THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No: 99/09
Not Reportable

In the matter between:

ABSA BANK LIMITED
Appellant

and

ENRICO BERNERT
Respondent

Neutral citation: ABSA v Bernert (99/09) [2010] ZASCA 36 (29 March
2010)

Coram:
NUGENT, CACHALIA, MALAN and TSHIQI JJA
and MAJIEDT AJA

Heard:
18 FEBRUARY 2010

Delivered:
29 MARCH 2010

Summary:
Claim in delict for damages – negligent misstatement
– statement not made to or relied on by plaintiff – on
facts statement in any event not false – duty of court
when separating issues.

___________________________________________________________

ORDER
___________________________________________________________

On appeal from: North Gauteng High Court (Pretoria) (Ranchod AJ
sitting as court of first instance)

The appeal is upheld with costs that include the costs of two counsel so
far as two counsel were employed. The order of the court below is set
aside and substituted with an order dismissing the claim with costs.
___________________________________________________________

JUDGMENT
___________________________________________________________

NUGENT JA (CACHALIA, MALAN and TSHIQI JJA and MAJIEDT
AJA concurring)

[1] In the course of his evidence the respondent in this appeal, Mr
Bernert, said that ‘in life you take things at face value’, and the court
below seems to have seen things in the same way. But I have found that
the evidence of Mr Merrett, of whom the trial court was rather dismissive,
serves as a more useful guide when evaluating this case.

[2] Mr Merrett is the assistant director of the Financial Investigation
Bureau of the International Chamber of Commerce. The Bureau
investigates suspicious banking and financial transactions and Mr Merrett
has considerable expertise in that field. The aspect of his evidence that I
have found to be useful is his explanation of what he called ‘financial

mist’. He said that it is common for those who engage in financial scams
to use fictitious documents, purporting to emanate from major financial
institutions and loaded with financial terminology, to create a mist that
blinds their targets to what is in truth occurring. That enables them to
induce the gullible into believing that they have wealth available for
investment and it also enables them to gauge the level of financial
sophistication of the target.

[3] This case is about documents, particularly a document that was
produced on a letterhead of the appellant, a well known financial
institution, which I will refer to as Absa Bank. Notwithstanding the
voluminous evidence the case really comes down to evaluating the
response of Absa Bank when it discovered the existence of that
document. But while the issue is narrowly confined I think it is important
to appreciate the context within which the document came to be created.

[4] There are many curious features of this case that were left
unexplained and there are many gaps in the narrative of what occurred.
That is because much of the trial was taken up with arguments between
counsel and witnesses on the meaning of documents and little interest
was shown in establishing all the facts.

[5] Before turning to the evidence in more detail I think that a brief
description of the principal characters in the story that unfolded and a
short synopsis of how this case came about will assist to explain what is
in issue in this appeal.

[6] Early in his life Mr Bernert received two years’ training as an
apprentice motor mechanic. He then joined his father’s business restoring

motor vehicles. In the course of this business he came across an
interesting design for a motor vehicle. He acquired the rights to the
design and, after making various modifications, he began building the
vehicles, which he called the ‘El Macho’. The events that led to this case
arose from his attempts to find finance to build a production plant.

[7] I have no reason to think that Mr Bernert is anything but honest or
that he was complicit in anything untoward that might have occurred. But
what emerges plainly from his evidence is that Mr Bernert was a novice
in the financial world. His evidence demonstrates that he had little
knowledge of the nature and structure of corporations or of financial
transactions in general and of financial documents in particular. I think it
is clear that the meaning that he attached to the various transactions to
which he was exposed was largely repetition of what he had been told
they meant.

[8] Mr Bernert was the sole member of Rotrax International CC, which
was the vehicle through which he hoped to develop his business. In his
search for finance to construct his production plant Mr Bernert met three
people through contact with the armaments industry.

[9] First, there was Mr Fanjek. Mr Fanjek has lived in this country
from 1967. He described himself as a businessman but the nature of his
business was not explored. The role that Mr Fanjek purported to play was
that of Mr Bernert’s agent for raising investment finance. In response to a
submission that Mr Fanjek was a liar the court below said that ‘careful
scrutiny of the relevant parts of [his] evidence shows that they were
common cause or can be inferred from the uncontested facts’. It is true
that at times the evidence of Mr Fanjek coincided with incontrovertible

facts. But except where his evidence is corroborated in that way I do not
believe a word that Mr Fanjek said. There was hardly a question to which
he gave a direct answer and for the most part his evidence was
nonsensical verbiage.

[10] Then there was Mr Dinawi, a citizen of Syria, whom Mr Bernert
met at an armaments exhibition in Abu Dhabi. Mr Dinawi held himself
out to be the ‘business manager’ of Sheikh Fawaz Bin Abdullah Al-
Khalifa. He did not give evidence at the trial.

[11] And finally there was Sheikh Fawaz himself. He volunteered at the
close of his evidence that he had come to this country to testify so as to
scotch doubts that had been expressed by Absa Bank as to his existence.
Sheikh Fawaz said that he was a member of the dynasty that has ruled
Bahrain for almost three centuries. The documents do not disclose
precisely where the Sheikh conducts business. His personal letterhead
reflects only that he receives his correspondence at a post office box in
Bahrain and at a ‘hotmail.com’ electronic address.

[12] The court below described Sheikh Fawaz as an impressive witness
but the record of his evidence does not bear that out. This court has
warned before against being seduced by the appearance of a witness at
the expense of analysing what the witness has to say.1 I have found the
evidence of the Sheikh to be almost as unimpressive as that of Mr Fanjek.
Most of his answers to questions about the transactions that I refer to later
in this judgment were incoherent and attempts to probe them in more

1 Body Corporate of Dumbarton Oaks v Faiga 1999 (1) SA 975 (SCA) at 979I-J; Commercial Union
Insurance Co of SA Ltd v Wallace NO; 2004 (1) SA 326 (SCA) paras 40-42; Medscheme Holdings
(Pty) Ltd v Bhamjee 2005 (5) SA 339 (SCA) para 13.

detail were brushed aside on the basis that those were matters that he left
to his advisers.

[13] Another person who played a prominent role was Mr Els, who was
employed as an insurance broker by Absa Brokers (Pty) Ltd. Mr Els was
deceased by the time of the trial and we thus have no tested explanation
for his unauthorised conduct, but it certainly seems to me that he was up
to no good.

[14] And then there was Mr Coetzee, who was employed by Absa Bank
as a ‘business manager’. One of his functions was to solicit deposits for
the bank. Mr Coetzee was an authorised signatory for a class of bank
transactions. The fact of his authority was reflected in a manual that is
available to banks internationally. Mr Coetzee was dismissed in
consequence of the events that gave rise to this case but he was later
reinstated. Though the explanations that he gave for his conduct are
extraordinary it is not material to this case whether or not they are true.

[15] Now a brief synopsis of what the case is about. In his search for
finance to build his plant Mr Bernert became acquainted with Mr Dinawi
and Mr Fanjek and ultimately with Sheikh Fawaz. The relationship
between them developed splendidly. The Sheikh agreed to invest millions
of dollars to construct and operate manufacturing plants on five
continents within the following five years. The precondition for this
investment was that Mr Bernert had to obtain and produce to the Sheikh a
particular document from a reputable bank. Mr Bernert duly produced the
document through the good offices of Mr Fanjek and Mr Els and Mr
Coetzee but nothing further seems to have been done on the project.
Instead Mr Bernert was invited by his new acquaintances to join them in

a new project altogether, which was to establish a company that would
deal in oil, precious metals and stones, and provide financial services and
investments. Mr Bernert was happy to do so.

[16] But all these plans came to an end when Absa Bank discovered the
document that Mr Bernert had produced. The document was on the
letterhead of Absa Bank and was addressed to Emirates Bank
International. The document had been compiled in collaboration between
Mr Fanjek and Mr Els and had been signed by Mr Coetzee. Volumes of
the evidence are taken up with argument between counsel and witnesses
on the true nature of the document. One said it was this, another said it
was that, and yet another said it was something else, and so it went on.
The court below said that the document was ‘strange and confusing’ but
felt that it was nonetheless a document that a bank might ordinarily issue.
The fact is that it was nothing of the sort. The document, when read as a
whole, was an aggregation of nonsense, decorated with financial
terminology.

[17] Once having discovered the existence of the document Absa Bank
set about attempting to retrieve it. Its attorney also wrote to Emirates
Bank informing it that the document had been issued irregularly and
without authority and that no reliance should be placed on the document
if it had been received.

[18] The Sheikh said that when he was informed of the letter by
Emirates Bank he decided that he would have nothing more to do with
the project or with Mr Bernert. Thus ended Mr Bernert’s hopes of
building his manufacturing plant – and of dealing in oil and precious
metal and stones, and providing financial services and investments.

[19] Mr Bernert sued Absa Bank in the High Court at Pretoria, as
cessionary of a claim of Rotrax. He said that Absa Bank had acted
unlawfully in causing the letter to be written to Emirates Bank. He said
that if Absa Bank had not done so, and thereby alienated the Sheikh,
Rotrax would have received the millions of dollars the Sheikh had
promised, it would have built the proposed manufacturing plant (at least
in South Africa), and it would have manufactured and sold over 10 000
cars, which would have earned it R187 million, and he claimed that
amount in damages. The court below (Ranchod AJ) found that Absa Bank
had indeed acted unlawfully and it issued a declaratory order, the terms of
which I deal with below. Absa Bank now appeals against that order with
the leave of the court below.

[20] Before turning to the detail of the evidence there is an observation
that I need to make. Before the trial commenced the parties agreed to
separate some of the issues in the case as envisaged by Rule 33(4). They
recorded their agreement in a pre-trial minute, in which they said that
they agreed to separate the ‘merits’ from the ‘quantum’ and went on to
define what they meant by the ‘merits’ with reference to certain
paragraphs of the particulars of claim. Amongst other things they said
that ‘the merits…consist of…paragraphs 11 to 18 (excluding 18.1 to
18.3)’. In paragraph 18 of the particulars of claim it was alleged that ‘[a]s
a result of the [allegedly unlawful acts], [Rotrax] suffered damages
computed as follows’ and the subparagraphs set out the calculation of the
alleged damages. In the course of the evidence of the first witness the
learned judge interposed to note that the parties had agreed to separate the
‘merits’ from the ‘quantum’ and to obtain confirmation that he was to try
only the ‘merits’.

[21] It is imperative at the start of a trial that there should be clarity on
the questions that the court is being called upon to answer. Where issues
are to be separated Rule 33(4) requires the court to make an order to that
effect. If for no reason but to clarify matters for itself a court that is asked
to separate issues must necessarily apply its mind to whether it is indeed
convenient that they be separated, and if so, the questions to be
determined must be expressed in its order with clarity and precision.2 In
some cases it might be appropriate to order the separation of the ‘merits’
and the ‘quantum’ of the claim. But to use that terminology when the
causative link between the wrongful act and the damage is a contested
element of the claim, as it was in this case, is bound to create uncertainty.

[22] In this case the court made no separation order as it was required to
do by Rule 33(4) and it gave no indication at the outset of the trial of
what it understood the ‘merits’ of the claim to entail. In its judgment it
found that the conduct of Absa Bank was unlawful and that it was ‘both
factually and legally the cause of the transaction failing’ and it said in one
sentence, without more, that ‘causality has been established’. It then
made an order declaring ‘that [Absa Bank] is liable for the proven or
agreed damages suffered by [Mr Bernert]’.

[23] At the outset of the hearing before us the legal representatives of
the parties said that they understood the court below to have disposed of
the ‘merits’ as they had been defined in their agreement with reference to
the pleadings. Thus they understood the order to mean that Absa Bank
was declared to be liable to Mr Bernert for the loss of the anticipated

2 See Denel (Edms) Bpk v Vorster 2004 (4) SA 481 (SCA).

sales of the cars. All that remained for determination, they said, was the
monetary value of those sales.

[24] I have difficulty accepting that that was indeed what the court
below intended because an order to that effect would be breathtaking. The
evidence in this case comes nowhere near establishing that if Absa Bank
had not acted as it did Rotrax would probably have constructed its plant
and manufactured and sold the cars. Indeed, the establishment of that
causative link was not even touched upon in the evidence.

[25] It is true that Mr Bernert had prepared a business plan with that as
its objective, but there is a long and often rocky path between preparing a
business plan and bringing the plan to fruition. Even if the Sheikh had
genuinely made and carried out the promise that Mr Bernert understood
him to have made (which I deal with later) there is no evidence at all that
even the first hurdle that would have then been encountered (which was
to raise a loan to build the factory) would probably have been overcome.
If the causative link was indeed one of the issues that the court was called
upon to decide then the claim ought to have failed on that ground alone.
Indeed, that causative link is inherently so speculative that I think the
claim was always doomed from the start.

[26] But in case the court below meant by its order only that Absa Bank
acted unlawfully and that it is liable for any damage that might yet be
causally linked to its conduct by adequate evidence I turn to whether
Absa Bank indeed acted unlawfully.

[27] To my mind the most noteworthy feature of the events that
occurred in this case was the preoccupation of the principal parties with
securing from Absa Bank the document I have referred to.

[28] The precondition that was set by the Sheikh for his massive
financing of the project was that the document should first be secured
before anything else was to happen. Yet the document that was required,
according to the Sheikh and Mr Fanjek, and as they explained it to Mr
Bernert, was really quite innocuous. What was required, according to
their evidence, was no more than an assurance from Absa Bank that it
would accept moneys from the Sheikh on fixed deposit, at a specified
interest rate, and that it would return the moneys when the term of the
deposit expired.

[29] One might think that the Sheikh could have obtained that assurance
by having his bank telephone Absa Bank. But the whole project, entailing
the investment of millions of dollars and the building of manufacturing
plants on five continents, was all preconditioned upon such a readily
obtainable assurance.

[30] Yet when Mr Fanjek went about securing that simple assurance he
did not approach the bank and ask for it, as one might expect him to have
done. Instead he went about things in a most unconventional way.
Moreover, he wanted the assurance to be worded in a particular way,
entailing the use of complex language studded with financial
terminology. And then when the assurance was secured nothing further
was done to progress the transaction.

[31] From the events that occurred, and also the lack of them, one might
almost think that the sole objective of the transaction was to secure the
document from Absa Bank. Certainly nothing else was achieved.

[32] I turn now to the evidence in more detail.

[33] The El Macho vehicle apparently lends itself to military and para-
military uses. In search of a market for the vehicle Mr Bernert exhibited it
at an armaments exhibition in Chile, and then again at a similar exhibition
in Abu Dhabi, where he became acquainted with Mr Dinawi. The
exhibition was held in 1995. The evidence does not fully disclose what
occurred between then and 1999.

[34] But by the middle of 1999 Mr Bernert had also made contact with
Mr Fanjek, who was introduced to him by an employee of Armscor. It
seems that by then discussions might already have been underway with
Mr Dinawi for the financing of the project. It also seems that by then Mr
Fanjek was already assisting Mr Bernert to arrange finance and had been
in contact with Mr Els. He said that he approached Mr Els because Mr
Els had previously arranged certain ‘offshore’ business for Mr Fanjek’s
wife. But that does not explain why Mr Fanjek chose to deal with Mr Els
when he knew full well that Mr Els was not employed by Absa Bank and
had no authority to do business on its behalf.

[35] On 8 July 1999 Mr Els addressed a letter to Rotrax, for the
attention of Mr Fanjek, on a letterhead of Absa Bank. Mr Els described
himself in the letter as ‘financial advisor’ and wrote as follows (sic):

‘ROTRAX CARS INTERNATIONAL
FOR ATTENTION: MR R. FANJEK
With regard to Investments within Financial Institutions and Investment Companies,
the following information is required before further consideration can be given to
your request.
1.
A mandate from overseas investor(s) stating that Mr E. Bernert (MD of Rotrax
S.A.) and Mr R. Fanjek may negotiate with Financial Institutions for the financing of
the Rotrax Projects.
2.
A description of Rotrax business plans locally and abroad and business plans for
the funds they will be receiving to be duly presented by Mr R. Fanjek
3.
A complete description and proof of the source of the funds (EG: legality,
transferring bank(s) and countries of origin).
4.
The business proposal (and/or a letter of cooperation between Rotrax Cars
International and the International Investor(s).
Subject to all the above conditions, financial institutions would consider co-operating
with the investment plan in conjunction with Rotrax Cars International.
Confidentiality between all parties concerned will be strictly adhered to at all times.
For reference on any of the above initiatives please do not hesitate to contact me.’

[36] It is curious that Mr Fanjek accepted the letter when he knew full
well that Mr Els was an insurance broker, not a financial adviser, and that
he was not authorised to conduct business on behalf of Absa Bank. The
content of the letter is curious in itself. But what is even more curious is
that Mr Fanjek had himself composed the content of the letter in a
document that he prepared a week earlier. Why Mr Fanjek should himself
have drafted what purports to be a response by Absa Bank to a request
that he had made was not explained.

[37] Meanwhile Mr Bernert had prepared a comprehensive business
plan, with the assistance of an accountant, Mr Thornton, which included
technical information, cash flow projections, and related financial

information. Upon receipt of the letter from Mr Els he handed to Mr
Fanjek various documents, including the business plan, under cover of a
letter that recorded that he had given to Mr Fanjek ‘authority to negotiate
proposed Investment for the project with Absa Bank’.

[38] Precisely what occurred immediately thereafter does not appear
from the evidence. But in September 1999 Mr Bernert travelled to Dubai,
in the company of Mr Thornton, where he met with Mr Dinawi and the
Sheikh. On 22 September 1999 a written agreement was signed by Mr
Bernert on behalf of Rotrax, and by the Sheikh on behalf of the ‘Al
Fawaz Group’. The Sheikh made a considerable effort in his evidence to
explain who the ‘Al Fawaz Group’ was but it has left me none the wiser.
But I will accept for present purposes that it was the medium through
which the Sheikh conducted business. A letterhead of the ‘Al Fawaz
Group’ reflects that it receives its correspondence at post office boxes in
Bahrain and in Dubai but does not reflect where it carries on business.

[39] The agreement purported to record the terms upon which the
Group would finance the construction and operation of manufacturing
plants in South Africa, the Middle East, Europe, the United States, South
America and Australia within the next five years. For an agreement of
that magnitude it is decidedly brief. The body of the agreement is
recorded in six pages that contain nine clauses, four of which deal with
formalities. Of the remaining five clauses, one contains definitions, and
one records the ‘territorial extent of the agreement’. The substance of the
agreement is in the other three clauses. Clause 2 deals with the
‘obligations of the Group’, clause 3 deals with the ‘obligations of the CC’
in eight lines, and clause 4 deals with the sharing of profits.

[40] Only clause 2 is now material and the following are its terms in full
(sic):
‘2.
OBLIGATIONS OF THE GROUP
The GROUP agrees to purchase 51% controlling share interest in the CC (first
territory3) including 2nd, 3rd, 4th and 5th territories4 and to finance the manufacturing
plants for the manufacturer of the vehicle in the territories, within a period of 5 years
from date of signature. The finance required for each territory is to be based on the
attached business plan.
2.1
The CC shall initially be obliged to obtain a formal undertaking and a
guaranteed interest rate for an amount of 6 (six) million U.S. Dollars from a AAA
rated South African Banking Institution.
2.2
Once a formal undertaking and guaranteed interest rate is received in writing
from the South African Banking Institution, the amount of six million U.S. Dollars
(the loan capital) will be paid from the Group’s bank account held at Emirates Bank
International in Dubai, into a said bank account in the name of the Group within
South Africa. The Group then undertakes to lodge loan capital and interest in the
interim, as security for the erection of the first manufacturing plant.
2.3
On completion of the erection of the first manufacturing plant, the loan capital
will revert to as “payment” for the controlling share interest in the CC of 51%, to Mr.
Enrico Bernert authorized representative of the CC.
2.4
The finance required as per the attached business plan Pg 18, Option 2, 5.5.
Million U.S. Dollars will be transferred to the CC on completion of erection of the
first manufacturing plant. The U.S. 5.5. Million will be deposited as additional
working capital and is non repayable by the CC or Mr. Enrico Bernert.
2.5
The obligations of the Group (Point 2.1 – 2.5) will also be the procedure for
future funding of the manufacturing plants 2, 3, 4 and 5.’

[41] Clause 2.1 required Rotrax to obtain a ‘formal undertaking and a
guaranteed interest rate’ from a South African Bank but the nature of the
‘undertaking’ that was required was not identified.

3 South Africa.
4 2nd: The G.C.C. Dubai / Saudi Arabia; 3rd: Europe / Spain; 4th: Australia / Adelaide / Perth; 5th:
U.S.A. / Latin America / Oshkosh / Mexico.

[42] The ‘undertaking’ that was required, according to the Sheikh and
Mr Fanjek, and as it was explained to Mr Bernert, was a written
assurance by Absa Bank that it would accept US $6 million on fixed
deposit, at the stipulated interest rate, and that it would return the money
when the deposit matured. The reason for that, according to the Sheikh,
was that he had not done business in this country before, and he wanted
to be sure that his money would be in good hands. One might have
thought that in the context of a project of this magnitude, to be
undertaken at massive cost, the question whether a bank would be willing
to accept a fixed deposit would be the least of their concerns. But if the
Sheikh was indeed anxious on that score, it seems to me, as I observed
earlier, that a telephone call from his bank to Absa Bank might have
sufficed.

[43] As for the remaining provisions of clause 2 both Mr Bernert and
the Sheikh said that the agreement envisaged that the Sheikh would place
US $6 million on fixed deposit with a South African Bank, and Rotrax
would then be authorised to borrow money for the construction of the
plant on the security of the deposit. Once the plant had been built the
Sheikh would hand over an additional US $5.5 million as working
capital, and in the process obtain 51% of the member interest in the
corporation. Questions directed to the Sheikh concerning the ultimate fate
of the US $6 million, particularly if it had been pledged, elicited vague
and contradictory answers.

[44] Mr Bernert returned to South Africa once the agreement was
signed and the agreement was given to Mr Fanjek under cover of a

handwritten letter, addressed to Mr Fanjek, but for the attention of Mr
Els, that read as follows (sic):
‘After a successful trip to Dubai, Mr Thornton and myself have received our j/venture
agreement from the Al-Fawaz Group, for your consideration in issueing Rotrax the
undertaking in order for the foreign investment as per the agreement to be deposited
with Absa Bank.
We have been asked to confirm that interest-rate as well as the period for which the
guarantees will be issued once the funds are deposited.
Kindly state that your terms and conditions re: your rights for withdrawal will be
limited or renewable for your initial term of guarantee.
Please return our original Joint Venture agreement a.s.a.p.’

[45] What was meant by the penultimate sentence, in the context of
what was said to have been required, is not intelligible. Nonetheless, steps
were then undertaken to obtain the document from Absa Bank. From this
point the evidence descends into farce.

[46] Mr Fanjek delivered the agreement to Mr Els and a document was
prepared by Mr Els on a letterhead of Absa Bank. In his evidence Mr
Fanjek distanced himself from the document, saying that he conveyed to
Mr Els only ‘some indications of what His Excellency Sheikh Fawaz
would be looking for’ but I have little doubt that Mr Fanjek contributed
materially to the content of the letter. Once the document had been
prepared it was signed by Mr Coetzee at the request of Mr Els. The
explanation given by Mr Coetzee for signing the document was that Mr
Els had approached him and told him that he had an overseas client who
wanted to invest money with Absa Bank but that the client wanted an
assurance in writing that the money would be safe. He told Mr Els that he
was too busy to write the letter but that Mr Els should do so and he would
sign it. Mr Els brought him the letter but he was busy with other clients

and did not read through it fully. Apart from insisting that the phrase
‘fixed deposit certificate’ should be inserted in the document he signed it
without amendment.

[47] For a simple assurance that Absa Bank would accept money on
fixed deposit, at a specified interest rate, and return the money when the
term expired, which is what the Sheikh said he wanted, the document that
was produced was decidedly complex. In fact, two documents were
produced.

[48] The documents were both addressed to Emirates Bank
International at a post office box in Dubai. One was addressed to ‘the
credit officer’ for the attention of Mr Majid Al Yousef. The other was
addressed to ‘the branch manager’ who was said to be Mr Halah
Mohammedd. But for that difference the two documents were identical.
They were dated 12 October 1999 and they read as follows (sic):
‘VERBIAGE OF BANK GUARANTEE
ABSA wishes to certify that Mr Robert Fanjek, an associate of ROTRAX, will be
guaranteed a fixed deposit on an amount of $6 mil USD (six million United States
Dollar)
at
our
bank.
On
receipt
of
funds
from
EMIRATES
BANK
INTERNATIONAL, the following will be applicable:
1. The $6 mil USD is a guaranteed Investment where the guarantee is irrevocable
and unconditional.
2. The guarantee is renewable after 12 months.
3. ABSA BANK proposes an interest rate of libor plus 1% payable to EMIRATES
BANK INTERNATIONAL. ABSA guarantees the money in US Dollars.
4. ABSA will guarantee the capital and the first quarter's interest which will be paid
in arrears. The second quarter’s interest and all quarter’s thereafter will be paid in
advance.
5. EMIRATES BANK INTERNATIONAL will approve the loan for a period of 5
years with the right of early repayment.

6. The guarantee (fixed deposit certificate) will only be issued on condition the
money is placed in ABSA BANK.
7. Simultaneously to the receipt of funds, ABSA will issue the said guarantee (fixed
deposit certificate) to EMIRATES BANK INTERNATIONAL in their favour.
8. Any cheques received from EMIRATES BANK INTERNATIONAL must be a
bank guaranteed cheque payable to ABSA BANK. Mr Robert Fanjek is giving the
bank certain guarantees on ROTRAX on behalf to secure the guarantee to
EMIRATES BANK INTERNATIONAL.
9. The guarantee (fixed deposit certificate) is legal in terms of international banking
practices.’

[49] Mr Coetzee said that he was asked by Mr Els for his signature on a
number of occasions and that he was under the impression on each
occasion that he was being asked to sign amended drafts of the document.
In fact he signed not only the two documents I have described, but also
three other documents, dated about a month later, which were given to Mr
Fanjek. Each of those documents was in much the same terms as the
documents that were addressed to Emirates Bank, except that in each case
the addressee, and the amount of the ‘investment’, differed. One was
dated 15 November 1999 and was addressed to ‘The CEO, Bank of
Commerce, Development and Industry’ and the stated amount of the
‘investment’ was US $12 million. Another was dated 17 November 1999,
addressed to ‘BIAC Bank’ in Kinshasa, and the amount was US $20
million. The third was dated 19 November 1999, addressed to ‘LG
International (UK) Ltd’ in Sandton, and the amount was US $6.8 million.

[50] Mr Bernert was unaware of the existence of those three documents
until much later. What Mr Fanjek was up to in obtaining those documents
was never adequately explained. This is the clearest explanation that I
have found in the evidence of Mr Fanjek:

‘I had some ideas of also proposing these projects on my behalf, because of the
similar procedures in terms that I did succeed to obtain such a document from Mr
Rico Bernert. So I thought it would only be logical to do this myself as well, as
everything was on board.’
As I understand that evidence Mr Fanjek was saying that since documents
of this kind were readily forthcoming he thought that he might just as
well have some for himself.

[51] Mr Fanjek gave Mr Bernert the letter addressed to Mr Majid Al
Yousuf and Mr Bernert said that he faxed it to Emirates Bank. I do not
find it surprising that he did not receive a response from Emirates Bank.
Instead he received a letter from Mr Dinawi, dated 17 November 1999,
proclaiming itself to have emanated from the Al-Fawaz Group. The letter
was as follows (sic):
‘With reference to the ABSA Document dated 12/09/1999 – REF NO: A62961. The
credit officer who is also the personal Bank officer of H.E. Sheikh Fawaz Bin
Abdullah Al-Khalifa at Emirates Bank International, Al Maktoum Branch, Dubai, Mr
Majid Al Yousuf has received your fax copy of undertaking by ABSA Bank dated
12/10/1999 - Ref No A62961, which contains the terms and conditions for issuing of
the fixed deposit certificate and that the terms set out are within international Banking
practice.
It is therefore my great pleasure on behalf of H.E. and the Al-Fawaz Group to inform
you of [our] acceptance of the Absa Bank undertaking Ref No: A62961 and that you
and your colleagues are invited to meet with H.E. personally in Bahrain, in order for
you to present the original Document as per our joint venture agreement and to
discuss the timing of investment.
Kindly confirm your travel details of the 1st week of February 2000, visas to be
collected on arrival at Bahrain International Airport, cost of travel will be reimbursed
and accommodation will be provided by the Al-Fawaz Group.’

[52] Once more one might ask why the ‘timing of the investment’ called
for discussion. Clause 2.2 of the agreement was perfectly clear. Once the
‘undertaking’ had been received the money would be deposited. And one
might ask why the ‘original document’ was required to be presented to
the Sheikh. The document, after all, was not intended to be presented to
third parties, but was there to satisfy the Sheikh that an assurance had
been given, and it is apparent from the letter that he was perfectly
satisfied that it had been given.

[53] Mr Bernert nonetheless travelled to Bahrain in February,
apparently to hand over the original document, in the company of Mr
Thornton and Mr Fanjek. The Al-Fawaz group seems to have overlooked
its offer to pay the expenses because Mr Bernert said that he paid most of
the travel and accommodation costs himself.

[54] The evidence does not tell us whether they talked about the ‘timing
of the investment’ but they certainly must have talked about branching
out into a new line of business altogether. Because on 14 February, in
Bahrain, a further document was signed by Mr Bernert and his new
acquaintances, as well as by Mr Thornton. The document was in the
following terms (sic):
‘MEMORANDUM OF ASSOCIATION
BETWEEN
SHAIKH FAWAZ BIN ABDULA AL-KHALIFA
(Passport No . . .)5
ENRICO BERNERT
(Passport No: . . .)
GHASSAN DINAWI
(Passport No: . . .)
ROBERT FANJEK
(Passport No: . . .)
ROBERT THORNTON
(Passport No: . . .)

5 I have omitted details of the passports.

1.
Whereas the above mentioned parties have agreed to enter a formal business
relationship.
2.
The business will one established and maintained through the medium of a
limited liability company registered in BAHRAIN under the name AL FAWAZ
GROUP L.L.C.
3.
The business will be established with a share capital of BD (N/A)
(Establishment capital) which amount will be reflected as a loan to the company.
4.
The establishment capital will be provided by Sheikh Fawaz AL-Khalifa.
5.
The registration and all costs associated with the registration and establishment
of the company will be borne out of the establishment capital.
6.
The object of the business will be to establish a general trading company which
will include but not limited to the following:
(i)
Dealing in oil and/or precious metals and stones,
(ii) Financial services and investments.
(iii) Any other business the shareholders approve.
7.
The shareholders reserve the right to amend the objectives of the business at any
time.
8.
The shareholding of the company will be as follows:”
 SHAIKH FAWAZ BIN ABDULA AL-KHALIFA
30%
 GHASSAN DINAWI
20%
 ENRICO BERNERT
20%
 ROBERT FANJEK
15%
 ROBERT THORNTON
15%
9.
Shareholders voting rights will be in proportion to their shareholding.
10. All matters must be approved by the shareholders in a general meeting and
approval requires a simple majority of shareholders.
11. Shareholders may only dispose of their shareholding on death or retirement to
their immediate family (directly or indirectly). If a shareholder wishes to dispose of
his holding under any other circumstances he must first offer it to the existing
shareholders who may purchase the shares in proportions to their shareholding or as
may be agreed by all existing shareholders. The valuation will be negotiated or if
deadlocked by the valuation of independent auditors.’

[55] It was soon thereafter that Absa Bank intervened and set about
retrieving the document. That was the end of the project. By then all that
had been achieved in the project to manufacture cars was the securing of
the Absa Bank document.

[56] Absa Bank’s intervention arose from information that it received
from a banking official in December 1999. Absa Bank was informed of
the existence of two of the documents that Mr Fanjek had obtained from
Mr Els. Mr Van Tonder, a former police detective who was employed as
an investigator in the forensic services division of Absa Bank, was
instructed to look into the matter.

[57] Mr Van Tonder interviewed Mr Coetzee and Mr Els and towards
the end of January 2000 he met with Mr Fanjek and asked him to return
the documents. Mr Fanjek declined to do so. The reason he gave is not
material. In February 2000 Absa Bank instituted proceedings against Mr
Fanjek in the high court, as a matter of urgency, for an order, amongst
other things, compelling him to return the documents. On 11 February
2000 an order was issued calling on Mr Fanjek to show cause why such
an order should not be made, and a final order compelling him to return
the documents was made on 24 May 2000.

[58] Mr Fanjek was in Bahrain with Mr Bernert at the time the
proceedings were launched, but the fact that the proceedings had been
instituted was brought to his attention. Mr Bernert also became aware of
the proceedings but felt that they had nothing to do with him. The
proceedings must also have come to the Sheikh’s attention because on 21
February 2000 Mr Dinawi wrote to Mr Bernert as follows:

‘Reference to our telephone conversation concerning the bank document you have
issued us with I regret to inform you, that after consulting with our bank H.E. will not
continue with the project or the investment until you or the issuer bank have given us
solid confirmation that there are no problems with this transaction or documents
supplied by you.’

[59] It was when Mr Fanjek handed over documents in compliance with
the order that was made on 24 May 2000 that Absa Bank discovered the
existence of the documents that had been given to Mr Bernert. Mr Bernert
was asked to return the documents but he refused to do so, and once
more, Absa Bank brought proceedings compelling their return. I need not
deal with those proceedings. It is sufficient to say that the documents
were recovered.

[60] On 30 May 2000 Absa Bank’s attorney, Mr Joubert, wrote a letter
to Emirates Bank in the following terms:
‘1.
We act on behalf of ABSA Bank Limited.
2.
It has come to our client's attention that a letter dated 12 October 1999 with
reference number A62961 on our client’s letterhead with the heading “Verbiage Of
Bank Guarantee”, was addressed to you.
3.
A copy of this letter is attached hereto for ease of reference.
4.
The purpose of this letter is to advise you that the letter was issued by a person
not authorized thereto, was issued in irregular circumstances and should be
disregarded by you.
5.
Should you in fact have received this letter, we shall be pleased to be advised
thereof.’

[61] That is the letter upon which the claim is founded. Sheikh Fawaz
said that when Emirates Bank brought the letter to his attention he was
shocked because he thought that something fraudulent might be afoot and
he terminated his relationship with Mr Bernert and the project. Why he

made no enquiries as to the bona fides of Mr Bernert, and why he did not
resume the project once his bona fides had been established, was left
unexplained.

[62] Although the letter dated 21 February 2000 indicates that the
Sheikh had decided not to proceed with the transaction until he had ‘solid
confirmation’ from Absa Bank that there were ‘no problems with ... the
documents’, which he never received, I have assumed for present
purposes that it was indeed the letter written to Emirates Bank on 30 May
2000 that caused the Sheikh to withdraw from the project. It was the
sending of that letter that serves as the basis of the claim.

[63] Three claims were brought by Mr Bernert, framed in the
alternative. The main claim was for breach of contract but that has been
abandoned. The second alternative claim was for alleged interference in
Rotrax’s contractual relations with the Sheikh and that has also been
abandoned. I need deal only with the first alternative claim.

[64] That was a claim that was framed in delict. It was alleged in the
particulars of claim that the letter written by Absa Bank’s attorney was
written ‘wrongfully’ and ‘intentionally or negligently’ in that Absa Bank
or its representatives
‘failed to ascertain the true position and circumstances under which [the document]
was obtained by [Rotrax] from [Absa Bank]; alternatively
were aware of the circumstances under which [the document] was obtained by
[Rotrax] from [Absa Bank].’

[65] The court below dealt with the claim on a rather different basis. It
said that the letter that was written by the attorney contained

misstatements that were wrongfully and negligently made. The
statements that were false, according to the court below, were the
statements that the document had not been authorised and that it had been
issued in irregular circumstances.

[66] The court went on to say that our law recognises liability for a
negligent misstatement resulting in pure economic loss. It relied in that
regard on Bayer South Africa (Pty) Ltd v Frost,6 and other cases to the
same effect.7 Those cases all concerned misstatements that were relied
upon by the plaintiffs to their prejudice. That is not the case before us. In
this case the allegedly false statements were not made to Mr Bernert and
his alleged loss did not arise from his reliance on the statements. The
statements were made to Emirates Bank.

[67] When that distinction was drawn to his attention the learned judge
said that the distinction was ‘irrelevant’. He said that he was supported in
that radical view by the decided cases that follow. None of those cases
provide that support, whether directly or by extension. Aucamp v
Univeristy of Stellenbosch,8 Perlman v Zoutendyk,9 and Standard
Chartered Bank of Canada v Nedperm Bank Ltd,10 were all concerned
with misstatements upon which the respective plaintiffs relied. Indac
Electronics (Pty) Ltd v Volkskas Bank Ltd11 was not concerned with
misstatements but with the liability of banks for negligently collecting
cheques. Nor was Tsimatakopoulos v Hemingway, Isaacs & Coetzee

6 1991 (4) SA 559 (A).
7 Mukheiber v Raath & another 1999 (3) SA 1065 (SCA); OK Bazaars (1929) Ltd v Standard Bank of
South Africa Ltd 2002 (3) SA 688 (SCA); Aucamp & others v University of Stellenbosch 2002 (4) SA
544 (C); Kantey & Templer (Pty) Ltd & another v Van Zyl NO 2007 (1) SA 610 (C).
8 Cited above.
9 1934 CPD 151.
10 1994 (4) SA 747 (A).
11 1992 (1) SA 783 (A).

CC.12 That case concerned liability to a subsequent owner of property
upon which a wall had been constructed negligently.

[68] But I do not think we should dispose of this case on the law
because it can just as well be disposed of on the facts.

[69] In the course of its judgment the court below said that Mr Merrett,
who opined that the document had features of financial ‘mist’, and Mr
Van Tonder, who was of the same opinion, were delinquent in not
‘looking at the total picture’ before forming their opinions.

[70] It seems that what the court had in mind was that if the witnesses
had obtained the ‘total picture’ they would have understood, which is as
the court understood it, that the document was meant to be an assurance
by Absa Bank to accept a fixed deposit, and to return the money when the
deposit matured, as the Sheikh and Mr Fanjek had explained. And once
that had been understood they would have realised that it fell within the
authority of Mr Coetzee to sign the document, because he had authority
to solicit fixed deposits, which was what the court found. Thus, the court
concluded, the statements in the letter that the document was issued
without authority, and in irregular circumstances, were false, and Absa
Bank was liable for the consequences.

[71] I am not altogether sure that the court below fully appreciated what
this case was about. This was not a claim to enforce the terms of a
contract, in which event the understanding of the parties to the document
might have been relevant. The claim was that Absa Bank was not
justified in advising Emirates Bank that the document had been issued

12 1993 (4) SA 428 (C).

without authority and in irregular circumstances.  In those circumstances
the question was not how the Sheikh or Mr Fanjek or even Mr Bernert
understood the document. The question was whether Absa Bank was
obliged to allow Emirates Bank, and indeed others to whom it might have
been presented, to rely upon its authenticity.  Clearly it was not obliged to
do so if the document was capable of misleading third parties.  Both Mr
Merritt and Mr Van Tonder believed that the document was indeed
capable of misleading third parties and they were perfectly correct.

[72] It needs to be borne in mind that the meaning that was given to the
document by the witnesses, and by the court, was teased out from
selected passages from the document, while ignoring other passages
altogether. And if one meaning can be teased out of selected passages,
when read in isolation, then a different meaning is capable of being
teased out from contradicting passages, when they are also read in
isolation. In my view the court below ought to have directed itself less to
what the witnesses told it that the document meant, and more to what
third parties might have thought it meant, particularly if they were told
that it had a different meaning.

[73] I do not intend going through the document in detail. It is sufficient
to say that at the commencement of argument Mr Bernert’s attorney was
asked to suggest a coherent meaning of the document when all its terms
are read as a whole. He was not able to do so and the reason for that is
plain. When all the terms are read together the document is a
compendium of gibberish. I have no doubt that a document containing
gibberish on the letterhead of a major financial institution is capable of
misleading third parties as to its meaning, perhaps even more so if it is
presented in the context of documentation indicating that it is part of a

larger transaction, and that Absa Bank was entitled to ensure that that did
not occur.  The fact that the document might not have been intended to be
used in that way is immaterial.  Absa Bank was not to know where the
document might have ended up. I think it goes without saying that
whatever authority Mr Coetzee might have had he had no authority to
issue gibberish that had the potential to mislead, and that the issuing of
gibberish that might mislead does not fall within the regular business of a
bank.

[74] What was said to Emirates Bank by Absa Bank’s attorney was
perfectly correct and Absa Bank cannot be faulted for instructing him to
say it. Indeed, had Absa Bank done nothing to ensure that the document
did not remain in circulation, and to ensure that no reliance was placed on
it, once it knew of its existence, I think its failure would have been
nothing short of reckless.

[75] In my view this claim ought to have failed at every step. I find it
surprising that it was brought at all.

[76] The appeal is upheld with costs that include the costs of two
counsel so far as two counsel were employed. The order of the court
below is set aside and substituted with an order dismissing the claim with
costs.

___________________
R W NUGENT
JUDGE OF APPEAL

APPEARANCES:

For appellant:
S W Burger

Instructed by Routledge Modise in association with
Eversheds

C/o Dyason Attorneys, Pretoria

Symington & De Kok

For respondent:
D J L Nel (attorney)

Instructed by Louis Nel Inc, Pretoria

Rossouw & Conradie Inc, Bloemfontein8