Banks Can Breathe A Sigh Of Relief, As Pretoria High Court Declines To Extend Delictual Liability For Pure Economic Loss

The Sasfin Bank Limited vs SARS judgment delivered last week dealt with the crossroads of tax enforcement, banking regulation and law of delict. The critical question in the case is whether a revenue authority may sue a bank in damages for facilitating the expatriation of undeclared taxable funds, when the financial-sector statutes already provide their own enforcement processes? The answer, in large part, is no, at least not under the common law.

Background and claims

The Commissioner for the South African Revenue Service (“SARS”) issued proceedings against Sasfin Bank Limited concerning transactions by 18 bank clients from 2013 to 2023. SARS alleged that Sasfin Bank assisted clients to expatriate undeclared taxable funds by processing foreign payments without proper supporting documents and, in some instances, by concealing transactions (including deletions from statements and BOPCUS reports). SARS tied these allegations to duties arising under the Banks Act and Regulations, the Financial Intelligence Centre Act (“FICA”), and the Exchange Control framework (including the Authorised Dealer Manual). The quantum asserted was substantial: approximately ZAR1.97 billion (Claim 1) and ZAR2.90 billion (Claim 2). 

SARS pleaded:

• Common-law delictual claims for pure economic loss on the basis that Sasfin Bank owed SARS a legal duty not to cause patrimonial loss by assisting the unlawful transfer of undeclared funds abroad. 
• An alternative statutory claim under section 278 of the Financial Sector Regulation Act (“FSRA”) (from 1 April 2018), asserting a right to recover loss caused by contraventions of “financial sector laws.” 

Sasfin Bank excepted to the particulars of claim, arguing principally that the pleaded legal duty does not exist; that the relevant statutes provide an exhaustive remedial scheme enforced by regulators; that recognising a duty would create indeterminate liability; and that causation was inadequately pleaded. 

Issues before the court

• Whether, as a matter of wrongfulness, South African law should recognise a common-law legal duty owed by a bank to SARS to prevent loss from the unlawful expatriation of undeclared funds by bank clients (pure economic loss). 
• Whether the particulars adequately pleaded causation. 
• Whether the alternative claim under section 278 FSRA was competent on the pleadings. 

Wrongfulness and the pleaded common-law duty

The court treated the main claims as classic pure economic loss claims where wrongfulness is not presumed and where policy-based constraints loom large. It anchored its analysis in the structure and purposes of the relevant statutory frameworks:

• Banks Act and prudential regime: These are designed to protect the public interest, primarily depositors and systemic stability, through specialised oversight by the Prudential Authority. They provide powerful administrative and other sanctions (including potential personal liability for directors), indicating a legislative intention to address non-compliance within that statutory system. Superimposing a delictual duty to SARS, risks creating double jeopardy and cuts across the scheme. 
• FICA: The duties (customer due diligence, record-keeping, suspicious and threshold reporting) are owed to the State and enforced by regulatory and criminal sanctions. FICA is not a vehicle for private damages claims by third parties for breach of reporting/record-keeping obligations.
• Exchange Control Regulations and the Authorised Dealer Manual: These instruments pursue macroeconomic and public-interest objectives (controlling capital flows and preserving reserves), with their own sanctions and regularisation mechanisms. They are not framed to protect the private interests of SARS as a creditor.
• SARS's own toolkit: The Tax Administration Act provides robust remedies, including applications to compel repatriation of foreign assets (section 186), as well as mechanisms to pursue directors and to resurrect deregistered companies to enable enforcement. SARS is therefore not a “vulnerable” creditor lacking remedies. 
• Indeterminate liability and systemic risk: Recognising a bank's duty to SARS in these circumstances would invite broad and potentially indeterminate exposure, with chilling effects on banking operations and costs. 

On a holistic reading, the court concluded it would be unreasonable to impose the pleaded common-law duty on an authorised dealer bank to protect SARS from loss arising from the tax affairs of the bank's customers. The legislative design points away from private delictual liability and towards regulatory enforcement and specific statutory remedies. 

Result: The exception to wrongfulness against Claim 1 and Claim 2 was upheld. Claims 1 and 2 were set aside, but SARS was granted leave to amend within 30 days. If SARS fails to do so, Claims 1 and 2 are dismissed.

• Causation

The court distinguished wrongfulness from causation. While wrongfulness can sometimes be decided on exception, causation is fact-intensive. In the court's view, SARS's pleadings on factual causation were sufficient to withstand exception; any debate about legal causation (remoteness, policy limits) is for trial court.

Result: The exception on causation therefore was not upheld, but claims 1 and 2 were set aside as set out earlier. 

• Section 278 FSRA: the statutory pathway

Section 278 FSRA provides that a person (including a regulator) who suffers loss “because of a contravention of a financial sector law” may claim compensation. The court characterised section 278 as a right of action: it does not impose liability by itself, but it enables damages where a breach of a specified financial-sector law causing loss is pleaded and proved.

SARS pleaded specific contraventions under the Banks Act and Regulations as the financial-sector law breaches underpinning the section 278 claim (post-1 April 2018). On exception, that was sufficient. 

Result: The exception to the section 278 alternative claim was accordingly dismissed. That claim stands for later adjudication, but is a small fraction of claims 1 and 2. SARS was also ordered to pay Sasfin Bank's costs including the cost of 2 counsel to be taxed on scale C.

Why this case matters

This judgment draws a sharp line between public-law regulatory frameworks and private-law delictual recovery for pure economic loss. It confirms that where Parliament has crafted detailed regimes, with designated regulators, sanctions, and remedial processes, courts will be reluctant to extend common-law duties, that risk undermining those schemes or creating indeterminate liability. At the same time, it affirms a statutory cause of action that may allow regulators (including SARS) to claim compensation where they can tie loss flowing from a contravention of a financial-sector law which only came into effect on 1 April 2018 and therefore does not relate to transactions entered into before 1 April 2018. 

Conclusion: Key principles distilled

• Duty in delict for pure economic loss: Courts will not readily impose a novel legal duty on banks to protect SARS from clients' tax-related losses where the statutory architecture points to public-interest regulation, not private compensation. 
• Statutory schemes are primary: The Banks Act, FICA, and the Exchange Control framework provide comprehensive, regulator-driven enforcement tools and sanctions. Their design and purpose point against parallel common-law damages claims by third parties for breaches of those obligations. 
• SARS is not “vulnerable”: The Tax Administration Act equips SARS with potent remedies (including orders compelling repatriation of assets abroad and director-focused measures), effectively countering arguments for a special common-law duty owed by banks to SARS. 
• Indeterminate liability and systemic stability: Recognising a duty to SARS would risk widespread, uncertain exposure for banks, with potential systemic and cost implications—an important policy brake in the wrongfulness analysis. 
• Causation is for trial: On exception, pleading factual causation suffices; debates about legal causation (remoteness/policy) must ordinarily await evidence. 
• Section 278 FSRA enables compensation: From 1 April 2018, a plaintiff, including a regulator, may sue for loss caused by contraventions of financial-sector laws. The provision creates a right of action, not automatic liability. Proper pleading of specific statutory breaches and causation is essential.

Note: Sasfin was represented by ENS in these proceedings.

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