REPUBLIC OF SOUTH AFRICA

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO:   2009/44215

(1)	REPORTABLE: YES / NO
(2)	OF INTEREST TO OTHER JUDGES: YES/NO
(3)	REVISED. 

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                   DATE			        SIGNATURE

In the matter between:

HECTOR PAREDES-TARAZONA   				  	Plaintiff

and

COBALT CAPITAL (PTY) LTD 					          Defendant

______________________________________________________________ 

J U D G M E N T
______________________________________________________________ 

KATHREE-SETILOANE, J:

 [1] 	The Plaintiff, Mr Hector Paredes-Tarazona seeks, in this action, to recover money from the Defendant, Cobalt Capital (Pty) Ltd (“Cobalt”), for losses which he sustained in the well publicised Ponzi (pyramid) scheme, purportedly orchestrated by Barry Tannenbaum (“Tannenbaum”)  and Dean Rees (“Rees”) (Rees v Harris and Others 2012 (1) SA 583 (GSJ). 
[2]	  Ponzi schemes are ostensibly fraudulent investment operations that pay returns to investors from the monies, which they invest rather than from profit earned. In order to entice unsuspecting investors, they typically offer returns ─ in the form of short-term returns that are either extraordinarily high or peculiarly inconsistent ─ that other investments cannot guarantee. The perpetuation of the returns that a Ponzi scheme advertises, and pays to investors, requires an ever-increasing flow of money from credulous investors in order to keep the scheme going. The system is destined to collapse because the earnings, if any, are less than the payments. 

 [3]	One such scheme was fittingly described by Conradie JA, in Fourie NO and Others v Edeling NO and Others [2005] 4 All SA 393 (SCA) at 394, as follows:

‘The audacity of its perpetrators and the credulity of its participants combined to produce a gargantuan fraud notoriously known as the Krion Pyramid Investment Scheme. It was operated from the beginning of 1998 and, as all these schemes do, collapsed when the inflow of funds could no longer sustain the outflow of extravagant returns to participants. Each participant on average “invested” in the scheme three times. Its turnover was some R1.5 billion. In order to throw regulatory authorities off the trail it was at one time or another conducted by entities called MP Finance Consultants CC, Madikor Twintig (Pty) Ltd, Martburt Financial Services Ltd, M & B Koöperasie Bpk and Krion Financial Services Ltd. The way in which the scheme was conducted made it attractive for investors to invest for periods as short as three months. When the loan capital with “interest” was repaid at the end of the agreed investment period, the investor would more often than not reinvest the capital and interest. The advantage for the investor in doing business in this way was of course that his already enormous interest was compounded. Typically an investor would invest an amount in the scheme having been promised a return of 10% per month, capital and profit repayable within three months. Until the collapse of the scheme, investors received repayment of their capital and their profit when due. Sometimes the investor would leave the capital and/or the profit in the scheme and this would then have been reflected by means of a book entry as a payment and a new investment. Other investors would take their capital and profit on the due date, some of whom returned after a while to reinvest a similar amount.”

 [4]	Shortly thereafter, in MP Finance Group CC (In Liquidation) v Commissioner, South African Revenue Services 2007 (5) SA 521 (SCA), Howie J stated thus (at 521 H-J) about the same scheme:

“For some years beginning in 1998 one Marietjie Prinsloo operated an illegal investment scheme commonly called a pyramid scheme. As is the pattern with such schemes, it readily parted greedy or gullible “investors” from their money by promising irresistible (but unsustainable) returns on various forms of ostensible investment. It paid such returns for a while to some before finally collapsing – owing many millions – when the predictable happened and the total amount of supposedly due returns vastly exceeded the total amount of obtainable investment money.”

[5]	There is little difference between the investment scheme in which the Plaintiff participated, and a typical Ponzi scheme. The Plaintiff has, nonetheless, endeavoured to present a case in terms of which Cobalt, through a close friend, Bruce Dunnington, induced him to participate in the scheme, by not only guaranteeing the payments of an extraordinarily high interest yield, but it also undertook to make the guaranteed payment instead of the scheme owners. 

[6]	The Plaintiff’s first claim is an alleged oral agreement concluded with Cobalt, represented by Dunnington, on 27 January 2009, in terms of which Cobalt would invest the Plaintiff’s money. Cobalt, however, breached the agreement by investing the Plaintiff’s money in a Ponzi scheme orchestrated by Rees and Tannenbaum, and the investment was lost. In his first alternative claim, the Plaintiff relies on certain misrepresentations made by Cobalt to him. In his second alternative claim, the Plaintiff relies upon the fact that Cobalt, through Dunnington, being an expert or holding himself out to be an expert in rendering financial advisory services, owed to the Plaintiff a duty of care to investigate the investment opportunity proposed to the Plaintiff.

[7]	The Plaintiff called the following witnesses: The Plaintiff himself; Megan Davey (“Davey”); Bruce Dunnington (“Dunnington”); and John Storey (“Storey”). Notably, Dunnington and Storey are co-owners and directors of Cobalt, and Davey was employed, by Cobalt, as a professional assistant to Dunnington and Storey.  Cobalt closed its case without calling any witnesses.

[8]	It is common cause that the Plaintiff invested in the scheme on two occasions. The Plaintiff made a substantial return on the first investment. However, on the second investment, the Plaintiff lost his capital investment of R1 000 000.00.

[9]	The Plaintiff’s causes of action are premised on his version of what transpired at a social function, at which Dunnington introduced him to the investment scheme. His version is this: Dunnington, a director of Cobalt, was a personal friend whom he had known since 1988, and regarded as an expert in financial and investment matters. Dunnington first approached the Plaintiff about the investment opportunity at a social function held at the Plaintiff’s home. Dunnington had taken him aside and told him that Cobalt, through him and his co-director Storey, had put together an investment scheme which was proving to be very lucrative and was open, by invitation only, to Cobalt’s select clients and friends.
  
 [10]	Dunnington explained to the Plaintiff that the investment scheme involved funding “trade finance deals” by providing short term finance to high profile pharmaceutical companies, in need of finance, to buy raw materials for the manufacture of antiretroviral medicines, which would be on-sold to a pharmaceutical manufacturing company.  Dunnington told the Plaintiff that the investment while being ‘rock solid’ would offer exceptional returns over short periods of time. Dunnington assured him that Cobalt had checked the validity of the investment, verified the use of the funds and confirmed that the investments were safe. Dunnington told the Plaintiff that both he and Storey  were satisfied with the investment, and that they had invested their own funds, as well as those of Cobalt, in the investment scheme.

[11]	Dunnington told the Plaintiff that, by law, Cobalt was enjoined to ensure that the investment was safe before offering it to clients, and that Cobalt had taken specific securities from Rees, the lawyer administering the funds. Based on the assurances given to him by Dunnington, the Plaintiff proceeded to participate in a trade finance deal under the auspices of the “Cobalt investment scheme” that was put together by Cobalt. The Plaintiff made it perfectly clear to Dunnington that in order for him to invest in the scheme, he would need to borrow the funds from his access bond, which was registered over his home. When Dunnington became aware that the Plaintiff could access up to R2,2 million from his loan, Dunnington suggested that he invest R2 million in the investment scheme. 

 [12]    After discussions with his wife, the Plaintiff decided to invest R1 million, and the investment was thereafter facilitated by Cobalt, through Dunnington who, in an e-mail, advised the Palintiff to deposit the R1 million into the trust account of Rees, and furnished the Plaintiff with the account number and details. Dunnington instructed the Plaintiff, in the same e-mail, to use as a reference his own name and that of Cobalt. The Plaintiff followed Dunnington’s instructions, and used as a reference “H Paredes Tarazona/Cobalt”.

[13]	The Plaintiff provided Dunnington with proof, of the transfer of the R1 million, in the form of an e-mail to Dunnington at the offices of Cobalt. Dunnington, in an e-mail sent from the offices of Cobalt, thereafter confirmed receipt and advised the Plaintiff that the payment date in respect of the first investment was 13 Janauary 2009, and that the total amount invested, including the 11% return would be paid directly to the Plaintiff by the importer, and would be confirmed by the attorney shortly. Dunnington, therefore, requested the Plaintiff to provide his banking details to Cobalt.

 [14]	 The Palintiff thereafter received from Cobalt a mandate form with the request that he complete and sign it. The Plaintiff telephoned Dunnington who explained to him how to complete the mandate form. Dunnington instructed the Plaintiff to insert as “agent” the words “Dunnington/Vision”, which the Plaintiff duly did. The investment, together with the return of R110 000 was repaid to the Palintiff on 15 January 2009.   

[15]	The Plaintiff contends that his only communications in respect of the investment scheme were with Cobalt, through its office and through the persons of Dunnington and Davey, an employee of Cobalt. Davey was the personal assistant to Storey, but she also acted on the instructions of Dunnington. The Plaintiff testified, in this regard, that when the first investment, together with the interest thereon, was paid to the Plaintiff, this fact was communicated to him by Davey in an e-mail dated 15 January 2009. The Plaintiff thus contends that his participation in the investment scheme, and his association with Cobalt, was based upon the representations made to the Plaintiff, by Dunnington, at the social function held at the Plaintiff’s home on 22 November 2008, and thereafter the Plaintiff’s investments in the scheme continued to be administered and handled entirely through the offices of Cobalt, by Dunnington and Davey.  

[16]	It is, accordingly, the Plaintiff’s contention that the first investment constituted an agreement between the Plaintiff and Cobalt, when he made the first deposit of R1 million on 9 December 2008, and that although the first investment and the return was not made directly to the Plaintiff by Cobalt, it was Cobalt who advised and confirmed such payment to the Plaintiff.    

[17]	The Plaintiff testified as follows in respect of his further participation in the scheme: On 21 January 2009 Cobalt, in an e-mail addressed by Dunnington to the Plaintiff, offered the Plaintiff an opportunity to participate in another trade finance deal, which was to begin on 23 January 2009, and mature on 27 March 2009, with a even higher return, this time, of 18% for the period of the investment. Although the Plaintiff had made an attempt to take up Cobalt’s offer, he was unable to transfer the funds in time, and missed the opportunity.

[18]	 The Plaintiff discussed this missed opportunity with Dunnington, who advised him to, nevertheless, deposit the available funds, as it would then be invested in the next trade finance deal, which was to commence on 28 January 2009 and mature on 28 February 2009, with a return of 9% to the Plaintiff. The Plaintiff’s participation in the latter trade finance deal was confirmed by e-mail correspondence from Cobalt, through Davey, to Suscito Investments, the company that attended to the investment administration on behalf of Rees. The Plaintiff accepted Cobalt’s proposal and duly deposited R1 million into the trust account of Rees on January 2009. The Plaintiff lost his capital investment of R1 million.

[19]	The Plaintiff contends that it was upon the payment of this amount that the agreement, pleaded by the Plaintiff and relied upon by him in this action, came about. He submits that in the absence of evidence to the contrary, and having regard to the circumstances surrounding the Plaintiff’s dealings with Cobalt, and in particular the manner in which Dunnington invited the Plaintiff to re-invest in the trade finance deals, it was tacitly agreed that the terms and conditions applicable to the first investment would apply to the second.  

[20]	Dunnington, Davey and Storey testified for the Plaintiff. Their evidence  is that Dunnington and Storey, chartered accountants by trade, founded Cobalt, a private equity venture capital business, together. The Dunnington and Storey family trusts each own a 42.5 percent and a 52.5 percent share in Cobalt, respectively. In early November 2008, Chris Harris, a friend of Storey, introduced Dunnington and Storey to the investment scheme, which was operated by Rees in collaboration with Tannenbaum. The scheme involved the purchase of raw materials, by Frankel Chemicals (Pty) Ltd, a local company (owned by Tannenbaum) for the manufacture of pharmaceutical products, which would then be on-sold to generic drug manufacturers such as Aspen to make antiretrovirals. Rather than borrow the funds from banks, they would borrow the funds from investors who would be paid peculiarly handsome returns for deals typically lasting a few months.
 
[21]	  Rees was known to both Storey and Dunnington, having previously dealt with them on a property deal. Storey met with Rees who outlined the objectives of the scheme, and how it worked. Storey requested copies of the financial statements of Frankel Chemicals, and carried out some limited checks into its affairs, and that of the investment opportunity. Convinced that it was a good and legitimate business opportunity, he persuaded Dunnington that they should invest in it. Dunnington and Storey made their first investment in the scheme, on 11 November 2008, by financing one of the trade finance deals. They made the investment through a company called Vision Health Care and Employee Benefits (Pty) Ltd (“Vision”), an associate company of Cobalt. Dunnington and Storey were also co-directors, and co-owners of Vision. Dunnington and Storey signed a client mandate with Rees, indicating that their participation in the trade finance deals will be done through Vision, and that Dunnington and Storey would act as Vision’s bankers. 

[22]	Having received the first return on their investment, Storey and Dunnington were persuaded to introduce friends and family members to the investment opportunity. They were promised an introduction fee by Rees for each new participant that they introduced to him. The introduction fee would be between two and three percent of the return on the particular investment. Rees determined the percentage of the introduction fee in discussion with Storey. Dunnington introduced his brother-in-laws Rory Mitchell and Paulo Pinheiro, as well as the Plaintiff, who was his friend and neighbour at the time, to the investment opportunity. Storey introduced his friends Brett Landman and George Janakopolis to the investment opportunity. All five them then participated in the trade finance deals. They received participation letters from Rees. They signed client mandates with Rees, and the moneys which they invested were deposited into the trust account of Rees. They also received their returns directly from Rees. Although some of the investors, including the Plaintiff, were not made aware by Dunnington and Storey that they would be earning an introduction fee, the client mandate which they signed with Rees, indicated that an introduction fee may be paid.
  
[23]	In relation to introducing the Plaintiff, in particular, to the investment scheme, Dunnington confirmed that he had a brief discussion about it with the Plaintiff at a social function. He was excited, having just received a handsome return on his investment in one of the trade finance deals. He described the investment opportunity to the Plaintiff, who appeared to be keen. Dunnington indicated to the Plaintiff that he would introduce him to Rees, and that Davey would make sure that he got all the necessary documents. He was adamant that he had not indicated to the Plaintiff that Cobalt operated the investment scheme or that it would guarantee a return on his investment. Dunnington also said that he did not describe the investment as a “rock solid” investment or that it was “ring fenced”. He did, however, mention that the money invested would be linked to a purchase order.  The discussion only lasted for six minutes, at most, over a drink. He said that the Plaintiff’s first investment in a trade finance deal was not subject to an introduction fee, as the arrangement with Rees was not yet in place. 
  
[24]	Although Rees had by January 2009 relocated to Switzerland, Kurt Hoggan (“Hoggan”) and Patrick Ferreira (“Ferreira”) administered the deals from Suscito Investments, a company based in Johannesburg. Suscito Investments attended to the investment administration on behalf of Rees. The administration at Suscito Investments was poor.   Davey, the professional assistant to Storey and Dunnington was, therefore, instructed by them to facilitate communications between the investors (introduced by Storey and Dunnington) and Rees, Hoggan or Ferreira at Suscito Investments. She kept track of the investments made by Dunnington and Storey through Vision, and the returns received by them. She also kept track of whether Vision received the introduction fees. The practise was for Vision to be paid the introduction fee after the individual investors had been paid the returns on their respective investments.

[25]	 When the payment of the returns on the investments were late, either Dunnington or Davey, on either Dunnington’s instructions or that of Storey’s, made enquiries with Rees, Hoggan or Ferreira.  Dunnington, in particular, attempted to put pressure on Rees to pay the investors, by indicating to him that they were looking to him for payment. He, however, made it clear in his testimony that none of the investors, whom either Storey or he had introduced to the investment scheme, looked to them for payment personally, as they were all aware that the contract was with Rees.

[26]	 Other than Paulo Pinheira, who got back all the money which he had invested, all the investors introduced by Dunnington and Storey had lost money. Dunnington and Storey lost R1.9 million, which they invested through Vision. Vision participated in the trade finance deals and not Cobalt. Vision participated in three trade finance deals ─ the first in November 2008, the second in December 2008, and the last in January 2009. Vision lost R1.9 million in its final participation, in a trade finance deal, in January 2009.             

[27]	The Plaintiff bears the onus to prove the agreement, which he contends for, on the balance of probabilities. Dunnington, Storey and Davey were called as witnesses by the Plaintiff, and not by Cobalt. I must, therefore, approach the Plaintiff’s case with this consideration in mind. 

[28]	The Plaintiff has sought to convince the Court that his friend, Dunnington would not only introduce him to the scheme but also that Dunnington, as Cobalt, guaranteed the payment of extraordinary returns to the Plaintiff,  and that this guarantee entailed that Cobalt itself would pay the Plaintiff and not the persons operating the scheme. Quite apart from the fact that this version does not accord with common sense and the probabilities, it was contradicted by his own witnesses ─ Dunnington, Storey and Davey. None of these witnesses, by any measure, supported Plaintiff’s version. On the contrary, they refuted the Plaintiff’s version. An analysis of the evidence of Davey, Dunnington and Storey makes it abundantly clear that:

	(i)	Dunnington did not contract with the Plaintiff on behalf of Cobalt;

(ii)	Dunnington did not represent or misrepresent to Plaintiff that Cobalt would guarantee payment of the returns on the investment to the Plaintiff, and would make the payment to the Plaintiff;

(iii)	Cobalt did not contract with the Plaintiff;

(iv)	the Plaintiff contracted with Rees; and

(v)	the Plaintiff received returns on the first R1 Million directly from Rees and not from Cobalt. This was conceded in evidence by the Plaintiff without any acceptable explanation as to why it did not come from Cobalt. 

 [29]	The Plaintiff relied on the evidence of Davey, Dunnington and Storey purportedly to support his version. Their testimony was, however, unfavourable to the Plaintiff, and contradicted his version. The Court was not asked to declare Dunnington, Storey and Davey to be hostile witnesses. Nor were they cross-examined by the Plaintiff. Their evidence accordingly stands  unchallenged ( Ratner v Rex 1910 TPD 1327, Mbatha v Rex  1935 NPD 1). 

[30]	The contradictions between the Plaintiff’s evidence and that of his witnesses ─ Dunnington, Storey and Davey ─ are numerous and unquestionably material. The cumulative effect of these contradictions is that they detract from the reliability and the credibility of the Plaintiff’s case. It cannot, in the circumstances, be said that the probabilities favour the Plaintiff.   

[31]	In addition, the documents which the Plaintiff has placed before Court also refute the acceptability of his version. The Plaintiff has been unable, in my view, to produce a document stating remotely: 
(i) 	the agreement  as contended for by Plaintiff;
(ii) 	that Cobalt contracted with him;
(iii) 	that Cobalt would pay the Plaintiff,  and had in fact guaranteed such payment; and 
(iv)	that the investment was free of any risk.

 [32]	I am persuaded, in this regard, by the argument of Cobalt that if the investment was in fact guaranteed and “rock solid” (on the Plaintiff’s version), then it makes no sense why the Plaintiff only invested R1 million when he had more than  R2 million available in his access bond account,  and why,  for that matter, did he think that it was “too risky” to venture the R2 million or why his wife thought that “… life is a little bit of a gamble”. It is also inconceivable why the Plaintiff inserted “Bruce Dunnington/Vision” on the client investment mandate after speaking to Dunnington, and why he did not insist on rather inserting “Cobalt”. This is at odds with his evidence and, in particular, his assertion that an agreement was entered into with Cobalt. This was, however, exposed not be correct when he was asked about the correspondence between him and Rees. He stated thus:

“…(A)ll it says is ourselves. So when I read ourselves I understood it is Bruce Dunnington/Vision because ourselves. That is the people I mandated to manage my funds.”

[33]	The Plaintiff’s evidence was furthermore contradicted by the documents before Court, particularly when regard is had to the following documents in the Discovery Bundle:
	
(i)	Document 2 – On 8 December 2008 Dunnington sent an e-mail to the Plaintiff to give him details of the bank account into which he had to deposit the R1 million. The bank account clearly refers to Dean Rees Attorneys at Law. Plaintiff never queried this. Nor did he indicate to Dunnington that it should be the bank account of “Cobalt”. 
	
 (ii)	Document 3 – This is an e-mail, dated 10 December 2008, from Dunnington to the Plaintiff telling the Plaintiff that the returns on investment would be paid “by an importer”. This e-mail, in my view, makes it clear that the Plaintiff knew that Cobalt will not be paying him, but that he would receive payment from another source. As such it contradicts not only his evidence, but also the averments in his particulars of claim that a material term of the agreement was that Cobalt would repay the Plaintiff the capital sum invested by him together with a stipulated return thereon. 
	
(iii)	Document 5 – This document is a letter, dated 12 December 2008, from Rees to the Plaintiff. In this letter it was made clear that the Plaintiff used Rees as his agent and attorney and not Cobalt. This letter is similar to the letter at document 32 which was also from Rees to the Plaintiff, dated 30 January 2009, and which again confirmed that Rees acted as his agent and attorney (and not Cobalt).
	
(iv)	Document 7 – This is a letter from Rees, dated 12 December 2008, to Vision. If the Plaintiff’s version is correct, then this letter ought to have been addressed to Cobalt and not Vision.
	
(v)	Documents 9 and 10 demonstrate that Davey forwarded the e-mail address of the Plaintiff to Kurt Hoggan, who was an agent /employee of Rees. If the contract was between Cobalt and the Plaintiff, there would have been no reason for either Davey, Storey or Dunnington to make available the Plaintiff’s e-mail address to Hoggan.
	
(vi)  Document 14 is an e-mail, dated 21 January 2009, from the Plaintiff to Dunnington. Once again in this e-mail, the Plaintiff makes no reference whatsoever to Cobalt or a guarantee or payment by Cobalt.
 
(vii)  Document 21 – This is an e-mail, dated 27 January 2009,  from the Plaintiff to Dunnington. The Plaintiff made it clear, in this e-mail,  that he knew that he was dealing with Rees when he stated as follows:  “[k]indly find attached confirmation of R1 million transfer to Dean Rees attorney (trust account)…”. If the Plaintiff’s version is correct, then he should have stated that it was a R1 million transfer into Cobalt’s bank account.

(viii)	Document 22 – This is an e-mail, dated 27 January 2009, from Dunnington to Hoggan, the agent/employee of Rees, informing Hoggan that the Plaintiff was interested in a further deal. If the transaction was between Plaintiff and Cobalt, then the there would have been no need to refer to the Plaintiff in this letter. 

(ix)	Document 23 is an e-mail from Davey to Hoggan. It again refers to Vision and not to Cobalt.

(x)	  Documents 34,37,39,41 and 43 are letters from Rees addressed to various persons that participated in the scheme. The letters confirm that these persons participated in an investment with Rees thus confirming that they did not participate in an investment with Cobalt, as alleged by the Plaintiff.

(xi)	 Document 52 – is a letter from Suscito Investments (a Rees associated entity) addressed to the Plaintiff, dated 23 March 2009. The Plaintiff in his evidence conceded that he did not enquire from Dunnington why Cobalt was not the contracting party, and why the letter was addressed to him.
Significantly, the Plaintiff conceded, in his evidence, that Dunnington did not use Cobalt in relation to the second investment.

[34]	The Plaintiff’s difficulties in proving his case is further exacerbated by the fact that he became involved in an investment that yielded up to 150% interest per annum. Such an investment is patently too good to be true. By the same token, such an investment could not simultaneously be risk free and yield such an extraordinarily high return, if it was above board. Moreover, apart from the facts, common sense and the probabilities dictate that no-one would have guaranteed such payment in an investment of this nature. The Plaintiff’s own witness, Dunnington, said as much in his evidence: 

“I said look we have made a huge return on it. There is no sure thing in life. There are no sure investments and we had participated and we had made a good profit and these things if you do it and you make a good profit and if I had known hindsight all the stories that come out I would have not but we were not aware of anything going on and 2008 was the first that we really got involved in it and we probably caught it at the end of the cycle unfortunately. So I would not, you know for me all of them knew the risks. All of them knew that they had to go directly with Rees…” 

[35]	To my mind, it cannot be said that the evidence of the Plaintiff, taken as a whole, establishes on a balance of probabilities that the Plaintiff had entered into a contract with Cobalt in the terms set out in his particulars of claim,  or at all. Accordingly, the Plaintiff’s main claim must fail.

 [36]	I now turn to the Plaintiff’s first and second alternative claims which are founded in delict. Relying on Lillicrap, Wassenaar and Partners v Pilkington Brothers (SA) Pty Ltd 1985 (1) SA 475 (A), Cobalt submits that in our law no claim is maintainable in delict where the negligence relied on consists solely in the breach of a term of a contract. It contends, in this regard, that the delictual breaches that the Plaintiff relies upon, in the first and second alternative claims, consist solely of breaches of the terms of the alleged  contract,  and not on a right which he had independently of the contract. As such, it contends that only the contractual claim should be considered, and the claims founded in delict ought to be dismissed because the same alleged misrepresentations which form the basis for the contractual claim are relied upon for the delictual claims.    

[37]	I am unpersuaded that the two alternative delictual claims (which are based on certain misrepresentations allegedly made by Cobalt and a breach of its duty of care) rely solely on the negligent breach of the terms of the agreement. The particulars of claim reveal that in his first alternative claim based on misrepresentation, the Plaintiff relies on a misrepresentation purportedly made by Cobalt in order to induce him to enter into the agreement. This includes representing that it was familiar with the investment opportunity it was recommending; that it had analysed the investment opportunity; and that it had ensured that adequate securities were in place etcetera.  
    
[38]	In relation to the second alternative claim, which is based on Cobalt’s breach of its duty of care,   the particulars of claim reveal that the Plaintiff relies on the fact that Cobalt, through Dunnington,  proposed the investment opportunity to him while he was, or held itself out to be an expert in the rendering of financial advisory services, and wrongly and negligently advised the Plaintiff to invest monies in circumstances where it had failed to thoroughly  investigate the investment opportunity,  despite its duty and ability to do so.  

[39]	 In relation to the main claim which is founded on a breach of contract, the particulars of claim reveal that the Plaintiff relies on Cobalt’s failure to ensure: that the investment was safe; that each purchase transaction (of raw pharmaceutical materials) was linked to a specific purchase order; and that adequate security was in place to protect the Plaintiff’s investment, and guarantee the repayment of the capital and returns. I am accordingly of the view that the alleged negligence of Cobalt, which is relied upon by the Plaintiff in its first and second alternative delictual claims, does not consist solely in the negligent breach of a term of the contract, which is relied upon in the main claim.

 [40]	This notwithstanding, I am of the view that the Plaintiff has a more fundamental difficulty to overcome in relation to its two alternative claims.  The Appellate Division in Lillicrap, Wassenaar and Partners v Pilkington Brothers (above) held that no claim is maintainable in delict when the negligence relied on consists solely in the breach of the contract. It, however, also held that where the claim exists independently of the contract (but would not exist, but for the contract), a delictual claim for economic loss may certainly lie (Bayer South Africa (Pty) Ltd v Frost 1991 (4) SA 559 (A) at 569I -570D; Holthausen v Absa Bank Ltd 2008 (5) SA 630 (SCA) at 632 H-I).  What Lillicrap, in my
 view, makes clear is that a delictual claim for economic loss, which exists independently of the contract, is competent, provided that the contract exists.

[41]	Therefore, the insurmountable difficulty with the Plaintiff’s first and second alternative (delictual) claims is their dependence on the existence of a contract having been concluded between the Plaintiff and Cobalt. Although independent of the purported contract between the Plaintiff and Cobalt, the delictual claims would not exist, but for that contract.  As a consequence of having failed, on a balance of probabilities, to prove that the contract, contended for by the Plaintiff, had been entered into between the Plaintiff and Cobalt, the Plaintiff’s first and second alternative claims must also fail.                   

[42]	In the result, I make the following order:
(a)	the Defendant is granted absolution from the instance.
(b)	The Plaintiff is ordered to pay the costs, including the costs occasioned by the employment of two counsel.

F. KATHREE-SETILOANE
JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG

	COUNSEL FOR THE PLAINTIFF:  	 GF PORTEOUS
ATTORNEY FOR THE PLAINTIFF: ALLAN ALLSCHWANG AND ASSOCIATES INC
	COUNSEL FOR COBALT: 	B ROUX SC with A LOUW
ATTORNEYS FOR COBALT: ERASMUS FABER GOERTZ SCOTT INC 
DATE OF HEARING: 12,13,16 MAY 2011, AND 10 OCTOBER 2011
DATE OF JUDGMENT: 23 APRIL 2012