Conrad Fourie v FirstRand Bank Limited and Jacobus Spangenberg NO

Supreme Car, a company trading in second-hand vehicles, entered into a floor plan agreement with FirstRand Bank (Wesbank) under which vehicles were financed and had to be repaid upon resale. Conrad Fourie, an accountant employed by the company’s auditor, prepared a series of financial statements portraying Supreme Car as profitable and financially sound. These statements were relied upon by FirstRand when repeatedly increasing the company’s credit facility. In reality, the statements were misleading and falsely suggested that they were audited, concealed substantial high-interest loans, and misrepresented the company’s financial position. Supreme Car sold financed vehicles without repaying FirstRand, became insolvent, and was liquidated. FirstRand sued Fourie personally under s 424 of the Companies Act 61 of 1973 for fraudulent and reckless conduct, and sued the auditor (later his estate) in delict on the basis of vicarious liability.

The appeal by Fourie was dismissed with costs. The cross-appeal by FirstRand was upheld. The second respondent (the auditor’s estate) was held jointly and severally liable with Fourie for payment of the outstanding capital amount, interest, and costs.

The case authoritatively clarifies that under s 424 of the Companies Act 61 of 1973, a creditor does not need to establish a causal link between fraudulent or reckless conduct and the company’s insolvency. It strengthens creditor protection by confirming the broad personal liability of individuals who knowingly participate in fraudulent or reckless trading, and affirms principles of vicarious liability in delict for professional misconduct.