IN THE HIGH COURT OF SOUTH AFRICA
(TRANSVAAL PROVINCIAL DIVISION)

15/10/2008

In the matter between:

ABSA BANK LTD	Defendant	

JUDGMENT

RANCHOD, AJ:

[1] In this matter the Plaintiff an adult businessman initially preferred three alternative claims against the Defendant a company with limited liability duly registered in terms of the statutes of the Republic of South Africa. Although not expressly alleged by the Plaintiff, it was implicit and never contradicted, that the Defendant is a registered bank. On the contrary, in its amended plea, the Defendant pleaded that it is a registered bank in terms of Chapter Id of the Banks Act, 193G. Before the trial, liability was separated from quantum with regard to all three alternative claims. Ultimately, the

[2]   This claim is as follows (as formulated in paragraphs 12 to 18 of
the Plaintiffs amended particulars of claim):
"12. During or about September 1999, to the knowledge of the Defendant, the cedent [i.e. Rotrax Cars International CC, a close corporation duty registered according to the statutes of the Republic of South Africa with registration number CK95/40067/23, as defined in paragraph 3 of the amended particulars of claim], duly represented by the Plaintiff in Dubai, entered into a written agreement with the Al Fawaz Group of Dubai, duly represented by Sheik Fawaz Bin Abdullah al-Khalifa, in order to obtain finance from such group for the manufacturing of a motor vehicle called the EI Macho Jeep. A copy of the said agreement is annexed hereto, marked Annexure 'C'

"13.2 During or about 2002 the cedent became aware that representatives of the Defendant, whose identity is to the Plaintiff unknown, acting within the course and scope of their employment, blacklisted the cedent With the International Chamber of Commerce. °14. The aforesaid acts were wrongful and were done intentionally,   alternatively  negligently  by  the  Defendant,

alternatively its representatives acting aforesaid, who acted in
the following manner;

"15. The Defendant, alternatively their representatives were aware that in the event that the cedent was blacklisted with the International Chamber of Commerce and/or was presented to the Emirates Bank as acting under dubious circumstances, such facts would come to the knowledge of the Al Fawaz Group and that under the said circumstances the Al Fawaz Group would no longer be willing to do any business with the said cedent, including the manufacturing [of] the said motor vehicles, and that should the cedent be blacklisted, no Triple A bank or any other financial institution would do: business with the cedent.

"16. As a direct consequence of the aforesaid conduct of the Defendant, the cedent was unable to obtain further finance for the manufacturing of the said vehicles. "17. The Al Fawaz Group as a result of the aforementioned acts by the Defendant, alternatively its representatives, refused to do any business with the cedent.
"16. As a result of the foregoing the cedent suffered damages
computed as follows:
"18.1 Get up costs expended and lost to the amount of R 115 260 000,00 (one hundred and fifteen million two hundred and sixty thousand rand);
In the alternative to 18.1 above:
"18.2 Orders procured for the manufacturing of 150 vehicles representing a loss of R 250 000,00 per vehicle, in total an amount of R 37 500 000,00; "18.3 Anticipated orders for a further 10 000 vehicle over five years at a loss of R 15 000,00 per vehicle, in total an amount of R 150 000 000,00.
"Wherefore Plaintiff claims in respect of Claim 2:
"1.   Payment of the amount of R 115 269 000,00;

"2. In the alternative to prayer 1 above payment of the amount of R 187 650 000,00;
"3.   Interest on the capital amount set out in prayer 1,

"4.   Costs of the action;
"5.   Further and/or alternative relief.''

[4] Annexure "A" is a letter written ostensibly on an official letterhead of the Defendant (Brooklyn Branch) under "Ref No: A62961" by Mr Louis Coetzee, Relationship Manager, addressed to

Mr Majid Al Yousuf, The Credit Officer, Emirates Bank International, Baniyas Square Branch, P.O. Box 2923 Dubai, concerning: Verbiage of Bank Guarantee. It is dated 12 October 1999. (Annexure "A" of the Particulars of Claim is identical to annexure "A" to Defendant's plea. Annexure "B" to the plea is also identical to "A" except that "A" is addressed to "The Credit Officer" a "Mr Majid Al Yousef of Emirates Bank International, whereas "B" is addressed to "The Branch Manager" "Mr Halah Mohammedd" of the same bank. The reference number on both is the same.

[5] Annexure "D" to the Particulars of Claim is a letter dated 30 May 2000 ostensibly written on an official letterhead of Routledge Modise Attorneys on behalf of that firm under the reference Mr A Joubert/jc to the selfsame Credit Officer referred to above (Ref: Mr Majid Al Yousuf) and headed: "Our Client: Absa Bank Limited" and "In Re: Verbiage of Bank Guarantee'."

[6]   in the amended plea (and, more particularly, in paragraphs 15 to 21 thereof), the Defendant pleaded as follows to Plaintiff's Claim 2: 15, Ad paragraph 12.

"15.1 The Defendant denies this paragraph.

the agreement, being [Annexure] 'C' to the particulars of claim,
the Defendant denies that a valid and/or lawful and/or
enforceable agreement came into being for the following
reasons:
15.2.1 the Defendant denies the existence of a legal entity known as the Al Fawaz Group;
15.22	the Defendant denies the authority of the representative of the Al Fawaz Group;
15.23	the agreement contravened section 29 of the Close Corporations Act, 1984 in that the Ai Fawaz Group is not a natural person as contemplated in section 29(1) of that Act;
15.24	the agreement constituted a contravention of regulations 3(1)(e) and 10(1)(c); and
15.25	Clause 2.1 of the agreement was not capable of being performed in that no South African banking institution has a 'triple A rating'.

"16. Ad paragraph 13.
"16.1 The Defendant repeats paragraphs 10.1 to 10.3 above
[which read as follows:
"10.1 On 15 December 1999, and in terms of international banking practice, the Defendant forwarded a letter (including certain annexures) to the International Chambers of Commerce, Commercial Crimes Services in London, a copy whereof (including the annexures) is annexed marked 'A'. "10.2 During 2000 the Defendant launched two applications under case number 3442/2000 and 14346/2000 to retrieve and regain possession of fake financial instruments issued unlawfully and unauthorised on its letterhead,
"10.3 On 13 May 2000 Routledge Modise Attorneys, representing the Defendant, forwarded a letter dated 30 May 2000, being [Annexure] 'B' to
the particulars of claim, to the credit officer, Emirates Bank International"].
"16.2 Save as aforesaid, the Defendant denies this paragraph.
"17. Ad paragraph 14. The Defendant denies this paragraph.
"18. Ad paragraph 15. The Defendant denies this paragraph.
"19. Ad paragraph 16. The Defendant denies this paragraph,

"21. Ad paragraph 18, The Defendant denies this paragraph."

[7] Annexure "A" to the amended plea appears on the face of it to be a copy of Annexure "A" to the amended particulars of claim.

[5] The Defendant did not pursue its special plea of prescription; nor did it persist in its denial of the cession (alleged in paragraph 3 of the amended particulars of claim and initially denied in paragraph 7.1 of the amended plea) by the cedent (Rotrax Cars International cc) to the Plaintiff of its supposed claim against the Defendant. The arguments in regard to issue estoppel were also not proceeded with.
[9] As I said in the end Plaintiff decided to rely only on Claim 2. I will therefore primarily deal with the evidence insofar as it relates to that claim,

[10] Five witnesses gave evidence on behalf of the Plaintiff, They were the Plaintiff himself, Mr Fowler, Mr Thornton, Mr Fanjek and Sheikh Fawaz.

[11] Plaintiff sketched the background relating to him ultimately appointing a Mr Fanjeck to, on his behalf, obtain Annexure "A" to the particulars of claim (the so-called "Verbiage of a Bank Guarantee") from the Defendant He testified that -

11.1 ROTRAX CARS INTERNATIONAL CC (Rotrax") of which the Plaintiff is the sole member, is a motor vehicle manufacturer and developed the El Macho motor vehicle. The Plaintiff is the owner of the design of the El Macho and the intellectual property rights relating thereto. Plaintiff is a motor mechanic by training.

11.2 The car was tested, by the South African; Bureau of Standards [SABS] and a car manufacturing license was issued. The SABS manufacturing licence entails that the vehicle can be produced in South Africa to standards known as ISO 9000 and up to ISO 9009 for commercial and civilian use. The vehicle when produced is regarded as being road worthy and it is not necessary to obtain a roadworthy certificate when it is sold. The owner of such a motor vehicle licence is also entitled to export the vehicle without a roadworthy certificate or other documentation required, apart from the usual export documentation.

113 A prototype of the vehicle was exhibited in co-operation with ARMSCOR at a military exhibition in Santiago, Chile in March 1994. There was tremendous interest in the vehicle. Thereafter the vehicle was exhibited, again in close corporation with ARMSCOR, at an exhibition in South Africa, where the vehicle was slung underneath a helicopter for quick deployment. This took place in October 1994.   Thereafter, in
March 1995, the vehicle was exhibited in Abu Dhabi (U.A.E.), also in co-operation with ARMSCOR.

11.4 Numerous enquiries were received from all over the world. There was also interest from the United Nations in Angola via the South African Ambassador, Rodger Ballard Tremeer.

(the cedent) for an amount of US$ 6 million less the cost of the building of a factory.
116	The US$6 million would have been paid into a bank account in the name of the Al Fawaz Group within South Africa. Before that could happen, ft was necessary for Rotrax in terms of clause 2.1 of the JVA, to obtain a formal undertaking and a guaranteed interest rate on the amount of US$ 6 million from a AAA-rated South African Banking Institution to assure Sheikh Fawaz his money was safe. The JVA provided that the US $ 6 million would be a loan that Sheikh Fawaz on behalf of the Al Fawaz Group would obtain from the Emirates Bank in Dubai.
117	The reason why Sheikh Fawaz wanted such an undertaking in advance, was because he had no knowledge of South Africa, has never done any business in South Africa and has never visited South Africa, prior to entering Into the JVA.
118	The Plaintiff appointed Mr Fanjek to negotiate such a format undertaking which resulted in annexure "A" to the
Plaintiffs Particulars of Claim being provided by Mr Louis Coetzee of the Defendant. [The relevant content of annexure "A" (dated "12/10/1999") ostensibly on Defendant's letterhead, is:

1.	The $6 mil USD is a guaranteed Investment where the guarantee is irrevocable and unconditional.
2.	The guarantee is renewable after 12 months
3.	ABSA BANK proposes an interest rate of libor plus 1% payable to EMIRATES BANK INTERNATIONAL ABSA guarantees the money in US Dollars.
4.	ABSA will guarantee the capital and the first quarter's Interest which will be paid in arrears. The second quarter's interest and all quarter's (sic) thereafter will be paid in advance.
5.	EMIRATES BANK INTERNATIONAL will approve the loan for a period of 5 years with the right of early repayment,
6.	The guarantee (fixed deposit certificate) will only be issued on condition the money is placed in ABSA BANK.
7.	Simultaneously to (sic) the receipt of funds, ABSA will issue the said guarantee (fixed deposit certificate) to EMIRATES BANK INTERNATIONAL in their favour.

9. The guarantee (fixed deposit certificate) is legal in terms of international banking practices.

Yours Sincerely (signature)
MR LOUIS COETZEE RELATIONSHIP MANAGER

11.13 Until that time the Plaintiff was not aware of the fact that Fanjek had been on a frolic of his own and had obtained documents from the Defendant for himself which were similar to annexure "A" but addressed to entities other than Emirates Bank. Those documents are annexures "C", "D" and "E" to the plea. The Plaintiff was uncertain as to the effect that the application would have on the status of annexures "A" and "B" and advised the Sheikh that the matter be put on hold. The Plaintiff immediately returned to South Africa with the intention of resolving the matter before any further negotiations with the Sheikh took place.
1114	
1115	Plaintiff adopted the attitude that the application against Fanjek had no bearing on the validity of annexures "A" and "B" in his possession, issued by the Defendant for the benefit of the Cedent.
1116	

'"Bernert" informed the meeting of the following:-
*	
*	The guarantee (original letter) was not in his possession or at his premises.

*	He (Bernert) was hot prepared to surrender the guarantee (disputed letter) or provide any details thereof.
*	Absa Group Limited must take him (Bernert) to Court for the court to decide what to do",

[13] The Plaintiff, though clearly angry at what he perceives to be a great injustice that has taken place because of Defendant's agents' conduct, gave his evidence in a forthright manner without any exaggeration or embellishment of the facts, I see no reason to reject any of it.

[15] Mr van Tonder, and Mr Merrett (who is also a forensic investigator) of the international Chamber of Commerce were called to testify on behalf of the Defendant. Merrett testified that it is the duty

[16] It is abundantly dear from Van Tonder's confidential report to the Defendant that he knew the purpose and object of annexure "A" was to obtain finance from the Al-Fawaz Group to invest in the Cedent, namely Rotrax. At that stage he also knew that annexure "A" had already been handed to the Sheikh and that the process of obtaining finance was in motion. Van Tonder, in my view did, and if he did not, he should have realized and appreciated that to interrupt the process to obtain finance for the project, could and in all probability, would cause serious harm and damages.

[18] The Sheikh testified that the intention was to sign the JVA on behalf of his personal business group and that the reference in the contract to LLC (Limited Liability Company) is, as far as he is concerned, not important and was in any event incorrect.
[19] Plaintiff's Counsel argued that it is of no legal consequence that the Defendant attacks the validity of the JVA as both the Sheikh and the Plaintiff regarded the JVA as binding upon them. I agree.

[20] The Joint Venture Agreement, clause 2.1 thereof, places an. obligation on Rotrax to obtain a formal undertaking and guaranteed interest rate from a South African Bank for US$6 000 000. The Sheikh explained the reasons why he wanted a formal undertaking as set out in paragraph 1.7 of the particulars of claim quoted above.

From:

[26] During argument defence counsel said he was not going to ask that the Sheikh's evidence be rejected. In my view, that was a wise concession as the Sheikh was an impressive witness and one who placed a high value on doing business honourably. I have no reason to doubt his evidence as he was clearly a truthful witness even though I got the impression that he did not quite clearly understand the legal niceties around juristic personalities - but this was hardly surprising given that he is not a lawyer. At first both the Emirates Bank and the Sheikh were happy with the contents of annexure "A". They did not have the queries and objections that the witnesses for the defence gave evidence about concerning the contents and interpretation of annexure "A". The reason for this is clear - both the Sheikh and Emirates Bank were aware of the underlying transaction and the reason for the issuing of annexure "A".

[28] Mr Fanjek then testified. His evidence was that through negotiation with Paul Els, the Absa broker, he also liaised and negotiated with Mr Louis Coetzee, even though he had never met Coetzee, and obtained the two undertakings referred to as annexures "A" and "B" to the Plea.

[29] Fanjek testified that annexure "A" refers to and relates to the business of Rotrax and the Plaintiff only. He had absolutely no part in that business at all. This is not contested by the Defendant. He said the letters referred to as "C" "D" & "E" related to the business envisaged by himself. The Plaintiff did not know about "C", "D" & "E" until told about them during the visit of the Plaintiff and Fanjek to Sheikh Fawaz in Bahrain during February 2000. Fanjek accompanied the Plaintiff to Bahrain to meet Sheikh Fawaz and Fanjek hoped to develop a business relationship with the Sheikh. It is an inescapable inference that Fanjek piggybacked on the business of Bernert and Rotrax to canvass for business for himself as well.

Fanjek's testimony in this regard is understandable and cannot, in my view, be regarded as a questionable.

[32] Given Fanjek's admission that he did tell a ("white") lie the question that arises is what weight should be given to his evidence, if at all. LAWSA First Re-issue par. 645 and the authorities quoted therein states as follows:

[34] A number of issues were uncontested in Fanjek's evidence. I refer to some of them. That Fanjek was mandated by Rotrax and the Plaintiff to negotiate an agreement with Defendant to the effect that Defendant will issue an undertaking regarding a S8 million investment which was relevant to the Rotrax project in fulfilment of clause 2.1 of the JVA between Rotrax and Sheikh Fawaz. That Fanjek negotiated with Paul Els, who was a broker in the employment of Absa Brokers (Pty) Limited. Els in turn conveyed Fanjek's request to Coetzee who ultimately signed annexure A. Fanjek handed to Els a copy of the cedent's business plan and other documents setting out the cedents plans for the El Macho project, Paul Els had an office in Absa Bank's Brooklyn Branch. Els previously advised and arranged for an investment on behalf of Fanjek's wife abroad. The investment was with Absa Bank Limited. Coetzee was at the relevant time and still was at the time of the trial a Relationship Manager at the Brooklyn Branch and his job description entailed canvassing for investments from the public in Absa products. Fanjek apparently assisted in the wording of the interest clause in Annexure "A". The rest of the document was at first drafted in rough in pencil by Coetzee and thereafter by both Els and Coetzee. Coetzee, before signing annexure "A", insisted that the words "fixed deposit certificate" be used instead of "guarantee", and Coetzee then added the words to the effect that Absa Bank would on receipt of funds issue a fixed deposit certificate. No fraud was committed by any party in the completion and production of annexure "A". (That there was no fraud involved on the part of Plaintiff was agreed to by Defendant in settlement of the application against Plaintiff to hand over "A" and "B" to the Defendant. The agreement was included in the court order.) Coetzee, as an "A" class signatory has formal signing powers also as far as Absa documentation of international relevance is concerned,

[35] The witnesses for the defence, especially Mr Van Tonder and Mr Merrett of the International Chamber of Commerce, who, like Van
Tonder, is a forensic investigator, wilfully ignored the underlying transaction and the motivation and the reasons for the existence of annexure "A". These two witnesses for the defence were in my view, clearly at fault in not looking at the total picture. They were only prepared to voice their opinion on the basis of a sentence by sentence interpretation of only Annexure "A". Mr Merrett testified that he was briefed to interpret only annexure "A" as a single document

Merrett, rather reluctantly, agreed under cross-examination that that should be the correct approach.

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[41] It was also put to Mr van Tonder that in the same affidavit he

stated the following:

But in his confidential report to Absa Management he wrote as follows;
"Van Staden reported that the State Prosecutor was of the opinion that reasonable grounds of suspicion exists but not enough evidence to continue with criminal prosecution:"

[42] He was unable to give convincing reasons for the contradictory views, in fact I would go so far as to say that he misled that court under oath.

[43] In the confidential report Van Tonder also wrote that Els would have obtained a commission of R2 million, it was put to him that in his recorded interview with Eils the latter had told him that he would

not have received any commission whatsoever on the US $ 6 million investment.

[44] Not much weight can be placed on the evidence of these two witnesses and their opinions are in effect of little value given their methodology in investigating the facts and circumstances that led to the issuing of Annexure "A" and effect thereof.

[47] It is common cause that Routledge Modise (as the admitted agents of the Defendant) wrote the letter of 30 May 2000 to Emirates Bank, it is apparent that this claim of the Plaintiff (Claim 2) is founded upon the contents of that letter,

[49] The misstatement complained of is embodied in the letter dated 30 May 2000 (Annexure "D" to the particulars of claim) and more particularly in paragraph 4 thereof. The body of this letter reads as. follows:

"1.   We act on behalf of Absa Bank Ltd. "2.    It has come to our client's attention that a letter dated 12 October 1999 with reference number A62961 on our client's letterhead with the heading Verbiage Of Bank Guarantee', was addressed to you.
"3. A copy of this letter is attached hereto for your ease of reference.
"4.   The purpose of this letter is to advise you that the latter was issued by a person not authorised thereto, was issued in irregular circumstances and should be disregarded by you. "5.   Should you in fact have received this letter, we shall be pleased to be advised thereof." [SO] That Mr Coetzee may have acted injudiciously in signing Annexure "A" is beside the point. He was an A class signatory of the Defendant, being reflected to the outside world as such' and held a managerial position at its Brooklyn Branch as Relationship Manager, Accepting fixed deposits fell within his authority. Soliciting fixed deposits clearly forms part of the ordinary business of the Defendant.

The evidence does not hear out the statement that Mr Coetzee was not authorised to sign Annexure "A". The ambiguity in the terms of Annexure "A" as contended for by Mr Merrett is irrelevant in this context. Although the contents of Annexure "A" may be strange and confusing, that is not the misstatement upon which Claim 2 is founded. Furthermore, it cannot be said on the evidence that the issue of Annexure "A" was tainted with impropriety or unlawfulness. There was no irregularity attached to the issue of Annexure "A" in this respect.

[51] It follows from the aforegoing that the Plaintiff has established a factual misstatement on the part of the attorneys acting for and on behalf of the Defendant. It is not suggested that the Defendant is not liable for the consequences of such misstatement by its agent.

[53] The misstatement was clearly unreasonable. Not only was it commercially unnecessary to write in such terms when a simple cancellation or an innocuous withdrawal of the letter Annexure "A" would have sufficed, but that the letter is false in fact because. Mr Coetzee was indeed authorised to sign the letter Annexure "A"; and

[56] the foundation of the Defendant's complaints regarding the validity of the joint venture agreement was never established. The evidence of Sheik Fawaz Bin Abdullah Al-Khalifa was to the effect that the Al Fawaz Group was not a limited liability entity ('LLC') but an 'establishment' or sole proprietorship as we know it. There was no legal impediment to the execution of the joint venture agreement demonstrated. The Defendant was accepted by both the cedent (as well as the Plaintiff) and the Al Fawaz Group (i.e. Sheik Fawaz Bin Abdullah Al-Khalifa) as being the equivalent of a 'triple A' banking institution in this country. The testimony of Sheik Fawaz Bin Abdullah Al-Khalifa was unequivocally to the effect that after receipt of the letter Annexure "D" he (and the Al Fawaz Group) wanted nothing further to do with this project, the cedent of the Plaintiff. That was the direct and immediate result of the misstatement; and the eminently foreseeable consequence thereof. There are no policy considerations justifying the release of Defendant from responsibility for that consequence.

[58} Contributory negligence on the part of the Plaintiff was neither raised nor argued on behalf of the Defendant.

[60] In the light of the aforegoing considerations I find in favour of the Plaintiff.

I accordingly order as follows; 1.    It is declared that the Defendant is liable for the proven or agreed damages suffered by the Plaintiff.
2.	
3.	The issue of quantum is postponed sine die.
4.	
RANCHOD A J

For Plaintiff: Attorney Louis Nel Inc. PRETORIA.

Counsel for Defendant: