Glofinco v Absa Bank Ltd. t/a United Bank (135/2001) [2002] ZASCA 91; 2002 (6) SA 470 (SCA) (30 August 2002)

Glofinco v Absa Bank Ltd. t/a United Bank (135/2001) [2002] ZASCA 91; 2002 (6) SA 470 (SCA) (30 August 2002)

The majority held that the appointment of a branch manager does not, in itself, constitute a representation that the manager is authorised to bind the bank in transactions outside the scope of ordinary branch business. The guarantees issued by Horne were not part of the ordinary business of a bank branch, as they exposed the bank to substantial risk without corresponding benefit and were not supported by evidence of customary banking practice. Braude, Glofinco's partner, was an experienced financier and was aware of the unusual nature of the transaction. His reliance was based on Horne's personal assurances rather than any representation by the bank itself. The court found that the...

Citation
[2002] ZASCA 91
Parties
Appellant: Glofinco; Respondent: Absa Bank Ltd. t/a United Bank
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
30 August 2002
Case Number
135/2001
Procedural Posture
Civil Appeal / Appeal From Witwatersrand Local Division; Trial Judgment Refusing Relief; Leave to Appeal Granted
Outcome
Appeal dismissed with costs, including costs of two counsel.
Judges
Nienaber, Schutz, Zulman, Farlam, Nugent
Legal Topics
Estoppel, Ostensible Authority, Bank Guarantees, Suretyship, Representation by Conduct
Commercial and Corporate Banking and Finance Estoppel Ostensible Authority Bank Guarantees Suretyship Representation by Conduct

Case Brief

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Parties

Glofinco

Appellant

Absa Bank Ltd. t/a United Bank

Respondent

Procedural Posture

Civil Appeal / Appeal From Witwatersrand Local Division; Trial Judgment Refusing Relief; Leave to Appeal Granted

Legal Issues

  1. 1 Whether the bank is estopped from denying liability for guarantees issued by its branch manager without authority.
  2. 2 Whether the appointment of a branch manager constitutes a representation of authority to bind the bank in such transactions.
  3. 3 Whether the transactions in question fell within the scope of ordinary banking business.

Ratio Decidendi

The majority held that the appointment of a branch manager does not, in itself, constitute a representation that the manager is authorised to bind the bank in transactions outside the scope of ordinary branch business. The guarantees issued by Horne were not part of the ordinary business of a bank branch, as they exposed the bank to substantial risk without corresponding benefit and were not supported by evidence of customary banking practice. Braude, Glofinco's partner, was an experienced financier and was aware of the unusual nature of the transaction. His reliance was based on Horne's personal assurances rather than any representation by the bank itself. The court found that the...

Court Disposition

Appeal dismissed with costs, including costs of two counsel.

Orders

  • The appeal is dismissed with costs, including the costs of two counsel.