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Last Updated: 8 June 2005
THE SUPREME COURT OF APPEAL
OF SOUTH
AFRICA
Reportable
Case no: 303/04
In the matter between:
AXIAM HOLDINGS
LIMITED Appellant
and
DELOITTE &
TOUCHE Respondent
_______________________________________________________
Coram: Howie
P, Navsa, Cloete, Heher et Jafta JJA
Date of hearing: 16 May
2005
Date of delivery: 1 June 2005
Summary: Auditor
─ duty to third parties ─ s 20(9) of Act 80 of 1991 ─
exception to claim based on negligent misstatement
by omission ─ held to
be sustainable on the pleadings ─ premature to decide question of
wrongfulness.
_______________________________________________________
JUDGMENT
(Dissenting pp 19-27)
_______________________________________________________
NAVSA
JA:
[1] The appellant company appeals against the upholding, in part, of
a two-fold exception taken to its particulars of claim in an
action it
instituted in the Johannesburg High Court. In this action, it claimed damages
amounting to R241 069 222-43, arising out
of the alleged negligent audit by the
respondent of the financial statements of the Business Bank Limited (TBB) for
the financial
year ending 31 March 1999. I shall, for the sake of convenience,
refer to the appellant as Axiam and the respondent as Deloitte.
[2] A
company in the PSG group, to which I shall refer as the PSG bank, ceded the
right to recover the damages in question to Axiam.
The essence of Axiam’s
main claim, to which exception was taken, is set out in the five paragraphs that
follow.
[3] For the financial year ending on 31 March 1999 TBB appointed
Deloitte, a partnership which conducts business as public accountants
and
auditors, to act as its auditor within the meaning of ss 274 and 282 of the
Companies Act 61 of 1973. Deloitte conducted an audit
and prepared and completed
TBB’s annual financial statements for that financial year (the 1999
statements) and on 1 July 1999
issued an auditor’s report that included
the following certificate:
‘We conducted our audit in accordance with
the statements of South African Auditing Standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance that the annual
financial statements are free of material misstatements.
. .
In our opinion,
these annual financial statements fairly present, in all material respects, the
financial position of the company
at 31 March 1999 and the results of its
operations and cash flow for the period then ended in accordance with generally
accepted
accounting practice and in the manner required by the Companies
Act.’
[4] The 1999 statements failed to present fairly the
financial position of TBB. They misrepresented TBB’s nett worth ─
reflecting a nett profit before tax of R29 266 176-00 whereas, in fact, TBB
suffered a nett loss of R77 899 201-00.
This inaccurate information
resulted from what is set out hereafter. Deloitte failed to include a bad debt
of R68 888 000-00 in the
income statement. This amount was reflected as
goodwill. In addition, non-existent income in an amount of R10,3 million was
included
in the financial statements as profit. Furthermore, an irrecoverable or
non-existent bad debt of R27 977 377-00 was wrongly
reflected as a
loan to a shareholder.
[5] Deloitte, in conducting the audit and completing
the financial statements, did not, inter alia, do so with the requisite
professional
and reasonable skill and care and failed to comply with Generally
Accepted Accounting Practice (GAAP). Had Deloitte done so the 1999
statements
would have accurately represented TBB’s financial position, alternatively,
would have contained a qualified audit
opinion. Thus, Deloitte, in conducting
the audit and certifying the 1999 statements, was negligent.
[6] During
February 2000 two companies within the PSG group, one of which was the PSG bank,
concluded linked agreements with TBB in
terms of which shares in TBB were
purchased and its business financed. At that time Deloitte was aware of the
negotiations and that
the 1999 statements and audit opinion would be relied on
by the two companies in that process. Prior to 22 February 2000 (the date
on
which the agreements were concluded) Deloitte knew, alternatively, could in
the circumstances reasonably have been expected to know, that the two companies,
in deciding
to conclude the agreements, would rely on the 1999 statements and
Deloitte’s audit opinion and knew, alternatively, could in
the
circumstances reasonably have been expected to know, that the 1999 statements
contained the misstatements and misrepresentations
referred to above.
[7] In the premises Deloitte owed the two companies a duty, prior to
22 February 2000, to warn them that the 1999 statements
and the audit
opinion were incorrect, alternatively to warn them that it had not conducted the
audit properly and that they should
not rely on the 1999 statements and the
audit opinion. Deloitte failed to issue the warnings. Such failure was negligent
and constituted
a representation within the meaning of
s 20(9)(b)(ii) of the Public Accountants’ and Auditors’
Act 80 of 1991 (the PAA Act), that the financial statements were accurate
and
fairly presented the financial position of TBB at the end of March 1999. In
consequence of Deloitte’s breach of the aforesaid
duty PSG bank paid TBB
an amount of R241 069 222-34, in terms of the agreements referred to
earlier, none of which it has been
able to recover. As stated earlier the right
to recover this amount was ceded to Axiam.
[8] Deloitte’s exception
was based on the following:
(i) the conclusion that Deloitte owed the two
companies a duty in law does not follow on either of the premises set out in the
italicised
part of para [6] above;
(ii) its failure to warn PSG is
insufficient in law to constitute a representation within the meaning of s
20(9)(b)(ii) of the PAA Act.
[9] Schwartzman J, in the court
below, considered the bases of the exception and concluded that in the main they
were sound. He issued
an order in the following terms:
'18.1 The exception to
the extent only that it is based on the Defendant’s knowledge of the facts
set out in paragraphs 12.1
and 12.2 of the Particulars of Claim is
dismissed.
18.2 The exceptions are in all other respects upheld.
18.3 The
Plaintiff is given twenty days within which to amend its Particulars of
Claim.
18.4 The Plaintiff is to pay the costs of this
application.’
The material parts of paras 12.1 and 12.2 are italicised
in para [6] above.
[10] In justifying the order set out in para 18.1 of
his judgment, the learned judge stated that a deliberate concealment of material
facts known to the defendant, in circumstances where it could be expected to
speak, could conceivably impose a duty to ensure that
PSG bank did not suffer
foreseeable harm. In rejecting the alternative basis of the claim set out in
para [6] above, the learned
judge stated as follows:
‘. . . PSG bank
cannot found a cause of action based on the proposition that what is in essence
being alleged is the Defendant’s
continuing misconduct that commenced in
July 1999 with its negligent audit and which continued through to February 2000.
The flaw
in this submission is that in July 1999, the Defendant did not owe PSG
Bank a duty of care, and that in February 2000, the Defendant
did not owe PSG
Bank a duty to speak.’
[11] Much time was spent by the learned
judge in the court below and by counsel before us in discussing English law and
applying dicta
in English judgments dealing with liability for negligent
misstatement inducing a contract and causing economic loss, rather than
following the course of applying our law on the
issue.[1] This is not to say that
there is no useful purpose in having regard to English law and to the law in
other common law countries for
reassurance that we are not out of step with
global norms as applied in the commercial world. However, we should not lose
sight of
what was stated by this Court in Minister of Safety and Security v
Van Duivenboden 2002 (6) SA 431 (SCA) at para [16]:
‘...what is
ultimately required is an assessment, in accordance with the prevailing norms of
this country, of the circumstances
in which it should be unlawful to culpably
cause loss.’
[12] In applying the principles set out in the
Standard Chartered Bank case, supra, one would be loath, at exception
stage, to hold that it is inconceivable that an auditor who knew of the
misstatement in the 1999 statements and audit opinion and who also knew that the
two companies in the PSG group, in concluding
the agreements, would rely on the
correctness thereof would not have a duty to speak. These are circumstances
which approximate fraud.
In this regard the judgment of Schwartzman J cannot be
faulted.
[13] The essential allegations in the alternative claim are as
follows: 1. Deloitte could in the circumstances reasonably have been
expected to
know that the 1999 statements and the audit opinion were inaccurate and did not
fairly present TBB’s financial
position;
2. Deloitte could reasonably
have been expected to know that the two companies would, in concluding the
agreements, rely on the correctness
of the 1999 statements and the audit
opinion;
3. In the premises Deloitte owed the two companies a duty to warn
them of the inaccuracies and of its failure to properly conduct
the audit of the
1999 statements;
4. Deloite had breached this duty by not so warning the two
companies;
5. The failure to warn the two companies constituted a
representation within the meaning of s 20(9)(b)(ii) of the PAA Act
to the effect that the 1999 statements were correct as certified by the audit
report and opinion;
6. In consequence of the representation aforesaid, the
agreements were concluded and the amount of R241 069 222-43 was paid over for
which Deloitte is now liable.
[14] Section 20(9)
provides:
‘(9) Any person registered as an accountant and auditor in
terms of this Act shall, in respect of any opinion expressed or certificate
given or report or statement made or statement, account or document certified by
him in the ordinary course of his duties ─
(a) incur no
liability to his client or any third party, unless it is proved that such
opinion was expressed or such certificate was
given or such report or
statement was made or such statement, account or document was certified
maliciously or pursuant to a negligent
performance of his duties; and
(b) where it is proved that such opinion was expressed or such
certificate was given or such report or statement was made or such statement,
account or document was certified pursuant to a negligent performance of his
duties, be liable to any third party who has relied
on such opinion,
certificate, report, statement, account or document, for financial loss
suffered as a result of having relied
thereon, only if it is proved that
the auditor or person so registered ─
. . .
(ii) in any way
represented, at any time after such opinion was expressed or such
certificate was given or such report or statement was made or such statement,
account or document was certified, to the third party that such opinion,
certificate, report, statement, account or document was correct, while at
such time he knew or could in the particular circumstances reasonably have
been expected to know that the third party would rely on such representation
for the purpose of acting or refraining from acting in some way or of entering
into the specific transaction into which the third
party entered, or any other
transaction of a similar nature, with the client or
any other
person.’
(Emphasis added).
It is important to note that s 20(1)
of the PAA Act sets out the standard of diligence required of an auditor before
reporting or
providing an opinion that financial statements fairly reflect the
affairs of any undertaking.[2] Section
20(9)(a) refers to a negligent performance of duties by an auditor
‘in respect of an opinion expressed...or report or
statement...’
[15] Our law now firmly recognises that a
negligent misrepresentation will give rise to delictual liability provided all
the necessary
elements of such liability are satisfied. It was submitted on
behalf of Axiam that there can in law be a misrepresentation by silence.
That is
undoubtedly so. See McCann v Goodall Group Operations (Pty) Ltd 1995 (2)
SA 718 (C) at 722F-726D. Silence or inaction as such cannot constitute a
misrepresentation unless there is a duty to speak
or act.
[16] It was
submitted for Deloitte that, on the alternative basis set out in para [6] above,
what was sought to be established was
liability for an audit opinion, the
inaccuracy of which Deloitte was, on the facts premised for this exception,
unaware of and therefore
under no duty to warn about. It was submitted further,
that Schwartzman J was correct in upholding the exception on the basis set
out
in para [10] above.
[17] It is clear from the essentials of Axiam’s
alternative claim that it relies on a negligent misstatement by omission (during
the period 1 July 1999 to 22 February 2000) to the effect that
Deloitte’s prior (negligent) certification was correct.
This cannot be
faulted either notionally or conceptually. Deloitte’s prior audit report
and opinion would thus not have been
completed in accordance with s 20(1) of the
PAA Act. Section 20(9)(b)(ii) enables a third party to sue an auditor if,
after such a negligent certification, it represents in any way that it was
correct.
The claim presently under discussion is in accordance with these
provisions and is not against fundamental principles.
[18] It is true
that decisions by courts on whether to grant or withhold a remedy for negligent
misstatement causing economic loss,
are made conscious of the importance of
keeping liability within reasonable bounds. It is universally accepted in common
law countries
that auditors ought not to bear liability simply because it might
be foreseen in general terms that audit reports and financial statements
are
frequently used in commercial transactions involving the party for whom the
audit was conducted (and audit reports completed)
and third parties. In general,
auditors have no duty to third parties with whom there is no relationship or
where the factors set
out in the Standard Chartered Bank case are
absent.
[19] In considering whether a defendant representor such as
Deloitte acted unlawfully in relation to a third party, ie in breach of
a legal
duty, the nature, context, purpose of the statement and knowledge thereof are
considered and so is the relationship between
the
parties.[3] In the Standard
Chartered case these factors were considered at the end of a trial after all
the circumstances of the case were revealed by the evidence.
[20] The
important factual implication in para 12.2 of the particulars of claim is that a
reasonable person in the defendant’s
position would, at the second, or
later, stage of the alleged events, have known of the defects in the report. On
that basis one
is justified in saying that the conclusion could well be drawn at
the trial that, possessed of such knowledge, the reasonable person
would not
have kept silent but have expressed at least a reservation as to the reliability
of the report. Although the application
of the criterion of a reasonable
person concerns the negligence aspect of liability, from which the legal duty
element is quite separate,
the provisions of s 20(9)(b)(ii) of the Act
provide a clear pointer that a negligent representation falling within its terms
is indeed wrongful.
[21] Whether the representation by silence alleged
in this case does fall within the section’s terms depends on whether there
was a duty to speak. In other words the duty relied on for there having been a
representation will be the same duty relied on for
the allegation of
wrongfulness.
[22] As to the existence of that duty, a court apprised of
all the factors and circumstances referred to in Minister of Law and Order v
Kadir [4] at 318H-I could find, on
the framework of the allegations made in the particulars of claim, and on final
evaluation, that the defendant’s
ignorance of its negligent report is no
bar to concluding that it bore the alleged duty. It must be remembered that we
are dealing
with a situation where the legal convictions of the community could
well consider it unacceptable that an auditing firm which issued
a seriously
negligent report should escape the legal duty to speak with care concerning that
report simply because it was, possibly
even negligently, ignorant of the
negligence of its report. And what is more, in circumstances in which the latter
negligence was
something it ought to have known of. Reliance on the case of
Universal Stores Limited v OK Bazaars (1929) Limited
[5] is misplaced. Two factors
distinguish that case. One is that the wrongful conduct in ignorance of which
the alleged representation
occurred was that of the representor itself. It could
well be the conclusion on trial that the representation compounds the negligence
of the earlier audit and report. The second factor consists of the statutory
provisions of s 20(9)(b)(ii).
[23] It cannot therefore be found
on exception that the defendant’s alleged omission to speak was not
wrongful (cf Indac Electronics (Pty) Ltd v Volkskas Bank Ltd at 801D
[6]).
[24] The court below was
faced with an exception to a claim which on the face of it was sustainable. It
was premature to decide whether
a legal duty could be said to
exist.
[25] In the English case of Andrews & Others v Kounnis
Freeman (a firm) 2000 Lloyd’s Rep PN 263 (p654) Jonathan Parker LJ
stated:
‘In my judgment, however, only rarely will the court be in a position to determine the question of the existence or otherwise of a duty of care owed by professional advisors on a strike out application. As Chadwick LJ said in Coulthard v Neville Russell [1998] 1 BCLC 143 at 155 “. . . The liability of professional advisors including auditors for failure to provide accurate information or correct advice can, truly, be said to be in a state of transition or development. As the House of Lords has pointed out repeatedly this is an area in which the law is developing pragmatically and incrementally. It is pre-eminently an area in which the legal result is sensitive to the facts. . . .” In my judgment these observations apply with equal force in the instant case. Although the judge in the instant case could see no realistic prospect of any further facts emerging at a trial, I am far from persuaded that once subjected to the scrutiny of a full trial the factual background will remain quite as stark as the Judge found it to be.’
(Emphasis added).
The attitude of our courts in relation to deciding matters of this kind on exception is not dissimilar. See Indac Electronics (Pty) Ltd v Volkskas Bank Ltd, supra, at 801A-B. Counsel could not refer us to, nor could we find, any judicial pronouncement on an auditor’s liability for negligence subsequent to a negligent report or opinion in circumstances such as those of the present case. In my view this makes it all the more necessary to establish the full factual matrix before a final pronouncement is made.
[26] For the reasons set out above I make the following order:
The appeal is upheld with costs including the costs of two counsel.
The order of the court below is substituted as follows:
‘1. The exceptions are dismissed with costs.’
_________________
M S NAVSA
JUDGE OF APPEAL
CONCUR:
HOWIE P
JAFTA JA
CLOETE
JA:
[27] I have had the advantage of reading the judgment of my colleague
Navsa JA. I respectfully disagree with the conclusion reached,
essentially
because Axiam has not in my view alleged facts which prima facie
establish a breach of a legal duty.
[28] Section 20 of the Public
Accountants’ and Auditors’ Act, 80 of 1991 specifies the powers and
duties of auditors.
Subsection (1) deals with the position pursuant to an audit.
The subsection begins:
‘No person acting in the capacity of auditor to
any undertaking shall, without such qualification as may be appropriate in the
circumstances, pursuant to any audit carried out by him in that capacity,
certify or report or express an opinion to the effect that
any financial
statement, including any annexure thereto, which relates to such undertaking,
presents fairly, or gives a true and
fair view of, or reflects correctly, the
affairs of such undertaking and the results of its operations, or the manner
dealt with
in such financial statement or annexure, as the circumstances may
require, unless ─’
and there follow seven paragraphs setting out
what the auditor must do.
[29] A negligent failure by an auditor to
perform the statutory obligations spelled out in s 20(1) gives rise to the
spectre of potential
limitless liability for pure economic loss to persons who
rely to their detriment on the certificate, report or opinion given by
the
auditor. It was obviously to meet this problem that subsection (9) was included
in s 20. The provisions of that subsection are
quoted in para [14] of the
judgment of Navsa JA. The essential question on appeal is whether Axiam made
allegations, in that part
of its particulars of claim under attack in this
appeal, which bring it within the ambit of s 20(9) and more particularly, s
20(9)(b)(ii).
The facts alleged by Axiam are set out in paras [2] to [7] of the
judgment of Navsa JA; Deloitte’s exeption, in para [8]; and
the
allegations relevant to the claim which is the subject matter of the appeal (the
alternative claim), in para [13]. The correctness
of the decision of the court
a quo to dismiss the other part of the exception (to the main claim) was
not debated before this court and I prefer to say nothing in that
regard.
[30] Axiam’s case is that the representation required by s
20(9)(b)(ii) was constituted by Deloitte’s silence at a time
when it was
ignorant of its own negligence but constructively aware thereof (ie it could by
the exercise of reasonable care have
acquired the knowledge). Silence does not
constitute a representation in the absence of a duty to speak. As is said in
Spencer Bower’s
The Law of Actionable Misrepresentation
3rd ed by AK Turner para 90 at 103:
‘It is not silence, or
reticence, which in itself can amount to a misrepresentation. It must be
concealment, or suppressio veri. And these terms import the
existence of a duty. A man cannot be said to conceal what he is not bound to
reveal, suppress what he
is under no duty to express, or keep back what he is
not required to put forward.’
Axiam has alleged that ‘prior to 22
February 2000’ Deloitte could reasonably have been expected to know of the
mistakes
and unfair presentation in the 1999 financial statements. If this
allegation means that Deloitte would at the time of the audit have
become aware
of the mistakes and unfair presentation had the audit been performed properly,
the allegation is irrelevant because
the section requires a representation to
have been made thereafter. If the allegation means that Deloitte could have been
expected
to have become aware of the mistakes and unfair presentation
subsequently, that allegation, by itself, is in my view insufficient
to
establish a duty to speak. It is illogical to impose without more a duty to
speak on an auditor where he (she) had no reason to
believe what he had done,
may have been negligent. You cannot disclose what you do not know; and to hold a
person liable for what
that person ought to have known, is to equate
constructive knowledge with actual knowledge. In Universal Stores Limited v
OK Bazaars (1929) Limited 1973 (4) SA 747 (A), this court refused to impose
a legal duty where the knowledge of the party on whom the legal duty was sought
to be imposed did not have actual knowledge. The facts in that matter were as
follows:
Bosch, an employee of the plaintiff (OK Bazaars), had fraudulently
altered cheques and ‘negotiated’ the cheques to the
defendant bank.
The plaintiff paid its creditors the amount of the debts in respect of which
cheques had been drawn. It then, as
the true owner of the cheques, sued the
defendant for such amount under s 81(1) of act 34 of 1964 as a person who had
been in possession
of the cheques after the theft or loss. The defendant pleaded
that the plaintiff was estopped by reason of its own negligence from
pursuing
its claim. The defendant’s case was based on a misrepresentation by the
plaintiff, accompanying each cheque, that
Bosch had a good title to each cheque.
For this representation by the plaintiff the defendant sought to rely on the
conduct of the
plaintiff, including carelessness inter alia in the running of
its affairs, particularly in not timeously detecting Bosch’s
dishonesty
and allerting the defendant to the situation.
Rumpff JA said at
761G-H:
‘The first question that arises is whether the
plaintiff’s failure to alert the defendant would constitute a breach of
a
legal duty to speak in the circumstances. Generally speaking, and depending on
the relationship between the parties, there would
be a duty to speak if it is
considered reasonable in the circumstances that the party who may act to his
detriment should be warned
by the other party.’
After dealing with what
the position might be if the plaintiff’s employees had actual knowledge
which could be imputed to the
plaintiff, the learned judge of appeal continued
at 762E-G:
‘According to the plea, and the particulars for trial,
defendant does not allege that plaintiff had actual or imputed knowledge
of
Bosch’s frauds. It relies on constructive knowledge, i.e. the knowledge
which plaintiff would have had, were it not for
its own negligence. If the
plaintiff was ignorant of Bosch’s fraudulent modus operandi, it
would have been under no legal duty to defendant to scrutinize its returned
cheques and bank statements; in that case it would
not even be obliged to do so
vis-à-vis its own bank ─ see Spencer Bower and Turner,
op. cit., pp. 53-55, 199. If ignorant, the plaintiff could not, in my view,
reasonably be expected to foresee that its silence might mislead
the defendant
into believing that Bosch had a good title to any cheques she offered to
transfer (see Connock’s case, supra at pp. 51-53 and 57-58).
In the result, in my view, the defendant can only rely on actual, i.e. imputed
knowledge of the plaintiff.’
The distinctions between that case and the
present suggested by Navsa JA in para [24] of his judgment appear to me, with
respect,
to be distinctions without a difference. As to the first, in both cases
the question is whether a duty can or should arise from constructive
knowledge;
and as to the second, the duty to speak in the present matter is not to be found
in the statute but must, as in the reported
case, be sought in the common law
─ as is clear (in particular) from paras [20] and [21] of my learned
colleague’s judgment.
[31] Nor in my view does public policy
require the imposition of a duty to speak in the circumstances. In Standard
Chartered Bank of Canada v Nedperm Bank Limited 1994 (4) SA 747 (A) Corbett
JA said at 770J-771A:
‘There are, in my view, no considerations of
public policy or fairness or equity to deny Stanchart [the plaintiff] relief in
this case. This is not the kind of case where a finding in favour of the
plaintiff raises the spectre of limitless liability or places
an undue or unfair
burden upon the bank [the defendant].’
In the present case, as I have
said, the spectre of limitless liability does arise; and an undue and unfair
burden would be placed
on an auditor. The burden would be undue because the
third party is not obliged to rely upon what the auditor has done (there is
no
suggestion of involuntary reliance in Axiam’s particulars of claim): the
third party can appoint its own auditor, or ask
the auditor whether it can rely
on the accuracy of the audit already done. The burden would be unfair because
should the third party
make such an enquiry, the auditor would be entitled to
refuse to answer[7]; but if the
enquiry is not made, the auditor would be obliged nevertheless to issue a
disclaimer (which would reflect on its professional
competence, and would be
completely unnecessary if it had not been negligent) or would be obliged at its
own expense to revisit the
audit, on pain of being held liable (perhaps, as in
this case, for many millions of rand) to any number of third parties whom the
auditor knows or ─ even worse ─ ought reasonably to know, will rely
on its accuracy. At common law, mere knowledge
that the third party did indeed
intend to rely on the correctness of the audit or a foreseeable risk that he
might, is not sufficient
to create a legal
duty.[8] The same is true of the
statute: para (ii) requires a representation in addition to knowledge (actual or
constructive).
[32] What para (ii) envisages is that the auditor must,
subsequent to the audit, take responsibility to the third party for its
accuracy.
If silence per se constituted a representation for the purposes
of para (ii) then that paragraph would be largely ineffective in curbing the
mischief
─ indeterminate liability ─ at which s 20(9) is aimed. A
third party in the position of Axiam would be entitled to sue
an auditor in the
position of Deloitte simply because Deloitte had been negligent in an audit
performed for its client and, not having
detected such negligence, had not
warned the third party, when it had actual or constructive knowledge that the
third party would
rely on the correctness of the audit. It is to limit such
potential liability that para (ii) requires a representation as well as
knowledge. It may be that silence can constitute a representation for the
purposes of the paragraph (although I confess to some difficulty
in appreciating
how this can be so); but because an omission is not prima facie
wrongful[9], facts which at least
prima facie establish a duty to speak must be
alleged.[10] As Hefer JA pointed out
in Minister of Law and Order v Kadir 1995 (1) SA 303 (A)
318H-J:
‘Decisions like these can seldom be taken on a mere handful of
allegations in a pleading which only reflects the facts on which
one of the
contending parties relies.
...
It is impossible to arrive at a conclusion
except upon a consideration of all the circumstances of the case and of
every other relevant factor. This would seem to indicate that the present matter
should rather
go to trial and not be disposed of on exception. On the other
hand, it must be assumed ─ since the plaintiff will be debarred
from
presenting a stronger case to the trial Court than the one pleaded ─ that
the facts alleged in support of the alleged
legal duty represent the high-water
mark of the factual basis on which the Court will be required to decide the
question. Therefore,
if those facts do not prima facie support the legal
duty contended for, there is no reason why the exception should not
succeed.’[11]
Such
allegations as have been made by Axiam, do not in my view even prima
facie establish a duty to speak and it is for that reason I conclude that
the exception to the alternative claim was properly upheld.
______________
T D CLOETE
JUDGE OF APPEAL
Concur: Heher JA
[1] See Standard Chartered Bank
of Canada v Nedperm Bank Ltd 1994 (4) SA 747 (A) where Corbett CJ (following
on Administrateur v Trust Bank van Afrika Bpk 1979 (3) SA 824 (A),
Siman & Co (Pty) Ltd v Barclays National Bank Ltd 1984 (2) SA 888
(A), International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A)
and Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A)) set out,
with customary clarity, the factors to be taken into account in considering
whether a party acted in
breach of a legal duty.
[2] In terms of s 20(1) no auditor
shall certify or report or express an opinion that any financial statement
presents fairly or gives
a true and fair view of the affairs of an undertaking
unless ─
‘(a) he has carried out such audit free of any
restrictions whatsoever;
(b) proper accounting records . . . have been
kept in connection with the undertaking in question, so as to reflect and
explain all
its transactions and record all its assets and liabilities
correctly and adequately;
(c) he has obtained all information, vouchers and
other documents which in his opinion were necessary for the proper performance
of his duties;
(d) he has, in the case of an undertaking regulated by
any law, complied with all the requirements of that law relating to the audit
of that undertaking;
(e) he has by means of such methods as are
reasonably appropriate having regard to the nature of the undertaking in
question, satisfied
himself of the existence of all assets and liabilities
shown on such financial statement . . .;
(f) he is satisfied, as far
as is reasonably practicable having regard to the nature of the undertaking . .
. and of the audit carried
out by him, as to the fairness or the truth or the
correctness, as the case may be, of such financial statement . .
.;
(g) any matter referred to in subsection (5) had, at the date on
which he so certified or reported or expressed such opinion been adjusted
to
his satisfaction.’
Subsection (5) deals with the position where an
auditor has reason to believe that in the conduct of the undertaking a material
irregularity
has taken place or is taking place. For present purposes it is not
necessary to consider those provisions any
further.
[3] See the Standard
Chartered Bank case, supra, at
770.
[4] 1995 (1) SA 303
(A)
[5] 1973 (4) SA 747
(A)
[6] 1992 (1) SA 783
(A)
[7] Standard Chartered Bank
of Canada v Nedperm Bank Ltd, above (para 31) 763A-B and
771A-B.
[8] BOE Bank Ltd v
Ries 2002 (2) SA 39 (SCA) para
13.
[9] BOE Bank Ltd v Ries
n 2 above, para 12 at p 46G-H and authorities there quoted; Minister of
Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA) para 12 and
authorities referred to in the
footnotes.
[10] Lillicrap,
Wassenaar and Partners v Pilkington Brothers 1985 (1) SA 475 (A) 496 in
fine ─ 497A.
[11] See
also Indac Electronics (Pty) Ltd v Volkskas Bank Ltd 1992 (1) SA 783 (A)
801C.
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