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[2015] ZAWCHC 177
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Cilliers and Others v Steenkamp and Others (1386/2014) [2015] ZAWCHC 177 (25 November 2015)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case No: 1386/2014
DATE: 25 NOVEMBER 2015
In the matter between:
JOHANN JACOBUS
CILLIERS
......................................................................................
First
Plaintiff
ROBERT PHILLIPS &
OTHERS
..................................................
Second
to Thirty-fourth Plaintiffs
V
JURGEN JOHANNES
STEENKAMP
.........................................................................
First
Defendant
ALBERT IVAN SURMANY &
OTHERS
.................................................
Second
to Sixth Defendants
Court: Justice J Cloete
Heard: 14 October 2015
Delivered: 25 November 2015
JUDGMENT
CLOETE J:
Introduction
[1] The 34 plaintiffs are shareholders
in a company, Kimberley Consolidated Mining (Pty) Ltd (‘KCM’).
The first and
seventeenth plaintiffs are also concurrent creditors of
KCM. This company was placed in provisional liquidation on 12
November
2010 and in final liquidation on 9 December 2010.
[2] The first to third defendants are
the duly appointed liquidators of KCM and for convenience they will
collectively be referred
to as ‘the liquidators’. They
are individually employed by the fourth to sixth defendants
respectively.
[3] Prior to its liquidation the sole
business of KCM was its 100% shareholding in two subsidiaries, namely
Bo-Karoo Diamond Mining
(Pty) Ltd (‘Bo-Karoo’) and
Channal Mining (Pty) Ltd (‘Channal’).
[4] On 30 January 2014 the plaintiffs
issued summons against the liquidators and the fourth to sixth
defendants (the latter on the
basis of vicarious liability for
alleged acts or omissions on the part of the individual liquidators
during the course and scope
of their respective employment). The
plaintiffs’ particulars of claim were subsequently amended on
20 May 2014. The plaintiffs
claim payment of the total sum of R101
957 995.78 as shareholders, pro rata to their respective shareholding
in KCM. In their capacities
as concurrent creditors the first
plaintiff claims R215 000 and the seventeenth plaintiff R33 000 as
the shortfall on their respective
creditors claims. Interest is also
claimed together with costs.
[5] The third and sixth defendants have
excepted to the amended particulars of claim (and the other
defendants have apparently advanced
similar objections to the
pleading in its current form). The third and sixth defendants contend
that the claims advanced by the
plaintiffs, as currently pleaded,
fail to disclose a cause of action, alternatively are vague and
embarrassing and that they are
severely prejudiced as a result.
The plaintiffs’ claims as
pleaded
[6] The plaintiffs have advanced four
claims which may be conveniently categorised as follows:
6.1 Claim A: the diamond proceeds
claim;
6.2 Claim B: the mining proceeds claim;
6.3 Claim C: the sale claim; and
6.4 Claim D: the approval claim.
Claim A: the diamond proceeds claim
[7] The plaintiffs allege that on 3
November 2010 KCM published a SENS announcement in which it notified
its shareholders that ‘the
subcontractor working on its
Bo-Karoo mining site recovered a 27 carat light-pink diamond’
(‘the diamond’). Shareholders
were advised that the
diamond would be placed on tender and that, in terms of the relevant
subcontract agreement, KCM would receive
a royalty of 15% of the
diamond’s gross selling price.
[8] The first plaintiff discovered that
the diamond was to be sold by an entity known as Pico Diamonds
(‘Pico’) and
not its owner, Bo-Karoo, and that the sale
proceeds were to be appropriated by Pico or its controlling director
and shareholder,
one Trevor Pikwane (‘Pikwane’). The
first plaintiff thus obtained an interdict on 22 November 2010
prohibiting this
sale, but in contempt of the interdict Pikwane
nonetheless went ahead with the sale at a price of some R43.9
million. In the interim
Pikwane had caused KCM to be placed in
provisional liquidation (he is alleged to have done so on the basis
of various fraudulent
averments).
[9] On the same date that the
provisional liquidation order was made final (i.e. 9 December 2010)
the first plaintiff obtained an
order freezing R30 million of the
sale proceeds of the diamond:
‘To enable the liquidators and /
or any other interested party to institute proceedings…for the
recovery of the proceeds
of the sale of the diamond, and for further
interim relief pertaining to the protection or preservation of such
proceeds…’
[10] The aforementioned order further
stipulated that the envisaged steps had to be taken by 24 January
2011, failing which its
terms would lapse. The deadline was
subsequently extended at the instance of the liquidators to 7
February 2011 in a further order
granted in similar terms on 21
January 2011.
[11] The liquidators failed to
institute proceedings by 7 February 2011, the freezing order lapsed,
and the sum of R30 million was
returned to Pico on 7 February 2011 or
shortly thereafter and has not been recovered.
[12] The cause of action is found at
paragraphs 52 and 55 of the pleading where it is alleged in essence
that:
12.1 The liquidators had a fiduciary
duty to act in the interests of KCM, its members and creditors and in
the exercise of such
duty were obliged to: (a) assume control of the
assets of KCM, including any of its wholly owned subsidiaries (and
thus including
Bo-Karoo); (b) assume proper control over all the
affairs of KCM and of any subsidiaries over which it exercised
control; and (c)
take such steps as were necessary to properly and
timeously investigate the facts concerning the sale of the diamond
and ensure
that action was instituted before the freezing order
deadline;
12.2 The liquidators failed to
institute the proceedings timeously and thus wrongfully, unlawfully
and negligently failed to discharge
their aforementioned duties
which, it was alleged, were imposed upon them by s 391 and s 386,
more specifically ss 386(1)(e) and
386(4)(a), (f), (g), (h) and (i)
of the Companies Act 61 of 1973.
[13] It is alleged that the failure to
discharge their aforementioned duties directly caused the plaintiffs
to suffer damages in
the form of pecuniary loss.
Claim B: the mining proceeds claim
[14] The plaintiffs allege that
Bo-Karoo was the holder of prospecting and mining rights entitling it
to mine and sell precious
stones or minerals found on the properties
over which the rights were registered for its own benefit.
[15] During 2009 a so-called
subcontract agreement was purportedly concluded between Bo-Karoo and
Pico at a time when the same individual,
Pikwane, was also a director
of KCM. The subcontract agreement authorised Pico to conduct
Bo-Karoo’s mining activities as
an ‘independent
subcontractor’ for which Pico would receive, on a sliding
scale, up to 90% of revenue generated and
Bo-Karoo the remainder,
with Pico paying a monthly rental to Bo-Karoo for equipment used.
However Pico retained all the revenue
and failed to pay any rental
whatsoever.
[16] It is alleged that the subcontract
was void, alternatively voidable on various specified grounds.
[17] The cause of action is pleaded on
the basis of the same fiduciary duty or duties which are alleged to
have fallen on the liquidators
in Claim A (but without any mention of
the sections of the Companies Act relied upon in Claim A). The
plaintiffs rely upon a breach
of these duties (essentially a failure
to properly and timeously investigate and to take the necessary steps
to set the subcontract
agreement aside) which, it is alleged,
directly caused them to similarly suffer damages in the form of
pecuniary loss.
Claim C: the sale claim
[18] The plaintiffs plead that
subsequent to the appointment of the liquidators Bo-Karoo sold its
mineral rights and equipment to
Bondeo 140 CC for the sum of R14
million, which was never paid.
[19] It is alleged that there was a
legal duty on the liquidators (described as ‘a duty of care’)
to recover the purchase
price or to compel the directors of Bo-Karoo
to do so.
[20] It is pleaded that in breach of
this duty of care the liquidators did not recover the purchase price,
nor did they take any
steps to compel the directors of Bo-Karoo to do
so, and that as a direct result the plaintiffs again suffered damages
in the form
of pecuniary loss.
Claim D: the approval claim
[21] The plaintiffs plead that the sale
of Bo-Karoo’s mineral rights and equipment which is the subject
of Claim C constituted
the sale of the greater part of its assets. As
such it required the approval, by special resolution, of the
liquidators of KCM
which was the sole shareholder in Bo-Karoo (which
would be in terms of s 228 of the old Companies Act 61 of 1973, or s
112 as read
with
s 115
of the
Companies Act 71 of 2008
, as the case
may be).
[22] It is similarly alleged that there
was a legal duty on the liquidators (also described as ‘a duty
of care’) to
ensure that the assets were not sold for a price
substantially less than market value; that these assets had a value
of at least
R75 million; and that in approving the sale at a price of
R14 million the liquidators breached their duty of care, again
directly
causing the plaintiffs to suffer damages in the form of
pecuniary loss.
Relevant requirements for pleadings
and exceptions
[23] A pleader is required to allege
the primary facts upon which he or she relies as well as the
conclusion sought to be drawn
from those facts. A pleading will be
defective if a conclusion is asserted without pleading the primary
facts to support it: see
Trope and Others v South African Reserve
Bank
[1993] ZASCA 54
;
1993 (3) SA 264
(AD) at 273A-B.
[24]
The particular facts that a party
must plead in order to disclose the cause of action relied upon
pertain not to matters of procedure
but to substantive law, given
that they must form the foundation for the legal conclusion which in
the ordinary course would support
the party’s right to
judgment: see McKenzie v Farmers’ Co-Operative Meat Industries
Ltd 192
2 AD 16
at 23 (which has consistently been followed); Makgae v
Sentraboer (Koöperatief) Bpk
1981 (4) SA 239
(T) at 245D. If
this is not done the pleading will be excipiable for failing to
disclose a cause of action.
[25] An exception on the ground that a
pleading is vague and embarrassing is aimed at the formulation of the
cause of action rather
than its legal validity per se, but this type
of exception can only be taken if the vagueness goes to the cause of
action itself,
and will only be allowed if the excipient will be
seriously prejudiced as a result: see e.g. Gallagher Group Ltd v I O
Tech Manufacturing
(Pty) Ltd
2014 (2) SA 157
(GNP) at para [54].
The grounds of exception
[26] The exception hinges on the
following central grounds:
26.1 The assertion by the plaintiffs of
the existence of a duty on the liquidators of KCM to take control of
its wholly owned subsidiary
Bo-Karoo as pleaded in Claims A and B;
26.2 The absence of the assertion of
any such duty as pleaded in Claim C (an unspecified duty of care is
instead relied upon); and
26.3 The claims are all for pure
economic loss but lack averments necessary to sustain same.
Discussion
[27] The excipients’ fundamental
attack on the duty to take control in Claims A and B is that the
pleading alleges a failure
to discharge such a duty, but does not
allege any primary facts from which a conclusion of the duty to take
control can be drawn.
[28] In the pleading under scrutiny the
plaintiffs allege that the duty to take control had as its source the
fiduciary duty of
the liquidators of KCM and that such a duty (at
least in respect of Claim A) was imposed on the liquidators by the
following sections
of the old Companies Act 61 of 1973: s 391 places
a duty on a liquidator to recover and take into possession all the
assets and
property of the company, to apply them in satisfaction of
the costs of the winding-up and the claims of creditors, and to
distribute
the balance among those who are entitled thereto; s
386(1)(e) empowers a liquidator inter alia to take steps for the
protection
of the property of the company; s 386(4)(a) to institute
legal proceedings; s 386(4)(f) to continue or discontinue any
business
of the company; s 386(4)(g) to enforce or abandon any
contract relating to the acquisition of immovable property by the
company
prior to registration of transfer, or to terminate any lease
concluded by the company; s 386(4)(h) to sell the company’s
movable and immovable property; and s 386(4)(i) to perform any other
act or exercise any power for which he or she is not expressly
required by the Act to first obtain leave of the court.
[29] During argument counsel for the
plaintiffs also referred to various authorities which emphasise (as
pleaded) that a liquidator
stands in a fiduciary relationship to the
company of which he or she is the liquidator as well as to the body
of creditors of that
company and members of that company as a whole.
[30] He stressed that for purposes of
deciding this particular issue on exception the court is duty bound
to accept as correct (unless
palpably untrue or improbable) the
primary facts alleged ex facie the pleading itself. However the
primary facts alleged are those
pertaining to the direct consequences
of the failure by the liquidators of KCM to fulfil their duty to take
control of Bo-Karoo.
[31] To my mind therefore the flaw in
this argument is that these “primary facts” presuppose
the existence of such a
duty on the part of the liquidators in the
first place, and that duty is pleaded as being a matter of law which
either does or
does not exist.
[32] The excipients contend that
Bo-Karoo, although a wholly owned subsidiary of KCM, is a separate
legal persona. The liquidators
have no powers that supersede the
powers of the directors of KCM’s subsidiary, even if it is
wholly owned. It is common cause
that the entity whose assets are in
issue in this matter is Bo-Karoo. That is (or was) a company with its
own directors and controlling
board. KCM was merely the shareholder
of Bo-Karoo, and could not itself control the affairs of Bo-Karoo.
Although shareholders
may have rights of intervention under
shareholder agreements, the plaintiffs do not rely on any such
agreements, nor do they rely
on any other power of control or any
statutory or common law derivative action (certainly none is
pleaded). They have pinned their
colours to the sole mast that the
fiduciary duty imposed upon the liquidators includes the duty to take
control of KCM’s
wholly owned subsidiary. The excipients submit
that not only have the plaintiffs failed to allege any primary facts
to support
that legal conclusion, but the conclusion itself is wrong
in law.
[33] In support of this argument the
excipients place principal reliance on Macadamia Finance BK en 'n
Ander v De Wet en Andere
NNO
[1993] ZASCA 21
;
1993 (2) SA 743
(AA). In that matter the
plaintiffs sued the defendants as liquidators of two companies in
liquidation, contending that they were
liable for damage caused by
fire to a plantation of macadamia nut trees on a farm belonging to
the second plaintiff, because the
defendants had negligently failed
to insure the assets of the second plaintiff. At the time of the fire
only the first plaintiff
was in liquidation, the second plaintiff
only having been placed in liquidation about five months after the
fire. The second plaintiff
was one of a number of wholly owned
subsidiaries of the first plaintiff and the plaintiffs based their
claim on the relationship
between these companies. It appeared that
the first plaintiff was the only active company in the group; the
directors of all the
companies were the same and all decisions were
effectively taken by the first plaintiff, although after the
liquidation of the
first plaintiff the second plaintiff had continued
to exist with its own board of directors. The court a quo dismissed
the action,
finding that although there was in general a duty on a
liquidator to insure the assets of a company, no such duty arose in
respect
of the assets of the second plaintiff because at the time of
the fire the liquidators were not appointed as such in respect of the
second plaintiff. The close relationship between the two companies
did not affect the legal distinction between the first plaintiff
as
holding company and the second plaintiff as its wholly owned
subsidiary.
[34] On appeal the then Appellate
Division agreed with the court a quo, finding as follows at 747C –
784A:
‘Om mee to begin: 'n likwidateur
het die bevoegdhede en verpligtings wat aan hom toegeken word deur
die bepalings van die
Maatskappywet 61 van 1973. Hy is verplig, onder
meer, volgens artikel 391 van die Wet, om die bates van die
maatskappy aan te wend
ter vereffening van die eise van die
skuldeisers van die maatskappy. Daar is geen bepaling wat hom magtig
om die bates van die
maatskappy onder sy beheer aan te wend ter
versekering van die bates van 'n ander maatskappy waarvan hy nie die
likwidateur is
nie. Dié probleem het die appellante se
advokaat probeer oorbrug deur te wys op die feit dat die eerste
appellant se aandeelhouding
in die tweede appellant 'n bate van die
eerste appellant was en aan te voer dat die respondente verplig was
om die eerste appellant
se bates te beskerm (vgl artikel 386(1)(e)
van die Wet). Die argument slaan die bal mis. Die appellante se saak
is nie dat die
eerste appellant 'n eis teen die respondente het weens
die verbreking van 'n verpligting teenoor die eerste appellant ten
opsigte
van sy bates nie. Daar is geen poging aangewend om aan te
toon wat die omvang van die eerste appellant se versekerbare belang
in
sy aandeelhouding was, of watter skade die eerste appellant sou
gely het nie. Die appellante se saak is dat die respondente 'n
regsplig teenoor die tweede appellant verbreek het, met betrekking
tot die tweede appellant se bates. Die bestaan van so 'n regsplig
is
onversoenbaar met die bepalings van die Wet. Die respondente as die
likwidateurs van die eerste appellant het nie oor enige
magte buite
die bepalings van die Wet beskik ten opsigte van bates anders as dié
van die maatskappy onder sy beheer nie.
Gevolglik is daar geen ruimte
vir die gedagte dat die respondente die beheer en bestuur van die
tweede appellant “oorgeneem”
het nie.
Vervolgens: afgesien van die bepalings
van die Wet, is daar in ieder geval geen regsfiguur of –beginsel
waarvolgens dit denkbaar
is dat die beheer en die bestuur van die
tweede appellant op die respondent oorgegaan het nie. Die feit dat
die eerste en tweede
appellante voor eersgenoemde se likwidasie
dieselfde direkteure gehad het, het opgehou om van enige betekenis te
wees met die likwidasie
van die eerste appellant en die aanstelling
van die respondente as sy likwidateurs. Voor die likwidasie het die
direkteure opgetree
in twee verskillende hoedanighede, met verwysing
onderskeidelik na die beheer en bestuur van die eerste appellant, en
die beheer
en bestuur van die tweede appellant. Vanweë die
likwidasie is die direkteure ontdaan van die een hoedanigheid, maar
seer sekerlik
nie van die ander nie. Die posisie is geensins
verskillend van wat dit sou gewees het as die twee appellante
verskillende direkteure
sou gehad het nie. Die gedagte dat die
respondente die beheer en bestuur van die tweede appellant sou
oorgeneem het van die direkteure
van die eerste appellant is
onbestaanbaar.’
[35] Moreover to the extent that the
pleading in the present matter might seek to allege some form of de
facto control by KCM over
Bo-Karoo, the findings in Macadamia Finance
are equally decisive. In any event no primary facts are alleged by
the plaintiffs to
support a conclusion of de facto control.
[36] The same difficulties lie with
Claims B and C but with these claims the position is worse, because
in Claim B no mention is
made of the statutory provisions relied upon
in Claim A, and in Claim C there is only a bald allegation of a duty
of care without
any primary facts being alleged to support it.
[37] Having regard to the aforegoing I
am persuaded that in respect of this particular issue the pleading
fails to disclose a cause
of action in respect of Claims A, B and C,
or alternatively is vague and embarrassing and the excipients are
severely prejudiced
thereby.
[38] As stated above, the excipients’
remaining attack is directed at the fact that all of the claims (i.e.
including Claim
D) are for pure economic loss. In Claim A the
allegation is made that the liquidators acted ‘wrongfully,
unlawfully and negligently’
in failing to discharge a
particular legal duty which, on my understanding of Macadamia
Finance, does not exist. To add to what
has been stated above Claims
B and C do not even allege negligence on the part of the liquidators
but simply that by omission they
breached an unspecified ‘duty
of care’. Claim D on the other hand relies on positive conduct
on the part of the liquidators
causing pure economic loss.
[39] As submitted by counsel for the
excipients, in contrast to cases of physical harm, conduct causing
loss is not prima facie
wrongful and there is no general right not to
be caused such loss: see Country Cloud Trading CC v MEC, Department
of Infrastructure
Development
2015 (1) SA 1
(CC) at para [22].
Furthermore, the fact that an act is negligent does not make it
wrongful, and to elevate negligence as the determining
factor
confuses wrongfulness with negligence: see Telematrix (Pty) Ltd t/a
Matrix Vehicle Tracking v Advertising Standards Authority
SA 2006 (1)
SA 461 (SCA) at paras [12] and [13].
[40] While accepting this to be the
legal position counsel for the plaintiffs argued that, given that
liability for pure economic
loss is a matter of judicial
determination involving criteria of public and legal policy, and that
there is no numerus clausus
in which such liability arises, it would
be inappropriate to decide this particular issue on exception and
before any evidence
is led. He argued that the facts to be adduced by
way of evidence at the trial will indicate whether, on the applicable
legal and
policy considerations of the facts, the liquidators should
be held liable.
[41] In Telematrix it was held at paras
[2] and [3] that:
‘[2] …the plaintiff
argued that it is inappropriate to decide the issue of wrongfulness
on exception because the issue
is fact-bound. That is not true in all
cases. This Court, for one, has on many occasions decided matters of
this sort on exception…Some
public policy considerations can
be decided without a detailed factual matrix, which by contrast is
essential for deciding negligence
and causation.
[3] Exceptions should be dealt with
sensibly. They provide a useful mechanism to weed out cases without
legal merit. An over-technical
approach destroys their utility. To
borrow the imagery employed by Miller J, the response to an exception
should be like a sword
that “cuts through the tissue of which
the exception is compounded and exposes its vulnerability…”
’
[Miller J in Davenport Corner Tea Room
(Pty) Ltd v Joubert
1962 (2) SA 709
(D) at 715H.]
[42] In my view the argument for the
plaintiffs overlooks the following, namely that the difficulty
arising from the manner in which
the duty to take control has been
pleaded (as dealt with above) impacts also on this part of their
case. If it is not discernible
how control lies or could be
exercised, it is entirely unclear how the omission to take control
which caused economic loss is wrongful
(as pleaded in Claims A, B and
C). I agree with the submission made for the excipients that the
plaintiffs’ argument is essentially
as follows: because of the
(as yet unidentified) control that might have been exercised, certain
steps (as yet unidentified) ought
to have been taken, and had they
been taken (on dates and in circumstances not clearly pleaded)
economic loss to the plaintiffs
would have been prevented.
[43] Given the absence of pleaded
foundational facts which could ultimately lead a court to find them
sustaining the conclusion
of wrongfulness, I am similarly persuaded
that the pleading in its current form does not pass muster and fails
to disclose a cause
of action on this particular issue, alternatively
is vague and embarrassing and the excipients are severely prejudiced
thereby.
[44] As far as Claim D is concerned,
the parties are ad idem that fault is a necessary element of the
cause of action and that it
has not been specifically pleaded.
[45] The argument advanced for the
plaintiffs however is that the liquidators’ duty to ensure that
assets were not sold for
a price substantially less than market value
has been pleaded, as has the fact that they approved the sale. It is
contended that
because s 391 of the old Companies Act imposes what it
does, this logically extends to the required approval of any sale,
and positive
conduct in breach thereof establishes fault which gives
rise to a valid cause of action for pure economic loss.
[46] However, as pointed out for the
excipients, this argument does not deal with the fundamental problem.
The mere fact that assets
were sold for less than their market value
is not of itself actionable. The cause of action (which the
plaintiffs accept) lies
in delict. Being in delict, fault must be
alleged and proved. If, for example, the liquidators authorised the
sale without negligence,
as a matter of law the claim would not
stand.
[47] As stated in Harms: Amler’s
Precedents of Pleadings, 8th ed. at p352, a party relying on a breach
of statutory duty as
a cause of action must satisfy the court that:
47.1 the statute, properly interpreted,
gives a right of action;
47.2 the plaintiff is a person for
whose benefit the duty was imposed;
47.3 the damage suffered is of the kind
contemplated by the statute;
47.4 the defendant’s conduct
constituted a breach of the statutory duty; and
47.5 the breach was causally linked to
the damage.
[48] The absence of these allegations
renders Claim D excipiable, on the basis that it does not disclose a
cause of action, alternatively
that it is vague and embarrassing and
the excipients are severely prejudiced thereby.
Conclusion
[49] Although I have found that the
exception must succeed on all three grounds, I am nonetheless mindful
of the fact that a considerable
sum of money is involved in this
matter and that it is one which is of great importance to the
parties. The usual order would be
to afford the plaintiffs 10 days to
amend their particulars of claim, but in the particular circumstances
I am of the view that
the interests of justice would be served by
giving them a longer period in which to do so, and that a deadline of
29 January 2016
would be appropriate.
[50] In the result the following order
is made:
1. The third and sixth defendants’
exception is upheld.
2. The plaintiffs are given leave, if
so advised, to further amend the particulars of claim by not later
than 29 January 2016. Failing
any amendment, the third and sixth
defendants are given leave to apply to strike out the claims, or for
similar relief.
3. The plaintiffs shall pay the third
and sixth defendants’ costs on the scale as between party and
party, jointly and severally,
as taxed or agreed.
J I CLOETE