IN THE HIGH COURT OF ESWATINI
JUDGMENT
In the matter Between: Case No. 79/2015
FIRST NATIONAL BANK SWAZILAND
LIMITED Plaintiff
And
JEREMIAH DLAMINI Defendant
Neutral citation : First National Bank Swaziland Limited v Jeremiah Dlamini (79/2015) [2019] SZHC 226 (29h November, 2019)
Coram : M. Dlamini J
Heard : 4th October, 2019
Delivered : 29th November, 2019
Civil action : The claim by the defendant is not for general (intrinsic) damages but special (extrinsic) damages. It is based on patrimonial loss as a result of dereliction of duty. Now the question is what are the elements that needs to be proved by plaintiff in an action of this nature viz, actio lex acquillia. These are well settled. They are:
(a) wrongful act or omission
(b) fault (either dolus or culpa)
(c) causation
(d) patrimonial loss (pure economic loss)
: causation: did plaintiff’s loss flow directly from the direct inaction or action of the defendant
: defence of contributory negligence - contributory negligence exonerated the defaulting party in a delict or tort action
: where loss emanated from a contractual relationship, contributory negligence or the negligence of the claimant has no room for consideration
: mora interest - the general principle is that interest is not awarded to an unliquidated claim
Summary: In its Particulars of Claim, the plaintiff demanded the sum of E222 857.00 together with interest as an amount lost through defendant’s neglect of duty of care as its employee. Plaintiff also alleged fraud on the part of defendant. Defendant resisted payment of the claim on the basis that nothing on the face of the documents presented to him reasonably raised suspicion of fraud. He also pleaded on the alternative that plaintiff failed to mitigate its loss.
The Parties
[1] The plaintiff is a financial institution duly registered as such. It has its principal place of business at the 2nd Floor, Sales House Building, Swazi Plaza, Mbabane, Hhohho district, Kingdom of Eswatini. The defendant is an adult male and a former employee of plaintiff.
Particulars of Claim
[2] The plaintiff pointed out that the defendant was under its employee. On 14th August 2012, defendant was promoted to be the marketing manager in the Wesbank division. At all material times, defendant had a duty of care as a marketing manager to ensure that plaintiff did not suffer any pecuniary loss. However, defendant breached his duty of care in the following manner:
“6.1 He knowingly approved an application for the financing of a vehicle, having verified and confirmed that the documentation in support of the application was fraudulent.
6.2 The Defendant in the review process of the application negligently accepted conflicting documents as supporting documents for the unit being financed.
6.3 The Defendant also breached his duty of care in that, after inspecting the vehicle in question he failed to report a discrepancy in the colour of the car he inspected, having stated that the car he inspected was a black Hyundai Sonata registered CSD 205 BH yet he had a quotation for the sale of a metallic white Hyundai Sonata 2.4 Auto Executive 2012 model.”[1]
[3] Due to defendant’s failure to exercise due care and defendant fraudulent conduct, the plaintiff suffered financial loss to the tune of E222 851.00. It then prayed:
“1. Payment of the sum of E222, 851.00 (Two hundred and twenty-two thousand, eight hundred and fifty one Emalangeni only).
2. Interest of 9% per annum a tempore morae.
3. Costs of suit.”[2]
The defence
[4] The defendant denied any act of neglect of duty on his side. He also challenged plaintiff to prove that he was fraudulent. He pleaded:
AD PARA 6
“6.2 Negligence is denied. On the face of the documents it was not apparent that there was anything wrong. It is for this reason that the higher levels of the process did not pick up the problem until a forensic audit was done.”[3]
[5] Before praying that the action be dismissed, he further pleaded:
AD PARA 8
“ALTERNATIVELY
The plaintiff failed to mitigate its losses in circumstances where this was possible.”[4]
Oral evidence
[6] The first witness for the plaintiff was Lomthunzi Siphiwe Mgabhi – Mngomezulu (Mngomezulu). In 2013 she developed a friendly relationship with one Gugu Gwebu (Gwebu). One day, Gwebu called her to enquire if she had an account with plaintiff. Following that she had previously been employed by the Government under the statistic department to conduct population censorship, she answered in the positive. Gwebu, who was a business lady then requested her for the account number. Gwebu pointed out that she was expecting a substantial sum of money from a client. She could not deposit this sum as all her accounts were overdrawn. Mngomezulu acceded to Gwebu’s request.
[7] Gwebu also asked her to go to plaintiff’s bank to meet defendant. She complied. She met the defendant at his Mbabane office. Defendant produced some documents and requested her to append her signature on a number of pages. She signed as defendant was directing her to the relevant pages and spaces for her signature. The meeting was brief as after signing, defendant thanked her and they bade each other fare well. Gwebu had also requested her to go to the bank to link her account. She duly complied. Thereafter a sum reflecting E240 000 was reflected into her account. She duly advised Gwebu.
[8) Some days thereafter, in the company of Gwebu, she proceeded to the bank. Gwebu parked above the Corporate Place Building. Gwebu then made a call. Defendant and one Mbali appeared. This was her second time to have an encounter with the defendant. Gwebu jumped out of the motor-vehicle they were driving. They greeted one another. Both defendant and Mbali inspected the motor-vehicle driven by Gwebu. This was a Sonata Hyundai, black in colour. Defendant and Mbali did not enter the motor-vehicle however.
[9] This witness was, some day, told to go to the bank to sign further documents. She met Mbali. She asked her to sign documents which remained unsigned the first time. She complied.
[10] This witness was cross-examined at length. In order not to burden this judgement, I shall refer to the salient features of the cross-examinations of all the witnesses later in this judgement.
[11] The second witness was Bongani Sibonginkosi Ndzimandze (Ndzimandze). He was the employee of plaintiff. He was the supervisor in the collection department. He knew defendant who was his supervisor at the collection department before he became the supervisor. When he became supervisor, defendant was promoted to be the marketing manager and transferred to that department. In the collection department, one of their duties was to do inspection of financed motor-vehicles. Instructions were received either by email or telephone. They would secure an appointment with the seller in order to inspect the motor-vehicle. During inspection, they would record their observations in the relevant form.
[12] In the present case, this form was not utilised. Instead, a scribble paper was used to record the description of the financed motor-vehicle. Ndzimandze also testified about the performance of the loan account in the name of Mngometulu. He told the court that the statement of account reflected that it was serviced. However, there were intervals where payment would be defaulted. At first, when payment resumed, arrears were settled. However, the last payment reflected a balance of E229 816.00 as at 30th September 2014. The bank closed the account.
[13] The next witness was Thembeni Pinky Nxumalo. She was an employee of Eswatini Bank. She came to court to testify on a document purportedly emanating from her bank. She disputed that such document could come from her bank. She looked at the style of writing, the font and other features. Her testimony was that there was no such client as reflected in the purchase order and that the document was not generated by her bank. She was not cross-examined.
[14] Plaintiff’s Counsel called the fourth witness whose name was Khetsiwe Oliet Khumalo. She identified herself as having been employed by plaintiff and was the finance and administration manager from 2004 to May 2019. She testified on the procedure followed in application for loans pertaining to private individuals. She attested that the purchaser would approached the plaintiff for finance. The purchaser would be referred to a business development officer of the bank. The business development officer would record the particulars of the purchaser. He would also require from the purchaser personal documents such as the driver’s licence, proof of residence address, financial statements or proof of income, if employed and a letter from his employer confirming the same. These documents would be on filed. A quotation must be obtained from the seller. There must also be evidence that the sold motor-vehicle is fully paid for or still owing to another financer. If it was not purchased through a financer, an invoice form the dealer reflecting the original purchase price must be produced.
[15] The development officer would then advice the prospective purchaser as to how and how much he shall be expected to pay instalments per month should his loan application succeed.
[16] The file with all the above documents is dispatched to the finance and administration department officer for validation. Once validated, it would be returned to the business development officer who would then motivate the application. Both the validation and motivation are then sent to the marketing manager who would scrutinise the file and then enter his recommendation by adding an approval condition.
[17] The application would be approved by the regional manager based at head office. The regional manager would rely mainly on the marketing manager’s notes. The regional manager would then return the file to the marketing manager who would pass it to the business development officer. The business development officer would inform the client of the status of his loan application. Once payment is made, the development officer signs the file cover and archives it.
[18] In the present case, Mbali Dlamini was the development officer. The file was then checked by Shirly Dlamini and Phinda Dube as ready for archives.
[19] The fifth witness was Siboniso Edison Mdluli (Mdluli). He told the court that he was employed by the plaintiff. In 2014, he was nominated to chair the disciplinary hearing against defendant. He presented to court the record of the disciplinary hearing. He testified that the charges against defendant were dishonesty and fraud. A third charge was added to read, “Causing financial loss to plaintiff.” Defendant pleaded not guilty to the charge of dishonesty and the third added charge. He pleaded guilty to the second charge in that he noted the description of the motor-vehicle as black instead of metallic white.
[20] The sixth witness was Mfan’futhi Mabuza. He is the former employee of eSwatini Bank. His last position at the bank was manager in the motor-vehicle finance department. He knew defendant through work. His testimony was brief although his cross-examination was lengthy. He testified that he initiated a meeting with defendant. He went to defendant’s workplace at the Corporate Building. He was in the company of Thembeni Dlamini. They discussed with defendant a statement of account and a settlement letter. There was also a clearance letter. This clearance letter was not authentic as it had either longer or shorter digits. These digits did not tally with the numbers used by Swazi bank. Similarly with the statement. All these documents were said to have been generated by Swazi bank. He pointed out to defendant that the documents were not authentic. They had spelling mistakes. He also raised that the signature on the clearance letter looked like his. The letter heads were not authentic. He was referred to the disciplinary hearing report. He read into the record his evidence and confirmed the same as his.
[21] The plaintiff closed its case. The defence led one witness in rebuttal.
Defence
[22] The defendant testified in his defence. He testified that he joined the plaintiff as a senior collection’s officer in 2007. When he left the plaintiff, he was the marketing manager. He was dismissed by plaintiff on unsatisfactory grounds. He had pleaded not guilty to all three counts. At one stage in time, when he was marketing manager, an application for a loan to purchase a used motor-vehicle was attended by him. The client was Nokwazi Matsenjwa. He noted that her pay slip did not tally. He called his subordinate and directed him to scrutinize the file again. There was a settlement quotation which was from Swazi Bank. He directed Mkhonta to call Swazi Bank about the settlement quotation.
[23] Mkhonta did call Swazi Bank about the settlement quotation. Swazi Bank denied any knowledge of the settlement quotation. Defendant decided to call the officer from Swazi Bank whose signature appeared on the settlement quotation. The officer came in the company of a lady officer. These were Mfan’futhi Mabuza and Thembeni. Mfan’futhi indicated that he knew nothing about the settlement quotation. He confirmed that it had been forged. He took a decision that he would hand over the client to the police. However, when he called the client, Nokwazi Matsenjwa, she failed to come to the bank.
[24] Over a year later, he was called by Mr. Phinda Dube, his superior. He asked him about his relationship with the bank’s client, Gugu Gwebu. He responded that she was a business friend to his wife. He was then given a suspension letter. Defendant testified further that he stayed at home for two months while investigations were done. He was summoned for his hearing on charges pertaining to Nomthunzi Mngomezulu as a client. He testified also that Nomthunzi Mngomezulu approached the bank. She was attended to by Mbali Dlamini. Nomthunzi Mngomezulu gave details of the motor-vehicle she intended to purchase. The seller was Ntfombindze Gama. The motor-vehicle to be financed still owed another bank.
[25] The defendant took time to testify on the procedure for financing a used motor-vehicle. I shall not regurgitate his evidence in this regard as it did not differ materially to that given by Khetsiwe Oliet Khumalo. He testified that Mngomezulu submitted all the necessary documents. The file went through all the relevant departments, mainly, verification officer, himself and the regional manager. He then referred the court to various documents which he scrutinised before approving Mngomezulu’s application. He testified further that Brooks as the regional manager scrutinised and also approved her application. The verifying officer was Amanda. Amanda called the place of employment to confirm the details.
[26] Sometimes during the process of the application, Mngomezulu came in the company of Gugu Gwebu. They were driving the motor-vehicle to be purchased. They parked at the Corporate Place. Mbali invited him to go and inspect the motor-vehicle. He obliged and listed all the things he saw on the motor-vehicle. The loan by Mngomezulu was serviced for over a year.
[27] He was then charged for Mngomezulu’s application. The only discrepancy in her application was that the quotation described the colour of the motor-vehicle as white whereas the one he viewed was black. He did not note this discrepancy. Another anomaly he failed to pick up was that the settlement letter by the bank was in the name of Sibusiso Mkhonta and not Ntfombindze Gama. He was dismissed for failing to note the discrepancies. However all the other officers were not dismissed viz, Amanda, Shirly and Brooks.
[28] Defendant lamented his dismissal at work. He pointed out that Mbali testified at the disciplinary hearing that she did attend to Nomthunzi at her office. Mfan’futhi was not honest with the court as he did give him copies of the settlement quotation but he failed to produce them during the hearing. The reason Mfan’futhi lied against him was because the plaintiff had devised a conspiracy to get rid of him. Further, the initiator at the disciplinary hearing applied that Mbali’s evidence be dismissed because it favoured him. The chair ignored objections by his legal representatives. Further Nomthunzi was not charged criminally for filling a forged document. Instead plaintiff decided to write off her debt.
Determination
Issue
[29] Is the defendant liable for the damages suffered by plaintiff?
Legal Principles
[30] The claim by the defendant is not for general (intrinsic) damages but special (extrinsic) damages. It is based on patrimonial loss as a result of dereliction of duty. Now the question is what are the elements that needs to be proved by plaintiff in an action of this nature viz, actio lex acquillia. These are well settled. They are:
(a) wrongful act or omission
(b) fault (either dolus or culpa)
(c) causation
(d) patrimonial loss (pure economic loss)
[31] Has the plaintiff proved these elements on a balance of probabilities?
- Wrongfulness: The question attended by this element is whether there was a legal duty[5] by the defendant to exercise due care in discharging his duties. The evidence serving before court is that the defendant was an employee of the plaintiff. There was a contract of employment by virtue of the employer - employee relationship. The defendant was elevated over the years to the position of marketing manager. His functions as testified by him was to authorise or approve applications for motor-vehicle loans as plaintiff’s main business in its Wesbank branch. From this set of circumstances, it can safely be concluded that there was a legal duty of care from the defendant in carrying out his supervisory work.
[32] (b)Negligence: Having established the legal duty, the next question is whether the defendant failed to exercise the duty of care expected of him in his position. Was the defendant negligent in his supervisory powers? Writing on this subject, Robert Sharrock[6] stated:
“In agreeing to perform a particular type of work, the employee impliedly warrants that he is reasonably competent to carry out the work. He further undertakes that he will exercise due skill and diligence in the performance of the various facets of the work. If he is inept or incompetent, or if he fails to exercise the requisite skill or care, he is liable for breach of contract.”
[33] To prove negligence, the plaintiff paraded a number of witnesses who gave their testimony under oath. I proceed to analyse their evidence, vis-à-vis that of the defendant’s both under their cross-examination and in defendant’s chief. Thembeni Nxumalo testified about exhibit 66B, the settlement quotation. This is a document purportedly generated by eSwatini Bank as so confirmed from the face of it by the letter head.. She testified that owing to a number of glaring discrepancies on the face of the document, it did not emanate from her bank. She stated in this regard:
“This document is not an official document because it has many misspellings and we do not have a client by the name of Mkhonta Sibusiso.”
[34] Thembeni Nxumalo proceeded to direct the court to the obvious incorrect spellings. The fourth line had a small letter “s” for “swaziland” whereas the official letter has a capital “S”. The account number does not exist. The words “Oredo and Concil” are wrongly spelt. They ought to read “Order” and Council” respectively. The terminology was also incorrect. This is evident in the reading, “This settlement Quote is only valid until 25/06/2013.” The bank does not write in this fashion. It should have read; “The settlement quote is valid for only 7 days”. Her bank does not write the date upon which the settlement quotation expires but the number of days.
[35] She also directed the court to exhibit 63B, a bank statement purportedly from her bank. She pointed out that the bank did not have a client in the name reflected thereto, viz., Nomthunzi Mngomezulu. Further, the account number reflected is non-existent as it has twelve digits instead of eleven. The layout of the statement did not correlate to that of the bank. The bank had six columns. She testified that Mr. Mfan’futhi Mabuza requested her to accompany him to plaintiff for purposes of identifying her bank’s documents. She could not remember the discussions that took place in plaintiff’s institution.
[36] Mr. Mfan’futhi Mabuza testified that he went to see defendant at his bank to explain about certain documents said to have originated from his bank (eSwatini bank). These were a settlement quotation and a statement from his bank. He testified:
“On the statement, it was not authentic because of the number of digits. On the clearance letter, it looked like my signature. On the letter heads, there were spelling mistakes on the writing and actual letter heads.”
[37] He then referred the court to his evidence adduced at the disciplinary hearing against defendant. He testified that what was captured in the record was his testimony. His evidence appeared at exhibit 74B. At the time of giving evidence, he testified that he could not recall the particulars in the two documents he had gone to the defendant’s bank to discuss due to time lapse and the fact that he was no longer with Eswatini Bank. The disciplinary hearing record reflected that he had gone to defendant to explain about a clearance letter belonging to Ntfombindze Gama and a bank statement for Nomthunzi Mngomezulu. The record further shows that Mabuza advised defendant that both documents were not authentic. Mr. Mabuza further denied discussing a settlement quotation with defendant.
[38] Cross-examination of Mabuza revealed that the defendant was disputing that Mabuza came to verify documents pertaining to Mngomezulu’s loan application. He asserted that Mabuza had come to verify documents pertaining to an application by Nokwazi Matsenjwa and further the document was a settlement quotation. This witness, maintaining that he could not recall the names of the parties he went to discuss, pointed out that if what defendant was asserting was correct, he would not have proceeded to defendant’s bank for the reason that he would have simply verified the settlement quotation from Swazi Bank’s end. There would have been no need for him to go to defendant’s bank to scrutinise a settlement quotation.
[39] Now from the defendant’s own version, he did not query the documents more particularly exhibit 66B. He did not invite Swazi Bank to explain the authenticity of such documents. It is not disputed that exhibit 66B ex facie reflected a number of misspellings, even to an ordinary lay person. Obviously, no banker could have approved an application for a loan with a settlement quotation of the nature in this case. He ought to have queried such a document as he did with respect to Nokwazi Matsenjwa’s application, if his evidence is anything to go by. He dismally failed in his duty of care.
[40] Then there is a further document in the form of the bank’s statements. Though Mabuza’s evidence is that he discussed a bank’s statement with odd account numbers, and alerted defendant that it was fraudulent, defendant denies such. Again as a banker the layout of the statement is glaringly inconsistent with any bank’s statement. It should have been obvious to him that it was not authentic. He failed to query it as he testified that he never invited Mabuza to the bank to discuss it. This is evidence of failure to exercise the skill of care expected of him.
[41] There was also the evidence of Bongani Ndzimandze who testified that his department was responsible for inspection of motor-vehicles financed by plaintiff. He referred the court to exhibit 92B – 93B and testified that when carrying out inspections of the motor-vehicles, they record their observations on exhibit 92B – 93B. In such application by Mngomezulu, such form was not utilised. Instead exhibit 85B which he defined as a scribble piece of paper was used to fill the information on inspection. He pointed out that vital information was missing even from exhibit 85B. There were no chassis and engine numbers of the motor-vehicle inspected. The condition of the tyres was not captured. There was further contradictions in the colour of the motor-vehicle inspected and the one intended to be purchased. Exhibit 85B reflected that the motor-vehicle inspected was black whereas Exhibit 70B showed that the motor-vehicle financed was metallic white.
[42] The defence under cross-examination of Ndzimandze seriously contested that the inspection form submitted by Ndzimandze was for financed vehicles. It was contended that the form (92B-93B) was for repossessed motor-vehicles. Defendant went to the extent of testifying that he designed the form for repossessed motor-vehicles as it so reflects. Ndzimanze stood his ground. I think it is unnecessary for me in the case at hand to consider whether the form was for financed or repossessed motor-vehicles. What stands un-contradicted here is the material evidence that the description of the motor-vehicle was in contrast with that in the application form (70B). Further, that a full description of the motor-vehicle was not noted. It is common cause that defendant made the inspection. In these set of circumstances, defendant failed to exercise due care in the inspection of the motor-vehicle.
[43] In regard to his duty of care, Counsel on behalf of defendant pointed out under cross-examination of Mngomezulu, the very first witness for the defendant as follows:
Mr. H. Nhleko : “Defendant would tell the court he had no reason to defraud his employer in this way. His only problem was that he was negligent in picking up the fraudulent document and he did not benefit anything. You and Gugu benefited.”
[44] This question was repeated to this witness. She replied that she knew nothing about fraud and that she did not benefit anything from the transaction. I must say that throughout her testimony, Mngomezulu did not testify on fraud or fraudulent documents in as much as the Particulars of Claim alleged fraud. So from the onset, defendant did not dispute his negligence.
[45] Plaintiff testified in chief:
“The application having gone via Amanda, was brought to me. I looked at the application and the supporting documents. I signed it and handed it over to my boss, Kavin Brooks.”
[46] On inspection of the motor-vehicle, he testified:
“Mbali invited me to come with her to the parking lot to confirm the car which I did. Having looked at the car I listed things I confirmed on the vehicle, things I saw.” This is at page 85 i.e. the colour of the vehicle, registration number, mileage which I read on the vehicle, the tyres and runners. I confirmed having looked at the car.”
[47] He was led by his Counsel:
Mr. H. Nhleko : “Before both of you appended your signatures what was expected of you?”
Defendant : “We did confirm that the application was signed by the applicant and that all the documents that were supposed to be on file were in place.”
Mr. H. Nhleko : “It appeared that the quotation that had been submitted or given by Nomthunzi by the seller stated that the vehicle she was going to sell was white whereas the one viewed was black.”
Defendant : “It happened to be one of those discrepancies I never picked up.”
[48] He gave the same response to the settlement quotation, saying that he ought to have picked up that the name of the seller did not correspond with that in the invoice. He was cross-examined with regard to exhibit 66B, the settlement quotation, which had glaring typo errors and had a different seller.
Mr. S.B. Dlamini : “You agree this discrepancy is glaring. You ought to have seen it?”
Defendant : “Yes, I do admit I ought to have seen it. I did admit it is one of the mistakes I should not have overlooked if Ntfombindze was seller.”
Mr. S.B. Dlamini : “I put it to you that as the manager employed by plaintiff, you failed to meet the standard of executing your duties with due deligence.”
Defendant : “I admit that mistake.”
[49] From the above set of circumstances, it is clear even from defendant’s version both in chief and under cross-examination that he failed to discharge the degree of duty of care expected from a person who was in his position as the marketing manager of plaintiff.
[50] (c) Causation: The next enquiry is whether the plaintiff did prove that the breach of duty to exercise due care resulted in its patrimonial loss. Did plaintiff’s loss flow directly from the direct inaction or action of the defendant? Corbett JA[7] expatiated on causation:
“[T]he defaulting party’s liability is limited in terms of broad principle of causation and remoteness to (a) those damages that flow naturally and generally from the kind of breach of contract in question and which the law presumes the parties contemplated as a probable result of the breach and (b) those damages that, although caused by the breach of contract, are ordinarily regarded in law as being too remote to be recoverable unless in the special circumstances attending the conclusion of the contract, the parties actually or presumptively contemplated that they would probably result from its breach (Shatz Investments (Pty.) Ltd. v Kalovyrnas, 1976 (2) S.A. 545 (A.D.) at p.550). The two limbs, (a) and (b), of the above-stated upon the defaulting party’s liability for damages correspond closely to the well-known two rules in the English case of Hadley v. Baxendale, 156 E.R. 145, which read as follows (at p.151):
[51] The learned Judge further quoted from Hadley’s case:
“where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contact, as the probable result of the breach of it.”
[52] Does the plaintiff’s claim flow naturally from defendant’s dereliction of duty? Turning to the case at hand, the defendant was cross-examined in relation to the names of the seller:
Mr. S.B. Dlamini : “Had you picked up this discrepancy the bank would not have processed this application with this discrepancy as a supporting document?”
Defendant : “Yes, not me alone though. Remember I was not the only approving officer. An approval does not stand as an approval without two signatures. My manager should have seen it but he did not pick it up.”
[53] The admission from defendant that had he noted the discrepancies in the supporting documents, the other bank officials would not have processed the payment, stands to be accepted in view of the evidence adduced by plaintiff’s witnesses. It is clear that the failure to note the discrepancies by the defendant as manager in the marketing department was a direct consequences of the loss incurred by defendant. The evidence is that upon realising that the account was not performing, Ndzimandze called Mngomezulu. Mngomezulu denied any knowledge of the application. She referred him to Gugu Gwebu. When he called Gugu Gwebu, her numbers were not available. As a result, the plaintiff as a banking institution was compelled to write off the debt by closing the account. This resulted in its loss. For the above, I hold that plaintiff proved causation on a balance of probabilities.
The defence of contributory negligence
[54] Now, the defendant has pleaded contributory negligence. He pleaded that the duty of care expected of him was equally expected of Mr. Brooks, the regional manager as both of them appended their signatures, indicating that the supporting documents were in order. In fact as the case progressed, defendant mentioned even his subordinates and the financial manager who issued the cheque of E250,000 that they all failed in their duties as well. He pleaded that he should not be made a scape goat by plaintiff. The plaintiff ought to have discovered the discrepancies more particularly Mr. Brooks.
[55] The answer to defendant’s defence of contributory negligence lies in the principle of the law. Does the law provide for the defence of contributory negligence where there is duty to exercise care arising out of a contractual relationship?
[56] Nienaber, JA et al[8] faced with an appeal, dealt at great lengths with the defence of contributory negligence in an action of patrimonial loss arising out of a contractual relationship. The facts of the case serving before Nienaber JA were that the auditors, Price Water House were alleged to have caused patrimonial loss to the appellant in that they had failed to discover discrepancies in the applellant’s books of account during auditing. Part of Price Water House’s defence was that the blame also had to be apportioned to the appellant for employing a person who had a past record of theft in the work place. The unanimous judgement by Nienaber JA first highlighted the position of the law in so far as delictual claims were concerned. He pointed out that in such claims the question of contributory negligence was to be taken into account in the enquiry of culpa. He pointed out that contributory negligence exonerated the defaulting party in a delict or tort action. He referred to Boberg[9] as follows:
In South Africa, under the influence of English law (compare Zimmermann and Visser, Southern Cross 575-6), the all or nothing approach prevailed and its application was, in the words of Boberg, The Law of Delict, vol 1 653, “uncompromising.” He continued:
“A plaintiff who was part author of his own loss could recover nothing at all. No provision existed for comparing the negligence of the parties and warding proportionate compensation. The plaintiff’s fall from grace, no matter how venial, costs him his remedy, and the defendant – through possibly far more negligent than the plaintiff – went scot-free. The defence was a complete one.”
[57] The learned Judge had stated earlier on the court a quo’s reasoning:
“It is wrong as a conclusion of fact since it cannot as a matter of practical common sense be said that PW’s negligence was so minimal in comparison to TBA’s careless as to be nullified as an effective cause of the loss. It is wrong as a proposition of law since it seeks to convert an approach which is more appropriate to the law of delict [than] to the law of contract where it is not appropriate.
“In the law of delict where there is culpa on both sides the so-called “all or nothing principle” has been applied since Roman times. This is dealt with in extensor by Zimmermann, op cit, 1010-1013 1030 and 1047-1048. At 1030 it is stated:
“The fault of the plaintiff/victim was, in a way, ‘set off’ against that of the defendant/wrongdoer, with the result that ‘culpa culpam abolet’. Hence the expression of compensation culpae or culpa compensation that came to be used to label the uncompromising approach to the problem of contributory negligence. Whether every contributory fault on the part of the victim-even culpa levissima-was originally taken to deprive him of his remedy is not quite clear. In the later usus modernus, at any rate, the issue appears to have been decided on the basis of a preponderance of fault: Only if he had displayed the same or a greater degree of negligence than the wrongdoer did the victim lose his claim. Where on the other hand, his negligence was less significant, when compared with that of the wrongdoer, his claim for damages remained completely unaffected.”
A plaintiff who was part author of his own loss could recover nothing at all. No provision existed for comparing the negligence of the parties and awarding proportionate compensation. The plaintiff’s fall from grace, no matter how venial, cost him his remedy, and defendant-through possibly far more negligent than the plaintiff-went scot-free. The defence was a complete one.”[10]
[58] Their Lordships proceeded to espouse that however, where loss emanated from a contractual relationship, contributory negligence or the negligence of the claimant had no room for consideration. Nienaber JA penned down the position of the law as follows in this regard:
[65] A similar clear-out statement is absent in the law of contract. There is a conspicuous dearth of express authority in the Roman-Dutch law either admitting or denying the existence of a defence of preponderance of own fault to a claim for damages for breach of contract. None was quoted to us by counsel and we were unable to find any ourselves, as to the applicability or non-applicability of an all-embracing “all or nothing principle”. Or any variant thereof, in a contractual setting. Nowhere is it expressly stated that a plaintiff who sued a defendant for negligently performing his contract but who was himself careless was thereby non-suited, except of course where his culpa was held to be the sole cause of his loss. On the other hand, there is also no direct authority to the effect that such a plaintiff was entitled to full payment notwithstanding his proven lack of care. Not surprisingly there is likewise no authority for the intermediate situation i.e. that a plaintiff’s claim is to be reduced in those circumstances in proportion to his own lack of precaution in preventing or minimising his loss.
[59] His Lordship then clarified:
“The defence of a preponderance of fault on the part of the plaintiff, on which the Court a quo appears to rely, is incongruent within the field of contract. Where a plaintiff can prove that the breach of the defendant was a cause of the loss (as opposed to the cause thereof) he should succeed even if there was another contributing cause for the loss, be it an innocent one, the actions of a third party (compare Nedcor Bank Lts t/a Nedbank v Lloyd-Gray Lithographers (Pty) Ltd 200 (4) SA 915 (SCA) par 10-12). Or, logically, the carelessness of the plaintiff himself in failing to take reasonable precautions to avoid it. A defencant who commits a breach of contract does so independently of any of the extraneous factors mentioned above. All the requirements for his liability will have been fulfilled. In the absence of the contrary term in the agreement itself or of legislative intervention excluding or reducing his claim, he should therefore be held fully liable, regardless of whether the plaintiff’s culpa was the dominant or pre-eminent cause of the loss. What was said for Australia in Alexander v Cambridge Credit Corporation Ltd and Another, supra 315B, applies, I believe, with equal force in South Africa:
‘It is irrelevant to inquire whether the defendant’s default was the dominant, effective or real cause of the plaintiff’s loss. If the evidence is suggestive of multiple causation, the inquiry to be made is whether the defendants’ default was a cause of the plaintiff’s loss. Fitzgerald v Penn (1954) 91 CLR 268 at 273.’
And again at 357G-358A:
‘In my opinion the above cases do no establish the proposition that a plaintiff in an action for breach of contract must prove that the breach of contract was the real and efficient or dominant cause of the loss which he suffered. In the law of tort it is well-established that it is sufficient that the wrongful act or omission or the defendant is a material cause of the plaintiff’s injury or damage. In principle the same rule must apply in the law of contract unless the terms of the contract require the sole or dominant cause to be determined. In Simonius Vischer & Co v Holt & Thopson [1979]2 NSWLR 322, Samuels JA, with whose judgment on this point Moffit P and Reynolds JA agreed, said (at 346) that in an action for breach of contract against an auditor it was ‘sufficient for the plaintiffs to establish that the defendants’ breaches were a cause of the loss notwithstanding that there may have been other concurrent causes.’”
[60] The learned Justice concluded on the discussion of the position of the law in regards to a claim for patrimonial loss due to neglect of duty of care:
“A plaintiff who sues for damages for breach of contract for a loss allegedly sustained through the negligence of the defendant but who was himself careless in relation to the non-avoidance of such loss may therefore be non-suited: (a) if there was a term in the contract to that effect; (b) if the plaintiff’s own carelessness is held to be the sole cause of the loss, either in its totality or, to that extent, in relation to a particular segment thereof; or (c) if the defendant’s negligence was, comparatively speaking, so negligible or minimal as to be discountable as a significant cause of the loss, which, strictly speaking is simply an instance of (b).”
[61] Turning to the case at hand, none of the parties referred me to any term which may vitiate the duty of care by defendant. I have demonstrated above that the defendant himself did concede that had he picked up those discrepancies in the supporting documents for the loan application, the plaintiff would not have incurred the loss so claimed. The evidence of the plaintiff’s witnesses support his concession. In brief, the cause for the loss is attributed to the defendant. Obviously, the defendant’s negligence cannot be said to be of such a minimal or negligible amount as to warrant his non-suit. In the result, a), b) and c) of Nienabar’s[11] category of exemption does not apply to the case at hand.
[62] In light of the above principle of law, the defence of contributory negligence stands to be rejected. I may add the rationale for this position of the law is that besides what has been stated by R. Sharrock[12] the regional manager was not employed to police the defendant. Mr. Brooks as his supervisor expected defendant to exercise due diligence in discharging his duties. He was for all intent and purposes entitled to rely on the approval of the defendant who was the manager of the department that was seized with the duty to scrutinise and verify supporting documents for the loan application. He could not be expected to re-perform defendant’s duties. Otherwise the relationship of trust in the work environment would be compromised.
Fraud as causa
[63] There is another ground upon which plaintiff laid a claim against defendant. It is that applicant was fraudulent in his dealings. The plaintiff relied on the evidence of Mngomezulu in this regard. Defendant profusely denied ever meeting Mngomezulu in his office. I must from the onset, point out that the evidence of Mngomezulu must be approached with great caution. I say this because from the onset, she testified that the reason Gwebu asked her to use her account to receive the sum of E240 000 was in order to avoid payment of an overdraft which she had with her bank. The transaction was therefore founded on dishonesty. I further find it odd that she could give Gwebu all her personal documents i.e. identity card, drivers licence, bank card, including her bank pin number to Gwebu. She knew about the unlawful transaction.
[64] That as it may however, there is a portion of her evidence which explains certain eventualities. For instance, it is clear why defendant failed to note the apparent discrepancies in the settlement quotation and the bank statements from Swazi Bank submitted as supporting documents. It further explains why defendant decided to inspect the motor-vehicle without referring such work to Ndzimandze’s department. It is further clear why all the particulars of the motor-vehicle were not noted as per standard procedure. I note from exhibit 85B that instead of noting the conditions of the tyres and rims, he merely mentioned their description. Mngomezulu’s evidence also tells the court why the incorrect colour was entered and why the name of the seller differed in the supporting documents. The answer to all these questions is that defendant participated in the fraud scheme that led to plaintiff incurring the financial loss.
[65] During cross-examination of the plaintiff’s Ndzimandze, defendant contested their action of closing the account when the bank statement indicated that it was being serviced. This was an attempt to point out that had plaintiff been patient, Gugu Gwebu who was in and out of the country would have returned to continue paying the instalments that were overdue as it had been the case previously. Mr. Ndzimandze pointed out that the reason they closed the account is because they discovered from Mngomezulu that the account was opened through fraud. Defendant insisted that plaintiff would not have occasioned the loss so claimed against it but for its impatience.
[66] I must be quick to point out that financial institutions such as the plaintiff are under strict constraints in terms of international banking standards to maintain clean accounts. The plaintiff was therefore justified in swiftly closing the account once it discovered that it was fraudulent.
Defence of conspiracy
[67] The defendant raised a further defence to the effect that plaintiff had conspired with its witnesses to have defendant dismissed from work. This was demonstrated by plaintiff’s failure to discover crucial evidence that would have assisted the defendant in this matter. For instance, the loan application form (exhibit A1 – A2) although discovered, certain pages were not. The blue book was not disclosed. The evidence by Ndzimandze to the effect that defendant ought to have referred inspection of motor-vehicle to his department and that he failed to complete the relevant form.
[68] I must hasten to refer to the dictum by F. Kroon J[13] :
“The object of pleadings is to ascertain definitely what is the question at issue between the parties and to enable each side to come to trial prepared to meet the case of the other and not be taken by surprise. This object can only be attained when each party states his case with precision. A pleader cannot be allowed to direct the attention of the other party to one issue and then at the trial attempt to canvass another. Trope v SA Reserve Bank and Another 1992 (3) SA 208 J at 210 G – 211 A 1993 (3) SA G4 at 107C – E & H.”
[69] It is common cause from the above orbiter dictum that the defendant did not plead the defence of conspiracy by the plaintiff and its witnesses. It follows therefore that it cannot be considered by this court. Further, it is not clear on why defendant failed to compel plaintiff to discover the documents which would advance his defence if what he asserted was anything to go by. At any rate, in his evidence in chief, defendant did not mention such conspiracy.
[70] (d) Patrimonial loss: The plaintiff’s summons reflected a claim of E222 851.00. However, when Ndzimandze gave evidence, it turned out that the only sum due to plaintiff was E109 051.54. This amount considered that the vehicle was by writ of execution issued in this court, sold and the balance was E109 081.54. There was also further evidence which was revealed by the plaintiff’s witnesses under cross-examination. Two of plaintiff’s witnesses conceded that rebate automatically falls due once execution takes place. Mr. Ndzimandze was cross-examined:
Mr. Nhleko : “My instructions are that when a bank writes off a debt the issue of rebate is automatic.”
Mr. Ndzimandze : “I agree”
Mr. Nhleko : “I put it to you that once there is a write off whether voluntary or involuntary rebate kicks in.”
Mr. Ndzimandze : It is automatic yes but due to the fact that this account was based or established on fraud, the bank decided not to consider rebate.”
Mr. Nhleko : “That reasoning is still false because once a bank writes off a debt, rebate is automatic and there are no exceptions.”
Mr. Ndzimandze : “I still maintain my answer.”
[71] Noting that this question needed further clarity, the court posed to Mdluli for the plaintiff:
Court : “At the bank, if an account is written off on the ground that it was founded on fraud, what happens to rebate?”
Mr. Mdluli : “Even on fraudulent loans once there is execution, rebate is considered.”
[72] In this regard, the rebate was said to be E41 554.58. It follows that a further deduction needs to be made.
Mora Interest
[73] The general principle is that interest is not awarded to an unliquidated claim.[14] However, in the present case, plaintiff claim is clearly established on a liquidated demand. For this reason interest must be awarded.
[74] In the course of writing this judgment, the defendant’s attorney filed submissions to the effect that the plaintiff had withheld Mbali’s pension on the same basis that it intended to recover its patrimonial loss in the same transaction under litigation herein. With due respect, the court at the stage of this case could not entertain such submission. If the defendant is of the view that the plaintiff shall be unjustly enriched, then he has a recourse in law. No counter-action served before me in that regard.
[75] In the result the following orders are entered:
75.1 Plaintiff’s cause of action succeeds.
75.2 Defendant is ordered to pay plaintiff the following sums:
75. 2.1 The sum of E67 526.96;
75. 2.2 Interest thereon at the rate of 9% per annum a tempore morae;
75. 2.3 Costs of suit.
_____________________
M. DLAMINI J
For Plaintiff : S.B. Dlamini of Musa M. Sibandze Attorneys
For Defendant : H.S. Nhleko of Dunseith Attorneys
[1] See page 5 of book of pleadings
[2] See page 6 of book of pleadings
[3] See page 10 of book of pleadings
[4] See page 11 of book of pleadings
[5] Media 24 Ltd and Others v SA Tax. Securitization (Pty) Ltd (437/2010) [2011] ZASCA 117 para. 11
[6] Business Transaction Law, 7th Ed. at page 408
[7] Holmdene Brickworks’ v Roberts Construction 1977 (3) SA at 687D - F
[8] Thoroughbred Breeders Association of South Africa v Price Waterhouse (416/99) [2001] ZASCA; [2001 ]ACC SA 161 A (1 June 2001)
[9] The Law of Delict, Vol 1 653
[10] See para 64 of Price Water House case supra
[11] See para 49 herein
[12] supra
[13] Twain and Others v Premier for the Province of Eastern Cape and others (460/99) [2008] ZA ECHC 1909
(1 October 2008) at para 81
[14] Robert v Baker 1983 (3) 229 at 236
