IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
CASE NO. 281/99
In the matter between
NBS Bank Limited
Appellant
and
Cape Produce Company Pty Ltd
First Respondent
Cape Produce Company  Port Elizabeth Pty Ltd.
Second Respondent
Benjy Lapiner Children’s Trust
Third Respondent
Ronelle Lapiner Children’s Trust
Fourth Respondent
Trevor Bradley
Fifth Respondent
Before:
NIENABER, MARAIS, SCHUTZ, NAVSA JJA and
FRONEMAN AJA
Heard:
20 AUGUST 2001
Delivered: 28 SEPTEMBER 2001
Ostensible authority of a bank manager – issuing letters of undertaking to repay
deposits – part of a fraudulent scheme – not within actual authority – bank liable on
basis of estoppel.
__________________________________________________________________
J U D G M E N T

SCHUTZ JA:
[1] The keeping of two sets of books is one of the stock devices employed  by
frauds.  It was the method employed by Mr Vito Assante when he was the branch
manager of the Kempton Park branch of the appellant, NBS Bank Ltd (“NBS”).
The ordinances of the bank required that an official accepting money on fixed
deposit should enter it on the computer, so that both the receipt of the money and
the identity of the depositor would be reflected in the bank’s accounting system.  At
the same time a computer-generated certificate would be delivered to the
depositor.
[2] Mr Assante did things differently.  He had a scheme to circumvent the
prescribed procedures.  In return for deposits he would issue a typewritten letter on
a NBS letterhead,  which he signed as branch manager, undertaking that the NBS
would re-imburse the depositor with stated interest on a given day.  This letter was

not entered in the computer.  In fact, once it had been typed Assante’s typist was
required to delete it from her word processor.  The original letter issued to the
depositor would be destroyed once it was surrendered, upon the ultimate repayment
of the deposit.  The only copy went, not into the NBS’s record system, but into
Assante’s   briefcase, which he took with him when he went on leave.  That was the
one set of books.  It recorded, correctly, the NBS’s receipt of the deposit, and,
again correctly, the name of the depositor.
[3] The cheques issued by Assante’s investors named the NBS as the payee and
in the case before us were crossed and marked “Not Negotiable”.  They were
deposited to the NBS’s account with its bankers. (The NBS operated as a building
society as we once  knew them and did not offer cheque account facilities).  Its
bankers were successively First National Bank and Standard Bank.  So the NBS’s
set of books correctly recorded the one  side of the transaction, the debit to its bank
account.  But in this second set of books there was no accounting record  of the

depositor as its creditor.  This was so, because Assante and his associate, Nel, an
attorney, had ordered matters so that the credit would be passed to a “corporate
saver account” held at the NBS by Nel’s firm, Nel Oosthuizen & Kruger,  generally
referred to as “NOK”.    This type of account was evolved to cater for the likes of
attorneys and accountants, who frequently bank money on behalf of clients.
Formerly they would open separate accounts for each client.  The advantages of a
combination of these accounts were that messengers would not have to be occupied
in making deposits on behalf of each individual, and that a combined investment
would command a higher rate of interest than would separate ones. The corporate
saver account was such a combined account.  There was only one bank account
(sometimes called the umbrella account) and only one customer, the attorney (to
treat him as the example).  The bank would not keep separate financial records of
the attorney’s clients.  That would be done by the attorney who would open sub-
accounts in his books, to which individual credits would be posted.  This was

simply bookkeeping.  And that is how the money of Assante’s depositors was
treated.  But with the vital perversion that the money was not credited in NOK’s
books to the persons who had issued the cheques, but to the accounts of developers
nominated by Assante.  The depositors were unaware of this.  They  believed that
they had been credited in the books of the NBS.
[4] Another feature of the corporate saver account was that the attorney was
handed a NBS cheque book and was authorised, up to a limit, to issue  NBS
cheques, which would be charged to the corporate saver account upon payment.
Above the limit the cheque would have to be signed by NBS officials. In either
event this  allowed NOK to repay depositors with a NBS cheque, so that to all
appearances as far as the depositor was concerned, when he received a deposit slip
reflecting the deposit of a NBS cheque, the money that he had directed to be paid to
the NBS, and which he thought had been so paid, was in due course repaid to him
by the NBS.

[5] In short, the NBS’s set of books did not know the depositor and the depositor
knew only the NBS.  Almost needless to say, a scheme of this nature included
attractive interest rates and the usual panoply of  brokers receiving exceptionally
large commissions.
[6] Once the money was credited to  NOK’s corporate saver account, Assante
and Nel had  control over it.  They used that control to make advances to
developers.   The record does not reveal exactly why, but clearly these investments
went badly awry.  Some hundreds of millions went through the account.  As it was
a pyramid scheme (the money of later entrants was used to keep earlier ones
content) it could not go on for ever.  After more than two years it came to an abrupt
halt in December 1996, when a bank in Port Elizabeth raised a query with the NBS
head office in Durban about one of Assante’s letters of undertaking.   By then some
R134 million had been lost.  Some twenty actions were  instituted, by a veritable
Who’s Who of plaintiffs.  The appeal before us lies against the judgment of Nugent

J, sitting in the Witwatersrand Local division, in one of them, finding  for the four
plaintiffs before him.
[7] I have given a broad description of the fraudulent scheme as it emerges from
the record, because once it is understood the huge detail and frequent irrelevance of
the 39 volume record can  largely be passed over.   From here on I deal more
narrowly with the facts of the case before us.  In setting out the scheme I have, as
did the  trial judge, rejected the evidence of Assante and accepted the broad version
of those who contradict him on  material points.  The essential difference in version
is this.  Assante says that the plaintiffs lent directly to the developers (without even
knowing who they were), that he Assante did not receive the plaintiffs’ cheques,
which were handed directly to NOK for loan to the developers, that NBS was not
the borrower, that the brokers who dealt with the plaintiffs’ representative, one Mr
Lapiner, were fully informed of the nature of the transaction, that Lapiner was in
turn informed  by them, and by himself Assante telephonically, and that Lapiner,

dazzled by an interest rate some two percent above the market rate, took his chance
with the developers.  The essence of Assante’s version is that the NBS was not
involved at all.  The NBS has not relied on  his version as a defence, but has
contended for a lesser version, that Lapiner was “either aware of the risks involved
or deliberately closed his eyes to them,” to quote the NBS’s heads of argument.  In
other words, he is contended not to have acted reasonably in relying on Assante’s
representations.
[8] The other main defence, if the plaintiff’s version is once   accepted, is that in
any event Assante did not have authority, actual or ostensible, to issue the letters of
undertaking as he did, partly because  he was acting for his own benefit, not that of
his employer, with the consequence, so it is contended, that the NBS is not liable to
the plaintiffs in contract.
[9] There are four plaintiffs, Cape Produce Company (Pty) Ltd, Cape Produce
Company Port Elizabeth (Pty) Ltd, Benjy Lapiner Children’s Trust and Ronelle

Lapiner Children’s Trust (collectively “Cape Produce”).  Mr Benjamin Lapiner,
aforesaid, who has expertise in the field of hides and skins, throughout acted on
behalf of the four plaintiffs in making investments. The main claim pleaded was
that the NBS was contractually bound to pay the plaintiffs the combined sum of
R31.5 million, in respect of the seven fixed deposits that were not previously
repaid, plus the agreed interest on them.  The basis of the claims was that Assante
had authority to bind the NBS, either actual or ostensibe. In the alternative, and to
cover the event that Assante acted without any authority, the plaintiffs relied on the
alleged enrichment of the NBS as the basis for their claim.  Since neither of these
claims is couched in delict the question of vicarious liability does not arise.  In
giving judgment Nugent J made orders for payment on the contractual claim  in
favour of three of the plaintiffs in the sums of R 26 240.307, R 4 961 773.97 and R
2 756 541.10, with the agreed interest for the terms of the loans and mora interest
thereafter.  The NBS joined six third parties.  The first of these was Assante.  He

was declared to be  liable to indemnify the NBS.  He has not appealed.  The same
declaration was made, jointly and severally,  against the second, third and fourth
third parties.  They did not appear at the trial and are not parties to the appeal.  The
fifth third party was one Trevor Bradley, one of the brokers.  NBS’s claim against
him for indemnification failed, absolution from the instance being ordered.  The
NBS has appealed against that order. Bradley neither filed heads of argument nor
appeared at the appeal, stating that he lacked the funds to do so.  A similar claim
against another broker, one Stephenson, was postponed before the trial.  The
respondents in the appeal are accordingly the four plaintiffs and Bradley, leave to
appeal having been granted by Nugent J in respect of the five of them.
[10] In order  to explain  the conclusion which I have already expressed with
regard to the rejection of Assante’s evidence and the acceptance of that of Lapiner,
and in order to examine the issues of Assante’s authority and also Bradley’s

possible liability to the NBS, it is necessary to examine certain of the evidence
more closely.
[11] Lapiner is a businessman of experience.  It was his practice to make regular
enquiries as to what rates of interest were on offer in the market, with a view to
investing surplus cash from time to time to best advantage.  It was his practice to
invest only in what he called “Triple A” companies.  One day he came to hear of
the excellent return being offered by the Kempton Park branch of the NBS.
Assante had informed various financial brokers what was on offer.  The scheme
presented was that the NBS was lending to property developers who were prepared
to pay high rates of interest, which allowed the NBS to offer better than average
rates to substantial investors who were willing to lend NBS the funds necessary for
the purpose.  One of these brokers was Bradley.  Bradley spoke to another broker,
Mason, who knew Lapiner.  The result was a meeting between Lapiner and Mason
in October 1994.  The latter produced a blank letter of “guarantee” from the

Kempton Park branch of the NBS.  The NBS complied with Lapiner’s criterion of a
Triple A company.  The investment was to be for a period of some months.  The
interest rate offered was 15%, which Lapiner described as “slightly above the going
rate at the time”.  Lapiner  insisted in evidence that he lent on the strength of NBS’s
name.  He would have been “horrified” at the thought of his money being lent not
to the NBS but to developers whose identity he did not even know.   At no time
was he aware of  any  developers’ names, nor had he heard of Nel or NOK.  When
the improbability of an experienced businessman lending millions to an unknown
developer was put to Assante, his answer was, “[I]t does seem impossible, but that
is in fact what happened.”  The improbability, to put it at its lowest, of this
happening is compounded by the consideration that many other experienced
businessmen behaved in the same inexplicable way, that is, if Assante is to be
believed.  At this point we have a fundamental conflict of fact between Lapiner on

the one hand, and Assante on the other, and also a fundamental improbability
against Assante.
[12] To revert to the dealings between Lapiner and Mason, it was agreed that R
4.5 million would be lent for 151 days.  A cheque dated 31 October 1994 for that
amount in favour of NBS was given in exchange for either an original letter of
guarantee or a copy.  (If it was the copy then the original arrived within a few
days).    The cheque was taken away by Mason, to be couriered to the NBS,
Lapiner believed.  In fact the cheque was couriered to Bradley.     According to him
(but not Assante) the first few cheques were handed to Assante.  The later ones, on
Assante’s instructions according to Bradley, were delivered directly to NOK.  On
31 October 1994 an “Asset Dealing Advice” was issued by Mason’s firm to Cape
Produce.  It reflected the asset type as “Direct Bond (Fixed Deposit)”, stated that it
was issued by NBS Bank Ltd and stated under the settlement details:  “We collect

your cheque in favour of NBS Bank.”  This document is consistent with Lapiner’s
version and inconsistent with Assante’s.
[13] The numerous later transactions followed the same pattern as the first one.
Except in the case of the last seven investments, repayment was made by means of
a NBS cheque on due date of the capital plus accrued interest.  The second
transaction was initiated by a note dated 8 November 1994 from Mason to Cape
Produce stating: “NBS have offered the following investment: R 2.5 million @
15.0% ……… This is the same as the one we did recently.”  This note also is
inconsistent with Assante’s version.
[14] Because of their central importance it is necessary to set out the terms of the
letters issued by Assante, on the face of them on behalf of the NBS.  There were
two series, the terms of all within a series being identical.  The first series used the
word “guarantee”, the second “undertake”.  The second series was brought into use
from 28 August 1995 and the seven investments with which this appeal is

concerned, commencing on 19 June 1996, were all made against a second series
letter.  The reason why there was a change in style was that Lapiner’s attorney, one
Loon, had expressed the view that the original letter did not accurately reflect the
agreement which Lapiner had described to him, because the word “guarantee”
suggested that some unnamed third party, other than NBS, was primarily liable.
When Lapiner conveyed this view to Assante telephonically, the latter was quite
ready to change the format in future to one drafted by Loon  and also to replace still
current series one letters with series two versions.
[15] Both forms of the letter were on the NBS’s Kempton Park letterhead and
signed by Assante as branch manager.  The original one, dated 28 October 1994,
read:
“Dear Sir
FINANCE – R 4 500 000
We hereby confirm that NBS guarantees to repay the sum of R 4 779 246 . . .
on 31 March, 1995 to Cape Produce Company upon presentation of this
letter.”

The difference between the two figures was the agreed interest.
The first of the second series letters, dated 28 August 1995, read:
“Dear Sir
FINANCE R 1 500 000.00
This letter serves to confirm  that you have deposited with us the sum of R 1
500 000 . . ., which we NBS Bank Limited undertake to pay with interest at
prime upon presentation of this letter on 7 March, 1996, this will amount to
R 1 644 452.06 . . .
We also confirm that the interest rate payable in terms of the above financing
is linked to prime and in the event of an increase in this rate, the amount
payable will be adjusted proportionally.  The additional sum will be payable,
together with the amount referred to above on 7 March, 1996.” (Emphasis
supplied.)
[16] As might have been expected, Assante did not fare well when cross-
examined on these letters.  He admitted that he had no actual authority to issue the
letters of undertaking.  (This was also the gist of the evidence of the NBS’s
witnesses Norton and Munro).  Assante sought to explain the existence of the
letters as “merely giving some sort of comfort to the parties that were providing the

funding in the knowledge that there was a bank employee involved in exercising
some sort of administrative or monitoring control over the funds.”  The letters were
not meant to be enforced against the NBS.  What they reflected was an agreement
between the broker and the developer.  This simply could not and did not wash.
The “you have deposited . . . with us” he attempted to explain as being a reference
to the corporate saver account, which had a “domicile” in the NBS’s bank account.
The “we NBS . . . undertake to pay” he tried to explain as also being a reference to
the corporate saver account, but he was driven to concede that on his version of the
agreement that part of the letter was false.  Later he conceded that the letter as a
whole was false and dishonest.
[17] It is unnecessary to examine Asssante’s credibility further, other than to
quote  what Nugent J had to say about him (which is consistent with the record):
“[N]ot only was he thoroughly dishonest in the manner in which he
conducted the affairs of the NBS, but the evidence that he gave was in my view
patently dishonest in material respects.  I would not rely upon a word that he said

without proper corroboration.  Nevertheless, I should add that he is well spoken,
urbane and articulate, and he has an agile mind.  He is also able to tell even the
most obvious untruths without a flicker of emotion or unease.  It is important to
bear all that in mind when assessing the reactions of those who dealt with him.”
Was a contract concluded with  Lapiner and Assante as the actors?
[18] The NBS disputes the  plaintiffs’ contention that tacit contracts to lend
and repay money with interest are proved even if Lapiner’s evidence is accepted
and Assante’s rejected.  To my mind a series of such contracts has clearly been
established by the conduct of Lapiner and Assante.  Mason presented Assante’s
scheme to Lapiner and he accepted it.  By the time that the latter had given his
cheque and retained the letter of undertaking in each case, all the necessary terms
had been agreed.  Nor does it matter that Assante, who had signed the letter, had
the unexpressed intention that the money would not be paid to the NBS, as
Lapiner had been told it would be: Pieters and Company v Salomon 1911 AD
121 at 130.  In deciding whether a tacit contract has been concluded, the law

objectively considers the conduct of both parties and the circumstances of the
case generally: Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd: Joel
Melamed and Hurwitz v Vorner Investments (Pty) Ltd 1984(3) SA 155 (A) at 165
H and the discussion and references contained in Christie The Law of Contract  4
ed 91 et seq.  To all outward appearances there was a contract.  Had Cape
Produce and Assante been the apparent parties, there would have been a contract
between them.  But the second apparent party was the NBS, so that what remains
to be decided is  whether Assante had ostensible authority to bind the NBS, as he
claimed to do.  Before setting out the law on that subject it is convenient to deal
with a further largely  factual question, whether  Lapiner acted unreasonably in
concluding that Assante did have authority.  This question will be relevant to the
existence of ostensible authority, as will appear later in this judgment.
Did Lapiner act unreasonably?

[19] In support of its contention that Lapiner deliberately closed his eyes to
the risks involved or was aware of them the NBS relies upon the cumulative
effect of various factors. Thus the “direct bond (fixed deposit)” on Mason’s
“Asset Dealing Advice” should have told Lapiner that he was lending not to the
NBS, but some borrower giving a mortgage bond as security.  Again, the word
“guarantee” in the first series letters should have conveyed a like message.  This
ignores that Lapiner had Mason sitting before him explaining to him exactly what
form the investment took.  Among other things Mason said that the investment
was “like a fixed deposit”.  Lapiner had no reason to distrust him. He had dealt
with him before.  With reference to the “direct bond” he said that Mason could
have called it a  direct bond or “He could have called it anything.”  And in words
reminiscent of Code 4.22  (“plus valere quod agitur . . .”) he added: “No.
Because it is not what he calls it.  It is how it is done.”

[20] A more weighty point made by the NBS is the high interest rate
offered -  about 2% above the going rate for fixed deposits, and later the prime
rate itself.  Some time after the first investment had been made Lapiner
telephoned Assante, introduced himself, and asked him how he could offer such a
high rate.  Assante confirmed that the money was invested with the NBS and
explained that the NBS would be approached by property developers in need of
funds.  Having satisfied itself as to the standard of the development, the NBS
would lend money as work progressed, but on condition that when the
development was completed, the NBS would be entitled to grant bonds to
individual purchasers.  Thus, according to Assante, the NBS scored twice and
was able to offer these favourable rates.  Lapiner’s comment was that he was not
a property developer, but that the explanation sounded feasible.  At a later stage,
when interest rates were rising, and Lapiner wished to know whether the
investments would still be available, Assante responded to Lapiner’s query as to

what rate he would  get in future, by granting him the prime rate as it was to be
from time to time.  Much was made of this in argument and understandably so.
Prime is the lending rate offered by a bank to its best customers , so that it is
difficult to see how a bank can make a profit if it customarily takes deposits at
the same rate.  Lapiner had an answer of sorts, when he pointed out that the
interest received by Cape Produce was calculated at the end of the period,
whereas interest charged on overdraft is calculated daily and debited monthly,
which means that the effective rate received by Cape Produce was less than
prime.  This is true, but because of the short periods involved (some six or seven
months) it would not make much difference.  His real answer was that he had
accepted Assante’s earlier explanation as to how the NBS could pay such high
rates.  In retrospect Lapiner’s explanations about Assante’s answers raise
questions, but if people did not often accept  such explanations the frauds would
all be out of work.

[21] Then there was reference to the high rates of commission rates paid to
agents.  Lapiner’s answer to this was brief.  He was not concerned with
commissions and did not know what commissions were being paid.  His position
may have been very different if he had known of the size of the commissions, that
is, if had indeed invested after being told what they were and still claimed that he
understood he was investing in a fixed deposit. The next point was, was it not
extraordinary that only the Kempton Park branch was offering these rates?  Lapiner
responded that he had had previous experience of such a situation – when the
Port Elizabeth branch of Trust Bank had offered 2% more than any other  Trust
Bank  branch in South Africa.  The fact that a computer-generated certificate of
fixed deposit was not issued was the next reason advanced why Lapiner’s suspicion
should have been aroused.  The answer is that the man in the  street is less
concerned with the bureaucrat’s workings than the bureaucrat thinks he should be.
Something was also sought to be made of the fact that Lapiner did not make an

electronic transfer directly into the NBS’s account rather than hand a cheque to a
broker.  This is hardly a point. Not surprisingly the NBS had not warned the public
that they should not trust its brokers with more traditional forms of payment. So,
why shouldn’t they?  Moreover, looking at the matter overall, consistently with the
way in which many fraudulent schemes are operated, the victims seem to have been
flattered into believing that they were being specially privileged by being allowed
to participate in a limited number of opportunities to gain exceptional returns.
[22] In retrospect one may consider that Lapiner was too trusting.  But I agree
with Nugent J that he  was neither untruthful when he said that he accepted
Assante’s assurances, nor unreasonable in doing so.  What was  emphasized by
Lapiner was that he was dealing with a branch manager of a large branch of a
reputable bank.  This is a factor not to be underestimated.  Add to that the
description of Assante by the trial judge already quoted.  He was an accomplished
liar.  Nor did Lapiner  confine himself to speaking to an agent or broker.  Before he

made the  later investments now in issue he had spoken to Assante on the telephone
on three occasions, once about the high interest rates, once about the wording of the
letters, and upon a third occasion about the reasons why Lapiner’s Port Elizabeth
bank would not accept one of the letters as a pledge.  On that occasion his bank
manager, one Skinner, spoke to Assante on the telephone.  An explanation was
given.  Again no suspicion was aroused.  As already explained, Lapiner’s attorney
Loon, was consulted about the form of the earlier letters.  This led to an agreed
amendment, but nothing untoward was sensed.  There is yet another incident.  In
September 1996 Lapiner’s accountant, Mr Liston, received from Assante, by hand,
an audit certificate reading:  “Total amount of deposits held at 30.6.1996 R 33 000
000,00.”  This certificate was on a NBS letterhead and was signed by Assante as
branch manager.  Liston, a chartered accountant who was well acquainted  with
Lapiner’s affairs, accepted it for what it was.

[23] These events, involving not only Lapiner, but several professional persons,
depose to how persuasive Assante’s fraud was.  Add to this evidence the fact that
by the time the deposits in issue were made, some R 60m had been invested by
Lapiner all of which had already been repaid or was repaid before Assante’s
exposure, and the point which I have stressed already with regard to Assante’s
credibility – the strong improbability of the lender to Triple A companies being
indifferent to whether his money was passing into the hands of unknowns.  Given
all those circumstances I do not agree with the submission that a reasonable man
would necessarily have telephoned the NBS head office to query Assante’s
authority before proceeding to invest.  An ultra-cautious person may have done
that, but  it was the very status of Assante that might cause a reasonable man not
even to consider such a step.
Authority of Asssante to issue the letters

[24] In the appeal Cape Produce abandoned reliance on actual authority and relied
only on Assante’s having had ostensible authority to act as he did.  The distinction
between these concepts is explained simply by Denning MR in Hely-Hutchinson v
Brayhead Ltd and Another [1968] 1 QB 549 (CA) at 583 A-G:
“[A]ctual authority may be express or implied.  It is express when it is
given by express words, such as when a board of directors pass a resolution
which authorises two of their number to sign cheques. It is implied when it is
inferred from the conduct of the parties and the circumstances of the case,
such as when the board of directors appoint one of their number to be
managing director.  They thereby impliedly authorise him to do all such
things as fall within the usual scope of that office.  Actual authority, express
or implied, is binding as between the company and the agent, and also as
between the company and others, whether they are within the company or
outside it.
Ostensible or apparent authority is the authority of an agent as it
appears to others.  It often coincides with actual authority.  Thus, when the
board appoint one of their number to be managing director, they invest him
not only with implied authority, but also with ostensible authority to do all
such things as fall within the usual scope of that office.  Other people who
see him acting as managing director are entitled to assume that he has the
usual authority of a managing director.  But sometimes ostensible authority
exceeds actual authority.  For instance, when  the board appoint the
managing director, they may expressly limit his authority by saying he is not

to order goods worth more than £500 without the sanction of the board.  In
that case his actual authority is subject to the £500 limitation, but his
ostensible authority includes all the usual authority of a managing director.
The company is bound by his ostensible authority in his dealings with those
who do not know of the limitation.  He may himself do the ‘holding-out.’
Thus if he orders goods worth £1,000 and signs himself ‘Managing Director
for and on behalf of the company,’ the company is bound to the other party
who does not know of the £500 limitation . . .”
[25] As Denning M R points out, ostensible authority flows from the appearances
of authority created by the principal.  Actual authority may be important, as it is in
this case, in sketching the framework of the image presented, but the overall
impression received by the viewer from the principal may be much more detailed.
Our law has borrowed an expression, estoppel, to describe a situation where a
representor may he held accountable when he has created an impression in
another’s mind, even though he may not have intended to do so and even though
the impression is in fact wrong.  Where a principal is held liable because of the
ostensible authority of an agent, agency by estoppel is said to arise. But the law

stresses that the appearance, the representation, must have been created by the
principal himself.  The fact that another holds himself out as his agent cannot, of
itself, impose liability on him.  Thus, to take this case, the fact that Assante held
himself out as authorised to act as he did is by the way.  What Cape Produce must
establish is that the NBS created the impression that he was entitled to do so on its
behalf.  This was much stressed in argument, and rightly  so.  And it is not enough
that an impression was in fact created as a result of the representation.  It is also
necessary that the representee should have acted reasonably in forming that
impression: Connock’s (SA) Motor Co Ltd v Sentraal Westelike Ko-operatiewe
Maatskappy Bpk 1964(2) SA 47(T) at 50 A-D.  Although  an intention to mislead is
not a requirement of estoppel, where such an intention is lacking and a course of
conduct is relied on as constituting the representation, the conduct must be of such
a kind as could reasonably have been expected by the person responsible for it, to
mislead.  Regard is had to the position in which he is placed and the knowledge he

possesses.  A court will not hold a person bound by consequences which he could
not reasonably expect and are therefore not the natural result of his conduct:
Monzali v Smith 1929 AD 382 at 386, Poort Sugar Planters (Pty) Ltd v Minister of
Lands 1963(3) SA 352(A) at 364 A-B.
[26] What Cape Produce therefore has to prove in order to establish Assante’s
ostensible authority is:
A representation by words or conduct.
Made by the NBS and not merely by Assante, that he had the authority to act
as he did.
A representation in a form such that the NBS should reasonably have
expected that outsiders would act on the strength of it.
Reliance by Cape Produce on the representation.
The reasonableness of such reliance.

Consequent prejudice to Cape Produce. (This last element is clearly present
and requires no further mention).
[27] It is necessary to state that two defences that have been unsuccessfully
advanced  in the past cannot avail the NBS.  They are, first, that Assante was acting
in his own interests and in fraud not only of Cape Produce but also of his employer,
the NBS: Chappell v Gohl 1928 CPD 47, Bowstead and Reynolds on Agency 16 ed
art 766 p 402.  The second is that there existed internal restrictions on the actual
authority of Assante even though they  were not known to Cape Produce: Bowstead
para 8-045 p 391-3, Broderick Motors Distributors  (Pty) Ltd v Beyers 1968(2) SA
1 (O) 3 E-F, De Villiers and Macintosh The Law of Agency in SA 3 ed 150.  Neither
of these contentions  was squarely raised, but there were rumblings of them in the
argument.
A representation by the NBS?

[28] Turning to the first two requirements of an estoppel, the making of a
representation, by the NBS, it was argued on its behalf that the sole peg on which
Cape Produce’s case hangs is the appointment by the NBS of Assante as its branch
manager at Kempton Park.  This, the argument proceeded, is a wholly insufficient
basis .  Where an estoppel is sought to be derived from the appointment of an agent
to a particular position, the principal is considered to represent no more than that
the agent has the authority usually associated with this position (Bowstead para 8-
018 p 368).  The extent of such authority has to be proved by evidence or
established by custom, and, so it was argued, proof and custom were lacking.
Moreover, there were features of Assante’s actions which were highly unusual.
Assante was committing a fraud and there could be no usual authority to do that.
(True; but that does not end the matter).  More realistically, the finger was  pointed
at the large amounts involved, the high rates of interest, the use of a broker to
solicit business, to collect cheques and deliver the letters, which were  couched  in

an unusual format, not the usual fixed deposit certificate – and so on.  (As has been
seen above, some of these points were also raised in the context of the
unreasonableness of Lapiner’s reliance on the representations of Assante).
[29] I have several difficulties with the argument that Cape Produce’s case rests
upon the “mere appointment” of Assante.  First, the importance of such a posting is
not to be diminished.  Members of the public may have an awareness of the
existence of a head office and of specialist departments in a bank, even of a
“wholesale” as opposed to a “retail” borrowing department and of a “money
market”, but for them the branch manager is the bank, the one who is authorised to
speak and act for it, if something should be beyond the competence of a lesser
official.  And for those who may know that for some acts, for instance “wholesale”
borrowing,  even he might need the confirmation of higher authority, they are
entitled to assume that he knows his own limits and will  respect them, so that when
he speaks, he speaks with the full authority of the bank.

[30] Moreover, the  supposed unusualness of certain of the features raised
amounts to little more than a complaint that Assante did not comply with internal
rules, with which Cape Produce was unacquainted and which were not its concern.
The fact that Assante at branch level was subject to limits as to amounts and rates
of interest was an internal matter.  Whether the occasional use of a broker is
“unusual” is debatable in the light of some of the evidence led, but in any event this
feature does not go to the core of Assante’s unquestioned actual authority, which
was the taking, indeed the solicitation,  and repayment of deposits.  How he did it
and whom he employed was of no concern to Cape Produce.  The NBS’s
accounting procedures and the format of its documents were, again,  internal
matters.
[31] Nor do I agree with the argument for the NBS that Cape Produce’s case is
limited to an appointment, that there is no evidence of what a branch manager’s
usual powers are.  In fact there was a good deal of evidence, some of it elicited by

the judge.  Not surprisingly, he did not suggest that the Mason/Lapiner transaction
was everyday.  Rather he took the more homely example of the man with a million
rands to spare who has himself ushered in to the branch manager to enquire what
the latter can do for him.  In argument it was contended that his questioning of  Mr
Norton (by the time of the trial the former chief executive officer of NBS Holdings,
the holding company of NBS) was over-vigorous and calculated to overawe.  The
questioning was often pointed, even persistent, perhaps undesirably so, but it was
directed, to my mind, towards establishing, in the face of a determined rearguard
action, the relative simplicity of a matter which had been  presented as abstruse and
complicated.  What has to be decided is whether a branch manager of a bank has
the authority to accept a deposit and issue a letter of undertaking to repay.  When
the enquiry becomes focused upon ostensible authority, evidence about the internal
controls of the bank is largely irrelevant, despite the fact that the bureaucratic mind
believes that things may not happen, do not happen, and finally, cannot happen,

unless the regulations are complied with.  The outsider does not think that way.
Nor does the law.  In my opinion a great deal of time and expense was wasted on
evidence that took the NBS’s case nowhere.  Cape Produce did not help matters by
relying on actual authority up to the time that the appeal was argued.
[32] What emerges from the evidence is not a nude appointment, but an
appointment with all its trappings, set in a context.  The context was a bank, whose
business was the taking of deposits for a period at interest, and the lending of
money on security at a higher rate of interest.  It created branches to carry on this
business and it appointed managers to manage them.  Assante was appointed the
local head of this business at Kempton Park.  He commanded the staff, including
his secretary, who typed the letters and then deleted them from her computer on his
instructions, keeping her qualms to herself, whether out of fear, or loyalty, or both.
The letterhead on which the letters were typed was provided by the NBS.  The
facility was created, and it functioned, for the NBS to take Cape Produce’s cheques

into its bank account, and for its cheques to be issued in repayment. This state of
affairs continued for some 18 months with numerous repayments, without the
NBS’s own system of control detecting the abuse.  When later Lapiner telephoned
Assante  as manager he found him at Kempton Park as manager.  No doubt for
good commercial reasons the NBS did not publish to the likes of Lapiner its
internal restraints upon its managers, and it knew that people like him would be
largely ignorant of these matters.  It held out its branch managers as its front to the
world and its local spokesmen.  And even if the modern manager has disappeared
behind screens of bullet-proof glass and chattering machines, it knew that the
public still has a view as to what a bank manager is.
[33] All in all the NBS created a façade (I use that word only because I am
concentrating on outward appearances) of regularity and order that made it possible
for Assante, for a time, to pursue his dishonest schemes.  And it is in the totality of
the appearances that the representation is to be found.  That representation was that

Assante was authorised to agree terms of deposit and take money deposited, even
in  non-routine transactions such as were concluded with Lapiner.
Should the NBS have expected outsiders to act on the representation?
[34] Of course, for purposes of the enquiry whether the NBS should reasonably
have foreseen that outsiders might be misled by its actions, one must not impute
knowledge of what Assante actually did to  the NBS in pursuance of his fraud: R v
Kritzinger 1971(2) SA57 (A) at 59 H – 60 D (decided in 1953, reported in 1971).
What the NBS was aware of was the way that it presented itself, Assante, and their
relationship, to the world, as already described.  Thus it knew that Assante could
and would convey terms of receipt of deposits to investors and cause money to be
taken and repaid, which is what he did.  It also knew, as already stated, that
members of the public would be largely ignorant of its internal rules and
procedures and would therefore not be protected by them  should their operation be
perverted by a dishonest manager.  Indeed the very existence of some of these rules

makes it more difficult for a bank to escape a finding of reasonable foresight.
Many centuries of experience has taught banks that vanity, foolishness and greed
may lead a manager off the path of strict probity.  Hence at least some of the
internal restrictions and procedures have been designed to prevent or limit
consequent harm.  A thieving bank manager is not a common figure but  he is not
unknown, and a bank knows that if it has had the misfortune to employ such a one,
he will have the machinery and the status that it has placed at his disposal, to
attempt to accomplish his ends.  Therefore, even though the NBS did not foresee
exactly what Assante later did, it could reasonably have foreseen, not only that
Assante would take deposits, but even that he might thereafter misappropriate
them.
Reliance on the representation
[35] Once the evidence of Lapiner is accepted and that of Assante rejected, as is
the case, it is clear that Lapiner did in fact rely not only on what Assante conveyed

to him, but also on the NBS’s representation as to who and what Assante was and
what authority he had.  The element of causation is  established.
Reasonableness of Lapiner’s reliance on the representation
[36] Although the enquiry as to the reasonableness of Lapiner’s actions relates to
his reliance on the NBS’s representation, it is nevertheless necessary to have regard
to what was known to Lapiner more generally, which knowledge arose largely out
of the way that Assante presented himself and his scheme to Lapiner through
Mason.  My conclusion is to be found earlier in this judgment.  It is that Lapiner
acted reasonably.
Conclusion on contract
[37] My further conclusion is therefore that Cape Produce has proved its claim to
hold the NBS to its ostensible contracts of deposit, concluded through the
ostensible agency of Assante.
Performance of its obligations by Cape Produce

[38] The NBS has contended that even if the contracts have been proved, Cape
Produce is not entitled to relief because  it has failed to perform its side of the
contracts, namely to deposit moneys in the NBS bank account.  The suggestion is
that due to the manipulations of Assante and NOK the moneys were somehow
never paid to the NBS but to someone else.  I have difficulty in understanding this
argument.  The evidence is clear.  The Cape Produce cheques were deposited into
the NBS bank accounts either at First National or Standard.  When these cheques
were collected money was transferred from Cape Produce’s bank account to the
NBS bank account.  That is payment.  In the terminology of s 1 of the Banks Act
94 of 1990 it is, as one might expect, a “deposit”, meaning “an amount of money
paid by one person to another person subject to an agreement . . . .”  Nor does it
seem to me to matter that the NBS, that is apart  from Assante, did not at the time
know of Cape Produce.  It cannot be heard to complain that it was not paid when a
payment in fact was dispatched and was received by it, no doubt because of the

manner in which the payee had been nominated and the cheques crossed,
precautions taken by Lapiner, which were effective and worked. The fact that the
moneys were later misappropriated is not a matter that concerns Cape Produce, at
least in respect of contractual performance where no blame can be attributed to it.
Unjustified Enrichment
[39] Cape Produce contended that even if its claims in contract should fail, it
should in any event succeed on the basis of unjustified enrichment.  As it usually
does, this  claim led to much debate, but in view of my earlier conclusion it is
unnecessary to say anything further about it.
Conclusion on Cape Produce versus The NBS
[40] In the result I consider that Nugent J was correct in upholding Cape
Produce’s claims in contract.  The appeal by NBS against the  plaintiffs must
therefore fail.
The NBS versus Bradley

[41] The essence of the NBS’s claim against Bradley for re-imbursement was that
he had caused or allowed the cheques not to be credited to Cape Produce and that
in so doing he had acted fraudulently as part of a conspiracy of which Assante was
part, or negligently in that Bradley owed a duty of care to the NBS.  The substance
of the case sought to be established against Bradley was that he was aware that
Assante, Nel and NOK were diverting Cape Produce’s moneys away from the NBS
into the hands of the developers, yet continued to take money from Lapiner, all of
this in return for a more than handsome commission.
[42] Assante gave direct evidence of Bradley’s knowledge that the money was
going directly to the developers,  but his evidence is worthless.  Bradley’s evidence
was that after he had heard of the Kempton Park scheme, he and another broker,
Kruger, visited Assante with a view to obtaining an explanation of the scheme and
their possible participation in it.  There he obtained the explanation which
ultimately reached Lapiner, that is, on Lapiner’s version.  The borrower was to be

the NBS, not the developer.  He also was taken in by Assante’s status as branch
manager.  Kruger gave evidence in support of Bradley.  Thereafter Bradley acted as
a courier sending  Assante’s letters to Lapiner and taking the latter’s cheques to
Assante, or more usually, on Assante’s instructions, to NOK.
[43] Bradley’s major difficulty was caused by the transcript of an enquiry held by
one van As on 8 February 1997, a few days after Assante’s fraud had been exposed.
In it Bradley adopted a position intermediate between that of Lapiner and that of
Assante.  This intermediate position, however, contradicted vital parts of Bradley’s
evidence in court, which corresponded with what Lapiner said had been conveyed
to him by Mason.  To recapitulate: Assante’s evidence was that NBS was never to
be a party and that Bradley was told as much, which was the message that should
have reached Lapiner.  The borrowers from Cape Produce were to be the
developers and that was known to all.  Lapiner’s version was that the sole
contracting party on the other side was to be the NBS, which would receive a fixed

deposit.  He was not told about the developers until months after the approach by
Mason and in a context that in no way altered the sole liability of the NBS.
Bradley’s evidence in court was to similar effect.  But his statements to van As
came to this.  Bridging finance was needed by the developers and was to be
provided directly to them by the investors, who were told as much by him, acting as
go-between.  After stating “I will categorically state that all my clients know that
this is bridging finance” he proceeded:
“There is no doubt in their mind.  We even went as far, you’ve mentioned
Cape Produce now, down the line when Mr Lapiner had got au fait  with the
whole sort of system and the way the whole investment was working.  We
even got Mr Lapiner to speak to Vito, just for comfort.  Vito again explained
the whole thing to Benji Lapiner about the whole bridging development and
he is happy with it.” (Emphasis supplied.)
[44] But although the developer was to be the borrower, “the NBS would be
underwriting that investment and guaranteeing its repayment.”  The suggestion that
a fixed deposit was intended was contemptuously rejected in these words:

“[I]f we had gone in and said to any of the of the clients this is a Fixed
Deposit, my clients would have said where is my Fixed Deposit certificate.
It was never ever approached from a Fixed Deposit point of view.  The guy
knew it was bridging finance and that is the way it was explained to him.  It
was bridging finance for the developer to be repaid back to you on a certain
date and that was it.  It’s just ludicrous if anyone just sits there and says this
is a Fixed Deposit”
[45] Bradley’s statement to van As is contradicted by that of Lapiner in essential
respects.  Its veracity need not be tested further as Bradley conceded in evidence
that large parts of it were untrue.  The lame excuse he gave for telling untruths was
that he was exaggerating his own  importance and that it was only towards the end
of the meeting with van As that he realized that the finger was pointing not only at
Assante, but at him too.  The importance of his statements is that they contain an
admission that he knew that the moneys were going straight to the developers,
which was, of course, directly contrary to Lapiner’s instructions and the terms of
Assante’s letters.

[46] Nugent J took a charitable view of Bradley, saying that he did not get the
impression that he was dishonest,  rather that he was witless, but no more than that.
The fact is that his two versions show him to be thoroughly dishonest.  Nugent J
also took into account in his favour as a probability, that Nel and Assante
would not have been likely to increase their risk by revealing to him what they
were about.  I am not so sure.  Frauds in established  positions usually expect to be
successful and win the profits of their fraud without detection.  We know very little
about what was happening in NOK, but the probability is that Nel and Assante
believed that the developments would prosper and they would benefit handsomely.
In order to find the necessary bridging finance they needed brokers who knew
people with money to spare.  Bradley was such a one.  What surer way than
offering him a tempting commission?  The commissions paid seemed to vary but
they were very high, some 5 or 6 per cent.  Lapiner knew nothing of the
commissions.  Bradley, on the other hand, knew that both the rates of interest and

the commission rates were high – a warning light to any money broker: see Durr v
Absa Bank Ltd and Another 1997(3) SA 448(A) at 465 C-E.
[47] Mindful of an appeal court’s reluctance to upset the credibility finding of a
trial judge, I am  of the view that Bradley’s version given in evidence should be
rejected, and that it is probable that he was a party to the conspiracy, together with
Assante and Nel.  I have reached this conclusion without reference to the possibly
contentious evidence of Ms Malan, the effect of which was that Bradley would
sometimes instruct her as to which developer’s sub-account in the corporate saver
account was to be credited, which would show that he knew where the money was
going.  We have Bradley’s own statement that he knew, however much he might
now say that it was a lie.
[48] Accordingly I consider that the NBS’s appeal against Bradley should
succeed with costs.  Whether Bradley should be made to bear the costs recovered
from the NBS by Cape Produce, as the NBS requests,  is less clear.  On the one

hand it may be argued that the NBS should have accepted Cape Produce’s
contractual claim and saved the expense of a protracted trial.  On the other it can be
argued that in order to bring home its claim for indemnification against Assante and
Bradley the NBS would have had to call some at least of the witnesses relied on  by
Cape Produce.  Most of the witnesses that were called by the NBS would, in my
opinion, not have been needed.  A fair allocation seems to me to be that Bradley
should bear one half of the costs recovered by Cape Produce.
[49] In the result:
1.
The appellant’s appeal as against the first four respondents (the four
plaintiffs) is dismissed with costs, including the costs consequent upon the
employment of two counsel.
2.
(a)
The appellant’s appeal as against Trevor Bradley is upheld with
costs, including the costs consequent upon the employment of two counsel.

(b)
The following is substituted for paragraph 4 of the order of the
court a quo:
“4(a) It is declared that the fifth third party is liable to the defendant
jointly and severally with the first, second, third and fourth third
parties in the amounts ordered to be paid by the defendant to the
plaintiffs as set out in para 1 of this order and half the taxed costs
recoverable by the said plaintiffs from the defendant in terms of para 2
of this order.
(b)
The defendant is granted leave to approach this Honourable
Court again, on the same papers, duly supplemented, with proof of
payment by the defendant to the plaintiffs or any of them of the
judgment debt set out in para 1 of this order and half of the taxed costs
set out in para 2 of this order, for an order against the fifth third party
for payment.

(c)
The fifth third party is ordered to pay the defendant’s costs,
such costs to include those consequent upon the employment of two
counsel.”
3.
The defendant and the fifth third party (Trevor Bradley) are granted  14 days
to make written submissions if they wish to object to the form of the orders made in
paragraphs 2(b) and (c) above.  Failing such objection those parts of the order will
also become final.
WP SCHUTZ
JUDGE OF APPEAL
CONCUR
NIENABER JA
MARAIS JA
NAVSA JA
FRONEMAN AJA