THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:
876/12

Reportable

In the matter between:

ABSA BANK LIMITED

Appellant

and

MAHOMED ARIF

First Respondent
ABDUL SHIRAZ                                                                          Second Respondent

Neutral citation:  Absa Bank Ltd v Mahomed (876/12) [2012] ZASCA 1 (20 January

2014)

Coram:

Maya, Malan, Petse, Willis and Saldulker JJA

Heard:

21 November 2013

Delivered:

20 January 2014

Summary: Banker – liability of a commercial bank for illegal and unauthorised transactions
purportedly concluded in its name by its agent – appellant bank’s agent and
respondents concluding interest bearing deposit investment agreements using
fictitious account holder names to conceal undeclared taxable funds from SARS –
bank agent misappropriating funds  – no trace of respondents’ deposits on bank’s
processing systems and records – bank agent not duly authorised to represent bank
in concluding illegal agreements designed to defraud the fiscus – respondents failing
to establish their pleaded causes of action and bank’s appeal upheld.

__________________________________________________________________
ORDER
___________________________________________________________________________________

On appeal from: South Gauteng High Court, Johannesburg (Maluleke J sitting as
court of first instance):

1 The appeal is upheld with costs, including the costs of two counsel.
2 The order of the court below is set aside and replaced with the following:
‘(a) The first plaintiff’s action is dismissed with costs, including the costs of two
counsel.
(b) The second plaintiff’s action is dismissed with costs, including the costs of two
counsel.’

__________________________________________________________________
JUDGMENT
__________________________________________________________________

MAYA JA (MALAN, PETSE, WILLIS and SALDULKER concurring):

[1] This is an appeal against the judgment of the South Gauteng High Court
(Maluleke J) which granted the respondents’ claims against the appellant, Absa Bank
Limited (Absa), for payment of money together with interest. The appeal is with the
leave of the court below.

[2] The two respondents, Mr Arif Mohamed and his nephew Mr Shiraz Abdul, are
retail businessmen based in Pretoria. The litigation arose out of interest bearing

deposit investment agreements which the respondents alleged they concluded with
Absa’s agent, Mr Naresh Rama Mistry. The transactions were made at Absa’s
Marabastad agency, one of two Absa agencies in Pretoria (the second agency was in
Laudium) that were operated by Mistry, as a sole proprietor of Mistry’s Financial
Services and Mistry’s Estate Agencies, on Absa’s behalf. Mistry ran the agencies
under an agency agreement concluded between his entities and United Bank Limited,
Absa’s predecessor, before the latter was amalgamated with three other commercial
banks (Volkskas, Allied and Trust Banks) to form Absa (formerly called the
Amalgamated Banks of South Africa Limited) in the 1990’s.

[3] In February 2009, it came to light that Mistry had perpetrated massive frauds at
the two Absa agencies. A forensic investigation and audit revealed that he had stolen
millions of Absa clients’ investments. Absa promptly launched sequestration
proceedings against Mistry, which were unopposed, and obtained a final order in May
2009. It does not appear though that any of the misappropriated proceeds were
ultimately recovered from Mistry who reportedly fled the country.

[4] The respondents, armed with purported Absa investment (deposit) certificates
(receipts), were among Absa’s clients who came forward claiming to be victims of
the swindle and seeking compensation from Absa. Mahomed alleged that he invested
various sums of cash, handed to Mistry for deposit, totalling R5 432 099.88 under
four investment accounts as follows: R1 million paid into JT Investments account on
24 May 2007, R1million paid into RD Family Fund account on 1 June 2007, R3
million paid into Rishi Family Fund account on 11 August 2007 and R432 099.88
paid into Judson Trading account on 18 August 2007. The investments would mature

in 12 months and bear interest at the rate of 17,5 per cent per annum. Abdul on the
other hand claimed payment of a sum of R2 020 843 which he alleged to have handed
to Mistry as cash for investment into three accounts: R808 752.34 into Goden Store
account on 19 March 2008, R246 419.91 into Judson Agency account on 5 February
2007 and R965 670.85 into HIF Investments account on 15 May 2007. The
investments would earn interest at 7,45, 7,35 and 7,20 per cent per annum,
respectively, over a 12 month investment period.

[5] None of the alleged investment accounts showed on Absa’s banking systems
and records. And as it emerged, the respondents and Mistry, unbeknown to Absa,
used fictitious names in concluding the investment agreements to conceal the
substantial taxable funds which the respondents had deliberately failed to declare to
the South African Revenue Service (SARS) to evade tax. Therefore, the entities in
which the investments accounts were held did not exist. Except for the deposit
receipts relied upon by the respondents, which Absa’s on-going forensic investigation
(conducted in tandem with police investigations) suggested were forgeries, the
respondents did not furnish Absa with documentation requested by its investigators
which would facilitate the verification and investigation of their claims.  Instead they
threatened, through their attorneys, to liquidate Absa and lay criminal charges against
its directors and Chief Executive Officer for breach of the provisions of the Financial
Intelligence Centre Act 38 of 2001 (FICA).1

1 Absa consequently launched urgent proceedings, which were successful, to interdict the threatened liquidation
application. And, interestingly, the respondents’ threats were carried out. These proceedings were preceded by litigation
supported by Mahomed which challenged the appointment of the then Governor of the Reserve Bank, Ms Gill Marcus,
Absa’s chairperson at the material time, for allegedly suppressing fraudulent activities at Absa. Mahomed had also laid
criminal charges against the Governor and Ms Maria Ramos, an Absa director, for collusion in Absa’s alleged attempted
extortion and concealing Absa’s breach of FICA requirements. However, both proceedings came to naught; the criminal
case was aborted and the application proceedings were held vexatious and dismissed with punitive costs.

[6] Absa denied any liability to the respondents who then turned to the high court
and launched application proceedings for payment of their respective claims as
described above.2 The respondents based their claims on contract.3 They alleged a
breach of the investment contracts by Absa which they pleaded misappropriated,
divested, lost or stole their investments and failed to automatically reinvest the
investment funds. In addition to the claims for the capital investment deposits,
Mahomed sought interest at the agreed rate of 17,5 per cent per annum whilst Abdul
demanded interest at the legal rate. They contended that their investment contracts
were substantiated by the deposit receipts issued by Absa. These receipts, they
alleged, bore the material terms of each of the investment agreements with which they
complied. The receipts each bore the names of the fictitious account holders, the
capital amount of the purported investments, the purported maturity date of the
investments and the purported applicable interest rates.  They also contained the
following terms:
‘On maturity, unless you instruct Absa otherwise, your investment will automatically be renewed
for the original term, but at the rate applicable at the time of maturity. Should you find this
unsatisfactory you may change details of this automatic reinvestment within 30 days from the date
of reinvestment, without incurring a penalty fee.
Clients are requested to insist on this receipt bearing a teller’s stamp which is the only official form
of receipt issued by Absa Bank.’

[7] In its pleas, Absa admitted only Mistry’s authority to operate its Marabastad
agency as its agent and denied liability. It disputed the genuineness of the deposit
receipts. It further denied the conclusion of the alleged investment agreements

2 In para [4].The respondents’ individual application proceedings were subsequently referred to trial and consolidated
for trial purposes.
3 Mahomed’s alternative cause of action of a breached duty of care, which Absa pleaded was vague and embarrassing,
was not pursued at trial.

alternatively, if they were so concluded, Mistry’s authority to act as its authorised
agent or representative when contracting with the respondents and the payment to it
of the funds represented by the deposit receipts. It then pleaded that the respondents,
acting independently or in concert with Mistry, intentionally and unlawfully
concealed the investments, their entitlement thereto and the source of the investment
funds from SARS to evade tax. Absa proclaimed its innocence and alleged that the
respondents assumed all risks associated with such conduct from which it did not
benefit. It finally pleaded that granting the respondents’ claims would offend public
policy, fairness and equity as it would constitute the enforcement of illegal, dishonest
and immoral conduct.

[8] The respondents replicated jointly and admitted that the underlying intent of
the investments was to evade tax. But they contended that they subsequently sought
and obtained amnesty from SARS for their non-disclosure and that this cured any
illegality that tainted the investments. They contended further that as Mistry
concluded the investments agreements on Absa’s behalf with the full knowledge of
their intent to defraud the fiscus, it would be unjust and against public policy to allow
Absa to be enriched by retaining the funds.

[9] The key issue at the trial was whether Mistry was duly authorised to represent
Absa in concluding the investment agreements. Both respondents testified in support
of their claims. Their respective versions were substantially similar. The nub of their
evidence was that they invested with Absa, represented by Mistry, large sums of cash
– Abdul stated that he also transferred some of the funds he invested from three
business accounts he held with Absa, BEE Central, Shy Prop Investments CC and SM
Store Manufacturers – made from their business activities which they had squirreled

away over the years. Neither of them was a registered taxpayer and they had no
intention of paying tax. They had legitimate accounts with Absa and had known
Mistry, whom they trusted, for years. They used fictitious investment account names
to hide the investments from SARS on advice given by Mistry who doubled as their
financial adviser and bookkeeper.4 In 2007, they applied to SARS for the Small
Business Tax Amnesty, again on Mistry’s advice. They declared all their income
including the investments, which they declared as assets. Mahomed, who had
declared all his income from 1989 to 2007, was allegedly granted amnesty and
SARS’ response in respect of Abdul’s application was still pending at the time of the
trial.

[10] Several flaws in the respondents’ evidence were laid bare in their cross-
examination. Apart from the disputed deposit receipts, neither respondent had any
other record or accurate recollection of the actual amounts of the initial deposits, the
agreed interest rates applicable to the investments and the calculation of capitalised
interest. It transpired that an addition of the alleged accrued interest to the capital
amounts of the investments oddly resulted in figures which did not tally with the
investment amounts reflected in the deposit receipts.

[11] Mahomed could not say with any certainty whether the deposit receipts upon
which he relied for his claim were the most recent ones from Mistry. He contradicted
himself on whether he ever witnessed a teller affix a stamp on them. (Abdul, on the
other hand, said he always collected his receipts from Mistry who would hand them
to him in an envelope and never saw a teller affix stamps on them.) Nor could he
explain the exorbitant interest rates applicable to his investments, which were

4 Mistry operated a private accounting bureau on the floor above the Marabastad agency.

glaringly out of kilter with the normal bank rates. He also could not explain why
Absa periodically corresponded with him in respect of his other investments with it
but sent him no communications, including the mandatory income tax certificates, at
all in respect of the disputed investments, which he did not query. It turned out that he
lied in his evidence-in-chief about the extent of his honesty to SARS in his tax
amnesty application, and had sought amnesty only in respect of a sum of R225 000
generated as rental income in the 2006 tax year. He was then constrained to admit that
he did not make full disclosures regarding the 2002/2003 tax returns and perpetrated
yet another fraud on SARS.

[12] Mahomed’s evidence that the amounts reflected in his deposit receipts in 2008
represented the amounts actually invested in 2005 did not withstand scrutiny. He
changed this version cross-examination and stated, as did Abdul, that the interest on
his investments was automatically capitalised when reinvested 12 months after initial
investment. But he then said as a Muslim he could not keep the interest and gave it to
charities in accordance with the prescripts of his faith. Strangely though, the amounts
stated in the deposit receipts were in the round figures which were allegedly
deposited with Mistry initially. And he still claimed payment of capitalised interest
which, on his version, would already have been included in these amounts.

[13] As mentioned, there were material defects in Abdul’s evidence too. He
admitted when questioned about the transfers he now alleged to have made from his
trading accounts into the investment accounts that he had previously given Absa’s
attorney, Ms Wright, a contrary version that the funds he invested comprised of cash
that he kept and accumulated in a safe. He could not explain satisfactorily why he
said he invested ‘R1.4 million to R1.5 million’ in his founding affidavit whereas his

oral version was that the investment amount was ‘approximately R2 million’. It also
came about that his tax amnesty application, which SARS ultimately rejected, was
curiously brought under his wife’s business, Nadrav Wholesalers CC, to which he
said he advanced his ‘total capital investment held with [Absa] in the names of Goden
Stores, Judson Agencies and HIF Investments’ in 2009.

[14] Absa called only one witness, Mr Uwe Erich Otto, its long-time employee and
‘specialised forensic investigator’. Otto’s evidence mainly concerned his
investigations into and findings on Mistry’s large scale fraud which he said spanned
2007 to 2009. He explained the investment deposit process and significance of a
teller’s stamp as follows. The cardinal requirements whenever the bank collected
funds from a client for saving or investment were (a) the completion of application
documents by recording the client’s details and stipulations for the relevant
transaction and (b) the issue of an official acknowledgement of the receipt of funds
by a bank official in the form of a deposit receipt or certificate. In the case of an
investment transaction, the receipt had to be endorsed by a teller’s stamp which
identified the official who collected the deposit and indicated the date of collection
and the site or branch code. The importance of the teller stamp was that it enabled the
bank, if any problem arose with a transaction, to trace it back to the specific branch
and the specific staff member, who attended the transaction, for confirmation and
rectification.

[15] His investigation, prompted by an anonymous tipoff received in February
2009, revealed that the account numbers on the respondents’ deposit receipts did not
exist in Absa’s systems and platform, as he called it. The only exception was the
number which suspiciously appeared on the deposit receipts in respect of both Judson

Trading and JT Investments. His search revealed that this account number was in
fact a genuine Absa number. But it was allocated to a different client, Judson Timber
CC, which had no connection whatsoever to Mahomed and his entities.5 This went
against Absa’s practice of allocating a unique account number to each client. He
confirmed that the trading accounts, BEE Central, Shy Prop Investments CC and SM
Store Manufacturers, from which Abdul claimed to have transferred funds for his
investments, in fact existed in Absa’s client records. But according to him, no
withdrawals or transfers matching the alleged investments were made from these
entities’ accounts. He also disputed Abdul’s version that he made the investment
transfers in 2003 and 2004 with the use of the old style, barcoded bank books which
Mistry had given him. Absa had phased out the bank book system in 1998 and
replaced it with the bank card system and regularly issued bank statements in respect
of all accounts. Otto also dismissed the respondents’ deposit receipts, which he said
bore an unfamiliar print font and style and no teller stamps but generic bank stamps,
as falsified. But he could not dispute the respondents’ evidence that they concluded
the investment agreements and deposited money with Mistry.

[16] Against this background, the court below found that Absa’s denial of the
agreements and deposits was without substance as no evidence supporting it was
adduced. The court below found that it was not disputed that Mistry held himself out
as, and was in fact,  Absa’s duly authorised agent with actual and ostensible authority
to transact on Absa’s behalf as he did when the investment transactions were
effected. In the court’s view,  ‘the contract to make a fixed deposit investment  . . .
was separate and distinguishable from the financial advice on how to evade . . . tax . .
. [and] was irrelevant to the issue that the branch manager of the bank, with the
requisite actual or ostensible authority, solicited and took deposits from the

[respondents] and issued fixed deposit deposits in respect thereof’.  Thus, the
respondents had established the

5 This entity had lodged its own claim which was subsequently found legitimate and paid by Absa.

requirements to hold Absa liable for its agent’s acts on the basis of estoppel and
proved their pleaded case on a balance of probabilities. Absa was held liable and
ordered to pay the respondents’ claims as prayed plus interest on the total capital
amount at the legal rate from the date of the institution of the proceedings to date of
payment. It is this decision that is the subject of this appeal.

[17] A few weeks before the hearing of the appeal, long after the parties had filed
their heads of argument, Mahomed lodged an application to amend his replication by
adding that Absa was estopped from denying Mistry’s authority to represent it. The
reason given for his failure to raise this defence previously was that Absa had
admitted its liability for Mistry’s fraud and other facts satisfying estoppel in the
sequestration proceedings it launched against Mistry. It was also contended that Absa
waived its right to object to the amendment, which would not occasion any prejudice
to it anyway, as the subject matter was canvassed in the court below and that if Absa
‘was genuinely prejudiced it would have asked for remittal’. Absa opposed the
amendment application on various grounds, including its lateness and the attendant
prejudice it said it would suffer because the defence was not properly canvassed at
trial and is not supported by available evidence.

[18] The application, which was argued during the appeal hearing, may be dealt
with shortly. According to Mahomed’s affidavit, the reason given for the lateness of
the application was known to him even before he approached the high court for relief.
As indicated above, Absa expressly denied that Mistry was authorised to represent it
in the circumstances of the respondents’ claims in its plea. Neither respondent raised
estoppel to this denial in their replication. And it appears from the affidavit filed in
support of the amendment application that this was a deliberate choice by Mahomed

and his legal representatives. Significantly, on several occasions thereafter, Absa
pertinently raised the respondents’ failure to plead estoppel in respect of Mistry’s
authority, the genuineness of the deposit receipts and the issue of the teller stamps –
in its heads of argument filed in the court below and, subsequently, in further
submissions filed in support of its application for leave to appeal in that court, in its
notice of appeal as a specific ground of appeal and in its heads of argument in this
appeal. None of these repeated cautions evoked any response until the eleventh hour
and it remains unclear why Mahomed suddenly saw the need to raise it at this late
stage.

[19] Quite obviously, the introduction of this defence, if allowed, will alter the
foundation of Mahomed’s case and the issues that were to be determined by the court
below. That has a direct bearing on the manner in which the parties would have
conducted their cases at the trial. For example, had the defence been raised properly,
Absa could well have filed a rejoinder, interrogated the issue in further particulars if
necessary and dealt with it in evidence. Allowing the proposed amendment at this
stage would undoubtedly prejudice Absa as it would deprive it of its right to have
taken the above steps. It would also deprive the trial court, this court and the parties
themselves of a proper ventilation of the issue. As a result, the amendment cannot be
allowed and is refused. Furthermore, as neither respondent relied on the apparent
authority of Mistry at the trial, it simply was not an issue before the court below
despite the latter’s finding in this regard, which I deal with later in the judgment.

[20] About two weeks before the appeal hearing, Mahomed’s attorneys made yet
another approach to this court on his behalf. They wrote the Acting President of the
court recording Mahomed’s apprehension that two of the justices assigned to

adjudicate the appeal, Malan and Willis JJA, were biased against his cause. This
perceived partiality reportedly arose from the justices’ ‘interest’ in or ‘association’
with Absa, discovered by the attorneys pursuant to their investigation into the issue.
According to the letter, Malan JA was a director at HRSC-RAU research unit for
Banking Law between 1987 and 1997 and Willis JA was a Fellow of the Institute of
Bankers of South Africa in 1995.

[21] The attorneys’ letter continued:
‘The reported case from the Constitutional Court Bernert v Absa Bank 2011 (3) SA (CC) revealed that:
i)     Prior to Malan JA’s appointment to the bench he was employed by the Institute of Banking and
Finance Law at Rand Afrikaans University (now the University of Johannesburg).
ii)      The Institute founded by Malan JA, was mainly sponsored by five major South African Banks,
with Absa Bank being the main sponsor.
iii)      Absa Bank paid the salary of Malan JA.
iv)       Absa Bank paid for Malan JA’s overseas research trips whilst he was employed by the Institute.
. . .
The interest and / or association Malan JA and Willis JA have with [Absa] was information exclusively in the
domain of Absa, Malan JA and Willis JA. [They] did not at any stage disclose this to [Mahomed].The
suppression of this material information in disregard to the law as expressed by the Chief Justice in Bernert
… has undermined [Mahomed’s] confidence in the judiciary. . . . The failure by Malan JA and Willis JA to
discharge the obligation of disclosure imposed by them by law of the land fortifies our client’s reasonable
apprehension of bias.’

[22] In response to this letter, the Acting President of this court referred to the
Constitutional Court’s ratio in this regard in the Bernert judgment which decided the
exact issue. But he directed Mahomed to file a substantive application for the

justices’ recusal by the date of the appeal hearing, if he so wished. All was quiet
until three days before the hearing when another letter from Mahomed’s attorneys
addressed to the two justices, was delivered at the court. Referring to the Bernert
judgment, the letter stated that Mahomed was considering his options and needed to
know ‘the current nature, extent and value of Malan JA and Willis JA’s interest and /
or association with Absa Bank’. No recusal application had been filed when the
appeal was called in court on the date of its hearing. Instead, Mahomed’s attorney
informed us that he would not be pursuing a recusal application and sought the
court’s leave merely to place on record that the two justices failed to disclose their
ties with Absa, as they were enjoined by the law, and did not timeously respond to his
written query.

[23] First, Willis JA has never had any ‘interest and/or association’ with Absa as
alleged  in Mahomed’s first letter and has never had any dealings of whatever nature
with the bank. The objection against him was unfounded also in so far as the
objection against Willis JA was premised on the fact that he is a Fellow of the
Institute of Bankers in South Africa. The insitute is a professional body whose
objective is to further the interests of the banking profession, bankers and the general
public. It exists to raise the professional standards of the banking industry in this
country, a fact which Mahomed’s attorney conceded during the hearing of the appeal.
An enquiry into the nature of the institute, which Mahomed’s attorney admitted he
did not exactly know,  would have been expected before an objection against Willis
JA’s involvement in the appeal was raised.

[24] As for Malan JA, the precise allegations about his purported ties with Absa
contained in Mahomed’s letter were raised to support a finding of bias against Malan
JA in the Bernert case. At the foot of page 92 of that judgment it is recorded that they

are ‘wholly untrue or substantively incorrect’. And the Constitutional Court dealt
pertinently with the issue, on the exact set of facts, and had this to say:6
‘Prior association with an institution cannot form the basis of a reasonable apprehension of bias,
“unless the subject-matter of the litigation in question arises from such associations or activities”.
Most judicial officials would have been engaged in a number of activities in pursuit of their
professional lives before their appointment. These activities contribute to the expertise that judicial
officers bring to the bench. What is required is that judicial officers should decide cases that come
before them without fear, favour or prejudice, according to the facts and the law, and not according
to their subjective personal views. Of course, where a judicial officer, in his or her former capacity,
either advised or acquired personal knowledge relevant to a case before the court, it would not be
proper for that judicial officer to sit in that case. . . . There is no suggestion in this case that the
subject-matter of the litigation arises from the association which ... Malan JA had with Absa Bank
prior to [his] appointment to the bench. Nor is there any suggestion that in the course of [his]
association with Absa Bank, [he] acquired personal information that was relevant to the appeal
before [him]. Nor do I consider that there was any obligation on [him] to disclose [his] prior
association with Absa Bank. In SARFU II [1999 (4) SA 147 (CC) para 89] this court said that
“(j)udicial officers are obliged to disclose only such facts as might reasonably be relevant to a
recusal application”. Non-disclosure of irrelevant facts cannot, therefore, be a basis for a reasonable
apprehension of bias. . . . No case, therefore, has been made that ... Malan JA should have recused
[himself] because of prior association with Absa Bank.’

[25] The above comments are clear and need no explanation. Without doubt, the
subject-matter of this appeal does not arise from any association Malan JA might
have had with Absa. Nor is there even a hint that in the course of that association they
acquired personal information that is relevant to this appeal. Mahomed’s or his
attorneys’ apprehension of bias had no basis whatsoever in the circumstances. The
justices owed Mahomed no obligation to disclose their prior association with Absa.
It must be said that it seems rather mischievous of Mahomed and his attorneys (who
incidentally invited television media to record the appeal proceedings without first

6 At paras 78 to 80.

asking this court’s permission as is required), with the full awareness of the Bernert
decision, to raise this issue as they did and to persist with their allegations of bias
even after their correspondence with the Acting President of this court which pointed
out that the Bernert judgment to which they referred did not support Mahomed’s
‘apprehension of bias’.

[26] I turn to deal with the merits of the appeal. The issues on appeal were whether
(a) Mistry was duly authorised to represent Absa in concluding the investment
agreements, which were designed to defraud SARS (and whether the court below was
entitled to have regard to the issue of estoppel which had not been pleaded), (b) the
respondents had established and proved their pleaded causes of action, (c) the
respondents were to be non-suited in enforcing illegal agreements against Absa from
which it did not benefit, and (d) the respondents were satisfactory witnesses.

[27] It was contended on Absa’s behalf that the respondents, who were poor
witnesses, failed to prove the alleged agreements. Mistry was not, and could not, have
been authorised to represent Absa in concluding the unlawful agreements, it was
argued. And the issues of ostensible authority and estoppel were irrelevant because
the respondents did not replicate an estoppel. But even if they had done so, their
claims would still fail. This was so, it was argued, because the relevant
representations were made by Mistry and not by Absa, and the respondents could not
reasonably have understood that Mistry was authorised to bind Absa to unlawful
agreements. And the respondents failed to prove an essential requirement of the
agreements, that the deposit receipts bore Absa’s teller stamps. It was finally
contended that even if the respondents succeeded on these points, the claims could
not be allowed as to do so would sanction their unlawful conduct in circumstances
where Absa is an innocent party.

[28] The respondents contended that the court below decided the matter correctly.
Their main submission was that Absa was liable and could not distance itself from its
agent’s action with whom they contracted and secured deposit receipts as proof of
payment. They emphasised that Otto was unable to gainsay that they concluded the
agreements with Mistry and gave him money. It was  insisted that they honestly made
full disclosures in their tax amnesty applications and relied entirely on their financial
advisor and accountant, Mistry, at all material times. Absa’s omission to call Mr
Sheldon Martin of its legal department, who deposed to the sequestration affidavit, as
a witness was criticised. A point was made that Absa suppressed the full reports of its
forensic investigation and insurance claims in respect of Mistry’s fraud and could
well have been reimbursed for all its losses, including for the respondents’ stolen
investments, by its underwriters. Absa was also castigated for failing to comply with
FICA requirements.  Mahomed’s attorney further urged us to consider the matter with
reference to the country’s apartheid past as the respondents decided to evade tax so as
not to empower the apartheid government and that they were granted amnesty by
SARS upon full disclosure of their financial status. For Abdul it was also argued that
his case was different because Absa had records of his investment accounts and the
bank did not disclose what was yielded by its search into the four legitimate accounts
from which he claimed to have transferred funds to the investment accounts.

[29] As I see it, the real issue in the parties’ dispute, in light of their pleadings,
having regard to the refusal of the amendment application to introduce estoppel to
Mahomed’s replication, and the evidence adduced at the trial, is whether Mistry was
duly authorised to represent Absa in concluding the alleged investment agreements.

In view of Absa’s categorical denial of such authority, the respondents were
obliged to

prove that Mistry had actual authority ie express authority given by words or
implied authority inferred from the conduct of the parties and the circumstances of
the case.7

[30] Even assuming that the respondents concluded the investment agreements with
Mistry and handed him money as they alleged, it nevertheless remains clear from the
evidence led at the trial and the agency agreement concluded between Mistry and
Absa that the latter did not give express authority to Mistry to conclude the alleged
agreements. Clause 5.5 of the agency agreement specifically set out the precise scope
of Mistry’s authority regarding the collection of money from the bank’s clients as
follows:
‘Subject to the Agency directives at all times being strictly complied with, the Agent may receive
money from clients on United’s behalf only against completion of the necessary documents in each
case and in each case the Agent shall give the official United acknowledgement to the person
making the deposit or payment.’
Otto’s testimony that the official bank acknowledgement was in the form of teller
stamps and that the stamps on the respondents’ deposit receipts were ordinary bank
stamps and not the teller stamps demanded by the very receipts, was not gainsaid.
Therefore, the respondents did not have official Absa acknowledgement of their
deposits. Whether the difference between the two types of bank stamps was readily
discernible to a bank customer is irrelevant in the light of the pleaded terms of the
agreements.

7 Hely-Hutchinson v Brayhead Ltd and Another [1968] 1 QB 549 (CA) at 583A ([1967] 3 All ER 98 at 102A; NBS
Bank Ltd v Cape Produce Co (Pty) Ltd and Others 2002 (1) SA 396 (SCA) at para 24.

[31] Moreover, on their own version, the respondents intentionally and knowingly
colluded with Mistry to open investments accounts with Absa in fictitious names to
facilitate their tax evasion, unlawful conduct which Absa was not shown to have
authorised Mistry, expressly (or otherwise), to undertake on its behalf. In this regard,
I cannot agree with the view espoused by the court below that the respondents’
underlying unlawful intent to circumvent tax laws has no bearing on the validity of
their claims and is a matter to be dealt with by SARS.

[32] Having failed to establish express authority, the respondents were obliged to
prove that Mistry had implied authority to contract with them under the
circumstances and on the terms they alleged he did, within the usual scope of his
office.8 As this court has pointed out:
‘The appointment by a bank of a branch manager [or, as in this case, an agent] implies a
representation to the outside world that the branch manager [or agent] is empowered to represent
the bank in the sort of business (and transactions) that a branch of the bank and its manager [or
agent] would ordinarily conduct. The notion of “ordinary business” in turn implies a qualification in
the form of a limitation: that the branch manager [or agent] is not authorised to bind the bank to a
transaction that is not of the ordinary kind. What the ordinary kind of business is remains a matter
of fact and hence of evidence. . . . A branch manager [or agent] clearly does not have, nor can he
reasonably be believed by anyone to have, free hand to bind the bank at will. His authority to do so
is not unlimited both as to the nature and the extent of the business he purports to transact in the
bank’s name. . . . An outsider dealing with a branch manager [or agent] is entitled to assume that the
latter’s functions encompass, but do not exceed, the activities that a branch manager [or agent]
would commonly be known to perform.’9

8 Hely- Hutchinson, above, n 7.
9 In Glofinco v Absa Bank Ltd t/a United Bank 2002 (6) SA 470 (SCA) para 15.

[33] It should go without saying that the type of agreements which Mistry
purportedly concluded with the respondents on Absa’s behalf do not fall within the

category of business or transactions that a branch of a bank and its agent would
ordinarily conduct. And the respondents most certainly could not reasonably have
believed that engaging in fraudulent conduct fell within Mistry’s functions and that
Absa had authorised him to represent it in unlawful activity. The respondents,
therefore, failed to prove that Mistry had implied authority to conclude the alleged
investment agreements on Absa’s behalf.  The court below, which referred to the
Glofinco judgment for its finding in this regard, obviously misapplied the decision of
the majority judgment in that case.

[34] I have dealt with the issue of estoppel which bears on ostensible authority,
albeit in another context. As I have said, the court below was not entitled to address it
for the simple but compelling reason that it was not pleaded and was therefore not an
issue between the parties. The court’s finding that it was not in dispute that Mistry
had (actual and) ostensible authority to represent Absa as he did was, of course,
wrong. That should be the end of this issue. But I should perhaps add that even if the
defence of estoppel had been raised pertinently the respondents would not have
succeeded in their claims. They simply would not be able, on the available evidence,
to meet the essentials of estoppel: a representation by words or conduct, made by
Absa as the principal that Mistry had the authority to conclude the unlawful
agreements, that their belief in the representation was reasonable and that they acted
on that belief to their prejudice.10  A party which knows that a transaction is unlawful
or is part of an unlawful scheme and is aware or should reasonably be aware that the
principal of the agent with whom it is contracting would not countenance the

10  NBS Bank Ltd above, n 7.

conclusion of such a transaction, is, in any event, precluded from relying on
ostensible authority.11

[35] In sum, in the light of the terms of the agreements pleaded by the respondents
and the absence of the teller stamps on the deposit receipts, there was no admissible
acknowledgement or admission by Absa of the amounts allegedly deposited with
Mistry. The respondents thus failed to prove not only that Absa misappropriated their
investments but even the very quantum of their claims. They failed to establish their
pleaded causes of action. For these reasons, their claims should have been dismissed
and there is no need to consider the other issues raised in the appeal and the further
misdirections of the court below.

[36] Lastly, there is another matter that requires mention. After we heard the appeal,
a document titled ‘1st Respondent’s Elucidation on Issues Raised by Learned Judges
on the 21 November 2013’ was filed on Mahomed’s behalf without our permission.
According to this court’s practice, parties may not file new material after the hearing
of an appeal without the court’s leave.12 But, in any event, the document essentially
rehashes submissions that were made during the appeal and does not add any value to
Mahomed’s case.  Nothing more need be said about it.

[37] In the result, the following order is made:
1 The appeal is upheld with costs, including the costs of two counsel.
2 The order of the court below is set aside and replaced with the following:

11  Absa Bank Ltd v IW Blumberg & Wilkinson 1997 (3) SA 669 (SCA) at 667G-H and 681G-H; Blackie Swart Argitekte
v Van Heerden 1986 (1) SA 249 (A).
12  AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social
Security Agency and others 2013 (4) SA 557 (SCA) para 7.

‘(a) The first plaintiff’s action is dismissed with costs, including the costs of two
counsel.

(b) The second plaintiff’s action is dismissed with costs, including the costs of two
counsel.’

____________________

MML Maya

Judge of Appeal

APPEARANCES
APPELLANT:

KW Luderitz SC (with GW Amm)

Instructed by:

Lowndes Dlamini Attorneys, Johannesburg

Matsepes Inc., Bloemfontein

1ST RESPONDENT:
Z Omar

Instructed by:

Zehir Omar Attorneys, Johannesburg

Ben van der Merwe Attorneys, Bloemfontein
2ND RESPONDENT:
DR Thompson / S Ebrahim

Instructed by:

Saleem Ebrahim Attorneys
Bokwa Attorneys, Bloemfontein