Maguwada and Others v KPMG Services (Pty) Limited SA (22014/2019) [2021] ZAGPPHC 267 (6 May 2021)

Maguwada and Others v KPMG Services (Pty) Limited SA (22014/2019) [2021] ZAGPPHC 267 (6 May 2021)

The court held that the plaintiffs' claim is for pure economic loss arising from an alleged negligent misstatement by KPMG in the audit of VBS Mutual Bank. South African law does not recognize a general duty of care owed by auditors to employees of the audited company for such losses. The court found that imposing liability on auditors in these circumstances would create indeterminate liability, contrary to public and legal policy. The particulars of claim failed to establish wrongfulness or a legal duty owed by KPMG to the plaintiffs, and the damages claimed were not sufficiently particularized or competent in law. The constitutional rights cited by the plaintiffs were not applicable to...

Citation
[2021] ZAGPPHC 267
Parties
Plaintiff: Nditsheni Nelly Maguwada and 59 Others; Defendant: KPMG Services (Pty) Limited SA
Court
North Gauteng High Court, Pretoria
Jurisdiction
South Africa
Judgment Date
6 May 2021
Case Number
22014/2019
Procedural Posture
Exception Application / Exception to Amended Particulars of Claim Under Rule 23(1)
Outcome
Exception upheld; plaintiffs granted leave to amend particulars of claim within one month; claims to be struck out with costs if not amended.
Judges
J Yende
Legal Topics
Pure Economic Loss, Wrongfulness, Auditor Liability, Exception Procedure, Negligent Misstatement, Constitutional Rights Claim
Delict Civil Procedure Commercial and Corporate Pure Economic Loss Wrongfulness Auditor Liability Exception Procedure Negligent Misstatement +1 more

Case Brief

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Parties

Nditsheni Nelly Maguwada and 59 Others

Plaintiff

KPMG Services (Pty) Limited SA

Defendant

Procedural Posture

Exception Application / Exception to Amended Particulars of Claim Under Rule 23(1)

Legal Issues

  1. 1 Whether auditors owe a legal duty to employees of the audited company for pure economic loss.
  2. 2 Whether the particulars of claim disclose a cause of action for delictual liability against auditors.
  3. 3 Whether the plaintiffs' claims for damages are sufficiently particularized and competent in law.

Ratio Decidendi

The court held that the plaintiffs' claim is for pure economic loss arising from an alleged negligent misstatement by KPMG in the audit of VBS Mutual Bank. South African law does not recognize a general duty of care owed by auditors to employees of the audited company for such losses. The court found that imposing liability on auditors in these circumstances would create indeterminate liability, contrary to public and legal policy. The particulars of claim failed to establish wrongfulness or a legal duty owed by KPMG to the plaintiffs, and the damages claimed were not sufficiently particularized or competent in law. The constitutional rights cited by the plaintiffs were not applicable to...

Court Disposition

Exception upheld; plaintiffs granted leave to amend particulars of claim within one month; claims to be struck out with costs if not amended.

Orders

  • The excipient/defendant's exception is upheld.
  • The plaintiffs/respondents are granted leave to amend their particulars of claim within one month of the date of this order.