International Shipping Company (Pty) Ltd. v Bentley (138/89) [1989] ZASCA 138; [1990] 1 All SA 498 (A) (10 October 1989)

International Shipping Company (Pty) Ltd. v Bentley (138/89) [1989] ZASCA 138; [1990] 1 All SA 498 (A) (10 October 1989)

The Supreme Court of Appeal held that although the respondent auditor negligently certified financial statements that were materially false and misleading, and although the appellant relied on these statements in deciding to maintain and increase financial facilities to the Deals Group, the loss ultimately suffered by the appellant was too remote to give rise to liability. The court found that intervening factors, including the appellant's decision to embark on a support programme, the escalation of credit beyond authorized limits, and the changed relationship between the parties, broke the chain of causation. The court concluded that there was not a sufficiently close connection between...

Citation
[1989] ZASCA 138
Parties
Appellant: International Shipping Company (Proprietary) Limited; Respondent: Clifford Frederick Bentley
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
10 October 1989
Case Number
138/89
Procedural Posture
Civil Appeal / Appeal From the Witwatersrand Local Division, Following Dismissal of the Action With Costs
Outcome
Appeal dismissed with costs, including the costs of two counsel.
Judges
Corbett, Botha, Hefer, Smalberger, Friedman
Legal Topics
Negligent Misstatement, Auditor Liability, Causation, Remoteness of Damage, Economic Loss
Delict Commercial and Corporate Negligent Misstatement Auditor Liability Causation Remoteness of Damage Economic Loss

Case Brief

Summary, issues, holding and outcome

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Parties

International Shipping Company (Proprietary) Limited

Appellant

Clifford Frederick Bentley

Respondent

Procedural Posture

Civil Appeal / Appeal From the Witwatersrand Local Division, Following Dismissal of the Action With Costs

Legal Issues

  1. 1 Whether the respondent auditor was liable in delict for negligent misstatement to a third party financier.
  2. 2 Whether the financial statements certified by the respondent were materially false and misleading.
  3. 3 Whether the respondent acted fraudulently or negligently in reporting on the financial statements.

Ratio Decidendi

The Supreme Court of Appeal held that although the respondent auditor negligently certified financial statements that were materially false and misleading, and although the appellant relied on these statements in deciding to maintain and increase financial facilities to the Deals Group, the loss ultimately suffered by the appellant was too remote to give rise to liability. The court found that intervening factors, including the appellant's decision to embark on a support programme, the escalation of credit beyond authorized limits, and the changed relationship between the parties, broke the chain of causation. The court concluded that there was not a sufficiently close connection between...

Court Disposition

Appeal dismissed with costs, including the costs of two counsel.

Orders

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