Cape Empowerment Trust Ltd v Fisher Hoffman Sithole (200/11) [2013] ZASCA 16; [2013] 2 All SA 629 (SCA); 2013 (5) SA 183 (SCA) (20 March 2013)

Cape Empowerment Trust Ltd v Fisher Hoffman Sithole (200/11) [2013] ZASCA 16; [2013] 2 All SA 629 (SCA); 2013 (5) SA 183 (SCA) (20 March 2013)

The Supreme Court of Appeal held that, although the respondent auditor was grossly negligent in issuing a false profit certificate, the appellant failed to establish the elements of wrongfulness and legal causation required for delictual liability for pure economic loss. The court found that the appellant had contractual remedies and safety nets, such as warranties and a due diligence investigation, which it failed to utilize. The appellant's own conduct in allowing the agreement to lapse and subsequently reinstating it for tax benefits rendered it the author of its own misfortune and broke the causal chain. The degree of negligence was not relevant to the imposition of liability....

Citation
[2013] ZASCA 16
Parties
Appellant: Cape Empowerment Trust Limited; Respondent: Fisher Hoffman Sithole
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
20 March 2013
Case Number
200/11
Procedural Posture
Civil Appeal / Appeal and Cross Appeal From Western Cape High Court
Outcome
Appeal dismissed with costs; cross-appeal upheld with costs; appellant's claim dismissed.
Judges
Brand, Maya, Cachalia, Shongwe, Swain
Legal Topics
Negligent Misstatement, Pure Economic Loss, Wrongfulness, Legal Causation, Auditor Liability
Delict Commercial and Corporate Negligent Misstatement Pure Economic Loss Wrongfulness Legal Causation Auditor Liability

Case Brief

Summary, issues, holding and outcome

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Parties

Cape Empowerment Trust Limited

Appellant

Fisher Hoffman Sithole

Respondent

Procedural Posture

Civil Appeal / Appeal and Cross Appeal From Western Cape High Court

Legal Issues

  1. 1 Whether the respondent auditor is delictually liable for pure economic loss resulting from a negligent misstatement.
  2. 2 Whether the degree of negligence is relevant to the imposition of liability for negligent misstatement.
  3. 3 Whether wrongfulness and legal causation were established on the facts.

Ratio Decidendi

The Supreme Court of Appeal held that, although the respondent auditor was grossly negligent in issuing a false profit certificate, the appellant failed to establish the elements of wrongfulness and legal causation required for delictual liability for pure economic loss. The court found that the appellant had contractual remedies and safety nets, such as warranties and a due diligence investigation, which it failed to utilize. The appellant's own conduct in allowing the agreement to lapse and subsequently reinstating it for tax benefits rendered it the author of its own misfortune and broke the causal chain. The degree of negligence was not relevant to the imposition of liability....

Court Disposition

Appeal dismissed with costs; cross-appeal upheld with costs; appellant's claim dismissed.

Orders

  • The appeal is dismissed with costs including the costs of two counsel.
  • The cross-appeal is upheld with costs including the costs of two counsel.