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1
Ostensible Authority and Estoppel in the
Law of Agency in view of Makate v Vodacom
by
David Akani Sithole
(18291865)
Submitted in partial fulfilment of the requirements for the degree
Master of Laws (Mercantile Law)
In the Faculty of Law,
University of Pretoria
November 2019
Supervisor: Prof R Brits
i
Declaration
1. I understand what plagiarism is and am aware of the University’s policy in this
regard.
2. I declare that this thesis is my own original work. Where other people’s work has
been used (either from a printed source, Internet or any other source), this has
been properly acknowledged and referenced in accordance with departmental
requirements.
3. I have not used work previously produced by another student or any other person
to hand in as my own.
4. I have not allowed, and will not allow, anyone, to copy my work with the intention
of passing it off as his or her own work.
David Akani Sithole
November 2019
ii
Summary
This dissertation examines the place of agency law in the South African context. The
dissertation is premised on the idea that the principles governing agency, such as
binding the principal for the conduct of her agent, are derived from English law. With
that starting point, the paper examines the English law, in order to place the South
African law of agency in context. The dissertation is not a comparative study and the
discussion of English law of agency is limited to providing context to the development
of agency law in South Africa. The dissertation further discusses the differences
between the principles of estoppel and ostensible authority. The theoretical basis for
agency and its practical effects are examined. Both the majority and minority
judgments of the court in Makate v Vodacom are discussed and the rationales thereof
examined. The dissertation recommends the appropriate mechanism to be employed
in holding the principal accountable without the need to evoke the traditional principles
which have been proved problematic by the Makate case.
iii
Acknowledgements
It took me 6 and half hours to pen down this section of the work. The final product is
this: thank you Prof. Brits (supervisor) and Israel (beloved), God bless you!
iv
Table of content
Declaration ................................................................................................................. i
Summary ................................................................................................................... ii
Acknowledgements ................................................................................................. iii
Table of content....................................................................................................... iv
Chapter 1: General introduction ......................................................................... 1
1.1 Introduction .................................................................................................... 1
1.2 Chapter breakdown ....................................................................................... 1
Chapter 2: Overview of the English law of ostensible authority
and estoppel ...................................................................................... 3
2.1 Introduction .................................................................................................... 3
2.2 Actual authority .............................................................................................. 3
2.3 Ostensible or apparent authority .................................................................... 3
2.4 Estoppel......................................................................................................... 7
2.5 Chapter conclusion ........................................................................................ 9
Chapter 3: Overview of the law of agency before Makate:
Ostensibles authority and estoppel .............................................. 12
3.1 Introduction .................................................................................................. 12
3.2 South African law of agency ........................................................................ 12
3.3 Assessment of the law prior to Makate (not necessarily abrogated) .............. 14
3.4 Chapter conclusion ...................................................................................... 17
Chapter 4: The Makate case ............................................................................. 19
4.1 Introduction .................................................................................................. 19
4.2 Factual background and litigation history of Makate case ........................... 19
4.3 The relevant issues ..................................................................................... 21
4.4 The majority judgment per Jafta J ............................................................... 22
4.5 The concurring judgment ............................................................................. 27
4.6 Chapter conclusion ...................................................................................... 29
Chapter 5: Estoppel and ostensible authority................................................. 31
5.1 Introduction .................................................................................................. 31
v
5.2 Motor vehicle cases: Estoppel ..................................................................... 31
5.3 Share dealing transactions .......................................................................... 33
5.4 Vindicatory actions ...................................................................................... 33
5.5 Turquand rule of company law and estoppel ............................................... 34
5.6 Ostensible authority and estoppel ............................................................... 35
5.7 Chapter conclusion ...................................................................................... 37
Chapter 6: Conclusion and recommendations ............................................... 39
6.1 Introduction .................................................................................................. 39
6.2 Ostensible authority ..................................................................................... 39
6.3 Estoppel....................................................................................................... 40
6.4 Recommendations ....................................................................................... 41
Bibliography ........................................................................................................... 42
Case law .............................................................................................................. 42
Journal articles ..................................................................................................... 43
Books ................................................................................................................... 44
Acts and constitutions .......................................................................................... 45
Old authorities ...................................................................................................... 45
Reports and rules ................................................................................................. 45
1
Chapter 1:
General introduction
1.1 Introduction
This dissertation shall discuss the South African context of the law of agency.
Particular attention shall be paid to the issues raised in the case of Makate v Vodacom
(Pty) Ltd.1 Authority in relation to the law of agency will be dissected and its forms
expounded. A critical question is whether estoppel and ostensible authority are twin
concepts.
The research is premised on two schools of thought, namely (1) that estoppel
and ostensible authority are synonymous and (2) that the two are distinguishable. Both
schools of thought shall be discussed, and one is countenanced in whole or in part.
Developments of both schools of thought shall be expounded and a preferred
application of the principles recommended.
With an assumption that our courts conflate the principles are which were
designed to preclude certain people who make certain representation, which may be
traced back to the English authorities, the paper shall visit the English authorities to
determine whether there is a conflation and whether it is necessary to separate the
principles.
The dissertation shall further expound on the necessity of clarifying the principles
relating to the law of agency, namely ostensible authority and estoppel. Special
attention shall be given to the practical effect in the procedural law, and particularly in
drafting the pleadings in support of a claim premised on the law of agency.
1.2 Chapter breakdown
This work comprises of six chapters. Chapter 1 introduces the study, while Chapter 2
outlines the position of the English law of agency with particular regard to the concepts
of ostensible authority and estoppel. Chapter 3 assesses the law of agency as it was
prior to the case of Makate, in order to ensure that the Makate dispensation is
understood in light of the historical context. Chapter 4 considers the law of agency
1 Makate v Vodacom (Pty) Ltd 2016 (6) BCLR 709 (CC) (henceforth referred to as “the Makate case”).
2
under the authority of the Constitutional Court case of Makate, with particular attention
to ostensible authority and estoppel. Chapter 5 is dedicated to ostensible authority and
estoppel. In Chapter 6, the findings of this work are summarised and
recommendations are made.
3
Chapter 2:
Overview of the English law of ostensible authority and
estoppel
2.1 Introduction
In this chapter, an overview of the English law of agency with particular attention will
be given to the otherwise problematic maxims of estoppel and ostensible authority.
This examination is embarked upon in order to secure an understanding of the
concepts of estoppel and ostensible authority and to facilitate an assessment of the
findings in Makate case. In this chapter, agency under English law will equally be
examined to ensure that a complete picture is painted when discussing these
intertwined concepts. Ostensible authority and estoppel are examined both in
substance and form.
2.2 Actual authority
In English law, an agent of a principal may have actual or ostensible authority, and the
former is created by an agreement between the principal and the agent. It is express
if it is given in words and implied if the agent is appointed in a position which has with
it the custom and the trappings of certain authority.2 It must be noted however that
where an agent is specifically prohibited from exercising certain powers that are
ordinarily implied from her employment on a certain position, it will not give rise to an
implied actual authority. In such circumstances, however, the question of ostensible
or apparent authority may arise, as discussed immediately below.
2.3 Ostensible or apparent authority
The English law on the issue of agency, and in particular, an entity with legal
personality as a principal and its employee (or other persons) as an agent can be best
explained with reference to the English case of Houghton and company v Nothard,
2 Collier “Actual and ostensible authority of an agent: a straightforward questions and answer” 1984 CLR 26-27. Also available at JSTOR www.jstor.org/stable/4506596 accessed on 10 November 2018.
4
Lowe and Wills, Limited.3 In this case, the director of the defendant company purported
to bind the defendant company in contract with the plaintiff company without the actual
authority to do so.4 The defendant company’s articles of association provided for the
confirmation of the contract of that nature by the defendant company’s board of
directors or the latter’s delegate(s).5 The secretary of the defendant company, in an
attempt to remedy the want of authority on the part of the director in binding the
defendant company, dispatched correspondence to the plaintiff company confirming
the contract.6 The secretary was equally not authorised to act for or on behalf of the
company in this regard, that is, to confirm the contract.7
The critical question is therefore to what extent, if at all, a company under
comparable circumstances as the defendant company referred to above could be held
liable. The premise is that the person that seeks to represent the principal lacked
actual authority.
The Houghton and Company case espoused the issue of ostensible authority.
The court ruled that in order for one to hold a company liable under ostensible
authority, one “must (a) prove that he relied upon the ostensible authority which he
sets up, and (b) must not have been put upon enquiry as to whether the transaction
was in order”.8 When a contract, which an agent seeks to bind her principal to, seems
to be unreasonable or bearing such terms that a reasonable person would question,
the other person should establish if the agent is indeed authorised.9
The conundrum that the plaintiff company faced in the Houghton and Company
case was that it admitted that it was not aware of the clause in the defendant
company’s articles of association authorising the board of directors to delegate their
powers. With such ignorance, the court found that the plaintiff company was precluded
from relying on such a clause to assume that such power to delegate was exercised
in favour of the director who sought to bind the company.10
3 Houghton and Company v Nothard, Lowe and Wills Limited (1927) 1 K.B 246 (henceforth referred to as “the Houghton and company case”).
4 Houghton and company ibid n 3 at p. 246. 5 Houghton and company ibid n 3 at p. 246. 6 Houghton and company ibid n 3 at p. 246. 7 Houghton and company ibid n 3 at p. 246. 8 Houghton and company n 3 at p. 246 ; See also Underwood v Bank of Liverpool (1924) 1 K.B 775. 9 Cassim & Cassim “The authority of company representatives and the Turquand rule revisited” 2017
SALJ 639-664 at p. 649. 10 Houghton and Company Ibid n 3 at p. 251. This finding is in line with the earlier judgment in the
case of Rama Corporation Ltd v Proved Tin and General Investments Ltd (1952) 1 All E.R 554 at p. 566 (henceforth referred to as “the Rama Corporation Ltd”).
5
The court in Houghton and Company highlighted that the fact that the plaintiff
company had no actual knowledge of the authority of the board of directors to delegate
their powers to a single person was destructive to the plaintiff company’s claim.11
In light of what is discussed above, one who relies on ostensible authority must
prove that in entering into a contract with the representative whose authority is later
impugned by her principal, must establish that he relied on ostensible authority. The
question is, therefore, what is ostensible authority under English law?
In the case of Hely-Hutchinson v Brayhead Ltd, the court observed that
“ostensible or apparent authority is the authority of an agent as it appears to others.”12
This definition is probably too wide to constitute a legal doctrine or a legal definition.
As it stands, the definition suggests that even an intruder into a temporarily closed
company who fraudulently holds himself to be a managing director and thereby
appearing to have the attendant authority to third parties may bind the company.13 As
held in Armagas Ltd, the principal may be held liable, with regard to the fraudulent acts
of persons vested with the ostensible authority to contract on behalf of the principal,
only if the agent that is complicit in such fraud acted within the scope of the ostensible
authority.14 The observation with regard to the nature of ostensible authority referred
to above in the case of Hely-Hutchinson may indeed be construed to encompass all
forms of fraudulent representations, yet it is necessarily absurd and definitely not
intended to be such.15 It is, therefore, necessary to narrow this down and afford it some
context. The case of Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd,
notwithstanding this judgment having been handed down prior to the Hely-Hutchinson
case, sets the definition in its proper context.16 It is noteworthy that the Freeman &
Lockyer case is described as a locus classicus case in the area of ostensible authority
by the highest court in English judicial system.17
11 Houghton and Company ibid n 3 at p. 266. 12 Hely-Hutchinson v Brayhead Ltd (1968) 1 Q.B 549 at p. 583 (henceforth referred to as “the Hely-
Hutchinson case”. 13 See Armagas Ltd v Mundogas S.A (1985) 3 W.L.R. 640 at p. 667(henceforth referred to as “the
Armagas Ltd case”) regarding the consequences of fraudulent representation. It will be noted that fraudulent representations, known to the other party will preclude the said party from claiming from the principal.
14 Armagas Ltd ibid n 13 at p. 658. 15 Hely-Hutchison ibid n 12 at p. 583. 16 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd, (1964) 2 Q.B 480 (henceforth
referred to as “the Freeman & Lockyer case”). 17 Armagus Ltd ibid n 13 at p. 652; See generally Belloff v Pressdram Ltd and another (1973) 1 All
ER 241 (ChD).
6
In light of the Freeman & Lockyer case, ostensible authority is found and
established by a legal relationship between the principal and the third party, the latter
being a person with whom the agent contracts with on behalf of the principal, flowing
from:18
a) representation by a person or persons who had authority to contract on the
particular matter on behalf of the principal to a third party that the agent has
authority to bind the principal in the nature of the contact which is eventually
entered into through that agent;
b) the representation was intended to induce the third party to rely on it;
c) the third-party was, in fact, induced and relied on it; and
d) the principal appeared to have been conferred authority on the agent, and
further, the founding documents of the principal did not preclude the delegation
of such authority to the particular principal.19
One that successfully sets up ostensible authority effectively estops or precludes the
other (the principal) from denying liability.20 The Freeman case specifically holds that
properly understood, ostensible authority (also known as apparent authority) is nothing
more than estoppel by representation.21 Estoppel by representation will be discussed
in paragraph 2.4 below in order to determine whether the requirements of estoppel by
representation can be reconciled with those of ostensible authority as discussed
above.
It is important to note the developments with regard to requirement (a) above,
that is, that the representation must have been made by someone who had authority.
In the case of First Energy (UK) v Hungarian International Bank Ltd, the court held that
an agent may be clothed with ostensible authority to represent that she, in fact, has
18 Freeman & Lockyer ibid n 16 at pp. 503 & 506. See also Armagas ibid n 13 at p. 652. 19 See also Rama Corporation ibid n 10 at p. 10. 20 Freeman & Lockyer ibid n 15 at p. 503. 21 Freeman & Lockyer ibid n 15 at p. 498. See also Armagus Ltd ibid n 13 at 667.
7
certain authority to bind her principal which in fact she does not have.22 In light of this,
the agent does not authorise herself but instead, the authorisation flows from the
conduct of her principal which engenders ostensible authority.23 This case dealt with
similar questions of law as that of the Armagas case. In the Armagas case, the court
held that it is permissible for an agent who has been clothed with ostensible authority
to represent the principal’s approval of an action that is otherwise outside the scope
of his ostensible authority.24
2.4 Estoppel
As examined by Braithwaite, English law estop persons who make representations of
a certain state of affairs in contract from asserting a different position should the liability
be denied and litigation follows.25 The observation in the Freeman & Lockyer case that
ostensible authority is, in fact, estoppel by representation proves to be problematic to
the South African jurisprudence insofar as the law of agency and the concepts behind
it are concerned.26 This problematic position of English law is also accepted as true in
the concurring judgment of Makate in the judgment’s assessment of English law.27
This conundrum was said to flow from a state of confusion of the English law in the
case of Insurance Trust & Investment v Mudalia.28 Whereas there is indeed confusion
under English law regarding the concepts of estoppel and ostensible authority, there
is also an issue of terminology, as will be established below. Adopting already
confused concepts from an equity-based jurisdiction, like the English judicial system,
into a system, such South Africa, which does not subscribe to the same jurisprudence,
possess a difficulty that may leave some scholars and judges alike bewildered as to
the status of the English law in the area of agency as it pertains to ostensible authority
or estoppel.
22 First Energy (UK) v Hungarian International Bank Ltd (1993) B.C.C 533 at p. 544 (henceforth referred to as “the First Energy case”). See Yap “Apparent authority: doctrinal underpinnings and competing policy goals” 2014 J.Bus.Law 72-82 at p. 72, for the clarification of the application of this finding.
23 Woan “The apparent authority of the unauthorised agent” 2014 SAcLJ 258-268 at p. 263. 24 Armagas ibid n 13 at pp. 652-653. 25 Braithwaite “The origins and implications of contractual estoppel” 2016 LQReview 120-147 at p. 1. 26 Freeman & Lockyer ibid n 14 at p. 498. 27 Makate ibid n 1 at p. 746. 28 Insurance Trust & Investments v Mudaliar 1943 NPD 45 at p. 61 (Henceforth referred to as “the
Insurance Trust & Investment case”).
8
By the very nature of the South African legal system, its courts adopt a legalistic
approach in construing concepts which are self-explanatory. Furthermore, the English
law concepts, such as estoppel, are applied in terms of the English law jurisprudence
of equity and as such, applying such concepts rigidly under South African law may
yield absurd results or clear injustice.29 As held in the case of Roebuck v Mungovin,
when estoppel is established, the court will give an order that is equitable under the
circumstances.30
Estoppel means to be stopped, and such preclusion may be based on different
forms of estoppel, including “[e]stoppel per rem judicatam, issue estoppel, estoppel by
deed, estoppel by representation, estoppel by conduct, estoppel by acquiescence,
estoppel by election or waiver, estoppel by negligence, promissory estoppel,
proprietary estoppel…”.31
Estoppel under English cannot be used as a cause of action, that is, a ground for
one to claim a form of relief in court, but only as a defence should one deny the
existence of a cause of action.32 It is important to visit the nature of estoppel by
representation in order to assess whether or not the observation in Freeman & Lockyer
case that ostensible authority is actually estoppel by representation is accurate.33
In the case of Spliethoff’s Bevraschingskantoor BV v Bank of China Limited, the
requirements for estoppel by representation were set out as follows:
“(i) a representation which is in law deemed a representation of fact, (ii) that the
precise representation was in fact made, (iii) that the later position taken
contradicts in substance the original representation, (iv) that the original
representation was of a nature to induce and was made with the intention and
result of inducing the party raising the estoppel to alter his position on the faith of
it and to his detriment, and (v) that the original representation was made by the
party sought to be estopped and was made to the party setting up the estoppels”.34
29 See generally Gillett v Holt (2000) 2 All ER 289. 30 Roebuck v Mungoovin (1994) 2 AC 224 at p. 235. 31 McIlkenny v Chief Constable of the West Midlands (1980) Q.B 283 (henceforth referred to as “the
Mcllkenny case”); See also Cartwright “Protecting legitimate expectations and estoppel in English law” 2006 EJCL, vol.10.3. Available at http://www.ejcl.org accessed on 12 April 2019.
32 See Berezovsky v Abramovich (2011) 1 W.L.R 2290 at p. 71; and Combe v Combe (1951) 2 K.B 215 at p. 224.
33 Freedman & Lockyer ibid n 16 at p. 498. 34 Spliethoff’s Bevraschingskantoor BV v Bank of China Limited (2016) 1 All ER (Comm) 1034 at p.
156 (hereinafter referred to as “the Spliethoff’s Bevraschingskantoor BV case”; See generally Feltham, Hochberg, Leech, & Bower (2004) The law relating to estoppel by representation Bloomsbury Professional. The requirements of estoppel by representation were accepted in the case of Natixis S.A v Marex Financial & Access World Logistics (Singapore) Pte Ltd & MCAP (2019) EWHC 2549 (Comm).
9
The requirements of estoppel by representation are clearly different from those of
ostensible authority and the difficulty arising from this incoherence will be discussed
in the concluding remarks in paragraph 2.5 below.
2.5 Chapter conclusion
The discussion in this chapter establishes the existence under English law of concepts
such as estoppel and ostensible authority. There is no authority under English law that
holds that ostensible authority is a form of actual authority. There is further no authority
that establishes ostensible authority as a legal principle (otherwise known as a
maxim), independent from estoppel.35 What can be said, however, is that it may well
be sound to find that ostensible authority may be an independent maxim, which, once
established, attracts the implications of estoppel. If this finding is correct, it may well
be the justification in English case law that once ostensible authority is established,
the apparent principal will be estopped from denying liability.
It may further be a sound assessment to hold that English case law’s usage of
“estop” or “estoppel” when employed in relation to ostensible or apparent authority is
used to denote the legal implications that flow from establishing such authority. The
implications may well not, under English law, it is submitted, invoke the application of
estoppel as a maxim, but simply preclude the principal from denying the authority of
her agent, therefore rendering the principal “estopped”.
If it is accepted that ostensible authority is a form of estoppel by representation,
it will be difficult to reconcile the requirements of ostensible authority, and estoppel by
representation as set out in the Freedman case, and the Spliethoff’s
Bevraschingskantoor BV case, respectively.36 Clearly, ostensible authority cannot
succeed where in fact the company sought to be precluded from denying liability could
not, by virtue of its founding documents, exercise such authority. This is however
permissible under estoppel by representation, as no such impediment exists in terms
of the requirements to set up estoppel by representation.
From the above one can conclude that ostensible authority is a form of estoppel
which is established by what appears to others, subject to the four requirements in the
Freedman & Lockyer case. It is submitted that the Freedman & Lockyer case reached
35 See the Armagas ibid n 13 at p. 652. 36 See paragraphs 2.3 and 2.4.
10
an erroneous finding that ostensible authority is estoppel by representation. As
discussed, this is impossible bearing in mind the distinct definitional elements of
estoppel by representation and ostensible authority.
Under English law, estoppel is not a technical concept. It is, in fact, a flexible
concept, with its primary objective being to ensure that justice and equity are served
and guaranteed.37 The concept of estoppel boils down to this: A person who leads
another into conceiving and believing that a certain state of affairs exists, will be
precluded from alleging otherwise at a later stage in the event that allowing same will
be unjust and/or inequitable.38 Estoppel may exhibit itself in various forms.39 The
question is, therefore, whether estoppel in its various forms can be considered a
unified doctrine or whether each manifestation of estoppel should be dealt with as a
singular, yet a closely related concept. As will be seen in chapter 5 below, some forms
of estoppel have distinct requirements. Is estoppel a legal doctrine or a consequential
phenomenon? Regardless of terminology, it seems that the English law has
established principles to hold persons who mislead, by the circumstances they create,
other persons who rely on such so created circumstances. In the light of the English
law jurisprudence of equity, estoppel is a legal phenomenon flowing from the creation
by a person whom the dictates of justice and equity entail that they should be held
liable. In terms of the Armagas case, ostensible authority is a form of estoppel.40 The
judgment of the Armagas case is binding on all English courts and as such reflects the
position of English law.41 In determining these, English law employs its established
requirements as guidance because estoppel is a flexible concept.42
It is clear from the foregoing examination that estoppel, whether as a concept, or
estoppel by ostensible authority, regardless of nomenclature and categorisation, all
seek to hold accountable a principal, either by means of established principles or
simply the dictates of equity and justice. There is nothing in reason or law that suggests
that conferring discretion upon the courts to determine whether or not a certain
agreement which purports to have been entered into by an apparent agent with a third
37 See Moorgate Mercantile Co Limited v Twitchings (1976) 1 Q.B 225 CA at p. 24; and Canada and Dominion Sugar Company Limited v Canadian National (West Indies) Steamship Limited (1946) AC 46 PC at p. 55.
38 Cooke (2000) The modern law of estoppel Oxford University Press at p.2. 39 See chapter 5. 40 Armagas ibid n 13 at p. 652. 41 See Makate ibid n 1 at p. 747. 42 See paragraph 2.4.
11
party on behalf of her principal should not be assessed in light of the dictates of equity
and justice. Perhaps the doctrine of estoppel would find better application under the
South African jurisprudence if South Africa subscribed to a comparable system of law,
namely equity.
12
Chapter 3:
Overview of the law of agency before Makate: Ostensible
authority and estoppel
3.1 Introduction
In order to understand the law of agency as endorsed in the Constitutional Court
judgment of Makate, it is important to examine the law, or the extent of clarity thereof,
prior to the Makate judgment. Agency itself, as a significant branch of the law of
contract, will also be discussed in order to place the relevant manifestations in context.
As the title of this work suggests, there was a dispensation in the South African
jurisprudence that existed prior to the decision of Makate as it pertains to agency, and
in particular the concepts of ostensible authority and estoppel.
3.2 South African law of agency
South African law of agency is a pivotal branch of the law of contract in the area of
substantive law which recognises the developments in commerce and the third person
method of transacting.43 Indeed, as Kerr observes, an agent is appointed by his
principal to perform such duties as the principal finds meet, on behalf of the principal,
the duties of which “the principal finds … impracticable, inconvenient, or difficult to do
for himself”.44
The rules governing agency necessarily entail the existence of three role players
to find application, namely the principal, the agent, and the third party to whom the
agent represents her principal. As held in Maye Serobe (Pty) Ltd v Lewusa Obo
Members, a relationship of agency between the principal and the agent may be
created by way of contract or operation of law, in terms whereof the agent is granted
authority by her principal to deal with third parties on the principal’s behalf.45
43 See Voet 1.8.28; and generally Morrison v Standard Building Society 1932 (AD) 237. 44 Kerr (1991) The law of agency LexisNexis at p. 3. See also Pothier (1979) Treatise on the contract
of mandate (traité du contrat de contrat de mandate) (translated by Rogers and De Wet) Lex Patricia at p.1.
45 Maye Serobe (Pty) Ltd v Lewusa Obo Members (J 2377/12) [2015] ZALCJHB 116 at p. 5 (henceforth referred to as “the Maye Serobe (Pty) Ltd case”). See also Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd (1984) 3 (A) 155 at pp.164-165.
13
Agents, in the execution of their duties, create rights for their principals and incur,
in the same process, liabilities for their principals.46 De Villiers and Knight set out the
requirements of a contract of agency as follows:47
a) The contract of mandate must relate to a performance that is to be carried
out in the future to the exclusion of the performances previously carried out.
In the event that the principal and an agent contract with regard to a subject
matter that has already been attended to, it is said that such a contract may
be void for, amongst other things, a common mistake between the parties.
b) The contract of mandate must, like any other contract, be legal in order for
it to be valid.48 This requirement is also buttressed by Myburgh; 49
c) Certainty is yet another foundational requirement for a contract of mandate;
d) The contract must be possible to perform for the principal;
e) The contract must equally be possible to perform for the agent; and
f) The contract must not be created to serve solely the interests of the agent;
therefore, such a contract must be entered into primarily for the benefit of
the principal.
It can be safely observed that few difficulties arise in agency under the circumstances
where the agent deals with third parties on behalf of the principal with the actual
authority (whether express or implied) of her principal and within the bounds of such
authority if any. A question may, therefore, arise on the status of a contract which was
purportedly entered into by and between the third party and the principal through the
representation of the apparent yet unauthorised agent.
46 See De Villiers, Macitosh and Knight (1956) The law of agency in South Africa Juta at pp.1 & 3. 47 De Villiers, Macitosh and Knight ibid n 46 at pp. 17&18. 48 Notwithstanding the directory nature of this requirement, consider Kylie v CCMA 2010 (4) SA 383
(LAC) in which the labour court dealt with the right of a sex worker. It should be noted further that trading in sex is a criminal offence under South African law and therefore, a contract for the provision of sexual services is an illegal contract (Sexual Offences Act 23 Of 1957).
49 Myburgh “On constitutive formalities, estoppel and breaking the rules” 2016 Stell LR 254-272 at p. 266.
14
3.3 Assessment of the law prior to Makate (not necessarily
abrogated)
Under South African law, the starting point in assessing the nature of ostensible
authority and estoppel is the case of NBS Bank Ltd v Cape Produce Company Pty
Ltd.50 A proper comprehension of the NBS Bank Ltd case and the matters that followed
it will give context to the analysis of this area of law in Chapter 4 of this work.51
The NBS Bank Ltd case concerned the fraudulent acts by the manager (being
the agent) of NBS Bank Ltd (being the principal), in terms of which the manager
conducted business in the name of his principal without the principal’s knowledge and
outside his (the agent’s) ostensible authority.52 The Cape Produce Company Pty Ltd
based, amongst other grounds, its claim that the NBS Bank Ltd was liable on actual
authority.53 Pursuant to such reliance on actual authority, the court adopted the
definition of actual authority in the English case of Hely-Hutchinson.54
In the Hely-Hutchinson case, the court held that actual authority binds the
principal and its agent, and it is equally binding on the third-party with whom the agent
contracts on the principal’s behalf.55 The principal’s agent can be clothed with actual
authority in one of two ways, namely, express or implied, in light of the position that
the agent holds.56
On the one hand, express actual authority speaks for itself. In the case of a
company, the authority may be conveyed to the agent by means of a resolution of the
board of that company.57 Implied actual authority may, on the other hand, be conferred
by the position that such an agent holds. For example, a managing director of a
company has actual authority to contract on behalf of the company absent anything to
the contrary.58
50 NBS Bank Limited v Cape Produce Company Pty Ltd 2002 (1) SA 396 (SCA) (Henceforth referred to as “the NBS Bank Limited case”).
51 The NBS Bank Limited case was followed in Glofinco v Absa Bank Ltd t/a United Bank 2002 (6) SA 470 (SCA); Northern Metropolitan Local Council v Company Unique Finance 2012 (5) SA 323 (SCA), the Coop case ibid n 65, amongst others.
52 NBS Bank Limited ibid n 50 at pp. 1-6 (for the relevant part of the facts of this case). 53 Ibid n 29 pp. 27- 28. 54 Hely-Hutchinson ibid n 12 at p. 583. 55 Hely-Hutchinson ibid n 12 at p. 583. 56 Hely-Hutchinson ibid n 12 at p. 583. 57 Hely-Hutchinson ibid n 12 at p. 583. 58 Hely-Hutchinson ibid n 12 at p. 583.
15
The issue that warrants discussion in relation to the NBS Bank Limited case, is
the question of ostensible authority: its actual ambit prior to Makate. The NBS Bank
case, in defining ostensible authority, lays down the requirements that will entitle the
third party to preclude the principal from denying liability for the contract entered into
by the person clothed with the principal’s ostensible authority. These requirements are
as follows:59
a) There must have been a representation which can be either express (in
words) or implied (by conduct);
b) The representation must have been made by the principal that the agent
has authority to contract on its behalf and not merely the agent’s ipse dixit;
c) In light of the form of the representation, the principal should have
reasonably expected third parties to be induced and rely on such
representation;
d) The reliance by third parties on such representation must have been
reasonable; and
e) The third-party must have been prejudiced by such reliance.
The NBS Bank Limited case did not hold ostensible authority to be synonymous to the
maxim of estoppel as understood under South African law, although it did set out its
requirements as those of estoppel. Equally, ostensible authority was not held to be an
independent legal principle. Further analysis to clarify this submission is required in
view of the observation in Makate case, that this case (NBS Bank Limited) conflated
ostensible authority with estoppel.60 It must be noted however that this clarity-seeking
examination should not be construed as an endorsement of the analysis of the issue
of ostensible authority and estoppel in the NBS Bank Limited case.
Perhaps the right course to explain the analysis in NBS Bank Limited, as a
starting point, is not to assess whether or not the court confused ostensible authority
with estoppel, but to firstly establish what constitutes ostensible authority. Once
ostensible authority has been clearly defined, an assessment of whether the court did
apply the correct principles of ostensible authority should be done.
59 NBS Bank Limited n 50 pp. 30 -31. 60 Makate n 1 at p. 710.
16
Whereas it is accepted that ostensible authority is such authority which appears
to have been vested in the agent insofar as other people are concerned, this
dissertation argues that this one statement singularly is insufficient to constitute a legal
principle in English law.61 It is equally submitted in respect of South African law,
ostensible authority must be defined and boundaries drawn. This may have been the
grounds for the NBS Bank Limited case to set out the requirements to establish
ostensible authority, as referred to above.62
It is submitted that, by setting out the requirements, the NBS Bank Limited case
gave expression to the abstract statement by Lord Denning in the Hely-Hutchinson
case pertaining to what constitutes ostensible authority as discussed above, thereby
adopting the principle subject to the qualifications introduced by the listed
requirements.
In view of the requirements to establish ostensible authority above, it is clear that
the Hely-Hutchinson observation on its own does not suffice to give rise to ostensible
authority.63 Clearly missing from the requirements to establish ostensible authority in
terms of the NBS Bank Limited case is the requirement that the founding documents
of the principal did not preclude the delegation of such authority to the particular
principal, which is part of the English law ostensible authority.64 Therefore, ostensible
authority was adopted from English law with qualifications. Under English law,
ostensible authority is an instance of estoppel, and the NBS Bank Limited case did not
observe otherwise.
What appears evident is that the requirements of ostensible authority as set out
in the NBS Bank Limited case are effectively synonymous with the characteristics of
estoppel. The requirements of estoppel are recorded in the Makate case and do not
bear repeating here.65
As will be seen in chapter 4 below, the majority judgment in the Makate case
holds that the NBS Bank Limited confused ostensible authority with estoppel. It is
submitted that even if the finding in the majority judgment of Makate was to be
accepted that the NBS Bank Limited case and the cases that followed it conflated
61 See chapter 4. 62 NBS Bank Limited ibid n 50 at pp. 30-31. 63 Hely-Hutchison ibid n 12 at p. 583. 64 Freeman & Lockyer ibid n 16 at pp. 503 & 506. See also Armagas n 13 at p. 652. See also Rama
Corporation ibid n 10 at p. 10. 65 Makate ibid n 1 at pp. 774.
17
ostensible authority with estoppel, this would not make a difference with regard to the
end that the concepts seek to achieve. It is submitted that even if ostensible authority
was said to establish a cause of action, therefore being different from estoppel, the
latter would still be indispensable as an enforcement mechanism to hold the principal
liable for the conduct of their agent executed within the agent’s ostensible authority.
This is buttressed by the findings of the trial court as referred to in Makate, to the effect
that once ostensible authority is pleaded and denied, estoppel needs to be pleaded in
replication.66
It must be observed, however, that the NBS Bank Limited case does not
delineate, in readily ascertainable terms, if at all, the issue of ostensible authority and
estoppel. Although there is no explicit finding in this regard, the failure may have been
occasioned by the court’s appreciation that ostensible authority and estoppel are
closely related and interconnected. As discussed above, in both cases there is a
representation.
The failure of the NBS Bank Limited case’s failure to clarify the concept of
ostensible authority has led to subsequent judgments reproducing the same
ambiguity, and in fact, ignoring the differences in form and substance of ostensible
authority and estoppel. The best example is perhaps the Supreme Court of Appeal’s
judgment in South African Broadcasting Corporation v Coop.67 In the Coop case,
Navsa JA complicated the issues further in that he observed that estoppel is
“otherwise described as ostensible authority”.68
3.4 Chapter conclusion
It is clear from the analysis above that conceptual misconstruction is owing not only to
flawed reasoning by current academics and judges but to the foundational findings
that were made in respect of old concepts. It must, therefore, be understood that in
order to correct the difficulties which flow well over decades, there is a need for reform,
for new principles that will uphold equity and justice, principles that will apply across
various factual questions. Indeed, discretion on the part of the judiciary should not be
66 Makate ibid n 1 at p. 721. Makate v Vodacom (Pty) Limited [2015] JOL 34657 (GL) at pp. 84-85 (the trial court).
67 South African Broadcasting Corporation v Coop (570/2004) (2005) ZASCA 118 (Henceforth referred to as “the Coop case”).
68 Coop ibid n 42 at p. 31.
18
so narrowed that judgments that are clearly not in the best interest of the prestige of
the judicial system should not be delivered. This, of course, is not to suggest that the
judiciary be conferred with law-making powers, but to refine principles in line with the
principles of natural justice and the spirit, purport and objects of the Constitution of the
Republic of South Africa.69
The examination in this chapter establishes that ostensible authority under South
African law prior to Makate was nothing but an instance of estoppel. The NBS Bank
Limited case did set out the requirements for ostensible authority, namely, “1 [a]
representation by words or conduct. 2 Made by the [principal] and not merely by [the
agent], that [s]he had the authority to act as [s]he did. 3 A representation in a form
such that the [principal] should reasonably have expected that outsiders would act on
the strength of it. 4 Reliance by [outsiders] on the representation. 5 The
reasonableness of such reliance. 6 Consequent prejudice to [outsiders].”70
It becomes more evident from the judgments that follow the NBS Bank Limited
case that ostensible authority is an instance of estoppel.71 The best example for this
proposition is the Coop case referred to above which held that ostensible authority is
synonymous estoppel.72
69 The Constitution of the Republic of South Africa, 1996, as amended (Henceforth referred to as “the Constitution”).
70 NBS Bank Limited case ibid n 50 at pp. 30-31; and Makate ibid n 1 at p. 723. The quotation has been amended to reflect the feminine gender and to replace name references to accord the requirements the status of general application under the principle of estoppel.
71 See n 51 for cases that followed the NBS Bank Limited case. 72 Coop case ibid n 65 at p. 31.
19
Chapter 4:
The Makate case
4.1 Introduction
It is necessary to discuss the position of the law as per the findings of the majority
court in the case of Makate.73 The jurisprudence relied upon will be assessed to
ascertain whether the court’s findings are tenable. As noted below, there are
inconsistencies in case law pertaining to the issues which the court was called upon
to adjudicate. The court decided upon such questions and its findings were to a certain
extent rejected by some renowned authors.74 In the light of the foregoing, an analysis
of this case is warranted and, the criticism by the concurring judgment of Wallis AJ will
also be examined, and its postulated theory analysed.
4.2 Factual background and litigation history of Makate case
The Makate case was instituted in the Gauteng Local Division of the High Court of
South Africa.75 After the High Court dismissed the plaintiff’s action, the latter
proceeded to petition the Judge President of the Supreme Court of Appeal who in turn
dismissed the petition.76 With no other legal avenue to address the plaintiff’s
grievances, the latter approached the Constitutional Court of South Africa for
assistance. It is the decision of the latter court that this dissertation shall deal within
the light of the High Court judgment.
Makate, while in the employ of Vodacom as a trainee accountant during 2000,
came up with an idea which is now called “please call me”. It is common cause that
the “please call me” product enables a user who is airtime deficient to send a “call me”
message to the user who is presumably in funds, prompting the latter to call the former.
Makate, having envisaged the foregoing in an abstract form and being desirous
of selling the idea, and having been advised by his mentor, Mr Lazarus Muchenje,
73 Makate ibid n 1. 74 Sharrock “Authority by representation – a new form of authority?” 2016 PER 1-21. 75 Trial court ibid n 66; and Makate ibid n 1 at . 712. 76 Trial court ibid n 75 at p. 99.
20
Makate escalated the idea to Mr Philip Geissler being Vodacom’s Director of Product
Development and Management.77
Pursuant to Makate’s escalation of his idea and upon the conclusion of the
negotiations, it was agreed between the parties that Makate’s idea would be utilised
to develop a new product that would be tested for profitability.78 It was further agreed
that should the product prove to be commercially viable, Makate would receive a share
of the profit. It was also agreed that in the event of the parties failing to agree on the
extent of revenue to be paid to Makate, Vodacom’s Chief Executive Officer would
make such determination.79
The “please call me” product was developed and proved successful to the
satisfaction of Vodacom.80 In fact, this product generated billions of Rands in revenue
for Vodacom.81 However, the product was implemented prior to it being approved by
Vodacom’s board, the latter having only approved it on 15 March 2001.82
Notwithstanding the above facts, Vodacom did not commence with the
negotiations for the remuneration of Makate for his idea as agreed. Instead, Vodacom
misappropriated the idea to itself. Vodacom perpetuated the narrative that Mr Alan
Knott-Craig, the Chief Executive Officer of Vodacom, devised the Please Call Me
concept.83
After Vodacom rejected Makate’s demand for compensation, he instructed
attorneys to issue a combined summons on his behalf against the former for the
enforcement of the agreement.84 In order to achieve his quest for remuneration,
Makate not only bases his claim on the validity of the agreement but also sought from
the judiciary the development of common law “and to infuse it with constitutional values
of ubuntu and good faith”.85
Makate’s claim was vigorously defended by Vodacom. The latter took issue with
the delay in the institution of the action.86 For this, Vodacom cited section 11(d) of the
77 Makate ibid n 1 at p. 712. 78 Makate ibid n 1 at p. 712. 79 Makate ibid n 1 at p. 712. 80 Makate ibid n 1 at p. 712. 81 Makate ibid n 1 at p. 713. 82 Makate ibid n 1 at p. 713. 83 Makate ibid n 1 at p. 713. 84 Makate ibid n 1 at p. 714. 85 Makate ibid n 1 at p. 717. 86 Makate ibid n 1 at p. 714.
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Prescription Act.87 Vodacom further contended that Makate’s idea fell squarely within
the scope of his employment and therefore he was not entitled to compensation other
than his salary.88
Perhaps the most crucial of the facts insofar as this dissertation is concerned is
Vodacom’s plea that Messrs Muchenje and Geissler were not acting on behalf of
Vodacom, because they lacked the requisite authority to represent Vodacom in the
“please call me” idea agreement. Vodacom submitted that Muchenhje and Geisler did
not have either actual or ostensible authority.89
4.3 The relevant issues
The Makate case invoked critical questions of law flowing from an ordinary set of facts.
With regard to the questions of law, this dissertation emphasises the terminology or
nature of concepts, namely estoppel and ostensible authority, instead of the end for
which the concepts were designed.
As noted in the factual background above, Vodacom denied that its senior
employee had the authority to bind it in the purported agreement.90 Therefore, the
court had to determine whether Vodacom was liable in contract or otherwise to honour
its end of the obligations flowing from the alleged contract between it (Vodacom) and
Makate. To this end, the court had to examine the South African jurisprudence to
determine the liability of Vodacom, if any.
In seeking to address the issues raised in the case, the concepts of ostensible
authority, actual authority, and estoppel were examined. Reference was made to
English and South African jurisprudence. In the examination of the jurisprudence, the
South African law of agency was redefined and the difficulties in conceptual
understanding highlighted.
The Constitutional Court in Makate case was divided on the position of the law
on the nature of ostensible authority.91 The majority judgment shall be referred to as
87 Prescription Act 68 of 1969. 88 Makate ibid n 1 at p. 714. 89 Makate ibid n 1 at p. 714. 90 See para. 4.2. 91 The full bench that heard the matter comprised of Mogoeng CJ, Moseneke DCJ (as he then was),
Jafta J, Khampepe J, Matojane AJ, Nkabinde J, Zondo J (as he then was), Wallis AJ, Cameron J, Madlanga J, and Van der Westhuizen.
22
the Jafta judgment, and the concurring judgment shall be referred to as the Wallis AJ’s
judgment.92
The court was therefore seized with the question of whether Makate had duly set
out the grounds which entitled him to obtain a judgment on the premise of ostensible
authority.93 The subsidiary question in this regard was whether there was a need to
develop the common law as it relates to agency and the confusing issues of ostensible
authority and estoppel.94
4.4 The majority judgment per Jafta J
Answering the question of whether or not ostensible authority was properly pleaded
will, in fact, establish the nature of ostensible authority and clarify its practical effects.
Jafta J’s judgment had to examine the judgment of the trial court in this regard as a
starting point, as the matter was before the Constitutional Court as an appeal matter.
Jafta J observed that the trial court assessed the matter as though Makate had raised
estoppel and not whether Makate had established ostensible which was, in fact, the
question before the trial court.95
The relevance of ostensible authority and estoppel becomes apparent where
there is doubt whether or not an agent had actual authority in purporting to conclude
a contract on behalf of his purported principal. Jafta J, therefore, outlined what
constitutes actual authority, which is viewed as significant in order to place ostensible
authority and estoppel in context and their relevance in the application of the law of
agency. Jafta J held that in the event that the principal had clothed her agent with
authority to contract on her behalf, whether expressly or impliedly, the question will be
answered in the positive, that is, the agent did have actual authority to represent that
principal thereby rendering the agent, an agent proper.96 In view of the discussion in
paragraph 2.2 above, it is clear that actual authority under English law is synonymous
to actual authority under South African law.
Jafta J found, in an attempt to distinguish the concept of estoppel from ostensible
authority that, estoppel is not elevated to a status of a substantive form of authority in
92 Justice Jafta scripted the majority judgment with six other justices concurring, and Acting Justice Wallis wrote for the concurring judgment with three other judges concurring.
93 Makate ibid n 1 at p. 718. 94 Makate ibid n 1 at p. 718. 95 Makate ibid n 1 at p. 717. 96 Makate ibid n 1 at p. 721.
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agency, but a rule of law envisaged and designed to preclude the principal from
denying liability on the basis that her conduct had the effects of misleading the third
party into believing that the unauthorised agent did, in fact, have authority to represent
the principal in that contract.97 This distinction is criticised by Cassim and Cassim on
the basis that even the concept from which Jafta J sought to distinguish estoppel is
not a form of authority.98 Indeed, this criticism is in line with the analysis of this
dissertation, spanning from the English law itself and under South African law for
reasons that are apparent in various parts of this dissertation.
A closer look at the Jafta judgment99 indicates that ostensible authority under
South African law is defined exclusively with reference to the sentence in the English
case of Hely-Hutchinson as indicated above.100 In terms of the Jafta judgment,
ostensible authority is established if it can be proved that there was a representation
by the principal, which can be express or implied to the effect that the agent has
authority to represent the principal.101
This definition of ostensible authority must be closely examined. In terms of the
authority relied upon by Jafta J, ostensible authority is “authority of an agent as it
appears to others”.102 The question that may flow from a principle of the law of this
nature is whether or not there are further requirements for this principle to be
established. As per Jafta J, as intimated above, there is none.103 This finding by Jafta
J has been found to be wanting and having ignored the general application of the
ostensible authority as analysed in the very case of Freeman and Lockyer.104
Jafta J found that English law was adopted in the NBS Bank case, referred to
above.105 However, this finding is probably erroneous for the reasons outlined in
chapter 3 above. As has been noted in chapter 3, the requirements of ostensible
authority under English law are different from the requirements of ostensible authority
as set out in the NBS Bank case.106
97 Makate ibid n 1 p. 721. 98 Cassim & Cassim “The authority of company representatives and the Turquand rule revisited” 2017
SALJ 639-664 at p. 641. 99 Makate ibid n 1 p. 722. 100 Hely-Hutchinson ibid n 11 p. 583. 101 Makate ibid n 1 at p. 722. 102 Hely-Hutchson ibid n 11 p. 583. 103 Makate ibid n 1 at p. 722. 104 Cassim & Cassim ibid n 98 p. 651. 105 Makate ibid n 1 at p. 722. 106 See Freeman & Lockyer ibid n 16 at p.503; and NBS Bank Limited ibid n 50 at pp. 30-31.
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As concluded in chapter 3, the law relating to ostensible authority was adopted
into South African law with qualifications. As the findings of this paper are that
ostensible authority under English law is an instance of estoppel for the reasons that
are furnished in chapter 2, it is absurd that Jafta J considers English law to emanate
from nothing but a single sentence of a court decision, read in isolation from all other
English cases.107
This difficulty is highlighted by the English case of Freeman & Lockyer, where it
was stated that when a third party relies on a representation made by the principal,
the principal will be estopped from denying that the agent had authority.108
The definition accorded to ostensible authority by Jafta J is probably too wide
and leaves room for erroneous future judgments. By way of example, what will the
status of the agreement be, where, notwithstanding the general representation that an
agent has authority to contract on behalf of the principal, the third party was aware
that the agent did not have the authority to enter into that particular contract? Clearly,
there is a need for a full and complete list of requirements to qualify ostensible authority
as a legal principle.
This dissertation holds that the formulation of principles in an area of law that has
been clouded by a long trail of judicial precedents, which are inconsistent with the
postulated theory should be done with care, and specific attention should be given to
guiding further academic and judicial discourse. Simply put, as noted in the discussion
of NBS Bank Limited in chapter 3 above, ostensible authority was construed under
South African law as an instance of estoppel. Therefore, there was a need to establish
the requirements of estoppel in order to set up ostensible authority.109
With reference to Trust & Investment case,110 Jafta J found that the state of
confusion in the analysis of the concept of ostensible authority and estoppel is
engendered by the state of confusion in English law.111 The question of the state of
confusion under English law was dealt with in chapter 2 above.
107 As is clear in the discussion in paragraphs 2.4 and 2.5, the requirements for ostensible authority and ostopell by representation are distinct.
108 Freeman & Lockyer ibid n 16 at p. 503. 109 Trial court ibid n 66 at p. 84. 110 The Insurance Trust & Investment case ibid n 28 at p. 61 . 111 Makate ibid n 1 at p. 730.
25
Jafta J further adopted the further analysis in the English case of Freeman &
Lockyer.112 The adopted analysis is to the effect that ostensible authority is a
relationship of legal nature as between the principal and the agent which has been
created by the representation made by the principal to a contracting third party that
the agent does have the requisite authority to contract on the principal’s behalf.113
Clearly, this contradicts the learned judge’s findings that no more requirements need
be proved beyond an appearance to others. The further adoption establishes that the
representation needs to have been made to the person raising ostensible authority
and not merely a general representation to third parties.
The Freeman & Lockyer case clearly requires that the representation must have
been directed to a particular person, namely the third party who seeks to hold the
principal liable under ostensible authority. Jafta J, on the other hand, held that: “The
means by which that appearance is represented need not be directed at any person.”
That begs the question, therefore: on what authority is this finding premised?
If it is to be accepted that Jafta J’s judgment effectively contradicted its own
stance on what constitutes the cause of action for ostensible authority, the principle
becomes even more inexplicable both in theory and application. Perhaps a more
generous interpretation of the finding that the representation need not be directed at
anyone should be that the representation need not be directed at the contracting third
party but a general prevailing representation which may be deduced from the
circumstances. Even if this interpretation is, in fact, the envisaged definition, the
difficulty with regard to its implications is not overridden. This difficulty is even more
pronounced by the fact that representation need not be in words but can equally be
implied. This dissertation holds that, once one establishes from circumstances created
by the principal as a representation that the agent does have authority to contract on
behalf of the principal, there is, therefore, a representation directed to someone, that
is, all persons that acquiesce themselves with the circumstances that give rise to the
representation.
Jafta J held that the facts establishing ostensible authority are not exclusive in
nature and the same facts may be relied upon to establish estoppel.114 He further held
that ostensible authority is what appears to others and such appearance may, in fact,
112 Freeman & Lockyer ibid n 15 at p. 503; and Makate ibid n 1 at p. 730. 113 Makate ibid n 1 at p. 730; See also Freeman & Lockyer ibid n 15 at p. 503. 114 Makate ibid n 1 at p. 729.
26
be not reflective of the circumstances, that is, the agent may in fact not have been
clothed with actual authority.115 In finding fault with the requirements of ostensible
authority as set out in NBS Bank Limited, Jafta J, criticised the inclusion of the
requirement that “in light of the form of the representation, the principal should have
reasonably expected third parties to be induced and rely on such representation” as
referred to above. The basis for such criticism is the apparent incoherence with that
statement and the observation that the principal may not have intended to make such
a representation and the representation, in fact, proves to be wrong.116 There is merit
in this challenge and unfortunately, the NBS Bank case cannot be salvaged from this
difficulty.
Another challenge that Jafta J launched is against the observation that the
principal must have expected third parties (outsiders) to act upon it as discussed
above. In challenging this finding, Jafta J referred to the case of Hely-Hutchinson in
which Lord Denning held that the principal will be bound by ostensible authority even
if the contracting third party is, in fact, a director and the unauthorised agent is the
managing director in the circumstances that the new director was oblivious of the fact
that the managing director was in fact not authorised to enter into the contract which
is later impugned for the lack of the managing director’s authority to bind her
principal.117
The proper reading of the example above in Hely-Hutchinson is that even a
director of a company which is being sued is considered an outsider by virtue of her
lack of knowledge of the actual extent of a managing director of the company that is
later sued for the representations made by the managing director. Therefore, such
director who is not apprised with the internal management of the company is no
different from an outsider and should be defined as such for the purposes of ostensible
authority. The requirement laid down in NBS Bank Limited as referred to above,
therefore, is not misplaced. The word “outsiders” seems to encompass all persons
who are not apprised of the limitations of the actual authority of the managing director
or a person who is clothed with ostensible authority. In any event, the example does
not relate to actual authority but to ostensible authority that is implied from the office
of a managing director.
115 Makate n 1 at pp. 721-722. 116 Makate n 1 at p. 724. 117 Hely-Hutchinson ibid n 11 at pp. 583-584.
27
If the foregoing submission is correct that an “outsider” shall refer only to persons
who are not apprised of the fact of the limitation of the agent’s powers notwithstanding
their ordinary ostensible authority to outsiders proper, that is people who may,
however, be at the principal’s employ yet lack the requisite knowledge of the agent
through whom they contract with the principal, therefore, Jafta J’s finding that “it is
clear that, even if the representee is not an outsider, under apparent authority the
principal could still be bound” is misplaced.118 There is nothing in reason or law that
suggests than an “outsider” can be defined with reference to their employment status,
other than the fact of the person’s knowledge or lack thereof of the existence of
limitations of ostensible authority.
Jafta J concluded that ostensible authority is authority as it appears to others and
that estoppel is distinct from ostensible authority and has always been treated as
distinct under South African law.119 He concluded that estoppel is not a form of
authority and also does not appear to be such.120 The court appears to have been
oblivious to the various forms of estoppel, alternatively did not consider it necessary
to discuss these forms of estoppel in order to justify its findings that ostensible authority
is not a form of estoppel. As will be noted in chapter 5, there are various forms of
estoppel, some of which have distinct requirements, though some are overlapping.
4.5 The concurring judgment
The concurring judgment of Wallis AJ in Makate offers a different perspective on the
South African law of agency, and pertinently, a discourse on the rather problematic
issues of ostensible authority and estoppel. It is confessed in the introductory part of
the judgment that the finding that Vodacom was bound in the contract for the
representations of its employee was not in issue.121 The main difference between the
majority and the concurring judgments was the categorisation of ostensible authority
and estoppel: what these concepts really mean under South African law.122
Wallis AJ found that estoppel applies to wide-ranging issues as an equitable
concept.123 As noted in chapter 2 above, the law judicial system is based on the
118 Makate ibid n 1 at p. 724. 119 Makate ibid n 1 p. 729. 120 Makate ibid n 1 at p. 724. 121 Makate ibid n 1 at pp.738-739. 122 Makate ibid n 1 at pp. 738 123 Makate ibid n 1 at p. 739..
28
principles of equity and justice. Wallis AJ further found, as opposed to Jafta J, that
ostensible authority is but a category of estoppel.124 In order to buttress his view that
estoppel is not a rigid concept but one with various branches, Wallis AJ cited various
examples.125 It is important that such examples be briefly discussed in order to
understand the court’s findings in this regard. These examples are discussed in
Chapter 5 below.
In answering the question whether ostensible authority is based on estoppel,
Wallis AJ found that ostensible authority under South African law is estoppel by
representation, that is, a branch of estoppel.126 Wallis AJ further admitted, inconsistent
with his general finding on the issues of ostensible authority, that ostensible authority
is a form of authority under the circumstances that the person that is clothed with
ostensible authority does in fact bear actual authority.127 Such admission is not in line
with the same concurring judgment’s finding that ostensible authority is a branch of
estoppel. If it is accepted, as the concurring judgment finds, that ostensible authority
is a branch of estoppel, it is nonsensical to suggest that estoppel can be employed
where there is actual authority. It can be accepted, however, that estoppel, whether it
is the mother body of ostensible authority or not, can be employed under the
circumstance where actual authority exists but is denied. In this event, it would have
been applied as a shield.128
The major difficulty with Wallis AJ’s admission above, namely that ostensible
authority may coincide with actual authority, in effect aligns the identifying features of
ostensible authority with those held by the majority judgment as adopted from the
Hely-Hutchinson case, that is “ostensible or apparent authority is the authority of an
agent as it appears to others”.129
With regard to the position under English common law, Wallis AJ observes, that
the English common law classifies ostensible authority within the branch of estoppel,
and estoppel by representation in particular.130 The position of English law in this
regard is discussed in chapter 2 above. The finding that ostensible authority is
124 Makate ibid n 1 at pp. 738 & 746. 125 Makate ibid n 1 at p. 739 . The various forms of estoppel are discussed in chapter 5. 126 Makate ibid n 1 at p. 758. 127 Makate ibid n 1 at pp. 745-746. 128 Makate ibid n 1 at p. 744. 129 Hely-Hutchison ibid n 12 at p. 583. 130 Makate ibid n 1 at p. 746.
29
estoppel by representation cannot be sustained in view of the fact that the
requirements of estoppel by representation and the requirements of ostensible
authority, both under English law are self-contradictory.131
The assessment of Wallis AJ is supported by the observation of Beck. Beck
observes that agency by estoppel and ostensible authority is one and the same
thing.132 In the final analysis, Wallis AJ found that ostensible authority is estoppel by
representation. For Wallis AJ, the requirements of estoppel by representation are
those requirements of ostensible authority (and estoppel) as established in NBS Bank
Limited.
The concurring judgment further acknowledges that estoppel remains a shield
but may be pleaded in the particulars of claim and not exclusively by means of
replication.133 In this fashion, Wallis AJ acknowledges that estoppel by representation
is not a form of authority.
This dissertation has difficulty with this finding. Ostensible authority indeed falls
within the rubric of estoppel but is not estoppel by representation. South African law
has not adopted the English law principle of estoppel by representation and therefore
such principle does not form part of our law. The requirements of estoppel by
representation were correctly recorded in English case law, as discussed in paragraph
2.4. Clearly, these requirements are different from the requirements of ostensible
authority set out in the Wallis judgment.
4.6 Chapter conclusion
The exposition of the law of agency in light of the analysis above reveals the state of
confusion of both the English law and South African law. It is noteworthy that the
English law principle of estoppel by the Jafta judgment in Makate assessed the issues
before the court with an erroneous premise that there are consolidated requirements
for estoppel. This misdirection must have played a significant role in Jafta J’s mind in
determining whether or not ostensible authority is estoppel. As will be evident in
chapter 5, estoppel manifests itself in various fashions with unique requirements. As
concluded in chapter 3, under English law, ostensible authority falls within the rubric
131 The requirements for estoppel by representation and ostensible authority under English law are set out in paragraph 2.4.
132 Beck (2002) Theory and principles of pleading and civil actions Butterworths at p. 199. 133 Makate ibid n 1 at p. 744.
30
of estoppel. Under English law, ostensible is not established by merely what appears
to others, but certain requirements must further be met, as discussed above. With no
difficulty would it be accepted that the NBS Bank case adopted the concept of
ostensible authority in a wrong fashion, but for different grounds. Clearly, the
requirements of ostensible authority as set out in the case of Freeman & Lockyer134
are different from the requirements for ostensible authority as set out in the NBS Bank
Limited case.135 With regard to the difference as it pertains to the limitation of a
company’s capacity in terms of its founding documents in Freeman & Lockyer,136 some
scholars137 observe that such requirement should be discarded in view of the changes
in legislative framework of South Africa.138
Ostensible authority and estoppel may be pleaded on the onset in the event that
one is of the view that authority may be in issue.139 In the event that it is not pleaded
in the summons, but the facts establishing same are raised, it may be raised by way
of replication.140
134 Freeman & Lockyer ibid n 16 at p. 503 & 506. 135 NBS Bank Limited n 50 at pp. 30-31. 136 Freeman & Lockyer ibid n 12 at p. 493. 137 Cassim & Cassim ibid n 98 at 648. 138 Section 19 (1)(b) of the Companies Act ibid n 161. 139 Makate ibid n 1 at p. 744; And Trial court ibid n 75 at p. 84. 140 Trial court ibid n 75 at pp. 84-85.
31
Chapter 5:
Estoppel and ostensible authority
5.1 Introduction
It is important to revisit the principles of estoppel and ostensible authority under South
African law with the benefit of the foregoing analysis. It is clear141 that estoppel
manifests itself even beyond the scope of agency and the requirements of estoppel
change from case to case, thereby buttressing the view that it is a flexible concept of
equity.142 In this chapter, a discussion is provided of estoppel as it applies to motor
vehicle disposition cases. The principle of estoppel as it finds application in share
dealing shall also be discussed. The requirements of estoppel as they apply to the
vindicatory action, the Turquand rule and ostensible authority will also be discussed.
This examination demonstrates that our law recognises various forms of estoppel and
buttresses the findings of this dissertation that ostensible authority falls within the wide
rubric of estoppel. As highlighted in paragraph 2.5 above, estoppel is not only flexible
under English law, but is also flexible under South African law. The examples below
are discussed to demonstrate that estoppel takes various forms and may have unique
requirements. In the light of the discussion that is to follow, this dissertation finds that
ostensible authority is equally a branch of estoppel.
5.2 Motor vehicle cases: Estoppel
Estoppel finds application in the sale of motor vehicles. In these forms of transactions,
it was held in the cases of Oakland Nominees (Pty) Ltd v Gelria Mining & Investment
Co (Pty) Ltd143 and Quenty’s Motors (Pty) Ltd v Standard Credit Corporation Ltd,144
that for estoppel to be established, the following requirements should be established:
141 Makate ibid n 1 at p. 739. 142 See paragraph 2.5. 143 Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd 1976 (1) SA 441 (A) 452
(henceforth referred to as “the Oakland Nominees (Pty) Ltd case”. 144 Quenty’s Motors (Pty) Ltd v Standard Credit Corporation Ltd 1994 (3) SA 188 (AD) at pp. 198 &199
(henceforth referred to as “the Quenty’s Motors (Pty) Ltd case”). See also Van der Molen v Fagan (41/2013) [2013] ZASCA 203 (02 November 2013) (henceforth referred as to “the Van der Molen case”).
32
a) The owner of the vehicle must have represented, by her conduct or
otherwise, that the person who dispossessed her motor vehicle was in fact
the owner thereof, alternatively had the right to so dispose of it;145
b) The representation by the owner referred to immediately above must have
been made owing to the negligence of the owner;
c) The person who subsequently raises estoppel must have placed reliance
on the negligent representation; and
d) The negligent representation should have caused the person raising
estoppel to act to her detriment.
The requirements to establish estoppel in motor vehicle transaction matters are
notably dissimilar to the general requirements of estoppel as referred to in NBS Bank
Limited,146 admitted as being the requirements of estoppel in the majority judgment in
Makate.147
Requirements (a), (c), and (d) above are clearly present the estoppel
requirements as per the NBS Bank Limited and Makate cases.148 Requirement (b)
above does not form part of the requirements listed in NBS Bank Limited. Furthermore,
the requirement of “reasonableness of such reliance” need not be established in motor
vehicle cases.149
The differences in the requirements for estoppel, especially as highlighted by
estoppel under motor vehicle cases, can be best explained by the judgment of the
Supreme Court of Appeal in Grosvenor Motors (Potchefstroom) Ltd v Douglas.150 In
this case, contrary to the established requirements of estoppel on motor vehicular
dispositions that the owner can, in fact, be estopped based on the principles of fairness
and equity.151
145 See also Electrolux (Pty.) Ltd. v Khota and Another, 1961(4) S.A. 244 (W), Broekman v TCD Motors (Pty) Ltd 1949 (4) SA 418 (T); Johaadien v Stanley Porter (Paarl) (Pty) Ltd 1970 (1) SA 394 (A); Grosvenor Motors (Potchefstroom) Ltd v Douglas 1956 (3) SA 420 (A) (Henceforth referred to as “the Grosvenor Motors (Potchefstroom) Ltd”).; Kajee v HM Gough (Edms) Bpk 1971(3) SA 99 (N); Oriental Products (Pty) Ltd v Pegma 178 Investments Trading CC 2011 (2) SA 508 (SCA).
146 NBS Bank Limited ibid n 50 at pp. 30-31. 147 Makate ibid n 1 at p. 723. 148 NBS Bank Limited ibid n 50 at pp. 30-31. 149 NBS Bank Limited ibid n 50 at pp. 30-31. 150 See generally Grosvenor Motors (Potchefstroom) Ltd ibid n 146. 151 Grosvenor Motors (Potchefstroom) Ltd ibid n 146 at p. 427.
33
Indeed, Du Plessis observes that estoppel gives an expression to the demands
of good faith and holds that estoppel can be linked to the well-established principle of
exception doli.152
In the light of the foregoing, it is submitted that holding that ostensible authority
falls within the rubric of estoppel accords with the purpose for which ostensible
authority seems to serve, that is, to hold persons who in terms of the dictates of equity
should be held accountable, notwithstanding lack of actual authority.
5.3 Share dealing transactions
The concept of share dealing entails the conveyance of shares from one owner to
another. The issues of estoppel in relation to share dealing transactions was
considered in the case of Oakland Nominees (Pty) Ltd.153 As will be noted, the
requirements are synonymous to those established in motor disposition cases as
discussed above.154 As discussed in Electrolux (Pty) Ltd v Khota,155 in cases of share
dealing, the mere act of making available of an article, such as a share certificate
which enables another person to transfer it will render the original owner of the share
certificate from denying that the person who has so disposed of the share certificate
has the authority to so dispose. Therefore, in these cases, no further requirements to
establish estoppel.
5.4 Vindicatory actions
Vindicatory claims have also been a subject of adjudication under South African law
in the area of estoppel. Vindicatory claims are claims for ownership to property.156 In
the case of Konstanz Properties (Pty) Ltd V Wm Spilhaus en Kie (Wp) Bpk, the
requirements for one to succeed with a claim for estoppel on vindicatory actions were
laid down as follows:157
(a) The original owner of the property must have represented to the new owner
that the person who disposed the property had authority to do so;
152 Du Plessis ‘Giving practical effect to good faith in the law of contract’ 2018 Stell LR 379 at 5.4.3. 153 Oakland Nominees (Pty) Ltd ibid n 144 at p. 452. 154 Oakland Nominees (Pty) Ltd ibid n 144 at 452. 155 Electrolux (Pty) Ltd v Khota 1961 (4) SA 244 (W) 247. 156 Praker & Zaal “Absa bank limited v Kert 2015 JDR 0996 (SCA)” 2016 De Jure 181-190 at p. 186. 157 Konstanz Properties (Pty) Ltd v WM Spilhaus en Kie (Wp) Bpk 1996 (3) SA 273 (A) 33.
34
(b) The representation must have been made with the element of culpa or
negligence on the part of the representor; and
(c) The other person who is raising estoppel must have acted on the basis of
such representation to her prejudice.
Noteworthy in these requirements is the fact that the representation needs to be
directed at a particular person, namely the person that has been misled and acted
upon such representation to her prejudice. Here, again, it must be proved that the
representor was negligent in her representation. The representor will be estopped from
denying liability even in the event that she is found to have been negligent in his
representation. It follows as a matter of course therefore that the representor’s
negligence is deduced from his failure to foresee that her representation may mislead
a third party that may rely on such representation to the third party’s prejudice.
5.5 Turquand rule of company law and estoppel
Closely related to the principle of estoppel is the Turquand rule. The English case of
Royal British Bank v Turquand,158 which established the so-called Turquand rule was
adopted into South African law in the case Legg & Co v Premier Tobacco Co2159 In
terms of the Turquand rule, a person who contracts with a company through its
representatives is entitled to assume that the internal rules of conferring authority upon
such individuals have been complied with.160 The assumption is however subject to
the nature of the contract as some contracts, in their nature may put the other person
to enquiry, that is, to ensure that indeed such internal management rules have been
complied with. As noted already, when a contract, which an agent seeks to bind her
principal to, seems to be unreasonable or bearing such terms that a reasonable person
would question, the other person should establish if the agent is indeed authorised.161
Under South African law, the Turquand rule has been incorporated into company
law by legislative means. The Companies Act provides that outsiders are not required
to enquire into the internal management of companies with which they deal and, in
158 Royal British Bank v Turquand (1856) 119 ER 474. See also Sealy “Agency principles and the rule in turquand's case” 1990 CLJ 406-408 at pp.406-408.
159 Legg & Co v Premier Tobacco Co2 1926 AD 132 at pp. 134-135. 160 See section 20(7) and 20(8) of the Companies Act 71 of 2008 for the codification of the principle
(Henceforth referred to as “the Companies Act”). 161 Cassim & Cassim ibid n 1 p. 64.
35
fact, such third parties are entitled to presume that the internal management rules of
the company have been complied with.162 The case of Bagport (Pty) Ltd v South
African Express Airways Soc Ltd further specifically affirms that the Turquand rule
forms part of our law.163
The legislative incorporation perhaps mitigates the discouraging nature of
English law in the application of the Turquand rule in favour of the ordinary rules
governing agency. The preference of other agency mechanisms over the Turquand
rule is highlighted by Sealy with reference to the case of Freedman.164
The Turquand rule is closely related to estoppel and is crucial for the analysis of
ostensible authority and estoppel. This rule highlights the place of estoppel under
South African law in that it effectively precludes the company (principal) from alleging
that its senior employees, for example, managing director, was not duly authorised. In
this regard it gives rise to estoppel. As held in the concurring judgment in Makate, the
Turquand rule is estoppel in motion.165
5.6 Ostensible authority and estoppel
The Makate case deals primarily with the question of ostensible authority and
estoppel.166 It seems, prior and post Makate there remains an ambiguity on the
question of what distinguishes ostensible authority from estoppel. The Constitutional
Court is the highest court in South Africa and its decisions are instructive and binding
to all other court. Therefore, the decision of Jafta in Makate constitutes the law of
South Africa until such time that the Constitutional Court arrives at a different decision.
Therefore, ostensible authority in this section will be assessed in view of the
Constitutional Court’s judgment.167
In order to place ostensible authority in context, it may be fruitful to outline the
basic procedure in bringing the questions of law before a court of law for adjudication.
162 See section 20(7) and 20(8) of the Companies Act ibid n 161. 163 Bagport (Pty) Ltd v South African Express Airways Soc Ltd (2018) ZAGPJHC 127 (henceforth
referred to as “the Bagport (Pty) Ltd case”) 164 Sealy ibid n 159 at pp. 406-408. 165 Makate ibid n 1 at p 739 with reference to the case of One Stop Services (Pty) Ltd v Neffnsaan
Ontwikkelings (Pty) Ltd 2015 (4) SA 623 (C); See also Cassim & Cassim ibid n 9 at p. 643. 166 Makate ibid n 1. 167 The judgment of the court under South African jurisprudence is the one derived by the majority.
The concurring judgment does not have binding effects upon other courts but may have persuasive force.
36
In the ordinary course, an aggrieved party, referred to as the plaintiff prepares in
person or through a legal representative a pleading called a combined summons in
which she succinctly and clearly sets out her case. A cause of action needs to be
established in the combined summons.168 In the event that reliance is placed on the
existence of ostensible authority as a cause of action, the facts establishing ostensible
authority must accordingly be pleaded.169
In the Makate case, it was noted that the trial court adjudicated upon the matter
from a mistaken footing. The footing of the trial court was that when a person relies on
ostensible authority, the person needs to plead estoppel in replication.170 As discussed
above, this finding emanates from the conflation of ostensible authority with
estoppel.171 It is clear under South African law that estoppel and ostensible authority
are distinct concepts and may not be used interchangeably.172
The general requirements of estoppel under South African law are:173
a) Words or conduct, including inaction or silence, which make a
representation;174
b) The person who raises estoppel must be the one to whom such
representation has been made;175
c) The representor must have expected, reasonably, that her representation
may mislead the person raising estoppel;176 and
d) The person raising estoppel must have acted upon the representation,
reasonably so, to her prejudice.
168 Rule 18 (4) of the Rules regulating the conduct of the proceedings of the several provincial and local divisions of the High Court of South Africa, in respect of actions instituted in the High Court of South Africa, and Rule 6(4) of the Rules regulating the Conduct of proceedings of Magistrates’ Courts of South Africa, in respect of actions instituted in the Magistrates’ courts.
169 This is in line with the Rules referred above in n 169. In terms of these rules, the cause of action must be clearly and concisely pleaded.
170 Trial court ibid n 75 at p. 84. 171 Makate ibid n 1 at p. 721. See also Trial court ibid n 75 at p.84. 172 Makate ibid n 1 at p. 723. 173 Makate ibid n 1 at p. 724. 174 See also Aris Enterprises (Finance) (Pty) Ltd v Protea Assurance Co Ltd 1981 (3) SA 247 (A). 175 See also NBS Bank Limited ibid n 50 pp. 30-31. 176 See also Monzali v Smith 1929 AD 382 at p. 386.
37
Ostensible authority, on the other hand, is nothing more than what a reasonable
person can deduce as authority from the circumstances.177 Indeed, actual authority
whether conferred impliedly or expressly, may coincide with ostensible authority.178
Sharrock suggests that the Makate case might have established a new form of
authority.179 However, the Makate case did not introduce new principle but clarified the
South African law in view of the court’s appreciation of the English law from which the
South African law of agency flows.
As discussed in chapter 3 above, estoppel by representation does not form part
of South African law. The findings of the concurring judgment in Makate that ostensible
authority is estoppel by representation, as discussed in chapter 3 above, seeks to
introduce a new concept into the South African law of agency. Fortunately, such
judgment does not reflect the law of South Africa as the majority judgment found
otherwise.180
If the findings in Makate that ostensible authority as defined in the same case
always formed part of South African law, it may be argued that such authority had
been repealed by a clear line of precedents that held that ostensible authority is an
instance of estoppel.
What is clear under South African law in light of Green v Fitzgerald is that law
may be repealed by disuse.181 It is submitted that the use of ostensible authority as
estoppel is not in line with the finding of the Makate case that ostensible authority
always formed part of South African law. Therefore, holding that ostensible authority,
in a different form, namely that of being a branch of estoppel, constitutes a new legal
principle.
5.7 Chapter conclusion
It is clear from the line of authorities that apparent authority was not squarely held out
as a singular legal principle and its use has always been, at least equated, if not held
out to be an instance of estoppel. Ostensible authority under South African law has
now been defined by the majority judgment in Makate. In terms of the definition,
177 See Makate n 1 at p. 19. See also Hely-Hutchinson ibid n 11 at p. 583. 178 Bagport (Pty) Ltd ibid n 97 at p.5. 179 Sharrock ibid n 74. 180 See chapter 4 above. 181 Green v Fitzgerald and others 1914 AD 88 111; See also R v Chipo 1953 (4) SA 573 (A) 578 pp.
573-579; and R v Sibiya 1955 (4) SA 247 (A) 265.
38
ostensible authority is nothing beyond an authority of an agent as it appears to others.
There are in principle no further requirements that need to be proved. As consistently
held by this dissertation, this principle is too wide to constitute a legal doctrine. The
doctrine has neglected the requisites elements which apply under English law as
discussed in chapter 3.
The examination above established that estoppel is a distinct form of a legal
principle whose application is intended to preclude persons that ought to be held
accountable for their actions so liable. Notwithstanding the authoritative case of
Makate, this chapter establishes that there are unique instances of estoppel and the
ostensible authority ought to be nothing more than an instance of estoppel.
39
Chapter 6:
Conclusion and recommendations
6.1 Introduction
South African law jurisprudence flows considerably from English law. The law of
agency is no exception. The confusion described in the Insurance Trust & Investment
case should not be taken lightly, in part because such alleged confusion may be an
explanation for the divergent legal analysis in this area of law.182
In this chapter, a summary of this paper’s essential findings is recorded and
recommendations for jurisprudential amendment recommended. The conclusion will
be dissected in order to ensure that a proper picture of what constitute estoppel and
ostensible authority is drawn. The conclusion remarks with regards to what the position
of the law ought to be will also be made. All things considered, this chapter shall record
its recommendations.
6.2 Ostensible authority
The analysis of this dissertation establishes that the English law lacks clarity on the
issue of ostensible authority. The Freeman & Lockyer case, being the locus classicus
case on the law of ostensible authority sets out the requirements of estoppel as noted.
In terms of the requirements, something more than authority as it appears to others is
required.
Therefore this dissertation finds that there is no confusion in English law with
regard to the classification estoppel and ostensible authority. Under English law,
ostensible authority falls within the general rubric of estoppel. Notwithstanding this
proper classification, the case of Freeman & Lockyer finds that properly assessed,
ostensible authority is estoppel by representation. This part is erroneous in that the
requirements of ostensible authority as set out in Freeman & Lockyer are irreconcilable
with the requirements of estoppel by representation as established in Spliethoff’s
Bevraschingskantoor BV.183 This paper finds that ostensible authority is a unique form
of estoppel with its requirements duly set out in Freeman & Lockyer. Therefore, the
182 Insurance Trust & Investment ibid n 24 p. 61 . 183 Spliethoff’s Bevraschingskantoor BV n 34 at p. 156.
40
finding in Freeman & Lockyer that ostensible authority is estoppel by representation
bust be severed from the entire judgment.
Ostensible authority by its very nature, under English law, whether it is an
independent concept (which it is not), or an instance of estoppel (which it is), is not
actual authority, therefore, it is used as a defence to a claim that the ostensible agent
lacked actual authority. Notwithstanding this, it may be pleaded on the onset, as this
does not change the nature of the principle.
Under South African law, ostensible authority is a concept independent from
estoppel. The effects of ostensible authority are synonymous to those of estoppel.
Under South African law, ostensible authority is equally not authority proper, it simply
insists on the effects of actual authority where there is in fact none. Therefore,
establishing ostensible authority does not entitle the relier to more rights than she
would have had the agent had actual authority.
The adoption of ostensible authority in the NBS Bank Limited case has been an
erroneous one.184 As discussed in chapters 2 and 4, the requirements of estoppel
there were designed to coincide with the requirements of general estoppel under
South African law. Clearly, there are various forms of estoppel under South Africa law,
and the NBS Bank Limited matter should have appreciated it and adopted the English
requirements of ostensible authority as they were. This is a mistake which may have
motivated the majority court in Makate to confine ostensible authority to the findings
of Hely-Hutchinson.
6.3 Estoppel
The traditional elements of estoppel are that there must be words or conduct, which
include inaction or silence, which may be construed as a representation that the agent
has authority; that the person who raises estoppel must be the one to whom such
representation must have been made;185 the representor (principal) must have
expected, reasonably, that her representation may mislead the person raising
estoppel;186 and the person raising estoppel must have acted upon the representation,
reasonably so, to her prejudice. Estoppel is equally a shield yet may be pleaded in the
184 NBS Bank Limited ibid n 50. 185 See also NBS Bank Limited ibid n 50 at pp. 30-31. 186 See Monzali v Smith 1929 AD 382 at p. 386.
41
onset should lack of authority be raised prior to the action. Estoppel is a wide
encompassing concept which serves the imperatives of equity and justice well in the
event that it is not limited to identifiable requirements.
6.4 Recommendations
Under South African law, it is permissible to adopt and develop foreign law in terms of
section 39 of the Constitution. The question is, therefore, why does the South African
courts insist on clarifying highly confused concepts of a foreign jurisdiction?
This dissertation recommends, beyond Makate case, that a globular principle of
equity be formulated to hold accountable principals or persons who make
representations that an apparent agent has the requisite authority. The foregoing
recommendation does not detract from the generality of estoppel as highlighted by
way of examples in chapter 5. The proposed globular concept should consider the
dictates of equity and justice.
In the event that the courts resist developing the law in the foregoing terms, it is
imperative for the Constitutional Court to develop ostensible authority. This is so
because, as this dissertation finds, there are no traces of ostensible authority as an
independent concept under South African law before Makate. Should the question of
ostensible authority arise before the constitutional court arise in future, it is
recommended that further requirements be introduced in line with the general
requirements of estoppel.
42
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Myburgh “On constitutive formalities, estoppel and breaking the rules” 2016 Stell LR
254-272.
Praker & Zaal “Absa bank limited v Kert 2015 JDR 0996 (SCA)” 2016 De Jure 181-
190 at p. 186.
Sealy “Agency principles and the rule in turquand's case” 1990 CLJ 406-408 at pp.406-
408.
Sharrock “Authority by representation – a new form of authority?” 2016 PER 1-21.
Woan “The apparent authority of the unauthorised agent” 2014 SAcLJ 258-268.
Yap “Apparent authority: doctrinal underpinnings and competing policy goals” 2014
J.Bus.Law 72-82.
Books
Beck (2002) Theory and principles of pleading and civil actions Butterworths
De Villiers, Macitosh and Knight (1956) The law of agency in South Africa Juta.
Pothier (1979) Treatise on the contract of mandate (traité du contrat de contrat de
mandate) (translated by Rogers and De Wet) Lex Patricia.
Kerr (1991) The law of agency LexisNexis.
Cooke (2000) The modern law of estoppel Oxford University Press at p.2. Also
available at
https://0wwwoxfordscholarshipcom.innopac.wits.ac.za/view/10.1093/acprof:oso
/9780198262220.001.0001/acprof-9780198262220 accessed on 8 August 2019.
Cartwright “Protecting legitimate expectations and estoppel in English law” 2006
EJCL, vol.10.3. Available at http://www.ejcl.org accessed on 12 April 2019.
45
Acts and Constitutions
Companies Act 71 of 2008.
Constitution of the Republic of South Africa, 1996.
Old authorities
Voet 1.8.28
Reports and Rules
Rules regulating the Conduct of proceedings of in respect of actions instituted in the
Magistrates’ courts.
Rules regulating the conduct of the proceedings of the several provincial and local
divisions of the High Court of South Africa.
Recommended