of any dividend to creditors. Mrs. Rom and Mrs. Levin had lost everything.
The two women, who were at that time unacquaint-ed, instituted separate actions for damages against Adderley Acceptances in the Cape Provincial Division of the Supreme Court. In March 1986 the two actions were consolidated and heard by BERMAN J, who gave judgment in favour of Mrs. Rom for R90 000, and in favour of Mrs. Levin for R110 000, with interest on the respective capital sums at the rate of 18½% per annum from the date of judgment to date of payment.
An application by Adderley Acceptances for leave to appeal was dismissed with costs. On a petition to the Chief Justice, however, leave was granted to appeal to this court. It was ordered that the costs of the petition
for .... / 4
for leave to appeal be costs in the appeal; and that the order for costs made by the court a quo on the application for leave to appeal be altered to an order that the costs of the application be costs in the appeal.
The appeal record does not include copies of the pleadings in Mrs. Levin's case, and Mrs. Rom's pleadings were not in all respects a model of clarity. Nevertheless, the issues as they had crystallized by the end of the trial are reasonably clear in both cases.
1.During November 1983 Richman, acting on behalf of Adderley Acceptances, orally represented to Mrs. Rom that - He had investigated the financial affairs of Servix;
Servix was in a strong and sound financial position; and
Loans made to Servix would constitute a safe investment and would be equivalent to in-vesting with a bank or similar financial in-stitution.
2.The said representations were material, and Rich- man made them with the intention of inducing Mrs. Rom to authorize him to invest her money in Servix.
3. .../ 7
3.The representations were false to the knowledge of Richman in that -
(i) he had not properly investigated the affairs of Servix; (ii) the company was not in a sound financial po-sition; and (iii) loans made to Servix would not constitute a safe investment and would not be equivalent to investing with a bank or similar financial institution. Mrs. Rom, relying on the truth of the representa-tions, authorized Adderley Acceptances to invest R90 000 with Servix, and it did so in 1983.
Servix has been liquidated and no dividend to its creditors will be paid. As a result, Mrs. Rom
has suffered the loss of the whole of her invest-ment.
This was her case in relation to alleged fraudulent mis-
At a later stage Mrs. Rom's particulars of
claim were amended. by the inclusion of the following para-
Plaintiff, First Defendant was a director of the said Company and was, in the premises, in duty bound to disclose to Plaintiff his interest in the said Company, but First Defendant fraudu-lently, and with the intention of inducing Plain-tiff to authorise the said investment, concealed from her the fact that he was a director of the said Company and was accordingly not in a posi-tion to give her impartial advice in regard to the financial stability of the Company."
And during the trial it emerged that Rich-
man himself lent R100 000 to Servix on 14 November 1983
and withdrew the whole amount on 21 November. Adderley
Acceptances did not disclose these facts to Mrs. Rom.
of the marriage. She got employment with an estate agent.
Because of her personal circumstances, she was always very
careful with money. Over the years she slowly accumulated
a competence, which in November 1983 totalled R90 000. In 1981 she had suffered a massive coronary thrombosis and she had been in indifferent health since then. Because she was uncertain about her future earning capacity, she could not afford to go into a risky investment. She invested always with banks, building societies and similar institutions.
She first met Richman in about 1981, when he was looking for a house, and through him she acquired a building society fixed deposit certificate for R25 000 which had some two years to run to maturity.
Thereafter and until the middle of April 1984 she was his client, and he made a number of investments on her behalf.
Richman told the court a quo during his
evidence .... / 11
evidence that he was born in 1940. After matriculating, he was articled to a firm of chartered accountants, and at the same time attended the University of Cape Town, where he obtained an accountancy qualification. After qualifying, he began operating on his own account as a finance broker and financial consultant. He formed Adderley Acceptances, of which he was the only beneficial shareholder and the only effective director, and whose business he described in the "Report of Directors" for 1983 as "financial and econo-mic consultants, advisers, economists, brokers and traders in the money market".
He specialized "in the larger type of in-stitution". His business was "basically funding of public and semi- public sector loans". He had very few small
clients such as Mrs.Rom and Mrs. Levin.
He became a director of Servix in April 1981.
If one is to believe his own evidencehe was no more than
a dummy director, who took little part in the company's
affairs. He owned no shares. Mr. Costa Zackos, the mana-
sented by the auditors. Richman's understanding was that
the company was doing exceptionally well. He said:
"That was my understanding and it showed in the balance sheet."
There was little dispute between Mrs. Rom
and Richman in regard to the Adderley Acceptances' mana-gement of her investments before November 1983. Until March of that year, her money had always been placed with banks and building societies. In that month Mrs. Rom authorized Richman to place her money with National Acceptances Ltd.,
a ... / 15
a company which operated in the money market, in order to get a better rate of interest. Thereafter National Accept-ances placed short term loans on her behalf with a variety of public companies of standing. It would seem clear that Richman told Mrs. Rom that these investments were similar to those made with a bank, because on 5 September 1983 Adderley Acceptances issued to Mrs. Rom a "receipt" in Richman's own hand, recording that R25 000 has been "placed today", and confirming that "you have a total of R75 000 placed at call with Banks or similar institutions." (a).