Hata-Butle (Pty) Limited v KPMG and Harley & Morris joint Venture NO (C of A (CIV) No 36 of 2000)

Media Neutral Citation: 
[2002] LSHC 5
Judgment Date: 
11 April, 2002

Downloads

C of A (CIV) No 36 of 2000

IN THE COURT OF APPEAL OF LESOTHO


In the matter between:


HATA-BUTLE (PTY) LIMITED Appellant

and

KPMG AND HARLEY & MORRIS JOINT VENTURE N.O. Respondent (previously LESOTHO BANK LIMITED)


HELD AT MASERU


CORAM: GROSSKOPF JA

PLEWMAN JA

MELUNSKY AJA


SUMMARY OF JUDGMENT


There is no procedure whereby the proceedings of the High Court can be reviewed by this Court. The only remedy is to appeal.


Consideration of requirements which an applicant seeking to re-open a case and lead further evidence will generally have to satisfy.


2


In what circumstances will a bank which has honoured cheques signed by unauthorised signatories be liable in damages to its customer?


Lack of authority to institute proceedings may subsequently be ratified.


C of A (CIV) No 36 of 2000

IN THE COURT OF APPEAL OF LESOTHO


In the matter between:


HATA-BUTLE (PTY) LIMITED Appellant

and

KPMG AND HARLEY & MORRIS JOINT VENTURE N.O. Respondent (previously LESOTHO BANK LIMITED)


HELD AT MASERU


CORAM: GROSSKOPF JA

PLEWMAN JA

MELUNSKY AJA


JUDGMENT


GROSSKOPF JA

The respondent ("the bank") brought an urgent application for the liquidation of the appellant company ("the company") in June 2000. The bank alleged that the company was indebted to it in the sum of M946 897 and that


2


judgment for an amount of M375 801 had been granted against the company in favour of Frasers Lesotho Ltd ("Frasers"). The bank maintained that the company was unable to pay these debts and that it was also just and equitable that the company be wound up. The High Court granted a provisional order of liquidation on 25 July 2000.


The company opposed confirmation of the rule and filed an opposing affidavit. It did not seriously dispute its indebtedness to the bank and Frasers, but made the bald allegation that it in turn has a substantial counter-claim of between M9 and M12 million against the bank and Frasers. No further particulars were supplied in the opposing affidavit. That affidavit did refer to a letter of demand dated 7 January 1998 with annexures which the company's attorneys had previously addressed to the bank, but these annexures did not form part of the court record. The letter, standing alone, does not shed any further light on the company's alleged claim against the bank. We have subsequently, and after the hearing of the appeal, received copies of these annexures. The annexures may have partially explained the company's alleged cause of action against the bank, but that was not the proper way to address the shortcoming. In any event those papers still did not adequately set out why the Court should not have granted a liquidation order.


3


The company filed a supplementary opposing affidavit on 11 October 2000 in which it sought to rely on certain bank statements showing a nil balance. This was a disingenuous attempt by the company to show that the company did not owe the bank any money. It is common cause that the entries on these bank statements did not reflect payment of the amounts due; they were brought about by the transfer of the company's accounts from one computer system to another.


Thereafter the company launched an urgent application on 17 October 2000 to stay all proceedings against it pending the determination of an action and a counter-application instituted by the company against the bank. No particulars of the alleged claims were however provided. This application was brought by the company in its own name, notwithstanding the provisional order of liquidation. It appears from the founding affidavit that the main reason for bringing the application was to stay the liquidation proceedings since the company "has successfully reached agreement with a financier to whom the liquidation proceedings posed a serious threat".


The company brought another application in its own name on 31 October 2000. This was an application for leave to file a supplementary affidavit in order to introduce new evidence. The additional evidence which the company sought to introduce did not, however, relate to the company's alleged counter-claim


4


against the bank but to an invitation by the bank to Frasers to participate as provisional liquidators of the company.


The Court a quo granted a final order of liquidation on 3 November 2000 but gave no reasons for its decision. We therefore do not know what the Court a quo had decided in connection with the company's applications referred to above. We are in any event not aware of any application by the company for Leave to introduce new evidence relating to its alleged claim against the bank.


The company duly filed a notice of appeal. Thereafter the company launched another urgent application, again in its own name, in which the High Court was asked to "suspend the mandate of the liquidator" pending the determination of an application to review the decision of the High Court. This was followed by a "Notice of Motion for Review" in terms whereof the company made application to this Court for an order in

the following terms:


"(a) That the order for the liquidation of the Applicant [the company] be set aside.


  1. That the matter be referred back to the Court a quo.


  1. That the Applicant be allowed to supplement its opposing affidavit with evidence relating to both prescribed and unprescribed portions of claims the Applicant may have against the Respondent [the bank] jointly and/or severally with Frasers Lesotho Limited.


5


  1. That the Court a quo be ordered to receive such evidence and adjudicate the matter against such evidence being considered as well."


There is of course no procedure whereby the proceedings of the High Court can be reviewed by this Court. The only remedy is to appeal. (See Ex parte Scott 26 SC 520; Gentiruco AG v Firestone SA (Pty) Ltd 1972(1) SA 589 (A) at 601 D-F; Lawsa first reissue vol.3(l) para 392, 393.) We shall, however, treat this review application as an application by the company in liquidation to introduce new evidence.


The main argument advanced by counsel for the company was that this Court should, in the exercise of its discretion, set aside the final liquidation order and allow the company to introduce further evidence relating to its alleged counter-claim against the bank.


It was held in S v De Jager 1965(2) SA 612(A) at 613 C-D that an applicant seeking to re-open a case and lead further evidence will generally be required to satisfy the following requirements:


"(a) There should be some reasonably sufficient explanation, based on allegations which may be true, why the evidence which it is sought to lead was not led at the trial.


6


  1. There should be a prima facie likelihood of the truth of the evidence.


  1. The evidence should be materially relevant to the outcome of the trial"


(See also S v Ndweni and Others 1999(4) SA 877 (SCA) at 880 D-F.)


Certain guiding principles governing an application for the hearing of further evidence on appeal have been enunciated in Colman v Dunbar 1933 AD 141 at 161-2. I would like to refer to only one of those principles set forth in the judgment of Wessels CJ at 162:


"The evidence tendered must be weighty and material and presumably to be believed, and must be such that if adduced it would be practically conclusive, for it not, it would still leave the issue in doubt and the matter would still lack finality."


(See further Simpson v Selfmed Medical Scheme and Another 1995(3) SA 816 (A).)

In my view the company has failed to satisfy the requirements for receiving further evidence. Nowhere in the affidavits filed on behalf of the company prior to its final liquidation did the company fully set out the actual evidence upon which it would rely to prove its counter-claim against the bank. It was only in the review application that the former chairperson of the board of directors of the company disclosed some of the facts on which the company


7


sought to rely. Only then did it appear on affidavit that the company's claim for M9 to M12 million mentioned in its initial opposing affidavit was based on the bank's alleged unauthorised payment of cheques drawn on it on behalf of the company by unauthorised employees of Frasers, Frasers obtained the signing powers on the company's bank account in terms of a written agreement entered into between the company and Frasers in 1980. The company alleged that Frasers changed the signatories to the bank account without the company's approval but that the company was unable to prove this because the paid cheques were in the possession of Frasers. However, it appears from the affidavit of the said former chairperson that the company had determined long before that cheques have been "incorrectly" paid from as early as 1988. There is therefore no reasonably sufficient explanation as to why the company's cause of action and the supporting evidence could not have been set out fully in the company's initial opposing affidavit, even if the company was not yet in a position to produce the paid cheques. The first requirement set out in De Jager's case, supra, has therefore not been satisfied in my view.


I am further of the opinion that the evidence now tendered on behalf of the company might in any event not be "practically conclusive", as required in Colman v Dunbar, supra. The company's claim is for damages based on the bank's breach of contract. The cheques honoured by the bank might well have


8

been and probably were drawn by Frasers and paid by the bank in favour of trade creditors in satisfaction of trade debts, as provided for in the written agreement. In these circumstances the company will have great difficulty in my view in proving that it suffered any damage, even assuming that the signatories were unauthorised. I may add that there is no allegation that either Frasers or the bank misappropriated the proceeds of the cheques or forged any signatures on cheques. In the absence of greater certainty the company has accordingly not made out an adequate case to establish loss.


The Australian case of Majesty Restaurant (Pty) Ltd (In Liq) v Commonwealth Bank of Australia Ltd [1999] 47 NSWLR 593 dealt with a similar problem. In that case a company's mandate with its bank required the signature of two company officers on cheques drawn on its cheque account. When the bank honoured cheques with one signature only, it was sued by the company for breach of contract and negligence, notwithstanding that the cheques were delivered by the company to its trade creditors in purported satisfaction of its trade debts. Damages were sought to the value of the cheques honoured. The Court there held that the payments to the company's trade creditors operated to satisfy the company's indebtedness to them and that the honouring of the cheques therefore caused no loss to the company.


9


It was previously held in B Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 KB 48 that where the paying bank makes an unauthorised payment which is assumed to have resulted in the discharge of the customer's debt, the bank is entitled to have the advantage of the discharge of that debt when sued by the customer.


The evidence which the company now seeks to introduce to prove its alleged counter-claim against the bank cannot in my judgment be regarded (as required in De Jager's case, supra) as "materially relevant" to the outcome of its claim if the company has not suffered any damage. There is, therefore, no reason to receive the further evidence or to stay the final order of liquidation as prayed for by the company. A liquidator is in any event in a better position to investigate claims and there seems to be no reason why the liquidator cannot pursue valid claims against the bank and Frasers. So much for the application to receive further evidence.


Counsel for the company argued two points on appeal. The first was a so-called point in limine which was raised for the first time on appeal. The submission was that the deponent Vos who instituted the liquidation proceedings on behalf of the bank was not properly authorised by the bank to apply for the liquidation of the company. Vos, who is a senior manager of the


10


bank, alleged that he was duly authorised to do so. The resolution of the board of directors of the bank which Vos annexed to his affidavit certainly authorised him to bring legal proceedings on behalf of the bank. It was couched in general terms but did not specifically authorise Vos to launch sequestration or liquidation proceedings against the bank's debtors. The allegation by Vos that he was duly authorised to bring the application was nevertheless ''not disputed" by the company in its opposing affidavit, or questioned in any of the subsequent affidavits. It was raised for the first time on appeal. The bank could no doubt have ratified the position if the alleged lack of authority had been properly raised in limine. (Cf Smith v Kwanonqubela Town Council 1999(4) SA 947 (SCA).) I would therefore dismiss the point in limine on this ground alone.


I am however satisfied on the papers before me that Vos had in fact been duly authorised to bring this application. In the case of Mall (Cape) (Pty) Ltd v Merino Ko-operasie Bpk 1957(2) SA 347(C) no resolution to institute the motion proceedings in that case had been annexed by the deponent. The full Court (per Watermeyer J) held as follows at 352:


The best evidence that the proceedings have been properly authorised would be provided by an affidavit made by an official of the company annexing a copy of the resolution but I do not consider that that form of proof in necessary in every case. Each case must be considered on its own merits and the Court must decide whether enough has been placed before it to warrant the


11


conclusion that it is the applicant which is litigating and not some unauthorised person on its behalf. Where, as in the present case, the respondent has offered no evidence at all to suggest that the applicant is not properly before the Court, then I consider that a minimum of evidence will be required from the applicant (cf. Parsons v Barkly East Municipality, [1952(3) SA 395(E)]; Thelma Court Flats (Pty) Ltd v Me Swigin, 1954(3) SA 457(C))."


The authority of the person acting for the respondent bank was challenged by the appellant in the case of Tattersall and Another v Nedcor Bank Ltd 1995(3) SA 222 (A). The Court there applied (at 228-9) the approach adopted in Mall's case, supra, namely that when the challenge to authority is a weak one, a minimum of evidence will suffice. The learned judge further remarked (at 228) that:


"A copy of the resolution of a company authorising the bringing of an application need not always be annexed."


The Court in that case came to the conclusion that the deponent's authority had been established.


In the present case the bank's resolution authorising Vos to institute proceedings on its behalf had been annexed. Vos further asserted that he was duly authorised by the bank to bring the Liquidation proceedings. The company did not dispute any of these allegations and offered no evidence at all to suggest


12


that the bank was not properly before the Court. I am accordingly satisfied on all the evidence that the liquidation application was properly authorised. I respectfully adopt the approach of the learned judge in the Tattersall case, suprar at 229, namely that to hold otherwise would be carrying formality too far.

The second point which the company raised on appeal, though not with much conviction, was that the bank's claim against the company "was not properly set out". The company did receive bank statements from time to time and never disputed that it was indebted to the bank. And the company did actually admit in its opposing affidavit that there existed "a relatively normal bank/client commercial debt of less than plus/minus Ml,000,000.00".


In my judgment the appeal cannot therefore succeed.


We were informed that the bank had also been liquidated in the mean -time. The bank's liquidator has now been substituted as the petitioner/respondent in these proceedings.


The following order is made:


  1. The appellant's application to introduce further evidence is dismissed with costs.


  1. The appeal is dismissed with costs.


13


Delivered at Maseru this 11th day of April, 2002


F H GROSSKOPf

JUDGE OF APPEAL


I agree:


C PLEWMAN

JUDGE OF APPEAL


I agree:


LS MELUNSKY

ACTING JUDGE OF APPEAL


For the Appellant: Adv. T J Botha and with him Adv Morethoane

For the Respondent: Adv. K J Kemp SC