International Shipping v Bentley

International Shipping Co (Pty) Ltd v Bentley[1] is an important case in South African law. It was heard in the Appellate Division on 25 and 26 September 1989, with judgment handed down on 10 November. The presiding officers were Corbett CJ, Botha JA, Hefer JA, Smalberger JA and Friedman AJA. The case is especially important in the law of delict, in the area of causation and on the question of the remoteness of damages. An auditor was sued by a financing company for loss caused by negligent misstatements contained in a report by the auditor of a group of companies. This report was misleading: It did not give an accurate picture of the bleak financial situation of the group for which the company was providing financial facilities. The court found that the auditor had acted negligently and unlawfully, and so established factual causation. On appeal, however, it was held that the company's loss was too remote for the auditor to be held liable. The judgment set out the factors relevant to determining whether or not a loss is too remote.

Facts

The appellant, International Shipping, a company carrying on the business of financiers and shippers, agreed to make certain financial facilities available to the D Group of companies in early 1976. The respondent, Bentley, was appointed auditor to the D Group in November 1977. In March 1979, Bentley issued reports in respect of the financial statements of each of the companies comprising the D Group, as well as its financial statements, for the year ending 20 December 1978. In each of these reports, which were not qualified in any way, Bentley stated that he had examined the financial statements in question and had complied with the requirements of section 300 of the Companies Act,[2] and that, in his opinion, the statements fairly represented the financial position of the company as at 20 December 1978, and the results of its operations for the period then ended, in the manner required by the Companies Act.

International Shipping continued to provide these financial facilities until the liquidation of the companies comprising the D Group in April 1981. At the time of such liquidation, the total indebtedness of the D Group to International Shipping amounted to R977,318, of which only the sum of R593,826 was recovered. International Shipping thus sustained a loss in the amount of R383,492.

In April 1982, International Shipping instituted an action for damages against Bentley in a Local Division, alleging

The action was dismissed by the court a quo.

Judgment

International Shipping thereafter brought the instant appeal in which the court held

The only remaining issue was that of causation.

As far as factual causation was concerned, the court held that the respondent's negligent report on the 1978 financial statements unquestionably constituted a causa sine qua non of the appellant's loss, since a proper and non-negligent performance of his duties as auditor would have obviated the appellant's ultimate loss. With regard to legal causation, the court held that there were a number of factors which tended to separate cause and effect in the instant case, viz

The support programme amounted to uninhibited lending to the D Group without added security, which was the real cause of the appellant's loss. Such a situation was hardly foreseeable in March 1979.

The court held, further, having regard to the above-mentioned factors, that the ultimate loss suffered by the appellant was too remote for legal liability on the respondent's part to arise. The appeal was accordingly dismissed and the decision in the Witwatersrand Local Division, in International Shipping Co (Pty) Ltd v Bentley, confirmed.

See also

References

Case law

Legislation

Notes

  1. 1990 1 SA 680 (A).
  2. Act 61 of 1973.
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