Delictual liability of a bank on the basis of misrepresentation

Abstract

This study will specifically focus on the delictual liability of a bank where misrepresentation with regards to a letter of comfort is the cause of damages suffered by a client. Ultimately, the goal of this study is to answer the legal question: Under what circumstances can a bank, with specific reference to letters of comfort, be held delictually liable for damages suffered by a client as a result of a misrepresentation by the bank? This study will be based on a comparison between the South African law and the English law. The English law is a statutory system based on the “Law of Commons” and it has had a marked influence on the South African law. Although South Africa is a third world country, its banking law is based on British legislation and also influenced by the case law of this first world country. During the past decade there has been a definite shift in the way South African courts view the legal relationship between banks and their customers. It is clear that the courts more readily hold banks liable for damages caused to their customers. (Bernert v Absa Bank Limited, case number 14302/03, is an unreported case heard in the North Gauteng High Court of South Africa on 15 October 2008). Nationally and internationally banks have gained a vast influence on the economic development of a country. As a result banking has become a controlled and regulated profession. Nevertheless, South African banking law is known to be conservative and very hesitant to change with regards to modern ideas and the constantly changing circumstances of our times. From the developments in the case of Bernert v Absa Bank Limited lessons may be learned from the English law. Although England has a system of parliamentary sovereignty while South Africa is now a constitutional democracy, it would nevertheless be recommended that South African courts more readily take into consideration the decisions made by the English courts as our commercial law legislation is based on English law. It would reduce the legal costs of the parties involved and more importantly have a positive effect on international trade as it would create legal certainty which could lead thereto that international traders would feel more comfortable and secure to bring their money into South Africa, make investments in our country and enter into import en export contracts with South African companies.