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LL Case No 408/1987
IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE DIVISION
In the matter between:
BARCLAYS NATIONAL BANK LIMITED Appellant
and
ROBERT
THOMPSON Respondent
CORAM: CORBETT, HOEXTER, VAN HEERDEN,
SMALBERGER et MILNE JJA
HEARD: 16 SEPTEMBER 1988
DELIVERED: 30 SEPTEMBER 1988
JUDGMENT
/VAN HEERDEN JA...
2 VAN HEERDEN JA:
During 1974 the respondent instituted action
against the appellant in the Witwatersrand Local Division. The respondent's
claims for
damages were based upon alleged breaches of contract committed by
Barclays Bank D C 0 at the beginning of 1961. (On 1 October 1971,
when the
registration under Act 23 of 1965 of Barclays Bank D C 0 ("the Bank") was
cancelled, the appellant took over the assets
and liabilities of the Bank.) The
appellant's plea was filed during February 1976 and some 9 years later the
respondent excepted
to the plea on the ground that "it lacks averments to
disclose a defence". The reasons for the inordinate delay in instituting action
and taking the exception do not appear from the papers before us. Nor is it
apparent why the appellant did not raise a plea of prescription.
The exception was upheld by Strydom J who subsequently granted the appellant leave to appeal to
3 this court.
In essence the following was common cause on the pleadings:
(1) Duríng the relevant period - end of 1960 to the beginning of 1961 - the Bank was in possession of share certificates pertaining to shares held by the respondent in various listed South African and Rhodesian companies. (2) In terms of the agreement pursuant to which the Bank held the certificates it was obliged
(i) to obtain, at the request of the respondent, reports and advice from stockbrokers relating to the shares concerned (para 8 (b) of the particulars of claim read with para 7 (b) (ii) of the plea); (ii) to take all necessary steps, when obtaining such advice, to acquaint such stockbrokers with full details of the respondent's situation, requirements and
4
intentions, and his reasons for seeking such advice (para 8 (c) of the
particulars of claim read with para 7 (b) (iii) of the plea);
(iii) to pass on
to the respondent the reports and advice of stockbrokers obtained by the Bank at
the request of the respondent (para
8 (d) of the particulars of claim read with
para 7 (b) (iv) of the plea);
(iv) to conduct its business dealings with the
respondent with the standard of care to be expected of experienced bankers (para
8
(f) of the particulars of claim read with para 7 (v) of the plea); and
(v)
not to act negligently either in obtaining, or giving to the respondent, advice
in regard to his shares (para 30 of the particulars
of claim read with para 27
of the plea). (3) During October 1960 the respondent,
5 who was not a
resident of South Africa, wrote to the Bank from Georgetown, British Guiana,
requesting it to obtain advice from stockbrokers
"on what to do with my
holdings" (i e the aforesaid shares). The letter continued:
"I am worried about what effect will be of S. Africa's certain expulsion from the Com-monwealth. I do not imagine that many of my holdings will be directly affected, but the Stock Exchange is so liable to rather childish inconsequential movements that it might offer a good opportunitý for a bear-type profit, and some things, such as United Fish Canners, will presumably be affected by the loss of Imperial preference. I am also wondering whether some importers might be worse off, owing to their goods bearing a heavier tariff."
(4) The, Bank responded on 3 November 1960 and enclosed recommendations received from a firm of stockbrokers. (The precise nature of these recommendations does not appear from the pleadings.) (5) On 1 December 1960 the respondent wrote to the Bank complaining that he could not
6 understand the brokers' "opinion" which he regarded as useless, and repeated his former request. He also stated that "I might make a lot of money by selling now and buying after the expulsion decision, but before a decision on Imperial Preference."
(6) On 8 December 1960 the Bank wrote to the respondent stating that the aforesaid stockbrokers could not foresee what the effect would be on market prices of shares should South Africa be expelled from the Commonwealth and should Imperial Preference be lost. (The respondent alleges that this letter reached him only on 18 February 1961.) (7) On 6 February 1961 the respondent sent a cable to the Bank asking to be forthwith provided with stockbrokers' advice on whether expulsion of South Africa from the Commonwealth would cause a general stock exchange fall justifying the sale of all his shares, and on the likely effect of expulsion on "each ...individual shareholding".
7
(8) A few days later the Bank sent a cable to the respondent to the effect that stockbrokers consulted were unable to give an opinion. (9) On receipt of this cable the respondent sent a further cable to the Bank with the re-quest that the opinion of other stockbrokers be obtained. (10) On 10 February 1961 the Bank re-plied, by cable, that further brokers had been approach-ed and that, whilst they were not prepared to make a de-finitive statement, the general view appeared to be that expulsion of South Africa from the Commonwealth would be "no justification for an investor to sell out."
In regard to the latter cable the following
was alleged in para 21 of the particulars of claim.
"(b) in fact the Bank had consulted a Mr. Robinson of H. Cooper & Co., who was not a stockbroker and was not qualified to give the advice which he was asked to give. The Bank had also consulted the firm of F.T. Mullavey, Athol Frank and Company.
8
(c) in breach of the duty set out in paragraph 8 (c) hereof, the Bank failed to inform either H. Cooper & Co. or F.T. Mullavey, Athol Frank and Company that the Plaintiff was not a resident of South Africa or as to the nature of the portfolio constituted by the said shares.
(d) in breach of the duties set out in paragraph 8 (d) and (f) hereof the Bank failed to pass on to the Plaintiff the opinion of F.T. Mullavey, Athol Frank and Company to the effect that if South Africa should leave the British Commonwealth there would be an initial setback on the stock exchange in Johannesburg followed by a recovery.
(e) in breach of the duties set out in paragraph 8 (b), (e) and (f) the Bank failed to obtain further details in relation to each of the shares in the Plaintiff's portfolio.
(f) further in breach of the said duties the Bank in the said cable of lOth February, 1961, wrongly stated
(i) that neither of the further brokers consulted was prepared to make a definite statement despite the fact that F.T.
9
Mullavey, Athol Frank and Company had already stated to the Bank as follows
'Should we be expelled from the Commonwealth there would be an initial set-back but a recovery would be staged.'
(ii) that the further brokers consulted had said that general opinion appeared to be that there was no justification for an investor to sell out.
(iii) that the contents of the
cable constituted the
opinion of at least two
stockbrokers and did not
include Max Pollak and
Freemantle."
In reply to these allegations the appellant
pleaded in para 19 of the plea:
"(b) The Bank had consulted a Mr. Robinson, who was not a stockbroker, of H. Cooper & Co., whose opinion was recorded by the Bank as follows:
'The question is hypothe-tical and should we be expelled from the
10
Commonwealth, first class securities would not be unduly affected. Defi-nitely no justification for selling.'
and the firm of F.T. Mullavey, Athol Frank and Co. whose opinion was recorded by the Bank as follows:
'Should we be expelled from the Commonwealth there would be an initial setback but a recovery would be staged.'
(c) Save as aforesaid the defendant denies as if specifically traversed each and every allegation contained in paragraph 21 of the particulars of plaintiff's claim."
It will be seen that the appellant admitted
that the
Bank had consulted Mr Robinson, who was not a
stockbroker, as well as the
firm of F T Mullavey, Athol
Frank and Co ("Mullavey"), and that the latter
had
advised that expulsion of South Africa from the
Commonwealth would
result in an initial setback (on the
Stock Exchange) followed by a recovery.
All the other
allegations in para 21 (b) to (f) of the particulars of
11
claim were denied. The appellant therefore denied that the Bank had committed
the breaches of duty alleged in para 21 (c) to (f).
In para 31 of the
particulars of claim the respondent went on to allege that in breach of its
duties set out in para 8 (f) and 30
(see para 2 (iv) and (v) of my above
summary) the Bank had acted incompetently or negligently in a number of
respects. These allegations,
which were denied by the appellant, are, however,
not material to this appeal.
The respondent concluded by alleging that as a result of the Bank's breach of
contract he refrained from instructing the Bank to sell
his remaining shares
(the significance of the word "remaining" will appear shortly); that, had the
Bank given him competent and proper
advice, he would have instructed the Bank to
sell those shares before it became known on 15 March 1961 that South Africa was
leaving
the Commonwealth; that
12 the prices of the remaining shares on the
Stock Exchange fell between 15 March and September 1961; that after September
the prices
of the remaining shares, and other shares which the respondent would
have bought if he had sold the former shares timeously, rose
to greater levels
than before 15 March 1961, and that in consequence he suffered damages in the
amount of R180 000. All these concluding
allegations, as well as a final
allegation relating to the foreseeability of the damages, were denied by the
appellant which, in
the alternative, also relied upon an alleged failure of the
respondent to mitigate his loss.
The particulars of claim also contain a second cause of action. In para 24 it is alleged that towards the end of February 1961 the respondent instructed the Bank to sell some of his shares ("the earmarked shares"). It is furthermore alleged that in breach of its mandate the Bank refused or failed to sell those shares and that as a result of this breach
13
the respondent suffered damages in an amount of
R120 000. Save for
admitting that the instruction was
received by the Bank and that it did not
sell most of
the earmarked shares, the appellant denied all
the
allegations pertaining to the second cause of action.
It also pleaded
that for a variety of reasons the Bank
was not obliged to accept the respondent's instructions.
The notice of exception reads as follows:
"KINDLY TAKE NOTE that Plaintiff hereby excepts to Defendant's Plea read with the Further Particulars thereto, on the ground that it lacks averments to disclose a defence, in that:
1. Paragraphs 18 and 19 and 7 (b) (iv) of the Plea, as read with paragraph 21 of the Particulars of Claim, amounts to an admission that it (the Bank) did not pass on the relevant information to Plaintiff, and therefore constitutes a breach of contract.
Wherefore Plaintiff claims that the exception be upheld with costs."
In para 7 (b) (iv) and 18 of the plea the
appellant admitted the respondent's allegations set out
14 in para 2 (iii)
and 9 of my summary. In para 19 of the plea the appellant admitted that the Bank
had sent the cable of 10 February
1961 (para 10 of my summary), and that
Mullavey had expressed the opinion that should South Africa be expelled from the
Commonwealth
"there would be an initial setback but a recovery would be staged".
The thrust of the exception was consequently that admissions
made by the
appellant conflicted irreconcilably with the denial of any breach of contract on
the part of the Bank.
The grounds upon which the court a quo upheld
the exception may be thus summarised: The appellant admits the respondent's
allegations that the Bank was contractually obliged
to pass on to the respondent
the reports and advice of stockbrokers obtained by the Bank at the request of
the respondent, and that
the Bank owed to the respondent a duty not to act
negligently in obtaining, or giving to the respondent, advice in regard to his
shares. The appellant also admits that in
15 the cable of 10 February 1961
the Bank conveyed to the respondent that according to the stockbrokers consulted
by it expulsion
was no justification for an investor to sell his shares, whereas
the opinion of Mullavey was that there would be an initial setback
followed by a
recovery. The appellant therefore admits that the Bank did not inform the
respondent of the view expressed by Mullavey.
However, in the face of these
admissions the appellant denies that the Bank acted in breach of its duties to
the respondent. "The
mere denial of such a breach is consequently excipiable as
disclosing no defence."
The court a quo also found that the defence of
a denial of breach of contract (in regard to the first cause of action) was a
self-contained one and
that the upholding of the exception would serve to avoid
the leading of unnecessary evidence at the trial. In the result the following
order was made: "The exception is consequently allowed with costs..."
16
The first question which arises is: what is the effect of the court's
order? A properly drafted notice of exception to a pleading
invariably contains
a prayer that the pleading, or part thereof, be struck out (cf Isaacs, Beck's
Theory and Principles of Pleading in Civil Actions, 5th ed, p 295, and
Pietermaritzburg
City
Council v Local Road Transportation Board,
Pietermaritzburg
1960 (1) SA 254 (N) 256). The respondent's notice did not contain such a prayer,
and the court a quo did not make an order that the plea, or part thereof,
be struck out or set aside. On the other hand it is clear that the court did
not
hold, and could not have held, that the plea as a whole was excipiable (albeit
that according to the introductory part of the
respondent's notice the exception
was directed against the whole plea). Firstly, no objection can be taken to that
part of the plea
which contains a defence to the second cause of action.
Secondly, the plea raises a number of defences to the
17 first cause of
action. So, for instance, it is denied that the Bank's breaches of contract, if
any, were causally related to the
respondent's decision not to sell his
remaining shares, or that the decision resulted in patrimonial loss. And, as
already stated,
the appellant also relies on an alleged failure of the
respondent to mitigate his loss.
It appears to me that the court a quo
interpreted the notice of exception as an attack on para 19 (c) of the plea,
i e, the denial that the Bank committed any of the breaches
of duty relied upon
by the respondent in regard to the cable of 10 February 1961. In this court
counsel for the respondent conceded
that the notice of exception should be so
construed. How-ever, he experienced some difficulty, to put it mildly, in
formulating the
prayer that the notice should have contained. In view of the
function of an exception, to which I shall return, I have little doubt
that the
only conceivable prayer would have been one directed at
18
the striking out, or setting aside, of para 19 (c) of the
Plea. I shall therefore consider the appeal as if the notice of exception
contained such a prayer, and the court a quo intended to strike out that
subparagraph.
Counsel for the appellant submitted that at best for the
respondent the appellant admitted that the ipsissima verba of the opinion
of Mullavey had not been conveyed to the respondent in the cable of 10 February
1961. Non constat, however, so the submission pro-ceeded, that that
failure constituted a breach of con-tract. Whether it did so, will depend on an
examina-tion of the entire course of dealing between the respon-dent and the
Bank viewed in the light of expert evidence on banking
practice and
customs.
There is some force in this contention but I find it unnecessary to
consider it and other allied sub-missions made by counsel for
the appellant. For
I am of the view that the appeal can be disposed of on a pro-cedural ground upon
which counsel also relied.
19
It seems clear that the function of a well-founded exception
that a plea, or part thereof, does not disclose a defence to the plaintiff's
cause of action, is to dispose of the case in whole or in part. It is for this
reason that exception cannot be taken to part of a
plea unless it is
self-contained, amounts to a separate defence, and can therefore be struck out
without affecting the remainder
of the plea (cf Salzmann v Holmes, 1914
AD 152, 156; Barrett v Rewi Bulawayo Development Syndicate, Ltd, 1922 AD
457, 459; Miller and Others v Bellville Municipality, 1971 (4) SA 544 (C)
546).
It has also been said that the main purpose of an exception that a
declaration does not disclose a cause of action, is to avoid the
leading of
unnecessary evidence at the trial: Dharumpal Transport (Pty) Ltd v
Dharumpal, 1956 (1) SA 700 (A) 706. Save for exceptional cases, such as
those where a defendant admits the plaintiff's allegations but pleads
that as
a
20
matter of law the plaintiff is not entitled to the relief
claimed by him (cf Welgemoed en Andere v Sauer 1974 (4) SA 1 (A)), an
exception to an plea should consequently also not be allowed unless, if upheld,
it would obviate the leading
of "unnecessary" evidence.
I proceed to apply
the above criteria to the respondent's exception. In para 21 (c) to (f) of the
particulars of claim the respondent
relied upon four separate breaches of duty
by the Bank (although those set out in subparagraphs (d) and (f) (i) appear to
overlap).
As regards subparagraphs (c) and (e), the appellant did not admit the
factual substratum of the two alleged breaches, viz failure
of the Bank to
inform H Cooper and Co or Mullavey that the respondent was not a South African
resident or as to the nature of the
respondent's portfolio (subparagraph (c)),
and failure to obtain further details in relation to each of the respondent's
shares (subparagraph
(e)). It follows that in so far as the appellant denied in
para 19 (c) of
21
the plea that the Bank committed the two breaches concerned, the denial is
unobjectionable.
Counsel for the respondent submitted that the factual
admissions made by the appellant in regard to the cable of 10 February 1961
and
Mullavey's opinion lead to only one conclusion: viz, that the Bank committed the
breaches set out in para 21 (d) and 21 (f) (i)
of the particulars of claim. I
shall assume, in favour of the respondent, that the submission is well-founded.
On this assumption
the appellant in effect admitted that the Bank acted in
breach of its duties by failing to pass on to the respondent Mullavey's opinion
and by stating in the cable that the brokers consulted were not prepared to make
a definite statement. Thus the denial in para 19
(c) of the plea is bad in law
in so far as it relates to those two breaches ("the admitted breaches") of the
Bank's duties.
This conclusion does not, however, assist the respondent. It is clear that the plea does not contain
22
an independent denial of the admitted breaches. On the contrary, the denial in para 19 (c) that the Bank committed those breaches, is inextricably bound up with a denial that the Bank acted in breach of the other duties relied upon by the respondent in para 21 of the particulars of claim. This becomes even more apparent when the question is asked: which self-contained portion of the plea must be struck out if the exception is upheld? Clearly not the whole of para 19 (c) since the denial relates to all the alleged breaches of duty and not only to the admitted breaches. It is no less clear that para 19 (c) is capable neither of such grammatical nor notional divisibility as would warrant the striking out of merely part thereof.
In essence the respondent's case amounts to this: in view of the admitted breaches the blanket denial in para 19 (c) is wholly bad in law. This involves a non sequitur. The sub-paragraph does disclose a partially valid
23
defence to the respondent's first cause of action; partial in the sense that
it raises a valid defence to a number of alleged breaches
of duty. It follows
that should para 19 (c) be struck out, a valid defence will also be set aside
and that, in my view, is not permissible.
But even if it were permissible to
uphold an exception to a defence which, though partially bad in law, is not
severable - resulting
in a notional striking out of the "bad" part - the
respondent's exception should not have been upheld. On this assumption it
appears
to me that a dictum of Botha J in Marais v Steyn en 'n
Ander 1975 (3) SA 479 (T) 487-8, with which I agree, constitutes, mutatis
mutandis, a decisive answer to the reasoning of the court a quo. In
that case the plaintiff alleged that a certain article was defamatory of him and
proceeded to set out a number of imputations
of dishonourable conduct or
attributes. The defendant denied those allegations. The plaintiff
24
then excepted to the relevant part of the plea on the
ground that the
denial was bad in law in that the
article was not capable of bearing a
non-defamatory
meaning. When the exception was heard, counsel for
the
plaintiff contended that as regards some of the
imputations the
denial did not constitute a valid
defence. In dismissing the exception Botha
J said:
"As die eiser se eksepsie daarop gegrond was dat geeneen van die lasterlike aantygings wat hy aangevoer het in sy uiteensetting van eis vatbaar was vir 'n nie-lasterlike uitleg nie, en ek sou hom hierin gelyk gegee het, dan sou die eksepsie wel aan 'n afsonderlike deel van die saak 'n einde gemaak het, aangesien die afsonderlike verweer vervat in die ontkenning van die beweerde lasterlikhede dan in toto sou verdwyn het. Maar soos ek reeds aangetoon het, is dit nie die grondslag van die huidige eksepsie nie; ek word inteendeel gevra om die eksepsie te handhaaf bloot omdat sommige van die gewraakte aantygings nie vatbaar is vir 'n nie-lasterlike uitleg nie. Om die eksepsie op so 'n beperkte grondslag te laat slaag, sal in geen werklike sin 'n einde maak aan 'n af-sonderlike deel van die saak nie. Dit kan wel gesê word dat die betrokke beweerde las-terlikhede dan uitgeskakel word van die area van dispuut, en ook dat die ontkenning dat die artikel lasterlik was dan nie meer 'n volkome verweer tot die eis uitmaak nie; maar om op
25
grond dáárvan te wil sê dat 'n deel van die saak' uit die weg geruim word, sou na my oordeel heeltemal kunsmatig wees en nie in ooreenstemming met die ware trant van die beginsels wat van toepassing is op eksepsies
nie Dit skyn my by uitstek 'n geval
te wees waar die eksepsie-prosedure onvanpas is en waar die betrokke geskilpunte oorgelaat behoort te word vir beslissing by die verhoor ten einde 'n brokkiesgewyse beslegting van die saak, wat fundamenteel vrugteloos is, te vermy."
There is a further consideration which
militates against the upholding of the respondent's
exception. When asked
how the order of the court a quo
could serve to avoid the leading of
unnecessary evidence
at the trial, the only reply of counsel for the
respon-
dent was that the latter might elect to jettison the
breaches
which were not admitted by the appellant. It
seems clear, however, that the
evidence which must be
rendered unnecessary by the upholding of an exception
to
a defence is evidence pertaining to that defence, and
not to some other
defence against which the exception is
not directed. Counsel's answer
therefore serves to
26
demonstrate that under the guise of an exception the respondent in effect sought to obtain a declaratory order that the Bank had committed breaches of duty.
The appeal is allowed with costs, including the costs of two counsel, and the following is substituted for the order of the court a quo:
"The exception is dismissed with costs, including the costs of two counsel."
H.J.O. VAN HEERDEN JA
CORBETT JA
HOEXTER JA CONCUR
SMALBERGER JA
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