THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable
Case no: 20729/2014

In the matter between:

GARY ITZIKOWITZ
APPELLANT

and

ABSA BANK LIMITED
RESPONDENT

Neutral citation:
Itzikowitz v Absa Bank Ltd (20729/2014) [2016] ZASCA 43 (31
March 2016)

Bench:

Ponnan, Cachalia, Willis and Saldulker JJA and Fourie AJA

Heard:

15 March 2016

Delivered:

31 March 2016

Summary:
Delict – pure economic loss – shareholder suing for diminution in
the value of his shareholding – wrong committed against company,
not shareholder – shareholder not entitled to recover loss.

_____________________________________________________________________

ORDER
______________________________________________________________________

On appeal from: Gauteng Local Division High of the Court, Johannesburg (Swartz AJ
sitting as court of first instance):

Save for affording the appellant 15 days to deliver a notice to amend
counterclaim A, if so advised, the appeal is dismissed and the cross-appeal is
struck from the roll in each instance with costs.
______________________________________________________________________

JUDGMENT
______________________________________________________________________

Ponnan JA (Cachalia, Willis and Saldulker JJA and Fourie AJA):

[1] This appeal and cross-appeal arise from exceptions taken by the respondent,
Absa Bank Limited (Absa) to two counterclaims by the appellant, Mr Gary Itzikowitz.
The appellant is the sole shareholder of Compass Projects (Pty) Ltd (Compass).
Compass, in turn, holds 17.29 per cent of the shares in a public company, Quantum
Properties Group Limited (QPG). QPG held 100 per cent of the shares in A Million UP
(Pty) Ltd (AMU), a property development company. Compass has a loan account in
AMU from which it is owed R5 292 442. Absa was the banker to AMU and QPG and
had extended loan facilities to AMU. After June 2010, Absa increased the loan facilities
to AMU from R390 million to over R500 million. According to Absa, as at 31 August
2011, it was owed a total of R569 318 000 by AMU.

[2] On 4 June 2012 the board of directors of AMU resolved that it voluntarily
commence business rescue. On 18 June 2012, and at the instance of Absa, the

Western Cape High Court, Cape Town (the WCHC) issued an order setting aside the
resolution of the board of AMU. On 29 June 2012 Absa applied to the WCHC for an
order that AMU be placed under provisional winding-up. It alleged that AMU was
hopelessly insolvent and unable to pay its debts. The provisional order was confirmed
and made final by the WCHC on 14 August 2012.

[3] On 30 August 2012 Absa caused a summons to be issued out of the South
Gauteng High Court, Johannesburg (the SGHC) against the appellant for payment of
the sum of R20 million together with interest and costs on the attorney and own client
scale. Absa relied for its cause of action on a suretyship signed by the appellant on 9
January 2008 in terms of which he bound himself „as a surety and co-principal debtor
jointly and severally together with‟ AMU in favour of Absa. The suretyship was „Limited
to a maximum of R20 million together with such further amounts in respect of interest
and costs as have already accrued or which will accrue until date of payment of the
amount‟. In response, the appellant filed a plea and two counterclaims – the subject of
this appeal.

[4] In support of his counterclaims the appellant alleged that AMU‟s demise was a
result of intentional, reckless or negligent conduct by Absa in: (a) advancing funds to
AMU when there was no reasonable prospect of the monies being repaid; (b) colluding
with directors of QPG and AMU, and the auditors of AMU, to ensure that they advanced
Absa‟s wishes to the detriment of AMU; (c) colluding with AMU‟s joint venture partner,
Protea Hotels, in order to secure benefits for it at the expense of AMU; (d) ignoring the
appellant‟s written request in September 2011 to cease advancing funds to AMU; and
(e) setting aside the attempted business rescue and then applying for AMU‟s winding-
up. As a result of AMU being wound up, so the allegation goes: (a) the value of QPG‟s
shareholding in AMU had reduced to nil; (b) trading in QPG shares was suspended by
the Johannesburg Stock Exchange; (c) the value of Compass‟ shareholding in QPG
was reduced to nil; and (d) Compass‟ loan amount in AMU amounting to R5 292 442
was rendered irrecoverable. By way of his counterclaims the appellant seeks to recover

from Absa the amount of the reduction in value of his shareholding in Compass, alleged
to be R50 002 338.

[5] The appellant‟s counterclaim A is founded in delict. The key allegations on which
he relies are that: (a) Absa knew that he was a surety, who had a financial interest as
an indirect shareholder in QPG and AMU; and (b) Absa knew (or more accurately
foresaw) that a winding-up of AMU would materially impact upon the value of the QPG
shares in AMU, the value of Compass shares in QPG and, correspondingly, the value of
his shares in Compass. The „legal duty‟ for his asserted delictual claim is framed thus:
„In the premises the plaintiff [Absa] owed the defendant [Mr Itzikowitz] a legal duty to conduct
itself towards AMU as a reasonable banker and not to take any decisions or to engage in any
business conduct which could adversely affect the value of shares in AMU or the value of any
loan account in AMU in material respects. The said legal duty arose directly as a result of the
banker-customer relationship between the plaintiff and QPG and between the plaintiff and
AMU.‟

[6] In counterclaim B, which was pleaded in the alternative, the appellant relies on
the same allegations of misconduct by Absa as in counterclaim A.  However, here he
relies on the provisions of s 218(2)1 read with s 22(1)2 of the Companies Act 71 of 2008.
He alleges that the devaluation of his shares in Compass qualifies as „any loss or
damage‟ contemplated by s 218(2) and that Absa‟s conduct constitutes a breach of s
22(1). This, so the allegation goes, permits him to recover the devaluation directly from
Absa.

[7] The SGHC (per Swart AJ) held:
„I am satisfied that claim A does not disclose a cause of action against the plaintiff and is bad in
law as the legal duty relied upon is non-existent. The defendant‟s claim A in reconvention is
struck out. Claim B in reconvention falls within the ambit of s 218(2) read with s 22(1) of the

1 Section 218(2) reads: „Any person who contravenes any provision of this Act is liable to any other
person for any loss or damage suffered by that person as a result of that contravention.‟
2 Section 22(1) reads: „A company must not carry on its business recklessly, with gross negligence, with
intend to defraud any person or for any fraudulent purpose.‟

Companies Act and is valid. Claim B in reconvention is allowed to proceed to trial in order for
the averments made in the claim to be proved.‟
It accordingly issued the following order:
„1.
The exception on claim A is upheld.
2.
Claim B in reconvention is allowed to proceed to trial.
3.
Each party is ordered to pay its own costs.‟
The appellant appeals against the order upholding Absa‟s exception, whilst Absa cross-
appeals the dismissal of its exception in relation to the appellant‟s counterclaim B.

[8] Counterclaim A is a delictual claim for pure economic loss. It is well-established
that in contrast to cases of physical harm, conduct causing pure economic loss is not
prima facie wrongful.3 As it was recently put by the Constitutional Court in Country
Cloud Trading CC v MEC, Department of Infrastructure Development, Gauteng [2014]
ZACC 28; 2015 (1) SA 1 (CC) para 23:
„So our law is generally reluctant to recognise pure economic loss claims, especially where it
would constitute an extension of the law of delict. Wrongfulness must be positively established.
It has thus far been established in limited categories of cases, like intentional interferences in
contractual relations or negligent misstatements, where the plaintiff can show a right or legally
recognised interest that the defendant infringed.‟ (Footnotes omitted.)
Indeed, as the Constitutional Court pertinently pointed out in Country Cloud (para 43):
„Until we are satisfied the department wronged Country Cloud, its claim does not get off the
ground‟.4

[9] Absa‟s primary contention is, in principle, very simple: It is that damage, if
suffered at all, had been suffered by AMU and that the appellant, being no more than in
the position of a shareholder thrice removed from that company, could not sue to
recover its (AMU‟s) loss or in the language of Country Cloud, that the appellant had not
been „wronged‟ by Absa. In approaching this enquiry it is important to keep certain
fundamental principles of company law in mind.5 The notion of a company as a distinct

3 Steenkamp NO v Provincial Tender Board, Eastern Cape [2005] ZASCA 120; 2006 (3) SA 151 (SCA)
para 1.
4 See also Minister for Safety and Security v Scott & another [2014] ZASCA 84; 2014 (6) SA 1 (SCA).
5 These principles are usefully discussed in 4(1) Lawsa 2 ed (2012) paras 65-70 and 76.

legal personality is no mere technicality – a company is an entity separate and distinct
from its members and property vested in a company is not and cannot be, regarded as
vested in all or any of its members.6 Generally, it is of cardinal importance to keep
distinct the property rights of a company and those of its shareholders, even where the
latter is a single entity.7 A company‟s property belongs to the company and not its
shareholders. A shareholder‟s general right of participation in the assets of the company
is deferred until winding-up, and then only subject to the claims of creditors.8 In Gohlke
and Schneider v Westies Minerale (Edms) Bpk 1970 (2) SA 685 (A) at 692E-G, Trollip
JA observed:
„The company and its members are bound only to the same extent as if the articles had been
signed by each member, that is, as if they have contracted in terms of the articles. The articles,
therefore, merely have the same force as a contract between the company and each and every
member as such to observe their provisions . . .‟

[10] Of particular relevance to the present enquiry is the following statement in
Lawsa:
„Since the shareholder‟s shares are merely the right to participate in the company on the terms
of the memorandum of incorporation, which right remains unaffected by a wrong done to the
company, a personal claim by a shareholder against the wrongdoer to recover a sum equal to
the diminution in the market value of his or her shares, or equal to the likely diminution in
dividend, is misconceived.‟9 (Footnote omitted.)
In support of that proposition, reference is made to Prudential Assurance Co Ltd v
Newman Industries Ltd (No 2) [1982] 1 All ER 354 (CA) at 366-367, in which it was
pointed out that:
„Such a “loss” is merely a reflection of the loss suffered by the company. The shareholder does
not suffer any personal loss. His only “loss” is through the company, in the diminution in the
value of the nett assets of the company . . . The plaintiff‟s shares are merely a right of
participation in the company on the terms of the articles of association. The shares themselves,

6 Dadoo Ltd & others v Krugersdorp Municipal Council 1920 AD 530 at 550.
7 The Shipping Corporation of India Ltd v Evdomon Corporation & another [1993] ZASCA 167; 1994 (1)
SA 550 (A) at 566C-D.
8 S v De Jager 1965 (2) SA 616 (A) at 625.
9 4(1) Lawsa 2 ed (2012) paras 67.

his right of participation, are not directly affected by the wrong doing. The plaintiff still holds all
the shares as his own absolutely unencumbered property.‟

[11] More recently, in Johnson v Gore Wood & Co (a firm) [2001] 1 All ER 481; [2002]
2 AC 1 (HL), Lord Bingham of Cornhill observed:
„(1) Where a company suffers loss caused by a breach of duty owed to it, only the company
may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity
and no other to make good a diminution in the value of the shareholder‟s shareholding where
that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to
make good a loss which would be made good if the company‟s assets were replenished through
action against the party responsible for the loss, even if the company, acting through its
constitutional organs, has declined or failed to make good that loss. So much is clear from
Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, particularly at 222-
223 . . . (2) Where a company suffers loss but has no cause of action to sue to recover that loss,
the shareholder in the company may sue in respect of it (if the shareholder has a cause of
action to do so), even though the loss is a diminution in the value of the shareholding.  . . . (3)
Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss
separate and distinct from that suffered by the company caused by breach of a duty
independently owed to the shareholder, each may sue to recover the loss caused to it by breach
of the duty owed to it but neither may recover loss caused to the other by breach of the duty
owed to that other.  . . .‟ 10

[12] In my view, counterclaim A falls squarely within the first category alluded to by
Lord Bingham. That being so, the following dictum from Prudential Assurance (at 222h-
223b) is particularly apposite:
„But what [a shareholder] cannot do is to recover damages merely because the company in
which he is interested has suffered damage. He cannot recover a sum equal to the diminution in
the market value of his shares, or equal to the likely diminution in dividend, because such a
“loss” is merely a reflection of the loss suffered by the company. The shareholder does not
suffer any personal loss. His only “loss” is through the company, in the diminution in the value of
the net assets of the company, in which he has (say) a 3 per cent. shareholding. The plaintiff‟s

10 Johnson v Gore Wood & Co (a firm) [2001] 1 All ER 481 (HL) at 502. See also the judgments of Lord
Hutton at 517 (51C-55G) and Lord Millett at 522 (61-66).

shares are merely a right of participation in the company on the terms of the articles of
association. The shares themselves, his right of participation, are not directly affected by the
wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property.
The deceit practised upon the plaintiff does not affect the shares; it merely enables the
defendant to rob the company. A simple illustration will prove the logic of this approach.
Suppose that the sole asset of a company is a cash box containing £100 000. The company has
an issued share capital of 100 shares, of which 99 are held by the plaintiff. The plaintiff holds
the key of the cash box. The defendant by a fraudulent misrepresentation persuades the plaintiff
to part with the key. The defendant then robs the company of all its money. The effect of the
fraud and the subsequent robbery, assuming that the defendant successfully flees with his
plunder, is (i) to denude the company of all its assets; and (ii) to reduce the sale value of the
plaintiff‟s shares from a figure approaching £100 000 to nil. There are two wrongs, the deceit
practised on the plaintiff and the robbery of the company. But the deceit on the plaintiff causes
the plaintiff no loss which is separate and distinct from the loss to the company. The deceit was
merely a step in the robbery. The plaintiff obviously cannot recover personally some £100 000
damages in addition to the £100 000 damages recoverable by the company.‟

[13] According to the appellant, this case is distinguishable from those authorities
because, so he asserts, Absa‟s conduct was „intentional‟. But, it matters not whether
Absa‟s conduct was intentional or merely negligent for the wrong was committed
against AMU and not the appellant.  As Country Cloud (para 19) reminds us, the
conduct must be wrongful, not in some general sense, but vis-à-vis the appellant. As the
relationship between a company and shareholder is contractual in nature,11 there can, it
seems to me, be no basis for distinguishing this case from Country Cloud. Moreover, as
Country Cloud makes plain, intentional conduct causing economic loss is not per se
actionable and is certainly not unlawful where the conduct involved is conduct permitted
by law. Here, one of the key allegations against Absa is that it „intentionally‟ applied to
court to liquidate AMU. The order was granted by the court and AMU was finally wound
up. It can thus hardly be open to a shareholder thrice removed to contend that Absa, the
major creditor of AMU, was legally not entitled to have applied to court to liquidate the

11 With reference to Gohlke and Schneider v Westies Minerale (Edms) Bpk 1970 (2) SA 685 (A), and
recently confirmed in Communicare & others v Khan & another [2012] ZASCA 180; 2013 (4) SA 482
(SCA) para 11.

company. To once again borrow from Country Cloud (para 43) „if [Absa] acted
permissibly in causing [the appellant] that loss, it does not matter that it did so
intentionally‟.

[14] The appellant calls in aid three decisions of the High Court in support of his
claim. In the first, McLelland v Hulett 1992 (1) SA 456 (D), a shareholder of a company
sued two of its directors for negligence, which had resulted in the diminution of the value
of his shareholding in the company. Despite recognising that the directors‟ conduct was
a wrong committed against the company, Booysen J found that the shareholder had a
personal claim against the directors. In that regard he stated (at 467B-H):
„The rule in Foss v Harbottle [(1843) 67 ER 189] is not an absolute rule . . . While it is clear that
the primary rule that a company must sue for a loss such as that in question in this case, and
not a shareholder, is a logical reflection of the concept of limited liability, in practice the real
reason why the rule must exist is linked more fundamentally to the separate existence of the
company, with the result that, if the shareholder is allowed to sue, any wrongdoer will be subject
to “double jeopardy” . . . Where, as in the present case, that risk is non-existent, and a
shareholder is left with a diminished patrimony, the continued application of the rule would
amount to an unwarranted and technical obstruction to the course of justice.‟

[15] In the second, Kalinko v Nisbet & others 2002 (5) SA 766 (W), a shareholder
sued the company‟s directors for a breach of their fiduciary duty, which allegedly
resulted in the diminution of the value of his shares in the company. The shareholder
sued personally, and not on behalf of the company. The defendant directors argued that
the conduct complained of, at best, established that the company may have a claim
against its directors to be pursued at the election of the company‟s liquidator. Claassen
J disagreed. He stated (at 778D-779C):
„It has, however, been held that a shareholder should not be entitled to institute a derivative
action where he complains that as a result of a wrong done to the company his shares have
diminished in value in circumstances where the company itself has a claim against the
wrongdoer for the loss suffered by it as a result of such wrong. This is so because to allow the
shareholder a right to claim such loss could result in “double recovery” by both the shareholder
and the company from the wrongdoer . . . In my view the mischief of a potential “double

recovery” is not a matter which is to be decided at the exception stage . . . Furthermore, it must
be remembered that the rule in Foss v Harbottle is not an absolute rule. Where the risk of
double jeopardy is non-existent and the shareholder is left with a diminished patrimony, the
continued application of the rule in Foss v Harbottle would amount to an unwarranted and
technical obstruction to the course of justice. See McLelland v Hulett 1992 (1) SA 456 (D) at
467B-H.‟

[16] Both Booysen J and Claassen J overlooked the dictum of Innes CJ in Dadoo Ltd
v Krugersdorp Municipal Council, that the conception of the existence of a company as
a separate entity distinct from its shareholders is a matter of substance.12 Instead they
allowed the likelihood of double recovery (a reason for the rule) – or more accurately its
absence – to become the basis for a novel exception to the rule. In McCrae v Absa
Bank Ltd,13 the third in the trilogy of cases relied upon by the appellant, a shareholder of
a company sued the defendant bank for the diminution of the value of his shareholdings
in four companies (where he was either the sole, or a substantial shareholder) caused
by wrongful conduct of the bank in effecting unlawful transfers of ring-fenced funds
belonging to the companies. The loss, so it would seem, had been suffered by the
companies, and the bank‟s obligation had been to the companies, not to the
shareholder. That notwithstanding, the shareholder sued in his personal capacity, not
derivatively. Adopting the reasoning of Booysen J (in McLelland) and Claassen J (in
Kalinko), Satchwell J dismissed the defendant‟s exception. In doing so, she made the
same mistake as in the two earlier judgments of failing to first determine the logically
anterior question, namely: into which of the three categories alluded to by Lord Bingham
in Johnson v Gore, did the claim fall. Since the plaintiff in McCrae was not bringing a
derivative action,14 the rule in Foss v Harbottle should have been irrelevant to an
evaluation of that claim. The key question in McCrae ought to have been whether the
plaintiff had been independently wronged by the defendant. Instead of first asking that

12 Dadoo Ltd v Krugersdorp Municipal Council 1920 AD 530 at 550.
13 McCrae v Absa Bank Limited unreported case no. 42229/2008 of the SGHC delivered on 7 April 2009.
14 Broadly stated, a derivative action (also referred to as the exception to the rule in Foss v Harbottle)
arises where a shareholder brings a claim on behalf of the company, to recover for the company a loss
which he alleges has been sustained at the hands of the individuals in control of the company. The
benefits of the action accrue to the company and not the shareholder. To the extent that the benefits
improve the balance sheet or prospects of the company, the reflective benefit may be realised in the
value of his shares.

question and determining into which category the claim fell, Satchwell J considered the
possibilities of double recovery and, being on exception, held that she could not rule out
the absence of a double recovery without evidence.15 In failing to first resolve the
anterior categorisation question, the learned judge allowed the enquiry into whether
there might be a double recovery to determine whether there was an actionable duty
owed to the shareholder.

[17] In Fourway Haulage SA (Pty) Ltd v South African National Roads Agency Ltd
[2008] ZASCA 134; 2009 (2) SA 150 (SCA) para 25, Brand JA pointed out that: „But the
absence of indeterminate liability itself will not automatically give rise to the imposition of
liability.‟ The same must hold true of the risk of double recovery. The fact that a double
recovery may not be likely in a particular situation does not create an entitlement in the
hands of a shareholder which he or she did not have in the first place. Where there is
only one wrong; that was committed against the company, the risk of double recovery
simply does not arise. The fact that the company has chosen not to sue, or is unable to
sue, does not convert that wrong into a wrong against its shareholders. The risk of
double recovery only becomes relevant when both the company and its shareholder(s)
have been independently wronged (the third category in Johnson v Gore). It is thus
necessary to first determine into which category a claim advanced by a shareholder
properly falls.

[18] The final string to the appellant‟s bow on this leg of the case is that a claim such
as this should not be decided on exception. It seems to me, however, that given the
novelty of the claim and the clear legal principles involved this is „quintessentially a
matter that is capable of being decided on exception‟.16 In Telematrix (Pty) Ltd v
Advertising Standards Authority SA [2005] ZASCA 73; 2006 (1) SA 461 para 3, Harms
JA stated:

15 Paragraph 36.
16 AB Ventures Ltd v Siemens Ltd [2011] ZASCA 58; 2011 (4) SA 614 (SCA) para 5, with reference to
Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority SA [2005] ZASCA 73;
2006 (1) SA 461 (SCA) para 3.

„Exceptions should be dealt with sensibly. They provide a useful mechanism to weed out cases
without legal merit. An over-technical approach destroys their utility. To borrow the imagery
employed by Miller J, the response to an exception should be like a sword that “cuts through the
tissue of which the exception is compounded and exposes its vulnerability”.17 Dealing with an
interpretation issue, he added:
“Nor do I think that the mere notional possibility that evidence of surrounding
circumstances may influence the issue should necessarily operate to debar the Court from
deciding such issue on exception. There must, I think, be something more than a notional or
remote possibility. Usually that something more can be gathered from the pleadings and the
facts alleged or admitted therein. There may be a specific allegation in the pleadings showing
the relevance of extraneous facts, or there may be allegations from which it may be inferred that
further facts affecting interpretation may reasonably possibly exist. A measure of conjecture is
undoubtedly both permissible and proper, but the shield should not be allowed to protect the
respondent where it is composed entirely of conjectural and speculative hypotheses, lacking
any real foundation in the pleadings or in the obvious facts.”‟ (Footnotes omitted.)

[19] Here, there seems to be a fundamental illogicality to the litany of allegations
relied upon by the appellant. It is common cause on the pleadings that Absa had lent
AMU hundreds of millions of rands. Absa was a secured creditor with a pledge over the
AMU shares held by QPG. On any reckoning, it had nothing to gain and everything to
lose by a failure of AMU. What is more is that the focus of the appellant appears to be
on the entitlement of a shareholder (in AMU) to pursue a claim for wrongs done to AMU.
The additional shareholder levels (QPG and Compass) are simply ignored. But even if
one were to assume in the appellant‟s favour that QPG as the sole shareholder in AMU
had a right of action against Absa, it remains unclear on what basis Compass (as a
17.29 per cent shareholder in QPG) also acquired such a right.

[20] In upholding Absa‟s exception to counterclaim A, the SGHC recognised that the
wrongs alleged to have been committed by Absa were all supposedly committed
against AMU in breach of duties owed by Absa to AMU. It found no facts to have been
pleaded that established a separate and independent duty owed to the appellant, a

17 Davenport Corner Tea Room (Pty) Ltd v Joubert 1962 (2) SA 709 (D) at 715H.

shareholder in Compass (three shareholding levels removed from AMU), and that
Absa‟s knowledge of his shareholding did not establish such duty. Consequently, the
court correctly found that the appellant could not proceed against Absa for wrongs done
to AMU. This principle found expression in the judgment of the English Court of Appeal
in Walker v Stones [2001] QB 902 at 932-933; [2000] 4 All ER 412 (CA) at 438-9. Sir
Christopher Slade there stated that a claimant is entitled to recover damages where:
„(a)
the plaintiff can establish that the defendant‟s conduct has constituted a breach of some
legal duty owed to him personally (whether under the law of contract, torts, trusts or any other
branch of the law) and (b) on its assessment of the facts, the court is satisfied that such breach
of duty has caused him personal loss, separate and distinct from any loss that may have been
occasioned to any corporate body in which he may be financially interested. . .‟
It follows that the appellant‟s appeal must fail with costs.

[21] Turning to Absa‟s cross-appeal: It relates to the dismissal of an exception. The
question which at once suggests itself is whether that decision is appealable. According
to Maize Board v Tiger Oats Ltd & others [2002] ZASCA 74; 2002 (5) SA 365 (SCA)
para 14:
„In the light of this court‟s interpretation of s 20, the decisions in Blaauwbosch, Wellington and
Kett, and the well-established principle that this court will not readily depart from its previous
decisions, it now has to be accepted that a dismissal of an exception (save an exception to the
jurisdiction of the court), presented and argued as nothing other than an exception, does not
finally dispose of the issue raised by the exception and is not appealable. Such acceptance
would on the present state of the law and jurisprudence of this court create certainty and
accordingly be in the best interests of litigating parties.‟

[22] It is so that Streicher JA said that in the context of s 20 of the now repealed
Supreme Court Act 59 of 1959 and that ss 16 and 17 of the Superior Courts Act 10 of
2013 differ somewhat from that provision. But it was not suggested by Absa that
anything should be made of the difference in language. Rather, so the argument went,
whilst the Maize Board principle, the correctness of which has been accepted and

followed by a long line of cases in this court,18 remained good under the new Act, it did
not find application to a cross-appeal.

[23] Howie JA pointed out in Guardian National Insurance Co Ltd v Searle NO [1999]
ZASCA 3; 1999 (3) SA 296 (SCA) at 301, that:
„As previous decisions of this Court indicate, there are still sound grounds for a basic approach
which avoids the piecemeal appellate disposal of the issues in litigation. It is unnecessarily
expensive and generally it is desirable, for obvious reasons, that such issues be resolved by the
same Court and at one and the same time. Where this approach has been relaxed it has been
because the judicial decisions in question, whether referred to as judgments, orders, rulings or
declarations, had three attributes. First, they were final in effect and not susceptible of alteration
by the court of first instance. Secondly, they were definitive of the rights of the parties, for
example, because they granted definite and distinct relief. Thirdly, they had the effect of
disposing of at least a substantial portion of the relief claimed. In this regard see Zweni v
Minister of Law and Order 1993 (1) SA 523 (A) at 532I-533B.‟19

[24] In Blaauwbosch Diamonds Ltd v Union Government (Minister of Finance) 1915
AD 599 at 601, Innes CJ said in respect of the question whether an order dismissing an
exception was final:
„It was then laid down that a convenient test was to inquire whether the final word in the suit
had been spoken on the point; or, as put in another way, whether the order made was reparable
at the final stage. And regarding this matter from that standpoint, one would say that an order
dismissing an exception is not the final word in the suit on that point [in] that it may always be
repaired at the final stage. All the Court does is to refuse to set aside the declaration; the case
proceeds; there is nothing to prevent the same law points being re-argued at the trial; and

18 See inter alia, American Natural Soda Corporation & another v Competition Commission & others 2003
(5) SA 655 (SCA) para 12; Ndamase v Functions 4 All 2004 (5) SA 602 (SCA); B v S 2006 (5) SA 540;
[2006] 4 All SA 515 (SCA) para 20; Gutsche Family Investments (Pty) Ltd & others v Mettle Equity Group
(Pty) Ltd & others 2007 (5) SA 491 para 12; Van Niekerk & another v Van Niekerk & another 2008 (1) SA
76 (SCA) para 4; Charlton v Parliament of the Republic of South Africa 2012 (1) SA 472 (SCA) para 19;
Carstens NO v Carstens [2012] ZASCA 62 (SCA) para 1; Picbel Groep Voorsorgfonds (In Liquidation) v
Somerville & related matters 2013 (5) SA 496 (SCA) para 6 and Thulamela Municipality & another v T
Tshivhase & others [2015] ZASCA 57 (SCA) para 7.
19 Zweni has been cited with approval by the Constitutional Court in International Trade Administration
Commission v SCAW South Africa (Pty) Ltd [2010] ZACC 6; 2012 (4) SA 618 (CC) para 49.

though the Court  is hardly likely to change its mind there is no legal obstacle to its doing so
upon a consideration of fresh argument and further authority.‟

[25] I must confess to having some difficulty in fully understanding the distinction
sought to be drawn by Absa. Maize Board laid down a general principle to the effect the
dismissal of every exception (save an exception to the jurisdiction of the court),
presented and argued as nothing other than an exception, is not appealable.
Importantly, Maize Board drew no distinction between appeals and cross-appeals. A
cross-appeal, as Schreiner JA pointed out in Goodrich v Botha 1954 (2) SA 540 (A) at
544, is „simply an appeal which is conveniently tacked on to another appeal.‟20 And, in
general, the rules applicable to appeals apply to cross-appeals. Moreover, the
considerations of principle and policy alluded to above that militate against entertaining
an appeal against the dismissal of an exception, must no doubt, apply with equal force
to a cross-appeal against the dismissal of an exception. Any other approach would in
effect mean that precisely the same issue, if raised by way of an appeal would not be
appealable but if raised by way of a cross-appeal would be appealable. Why, it must be
asked, should a cross-appellant be treated more favourably than an appellant? If,
indeed, the final word is yet to be spoken on the points raised in counterclaim B, as both
parties accepted before us, an appeal can hardly avail Absa at this stage. It follows that
Absa‟s cross-appeal must fail with costs.

[26] In the result:
Save for affording the appellant 15 days to deliver a notice to amend counterclaim A, if
so advised, the appeal is dismissed and the cross-appeal is struck from the roll in each
instance with costs.

_________________
V M Ponnan
Judge of Appeal

20 See also Gentiruco AG v Firestone SA (Pty) Ltd 1972 (1) SA 589 (A) at 606H-608A; National Union of
Metalworkers of SA v Henred Fruehauf Trailers [1994] ZASCA 153; 1995 (4) SA 456 (A) at 475F-G and 4
Lawsa 3 ed (2011) para 410.

APPEARANCES:

For Appellant:

M Dendy

Instructed by:

Itzikowitz Attorneys, Johannesburg

Lovius Block, Bloemfontein

For Respondent:

D Turner

Instructed by:

Webber Wentzel Attorneys, Johannesburg

Honey Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

31 March 2016

STATUS

Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.

Itzikowitz v Absa Bank Ltd (20729/2014) [2016] ZASCA 43 (31 March 2016).

The Supreme Court of Appeal (SCA) today handed down judgment relating to whether a shareholder
can sue for the diminution in value of shares due to a wrong committed against a company.

The appellant, Mr Itzikowitz, is a sole shareholder in a company (Compass) which in turn holds 17.29
per cent in another company (QPG). QPG was the sole shareholder in yet another company (AMU).
Compass is owed over R5 million by AMU through a loan account. The respondent, Absa was the
banker for AMU and QPG and had provided loan facilities to AMU which had been increased after
June 2010 from R390 million to an amount in excess of R500 million as at 31 August 2011.

On 4 June 2012 AMU’s board resolved to voluntarily commence business rescue. On 18 June 2012
Absa obtained an order setting aside the resolution in the Western Cape High Court (WCHC) and on
29 June 2012, Absa obtained an order placing AMU under provisional liquidation on the basis that
AMU was hopelessly insolvent. The provisional order was made final by the WCHC on 14 August
2012.

Then, on 30 August 2012, Absa sued Itzikowitz out of the South Gauteng High Court (SGHC) for the
payment of R20 million on the basis of a suretyship he had signed on 9 January 2008 in terms of
which he bound himself as surety and co-principal debtor jointly and severally liable with AMU in
favour of Absa in the amount to R20 million. Itzikowitz filed a plea and two counterclaims which are
the subject of the appeal to the SCA.

In his counterclaims, Itzikowitz alleged that AMU’s demise was a result of intentional, reckless or
negligent conduct by Absa in that it, among other things: advanced funds to AMU when there was no
reasonable prospect of the monies being repaid; ignoring his written request in September 2011 to
cease advancing funds to AMU; and setting aside the attempted business rescue and then applying
for AMU’s winding-up. As a result of AMU being wound up, Itzikowitz alleged that: the value of QPG’s
shareholding in AMU had reduced to nil; trading in QPG shares was suspended by the Johannesburg
Stock Exchange; the value of Compass’ shareholding in QPG was reduced to nil; and Compass’ loan
to AMU amounting to over R5 million was rendered irrecoverable. By way of his counterclaims
Itzikowitz sought to recover from Absa the amount of the reduction in value of his shareholding in
Compass, which he alleged to be R50 002 338.

In counterclaim A, founded in delict, Itzikowitz alleged that: Absa knew that he stood surety for AMU
and that he had an indirect financial interest in QPG and AMU; Absa knew and foresaw that a
winding-up of AMU would materially impact on the value of QPG shares in AMU, Compass’ shares in
QPG and the value of his shares in Compass. He alleged that Absa owed him a legal duty to conduct
itself toward AMU as a reasonable banker by not taking any adverse decisions towards AMU’s
business and share value. In counterclaim B, Itzikowitz pleaded the same allegations in the
alternative, but relying on s 218(2) read with s 22 of the Companies Act 71 of 2008. He alleged that
he could on this basis also recover the value of the devaluation directly from Absa.

The SGHC: (a) upheld the exception against counterclaim A ruling that it did not disclose a cause of
action against Absa because the legal duty relied upon was nonexistent; in respect of counterclaim B,
the SGHC (b) dismissed the exception ruling counterclaim B to be valid and that it was allowed to
proceed to trial for proof of the averment made in its respect. It was to the order under (a) that
Itzikowitz appealed, whilst Absa cross-appealed in respect of the order under (b).

As to Itzikowitz’s appeal in relation to (a), the SCA held it was a delictual claim for pure economic loss
which was not prima facie wrongful. The SCA accepted Absa’s argument that Itzikowitz being no
more than a shareholder three times removed from AMU, could not sue to recover its loss as he had
not been wronged by Absa. The SCA held in this regard that the fundamental company law principle
that a company is a separate entity had to be kept in mind. The SCA also held in the light of such
principle that Itzikowitz’s personal claim for the diminished value of his shares in AMU was
misconceived. The SCA found that it could hardly be open to Itzikowitz, a shareholder thrice removed
from AMU to contend that Absa, AMU’s major creditor, was legally not entitled to have applied to
court to liquidate the company.

The SCA further held that a claimant in the position of Itzikowitz could only recover damages, firstly
where he could establish that the wrongdoer’s conduct constituted a breach of a legal duty owed to
him personally. Secondly, where on an assessment of the facts, a court is satisfied that the breach of
duty caused the claimant personal loss that is distinct from that of the company as a separate
corporate entity. The SCA according held that Itzikowitz’s appeal had to fail with costs.

And as to Absa’s appeal in relation to (b), the SCA held that the dismissal of an exception is not
appealable. The court held that it is trite that the dismissal of an exception (save an exception to the
jurisdiction of the court) does not finally dispose of the issue and is thus not appealable.

The SCA further rejected Absa’s argument that the court had jurisdiction to entertain its cross-appeal.
It held that there is no distinction between appeals and cross-appeals as a cross-appeal is merely an
appeal that is conveniently tacked on to another appeal, thus that in general, the rules applicable to
appeals also apply to cross-appeals.

The SCA accordingly ordered, except for allowing Itzikowitz 15 days to deliver a notice to amend
counterclaim A if he is so advised, that Itzikowitz’s appeal is dismissed and that Absa’s cross-appeal
is struck from the roll, and in each these instances with costs.

--- ends ---