A gem of a case

Robert Vivian, IISA professor of insurance and risk management at Wits University, says that it is always difficult to comment on a case which is reported in a newspaper.

“Cases can take days, even yearsto resolve and involve thousands of pages of evidence and the judges' judgment can run into hundreds of pages.

"It is very difficult for a newspaper to distill this accurately into a few paragraphs.

“So I will discuss in broad principle the legal issues involved.What I say must not thus be taken as a criticism of the judgment itself but rather to alert the reader to the complex underlying legal debate,” says Vivian.

A history lesson

At the heart of this case lies2 500 yearsof constitutional safeguards and in South Africa at least 120 years of legal debate.

“If you go back as long as you like in history you will find a pervasive point - now all but forgotten - judges may only decide cases in terms of objective facts in terms of pre-existing laws.”

They may not substitute there opinion for the law. So for example in Rome, from whence our common law comes, there was a time when judges made decisions according to their own opinions.

It was not longthereafter that the legal system was corrupt and the people of Rome forced judges to make decisions according to objective facts and laws. Thus the Rule of Law was born.

That was not protection enough and the actiosystem was devised.

Before any case could be heard the facts were taken to the Praetor (not a judge) and only if he was convinced the facts of the case fell within the existing law would he grant the plaintiff an actio.

Armed with the actio the matter was taken to a judge.

Before hearing the case, the judgetook an oath that he would make a decision strictly in accordance with the existing law and not alter the law.

This system migrated to England as the Writ System.No case could be brought before a judge until a Writ was issued and no writ would be issued unless the facts of the case fell within existing law.

Where there was no Writ there was no remedy. In this way the public was protected from ruinous litigation.

“Why do I tell you this historical story?”

Because in terms of the original common lawit is difficult to see that Mrs Steenkamp hasa case to answer for.

“She can only be sued either in terms of contract or delict. To sue her in contract it would have to be shown firstly that she was party to the contract.

Since it appears that she was at most acting as the agent of her companyit would bedifficult to see howcould be party to the contract.”

The contract, if indeed any existed,was between Mr Vogel andthe close corporation.

Secondly , if this difficulty could be overcome, it would have to be shown that she intended to contract. In Roman Law there had to be just a causa or more correctly stated in English law that she had to receive due consideration.

“The report does not indicate that she was paid for the service she rendered. Without payment there is no contract,” says Vivian

Thirdly if those two obstacles were overcome it would have to be shown that she agreed that if the investment went sour he would indemnify Mr Vogel. Now why should any investment adviser do that?

“They do not.Since the basis ofcontract iswhat the parties agreed at the time, she cannot discover after the contract that she accidentally agreed to indemnity Mr Vogel.

"It should thus beclear that to sue her in terms of the original law of contract would be difficult indeed.”

The problem nowturns to the law of delict.

This branch of law was only applicableto cases where Mrs Steenkamp physically injured Mr Vogel by her positive conduct say,by running him over with her car.

In the 2000years ofRoman-Dutch law no example exists where the lawwas applied where theplaintiff (Mr Vogel in this case)suffered mere financial loss.

So in terms of the Roman-Dutch common law it would be impossible to sue Mrs Steenkamp in delict.

This is now where the 120 years of legal debate comes in.In 1886 a South African court suggested that it was possible to be liable for a mere financial loss.

The Cardosa ruling

Nothing happened until 1931 when in an American judge Mr Benjamin Cardosa in the case of Ultramares v Touche involving a firm of accountantswarned against holding people liable formere financiallosses.

Since, as he put it,this will result in an indeterminate loss,to an indeterminate class of defendants, for an indeterminate number of reasons, for an indeterminate period of time.

“Well, his warning did not help.Thereafter the idea of holding people liable for financial losses took hold.”

At the same timethe idea that judges must make decisions in terms of the existing law startedto wane. In 1934 a Cape Court thought it would be a good idea to hold people liable for a mere financial loss.

At this point Professor McKerron, one time of Wits university makes an appearance. He pointed out that no law existed to hold anyone liable fora mere financial loss and the usual law applied to physical injuries simply cannot work.

“Iwill point out 20 years after his deaththe English House of Lords came to the same conclusion.”

Let us illustrate the point aboutthe usual laws.

Bungee jump

Say Dr Steenkamp decided to attempt to bungee jump. Well if liability for amere financialloss does indeed exist then Mrs Steenkamp or their children or his parents would be able to get a court order to restrain him from doing so because by so doing he is threatening their right of support.

They have a claim to prevent a pure financial loss. Indeed, if the Receiver of Revenue found out that he was going to undertake this risky activity he too could get a restraining order to protectthe taxes he would loose if Dr Steenkamp died, if such a right existed.

Until death us do part

Professor McKerron was so influential that they had to wait until he died in 1973 before they could try again to get the courts to acceptliability for a purefinancial loss can form the basis of a legal claim.

“In fact the last thing that the professor wrote before his death was that it wasridiculous to think that liability exists for amerefinancial loss.”

Well, what he thought to be ridiculous is now argued and accepted every day in the courts.

“Under what circumstances, as amatter of law and not opinioncan a person be liable for amerefinancial loss? No-one knows.”

Gut feel?

I think the late Professor Boberg also of this university was correct. “It is determined by the judge by the application of his judicial gut reaction.If he feels the defendant is liable, then the defendant is liable.

“What happens in Courts today hasbecome a matter of mere opinionrather than law. Thelegal practice is clearly then not the Rule of Law.

"Our legal system is thus goingback to where it started 2 500 years ago - with the rule of judge and not the rule of law,” says Vivian.