgments was the categorisation of ostensible authority

and estoppel: what these concepts really mean under South African law.122

Wallis AJ found that estoppel applies to wide-ranging issues as an equitable

concept.123 As noted in chapter 2 above, the law judicial system is based on the

118 Makate ibid n 1 at p. 724. 119 Makate ibid n 1 p. 729. 120 Makate ibid n 1 at p. 724. 121 Makate ibid n 1 at pp.738-739. 122 Makate ibid n 1 at pp. 738 123 Makate ibid n 1 at p. 739..

28

principles of equity and justice. Wallis AJ further found, as opposed to Jafta J, that

ostensible authority is but a category of estoppel.124 In order to buttress his view that

estoppel is not a rigid concept but one with various branches, Wallis AJ cited various

examples.125 It is important that such examples be briefly discussed in order to

understand the court’s findings in this regard. These examples are discussed in

Chapter 5 below.

In answering the question whether ostensible authority is based on estoppel,

Wallis AJ found that ostensible authority under South African law is estoppel by

representation, that is, a branch of estoppel.126 Wallis AJ further admitted, inconsistent

with his general finding on the issues of ostensible authority, that ostensible authority

is a form of authority under the circumstances that the person that is clothed with

ostensible authority does in fact bear actual authority.127 Such admission is not in line

with the same concurring judgment’s finding that ostensible authority is a branch of

estoppel. If it is accepted, as the concurring judgment finds, that ostensible authority

is a branch of estoppel, it is nonsensical to suggest that estoppel can be employed

where there is actual authority. It can be accepted, however, that estoppel, whether it

is the mother body of ostensible authority or not, can be employed under the

circumstance where actual authority exists but is denied. In this event, it would have

been applied as a shield.128

The major difficulty with Wallis AJ’s admission above, namely that ostensible

authority may coincide with actual authority, in effect aligns the identifying features of

ostensible authority with those held by the majority judgment as adopted from the

Hely-Hutchinson case, that is “ostensible or apparent authority is the authority of an

agent as it appears to others”.129

With regard to the position under English common law, Wallis AJ observes, that

the English common law classifies ostensible authority within the branch of estoppel,

and estoppel by representation in particular.130 The position of English law in this

regard is discussed in chapter 2 above. The finding that ostensible authority is

124 Makate ibid n 1 at pp. 738 & 746. 125 Makate ibid n 1 at p. 739 . The various forms of estoppel are discussed in chapter 5. 126 Makate ibid n 1 at p. 758. 127 Makate ibid n 1 at pp. 745-746. 128 Makate ibid n 1 at p. 744. 129 Hely-Hutchison ibid n 12 at p. 583. 130 Makate ibid n 1 at p. 746.

29

estoppel by representation cannot be sustained in view of the fact that the

requirements of estoppel by representation and the requirements of ostensible

authority, both under English law are self-contradictory.131

The assessment of Wallis AJ is supported by the observation of Beck. Beck

observes that agency by estoppel and ostensible authority is one and the same

thing.132 In the final analysis, Wallis AJ found that ostensible authority is estoppel by

representation. For Wallis AJ, the requirements of estoppel by representation are

those requirements of ostensible authority (and estoppel) as established in NBS Bank

Limited.

The concurring judgment further acknowledges that estoppel remains a shield

but may be pleaded in the particulars of claim and not exclusively by means of

replication.133 In this fashion, Wallis AJ acknowledges that estoppel by representation

is not a form of authority.

This dissertation has difficulty with this finding. Ostensible authority indeed falls

within the rubric of estoppel but is not estoppel by representation. South African law

has not adopted the English law principle of estoppel by representation and therefore

such principle does not form part of our law. The requirements of estoppel by

representation were correctly recorded in English case law, as discussed in paragraph

2.4. Clearly, these requirements are different from the requirements of ostensible

authority set out in the Wallis judgment.

4.6 Chapter conclusion

The exposition of the law of agency in light of the analysis above reveals the state of

confusion of both the English law and South African law. It is noteworthy that the

English law principle of estoppel by the Jafta judgment in Makate assessed the issues

before the court with an erroneous premise that there are consolidated requirements

for estoppel. This misdirection must have played a significant role in Jafta J’s mind in

determining whether or not ostensible authority is estoppel. As will be evident in

chapter 5, estoppel manifests itself in various fashions with unique requirements. As

concluded in chapter 3, under English law, ostensible authority falls within the rubric

131 The requirements for estoppel by representation and ostensible authority under English law are set out in paragraph 2.4.

132 Beck (2002) Theory and principles of pleading and civil actions Butterworths at p. 199. 133 Makate ibid n 1 at p. 744.

30

of estoppel. Under English law, ostensible is not established by merely what appears

to others, but certain requirements must further be met, as discussed above. With no

difficulty would it be accepted that the NBS Bank case adopted the concept of

ostensible authority in a wrong fashion, but for different grounds. Clearly, the

requirements of ostensible authority as set out in the case of Freeman & Lockyer134

are different from the requirements for ostensible authority as set out in the NBS Bank

Limited case.135 With regard to the difference as it pertains to the limitation of a

company’s capacity in terms of its founding documents in Freeman & Lockyer,136 some

scholars137 observe that such requirement should be discarded in view of the changes

in legislative framework of South Africa.138

Ostensible authority and estoppel may be pleaded on the onset in the event that

one is of the view that authority may be in issue.139 In the event that it is not pleaded

in the summons, but the facts establishing same are raised, it may be raised by way

of replication.140

134 Freeman & Lockyer ibid n 16 at p. 503 & 506. 135 NBS Bank Limited n 50 at pp. 30-31. 136 Freeman & Lockyer ibid n 12 at p. 493. 137 Cassim & Cassim ibid n 98 at 648. 138 Section 19 (1)(b) of the Companies Act ibid n 161. 139 Makate ibid n 1 at p. 744; And Trial court ibid n 75 at p. 84. 140 Trial court ibid n 75 at pp. 84-85.

31

Chapter 5:

Estoppel and ostensible authority

5.1 Introduction

It is important to revisit the principles of estoppel and ostensible authority under South

African law with the benefit of the foregoing analysis. It is clear141 that estoppel

manifests itself even beyond the scope of agency and the requirements of estoppel

change from case to case, thereby buttressing the view that it is a flexible concept of

equity.142 In this chapter, a discussion is provided of estoppel as it applies to motor

vehicle disposition cases. The principle of estoppel as it finds application in share

dealing shall also be discussed. The requirements of estoppel as they apply to the

vindicatory action, the Turquand rule and ostensible authority will also be discussed.

This examination demonstrates that our law recognises various forms of estoppel and

buttresses the findings of this dissertation that ostensible authority falls within the wide

rubric of estoppel. As highlighted in paragraph 2.5 above, estoppel is not only flexible

under English law, but is also flexible under South African law. The examples below

are discussed to demonstrate that estoppel takes various forms and may have unique

requirements. In the light of the discussion that is to follow, this dissertation finds that

ostensible authority is equally a branch of estoppel.

5.2 Motor vehicle cases: Estoppel

Estoppel finds application in the sale of motor vehicles. In these forms of transactions,

it was held in the cases of Oakland Nominees (Pty) Ltd v Gelria Mining & Investment

Co (Pty) Ltd143 and Quenty’s Motors (Pty) Ltd v Standard Credit Corporation Ltd,144

that for estoppel to be established, the following requirements should be established:

141 Makate ibid n 1 at p. 739. 142 See paragraph 2.5. 143 Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd 1976 (1) SA 441 (A) 452

(henceforth referred to as “the Oakland Nominees (Pty) Ltd case”. 144 Quenty’s Motors (Pty) Ltd v Standard Credit Corporation Ltd 1994 (3) SA 188 (AD) at pp. 198 &199

(henceforth referred to as “the Quenty’s Motors (Pty) Ltd case”). See also Van der Molen v Fagan (41/2013) [2013] ZASCA 203 (02 November 2013) (henceforth referred as to “the Van der Molen case”).

32

a) The owner of the vehicle must have represented, by her conduct or

otherwise, that the person who dispossessed her motor vehicle was in fact

the owner thereof, alternatively had the right to so dispose of it;145

b) The representation by the owner referred to immediately above must have

been made owing to the negligence of the owner;

c) The person who subsequently raises estoppel must have placed reliance

on the negligent representation; and

d) The negligent representation should have caused the person raising

estoppel to act to her detriment.

The requirements to establish estoppel in motor vehicle transaction matters are

notably dissimilar to the general requirements of estoppel as referred to in NBS Bank

Limited,146 admitted as being the requirements of estoppel in the majority judgment in

Makate.147

Requirements (a), (c), and (d) above are clearly present the estoppel

requirements as per the NBS Bank Limited and Makate cases.148 Requirement (b)

above does not form part of the requirements listed in NBS Bank Limited. Furthermore,

the requirement of “reasonableness of such reliance” need not be established in motor

vehicle cases.149

The differences in the requirements for estoppel, especially as highlighted by

estoppel under motor vehicle cases, can be best explained by the judgment of the

Supreme Court of Appeal in Grosvenor Motors (Potchefstroom) Ltd v Douglas.150 In

this case, contrary to the established requirements of estoppel on motor vehicular

dispositions that the owner can, in fact, be estopped based on the principles of fairness

and equity.151

145 See also Electrolux (Pty.) Ltd. v Khota and Another, 1961(4) S.A. 244 (W), Broekman v TCD Motors (Pty) Ltd 1949 (4) SA 418 (T); Johaadien v Stanley Porter (Paarl) (Pty) Ltd 1970 (1) SA 394 (A); Grosvenor Motors (Potchefstroom) Ltd v Douglas 1956 (3) SA 420 (A) (Henceforth referred to as “the Grosvenor Motors (Potchefstroom) Ltd”).; Kajee v HM Gough (Edms) Bpk 1971(3) SA 99 (N); Oriental Products (Pty) Ltd v Pegma 178 Investments Trading CC 2011 (2) SA 508 (SCA).

146 NBS Bank Limited ibid n 50 at pp. 30-31. 147 Makate ibid n 1 at p. 723. 148 NBS Bank Limited ibid n 50 at pp. 30-31. 149 NBS Bank Limited ibid n 50 at pp. 30-31. 150 See generally Grosvenor Motors (Potchefstroom) Ltd ibid n 146. 151 Grosvenor Motors (Potchefstroom) Ltd ibid n 146 at p. 427.

33

Indeed, Du Plessis observes that estoppel gives an expression to the demands

of good faith and holds that estoppel can be linked to the well-established principle of

exception doli.152

In the light of the foregoing, it is submitted that holding that ostensible authority

falls within the rubric of estoppel accords with the purpose for which ostensible

authority seems to serve, that is, to hold persons who in terms of the dictates of equity

should be held accountable, notwithstanding lack of actual authority.

5.3 Share dealing transactions

The concept of share dealing entails the conveyance of shares from one owner to

another. The issues of estoppel in relation to share dealing transactions was

considered in the case of Oakland Nominees (Pty) Ltd.153 As will be noted, the

requirements are synonymous to those established in motor disposition cases as

discussed above.154 As discussed in Electrolux (Pty) Ltd v Khota,155 in cases of share

dealing, the mere act of making available of an article, such as a share certificate

which enables another person to transfer it will render the original owner of the share

certificate from denying that the person who has so disposed of the share certificate

has the authority to so dispose. Therefore, in these cases, no further requirements to

establish estoppel.

5.4 Vindicatory actions

Vindicatory claims have also been a subject of adjudication under South African law

in the area of estoppel. Vindicatory claims are claims for ownership to property.156 In

the case of Konstanz Properties (Pty) Ltd V Wm Spilhaus en Kie (Wp) Bpk, the

requirements for one to succeed with a claim for estoppel on vindicatory actions were

laid down as follows:157

(a) The original owner of the property must have represented to the new owner

that the person who disposed the property had authority to do so;

152 Du Plessis ‘Giving practical effect to good faith in the law of contract’ 2018 Stell LR 379 at 5.4.3. 153 Oakland Nominees (Pty) Ltd ibid n 144 at p. 452. 154 Oakland Nominees (Pty) Ltd ibid n 144 at 452. 155 Electrolux (Pty) Ltd v Khota 1961 (4) SA 244 (W) 247. 156 Praker & Zaal “Absa bank limited v Kert 2015 JDR 0996 (SCA)” 2016 De Jure 181-190 at p. 186. 157 Konstanz Properties (Pty) Ltd v WM Spilhaus en Kie (Wp) Bpk 1996 (3) SA 273 (A) 33.

34

(b) The representation must have been made with the element of culpa or

negligence on the part of the representor; and

(c) The other person who is raising estoppel must have acted on the basis of

such representation to her prejudice.

Noteworthy in these requirements is the fact that the representation needs to be

directed at a particular person, namely the person that has been misled and acted

upon such representation to her prejudice. Here, again, it must be proved that the

representor was negligent in her representation. The representor will be estopped from

denying liability even in the event that she is found to have been negligent in his

representation. It follows as a matter of course therefore that the representor’s

negligence is deduced from his failure to foresee that her representation may mislead

a third party that may rely on such representation to the third party’s prejudice.

5.5 Turquand rule of company law and estoppel

Closely related to the principle of estoppel is the Turquand rule. The English case of

Royal British Bank v Turquand,158 which established the so-called Turquand rule was

adopted into South African law in the case Legg & Co v Premier Tobacco Co2159 In

terms of the Turquand rule, a person who contracts with a company through its

representatives is entitled to assume that the internal rules of conferring authority upon

such individuals have been complied with.160 The assumption is however subject to

the nature of the contract as some contracts, in their nature may put the other person

to enquiry, that is, to ensure that indeed such internal management rules have been

complied with. As noted already, when a contract, which an agent seeks to bind her

principal to, seems to be unreasonable or bearing such terms that a reasonable person

would question, the other person should establish if the agent is indeed authorised.161

Under South African law, the Turquand rule has been incorporated into company

law by legislative means. The Companies Act provides that outsiders are not required

to enquire into the internal management of companies with which they deal and, in

158 Royal British Bank v Turquand (1856) 119 ER 474. See also Sealy “Agency principles and the rule in turquand's case” 1990 CLJ 406-408 at pp.406-408.

159 Legg & Co v Premier Tobacco Co2 1926 AD 132 at pp. 134-135. 160 See section 20(7) and 20(8) of the Companies Act 71 of 2008 for the codification of the principle

(Henceforth referred to as “the Companies Act”). 161 Cassim & Cassim ibid n 1 p. 64.

35

fact, such third parties are entitled to presume that the internal management rules of

the company have been complied with.162 The case of Bagport (Pty) Ltd v South

African Express Airways Soc Ltd further specifically affirms that the Turquand rule

forms part of our law.163

The legislative incorporation perhaps mitigates the discouraging nature of

English law in the application of the Turquand rule in favour of the ordinary rules

governing agency. The preference of other agency mechanisms over the Turquand

rule is highlighted by Sealy with reference to the case of Freedman.164

The Turquand rule is closely related to estoppel and is crucial for the analysis of

ostensible authority and estoppel. This rule highlights the place of estoppel under

South African law in that it effectively precludes the company (principal) from alleging

that its senior employees, for example, managing director, was not duly authorised. In

this regard it gives rise to estoppel. As held in the concurring judgment in Makate, the

Turquand rule is estoppel in motion.165

5.6 Ostensible authority and estoppel

The Makate case deals primarily with the question of ostensible authority and

estoppel.166 It seems, prior and post Makate there remains an ambiguity on the

question of what distinguishes ostensible authority from estoppel. The Constitutional

Court is the highest court in South Africa and its decisions are instructive and binding

to all other court. Therefore, the decision of Jafta in Makate constitutes the law of

South Africa until such time that the Constitutional Court arrives at a different decision.

Therefore, ostensible authority in this section will be assessed in view of the

Constitutional Court’s judgment.167

In order to place ostensible authority in context, it may be fruitful to outline the

basic procedure in bringing the questions of law before a court of law for adjudication.

162 See section 20(7) and 20(8) of the Companies Act ibid n 161. 163 Bagport (Pty) Ltd v South African Express Airways Soc Ltd (2018) ZAGPJHC 127 (henceforth

referred to as “the Bagport (Pty) Ltd case”) 164 Sealy ibid n 159 at pp. 406-408. 165 Makate ibid n 1 at p 739 with reference to the case of One Stop Services (Pty) Ltd v Neffnsaan

Ontwikkelings (Pty) Ltd 2015 (4) SA 623 (C); See also Cassim & Cassim ibid n 9 at p. 643. 166 Makate ibid n 1. 167 The judgment of the court under South African jurisprudence is the one derived by the majority.

The concurring judgment does not have binding effects upon other courts but may have persuasive force.

36

In the ordinary course, an aggrieved party, referred to as the plaintiff prepares in

person or through a legal representative a pleading called a combined summons in

which she succinctly and clearly sets out her case. A cause of action needs to be

established in the combined summons.168 In the event that reliance is placed on the

existence of ostensible authority as a cause of action, the facts establishing ostensible

authority must accordingly be pleaded.169

In the Makate case, it was noted that the trial court adjudicated upon the matter

from a mistaken footing. The footing of the trial court was that when a person relies on

ostensible authority, the person needs to plead estoppel in replication.170 As discussed

above, this finding emanates from the conflation of ostensible authority with

estoppel.171 It is clear under South African law that estoppel and ostensible authority

are distinct concepts and may not be used interchangeably.172

The general requirements of estoppel under South African law are:173

a) Words or conduct, including inaction or silence, which make a

representation;174

b) The person who raises estoppel must be the one to whom such

representation has been made;175

c) The representor must have expected, reasonably, that her representation

may mislead the person raising estoppel;176 and

d) The person raising estoppel must have acted upon the representation,

reasonably so, to her prejudice.

168 Rule 18 (4) of the Rules regulating the conduct of the proceedings of the several provincial and local divisions of the High Court of South Africa, in respect of actions instituted in the High Court of South Africa, and Rule 6(4) of the Rules regulating the Conduct of proceedings of Magistrates’ Courts of South Africa, in respect of actions instituted in the Magistrates’ courts.

169 This is in line with the Rules referred above in n 169. In terms of these rules, the cause of action must be clearly and concisely pleaded.

170 Trial court ibid n 75 at p. 84. 171 Makate ibid n 1 at p. 721. See also Trial court ibid n 75 at p.84. 172 Makate ibid n 1 at p. 723. 173 Makate ibid n 1 at p. 724. 174 See also Aris Enterprises (Finance) (Pty) Ltd v Protea Assurance Co Ltd 1981 (3) SA 247 (A). 175 See also NBS Bank Limited ibid n 50 pp. 30-31. 176 See also Monzali v Smith 1929 AD 382 at p. 386.

37

Ostensible authority, on the other hand, is nothing more than what a reasonable

person can deduce as authority from the circumstances.177 Indeed, actual authority

whether conferred impliedly or expressly, may coincide with ostensible authority.178

Sharrock suggests that the Makate case might have established a new form of

authority.179 However, the Makate case did not introduce new principle but clarified the

South African law in view of the court’s appreciation of the English law from which the

South African law of agency flows.

As discussed in chapter 3 above, estoppel by representation does not form part

of South African law. The findings of the concurring judgment in Makate that ostensible

authority is estoppel by representation, as discussed in chapter 3 above, seeks to

introduce a new concept into the South African law of agency. Fortunately, such

judgment does not reflect the law of South Africa as the majority judgment found

otherwise.180

If the findings in Makate that ostensible authority as defined in the same case

always formed part of South African law, it may be argued that such authority had

been repealed by a clear line of precedents that held that ostensible authority is an

instance of estoppel.

What is clear under South African law in light of Green v Fitzgerald is that law

may be repealed by disuse.181 It is submitted that the use of ostensible authority as

estoppel is not in line with the finding of the Makate case that ostensible authority

always formed part of South African law. Therefore, holding that ostensible authority,

in a different form, namely that of being a branch of estoppel, constitutes a new legal

principle.

5.7 Chapter conclusion

It is clear from the line of authorities that apparent authority was not squarely held out

as a singular legal principle and its use has always been, at least equated, if not held

out to be an instance of estoppel. Ostensible authority under South African law has

now been defined by the majority judgment in Makate. In terms of the definition,

177 See Makate n 1 at p. 19. See also Hely-Hutchinson ibid n 11 at p. 583. 178 Bagport (Pty) Ltd ibid n 97 at p.5. 179 Sharrock ibid n 74. 180 See chapter 4 above. 181 Green v Fitzgerald and others 1914 AD 88 111; See also R v Chipo 1953 (4) SA 573 (A) 578 pp.

573-579; and R v Sibiya 1955 (4) SA 247 (A) 265.

38

ostensible authority is nothing beyond an authority of an agent as it appears to others.

There are in principle no further requirements that need to be proved. As consistently

held by this dissertation, this principle is too wide to constitute a legal doctrine. The

doctrine has neglected the requisites elements which apply under English law as

discussed in chapter 3.

The examination above established that estoppel is a distinct form of a legal

principle whose application is intended to preclude persons that ought to be held

accountable for their actions so liable. Notwithstanding the authoritative case of

Makate, this chapter establishes that there are unique instances of estoppel and the

ostensible authority ought to be nothing more than an instance of estoppel.

39

Chapter 6:

Conclusion and recommendations

6.1 Introduction

South African law jurisprudence flows considerably from English law. The law of

agency is no exception. The confusion described in the Insurance Trust & Investment

case should not be taken lightly, in part because such alleged confusion may be an

explanation for the divergent legal analysis in this area of law.182

In this chapter, a summary of this paper’s essential findings is recorded and

recommendations for jurisprudential amendment recommended. The conclusion will

be dissected in order to ensure that a proper picture of what constitute estoppel and

ostensible authority is drawn. The conclusion remarks with regards to what the position

of the law ought to be will also be made. All things considered, this chapter shall record

its recommendations.

6.2 Ostensible authority

The analysis of this dissertation establishes that the English law lacks clarity on the

issue of ostensible authority. The Freeman & Lockyer case, being the locus classicus

case on the law of ostensible authority sets out the requirements of estoppel as noted.

In terms of the requirements, something more than authority as it appears to others is

required.

Therefore this dissertation finds that there is no confusion in English law with

regard to the classification estoppel and ostensible authority. Under English law,

ostensible authority falls within the general rubric of estoppel. Notwithstanding this

proper classification, the case of Freeman & Lockyer finds that properly assessed,

ostensible authority is estoppel by representation. This part is erroneous in that the

requirements of ostensible authority as set out in Freeman & Lockyer are irreconcilable

with the requirements of estoppel by representation as established in Spliethoff’s

Bevraschingskantoor BV.183 This paper finds that ostensible authority is a unique form

of estoppel with its requirements duly set out in Freeman & Lockyer. Therefore, the

182 Insurance Trust & Investment ibid n 24 p. 61 . 183 Spliethoff’s Bevraschingskantoor BV n 34 at p. 156.

40

finding in Freeman & Lockyer that ostensible authority is estoppel by representation

bust be severed from the entire judgment.

Ostensible authority by its very nature, under English law, whether it is an

independent concept (which it is not), or an instance of estoppel (which it is), is not

actual authority, therefore, it is used as a defence to a claim that the ostensible agent

lacked actual authority. Notwithstanding this, it may be pleaded on the onset, as this

does not change the nature of the principle.

Under South African law, ostensible authority is a concept independent from

estoppel. The effects of ostensible authority are synonymous to those of estoppel.

Under South African law, ostensible authority is equally not authority proper, it simply

insists on the effects of actual authority where there is in fact none. Therefore,

establishing ostensible authority does not entitle the relier to more rights than she

would have had the agent had actual authority.

The adoption of ostensible authority in the NBS Bank Limited case has been an

erroneous one.184 As discussed in chapters 2 and 4, the requirements of estoppel

there were designed to coincide with the requirements of general estoppel under

South African law. Clearly, there are various forms of estoppel under South Africa law,

and the NBS Bank Limited matter should have appreciated it and adopted the English

requirements of ostensible authority as they were. This is a mistake which may have

motivated the majority court in Makate to confine ostensible authority to the findings

of Hely-Hutchinson.

6.3 Estoppel

The traditional elements of estoppel are that there must be words or conduct, which

include inaction or silence, which may be construed as a representation that the agent

has authority; that the person who raises estoppel must be the one to whom such

representation must have been made;185 the representor (principal) must have

expected, reasonably, that her representation may mislead the person raising

estoppel;186 and the person raising estoppel must have acted upon the representation,

reasonably so, to her prejudice. Estoppel is equally a shield yet may be pleaded in the

184 NBS Bank Limited ibid n 50. 185 See also NBS Bank Limited ibid n 50 at pp. 30-31. 186 See Monzali v Smith 1929 AD 382 at p. 386.

41

onset should lack of authority be raised prior to the action. Estoppel is a wide

encompassing concept which serves the imperatives of equity and justice well in the

event that it is not limited to identifiable requirements.

6.4 Recommendations

Under South African law, it is permissible to adopt and develop foreign law in terms of

section 39 of the Constitution. The question is, therefore, why does the South African

courts insist on clarifying highly confused concepts of a foreign jurisdiction?

This dissertation recommends, beyond Makate case, that a globular principle of

equity be formulated to hold accountable principals or persons who make

representations that an apparent agent has the requisite authority. The foregoing

recommendation does not detract from the generality of estoppel as highlighted by

way of examples in chapter 5. The proposed globular concept should consider the

dictates of equity and justice.

In the event that the courts resist developing the law in the foregoing terms, it is

imperative for the Constitutional Court to develop ostensible authority. This is so

because, as this dissertation finds, there are no traces of ostensible authority as an

independent concept under South African law before Makate. Should the question of

ostensible authority arise before the constitutional court arise in future, it is

recommended that further requirements be introduced in line with the general

requirements of estoppel.

42

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Myburgh “On constitutive formalities, estoppel and breaking the rules” 2016 Stell LR

254-272.

Praker & Zaal “Absa bank limited v Kert 2015 JDR 0996 (SCA)” 2016 De Jure 181-

190 at p. 186.

Sealy “Agency principles and the rule in turquand's case” 1990 CLJ 406-408 at pp.406-

408.

Sharrock “Authority by representation – a new form of authority?” 2016 PER 1-21.

Woan “The apparent authority of the unauthorised agent” 2014 SAcLJ 258-268.

Yap “Apparent authority: doctrinal underpinnings and competing policy goals” 2014

J.Bus.Law 72-82.

Books

Beck (2002) Theory and principles of pleading and civil actions Butterworths

De Villiers, Macitosh and Knight (1956) The law of agency in South Africa Juta.

Pothier (1979) Treatise on the contract of mandate (traité du contrat de contrat de

mandate) (translated by Rogers and De Wet) Lex Patricia.

Kerr (1991) The law of agency LexisNexis.

Cooke (2000) The modern law of estoppel Oxford University Press at p.2. Also

available at

https://0wwwoxfordscholarshipcom.innopac.wits.ac.za/view/10.1093/acprof:oso

/9780198262220.001.0001/acprof-9780198262220 accessed on 8 August 2019.

Cartwright “Protecting legitimate expectations and estoppel in English law” 2006

EJCL, vol.10.3. Available at http://www.ejcl.org accessed on 12 April 2019.

45

Acts and Constitutions

Companies Act 71 of 2008.

Constitution of the Republic of South Africa, 1996.

Old authorities

Voet 1.8.28

Reports and Rules

Rules regulating the Conduct of proceedings of in respect of actions instituted in the

Magistrates’ courts.

Rules regulating the conduct of the proceedings of the several provincial and local

divisions of the High Court of South Africa.