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[2016] ZAWCHC 35
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Blue Farm Fashion Limited v Rapitrade 6 (Pty) Ltd and Others (22288/2014) [2016] ZAWCHC 35 (1 April 2016)
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
CASE
NO. 22288/2014
DATE:
01 APRIL 2016
REPORTABLE
In
the matter between:
BLUE
FARM FASHION
LIMITED
..........................................................................................
Plaintiff
And
RAPITRADE
6 (PTY)
LTD
...........................................................................................
First
Defendant
MARCEL
PHILIP
JOUBERT
...................................................................................
Second
Defendant
WARRICK
KINGSMAN
GAUTIER
..........................................................................
Third
Defendant
HERSCHEL
OPPEL
...................................................................................................
Fourth
Defendant
MOIRA
TANYA
O’REILLY
..........................................................................................
Fifth
Defendant
JUDGMENT
DELIVERED ON: 01 APRIL 2016
MANTAME,
J
A
INTRODUCTION
[1]
This matter relates to the two exceptions raised by defendants on the
plaintiff’s particulars of claim. Plaintiff
sued first
defendant for breach of contract in the amount of US$414 665.90 and
seeks an order that the second to fifth defendants
who are directors
of the first defendant, be declared personally liable for the debt in
terms of Sections 77(3)(b), 22(1) and 77(6)
of the Companies Act 71
of 2008 (“the Act”) and or Sections 77(3) and 77(6) of
the said Act.
[2]
Mr Howie legally represented the plaintiff and Mr Loots the
defendants.
B
SUMMARY OF FACTS
[3]
In December 2013, Plaintiff and first defendant concluded an
agreement at its instance and requested that plaintiff deliver
the
clothing ordered to the first defendant in one shipment in Cape Town
in January 2014. On conclusion of the agreement,
plaintiff
delivered the clothing in Cape Town whereupon the purchase price of
US$414 665.90 became due and payable.
[4]
First defendant breached the agreement by failing to pay the purchase
price despite demand on numerous occasions.
[5]
Plaintiff proceeded filing summons in this Court on 12 December 2014
against first defendant and its four (4) directors being
second to
fifth defendant. Second to fifth defendant were sued on the
basis that they knew that the first defendant had no
cash or liquid
assets with which to pay the debt it would incur by purchasing the
clothing from the plaintiff; nevertheless caused
the first defendant
to conclude the agreement; knowingly misled the plaintiff into
believing that it would receive payment of the
purchase price; and
were therefore knowingly party to the carrying-on of the business of
the first defendant recklessly and / or
in a manner calculated to
defraud the plaintiff as a creditor of the first defendant and / or
for a fraudulent purpose.
[6]
Subsequent to filing of plaintiff’s summons, defendants noted
two (2) exceptions to the plaintiff’s particulars
of claim on
the basis that it does not disclose a cause of action and is bad in
law.
C
EXCEPTIONS
[7]
Defendants’ exceptions are set out as follows:-
7.1
First
,
that there is a misjoinder of plaintiff. Annexure “
POC
2
” relied on by the plaintiff as
being the written agreement between the plaintiff and first defendant
(referred to in paragraph
9 of the particulars of claim) identify the
contracting party with the first defendant as
Blue
Farm Textile Ltd
and not
Blue
Farm Fashion Limited
, the latter being
the plaintiff in this action.
7.2
Second
,
that plaintiff’s only relationship to the first defendant is as
its alleged creditor. Plaintiff does not have
locus
standi
to seek to impose personal
liability upon the second, third, fourth and fifth defendants as
directors of the first defendant by
virtue of the provisions of
sections 22 and / or 77 of the Act. For instance, plaintiff’s
claim against the second
to fifth defendants is based upon the
provisions of sections 77(3)(b), 22(1) and 77(6) of the Act. Whilst
Section 22(1) establishes
a prohibition against reckless trading, it
does not, of itself, provide for personal liability of directors.
Section 77(3)(b)
provides that a director of a company may be held
liable if he or she “
acquiesced in
the carrying on of the company’s business despite knowing that
it was being conducted in a manner prohibited
by Section 22(1).
”
The first part of Section 77(3) states that liability is “
for
any loss, damages or costs sustained
by
the company
.” This
subsection does not grant a creditor of a company a statutory cause
of action to claim the loss, damages and
or costs it has suffered
from a director of a company. Section 77(6) does not establish
a substantive basis for personal
liability, it merely provides that
“
[t]he liability of a person in
terms of this section is joint and several with any other person who
is or may be held liable for
the same act.
”
D
ISSUES
[8]
The issues for determination are whether these two (2) grounds of
exceptions have merit and / or are good in law.
E
ARGUMENTS BY BOTH PLAINTIFF AND
DEFENDANT
[9]
At the commencement of the hearing, defendants’ Counsel stated
from the onset that defendants are no longer pursuing the
first
exception. The Court asked Mr Loots for defendants if the first
exception was abandoned by the defendants. Counsel’s
response was that he does not have instructions to that effect, but
was no longer pursuing the first exception. Defendants’
arguments were therefore based on the second
exception. As a result thereof, the arguments and the finding
will be dealt with
as if there was one exception before this Court,
i.e. the second exception dealing with the
locus
standi
of the second to fifth
defendants.
[10]
Mr Loots for the defendants argued that the plaintiff is not
entitled, as a third party creditor, to rely on the provisions
of
Section 77(3)(b), 22(1) and 77(6) of the Act to hold the directors of
the company personally liable for a debt allegedly due
to it by the
company of which they are directors. In this case, plaintiff
should have relied on Sections 22, 76 and 218 of
the Act.
Section 77(3)(b) and (c) of the Act reads as follows:
“
77(3)(b)
A director of a company is liable for any loss, damages or costs
sustained by the company as a direct or indirect consequence
of the
director having acquiesced in the carrying on the companies’
business despite knowing that it was conducted in a manner
prohibited
by Section 22(1).
77(3)(c)
A director of the company is liable for any loss, damages or costs
sustained by the company
as a direct or indirect consequence of the director having been a
party to an act or omission by the company despite knowing that
the
act or omission was calculated to defraud a creditor, employee or
shareholder of the company, or had another fraudulent purpose.”
According
to defendants’ counsel, these aforementioned sections
contemplate that the company may recover any loss suffered
by it as a
result of the directors having acted in the manners contemplated by
the various sub-sections of Section 77(3).
[11]
Section 77(3) of the 2008 Act was compared by the defendants with
Section 424 of the old companies Act 61 of 1973 which reads
as
follows:
“
Liability
of directors and others for fraudulent conduct of business.
–
(1) When it appears, whether it be in a winding-up, judicial
management or otherwise, that any business of the company was
or is
being carried on recklessly or with intent to defraud creditors of
the company or creditors of any other person or for any
fraudulent
purpose,
the Court may, on
application of the Master, the liquidator, the judicial manager, any
creditor or member or contributory of the
company
,
declare that any person who was knowingly a party to the carrying on
of the business in the manner aforesaid, shall be personally
responsible, without any limitation of liability,
for
all or any of the debts or other liabilities of the company as the
Court may direct.
”
It
was submitted on behalf of the defendants that the section envisaged
that the Master, liquidator, the judicial manager, any creditor
or
member or contributory of the company may apply for an order in Court
directing that a person is to be held personally liable
for the debts
of a company to the third parties. Section 77 does not do
that. Section 77(3) contemplates a liability
towards the
company for any loss or damages suffered by it as a result of a claim
brought against it by a third party creditor.
It does not
create a
lis
between
the director and a third party. One party cannot ordinarily
claim the loss sustained by another. Whereas Section
424
contemplates that the directors or other persons, found by the Court
to be liable for the debts and liabilities of the company,
has a
direct liability towards the third party creditors of a company.
Had the legislature wished to create a liability in
the manner
contemplated by Section 424, Section 77 would have been drafted in
similar terms, but this was not done.”
[12]
It was submitted further by the defendants that, on reading the
wording of Sections 424 and 77 of the different Acts as clearly
and
correctly set out, Section 77 is not available as a remedy to third
party creditors and that was illustrated in the finding
by Fourie J
in
Grancy Property Ltd and Another v Gihwala and Others
[2014] ZAWCHC 97
at paragraphs 103 and 104 which stated
that:
“
[103]
The next question which arises, is whether, in these circumstances,
it is open for Grancy to invoke Section 77(3) of
the 2008
Companies
Act and
thereby have Gihwala and Manala declared statutorily liable
for this debt. The difficulty that I have with a declaration on
this basis, is that Section 77(3) of the 2008
Companies Act provides
that a director of a company is liable for any loss, damages or
costs
sustained by the company
(my emphasis) as a direct or indirect consequence of the director
having acted in the manner set out in the subsection. On
my
reading of
Section 77(3)
, it renders the director liable to the
company and not to a third party creditor. Grancy argues that,
in view of the remedy
which a creditor had to hold a director
personally liable under Section 424 of the 1973
Companies Act, it
is
unthinkable that the legislature has now put paid to the remedy which
previously availed creditors to hold a director personally
liable for
his or her reckless and fraudulent conduct.
[104]
It appears to me that this submission does not take proper account of
the fact that the remedy under Section 424 of the 1973
Companies Act,
was
available in a different context, i.e. in circumstances where the
company was liable to the creditor and the director who acted
fraudulently or negligently, may be declared liable for the debt in
circumstances where the company is unable to pay its debts.
This is not the aim of
Section 77(3)
, which, in my opinion, does not,
on a proper interpretation of the plain wording thereof, confer
standing on anyone other than
the company. In any event,
Section 218(2) of the 2008
Companies Act, provides
that any person
(this would include a director of a company) who contravenes any
provision of the Act, is liable to any other person
for any loss or
damage suffered by that person as a result of that contravention.
It follows that a director who does not
comply with the standards of
directors’ conduct as set out in Section 76 of the 2008
Companies Act, would
be liable to any person suffering a loss as a
consequence thereof.”
According
to defendants, as stated at paragraph [104], the appropriate route
for a third party creditor to follow in circumstances
where the Act,
finds application is to rely on the provisions of Section 218 of the
Act read with Sections 22 and 76 of the Act,
rather than Section
77(3)(b) of the Act. So, Section 218(2) of the Act reads as
follows:-
“
Any
person who contravenes any provision of this act is liable to any
other person for any loss or damage suffered by that person
as a
result of that contravention.”
As
per defendants’ interpretation, this section provides a general
remedy to any person to sue another person who contravenes
any
provision of the Act for any loss or damage suffered as a result of
the contravention. Similarly in this matter, should
the
plaintiff be able to establish a contravention of the Act, plaintiff
would be enabled to sue the directors of the first defendant
for any
loss or damage suffered as a result of the contraventions of the Act.
[13]
On the other hand, it was submitted by the defendants that Section
22(1) of the Act which provides that:
“
a
company must not carry on its business recklessly, with gross
negligence, with intent to defraud any person or for any fraudulent
purpose.”
It
was defendant’s argument that if plaintiff intended to invoke
this Section, its claim should have been directed to the
company not
to its directors.
[14]
Mr Loots submitted that relevant to the present case is Section 76(3)
of the Act which provides as follows:
“
76(3)
Subject to the subsections (4) and (5), a director of a company, when
acting in that capacity, must exercise the powers and
perform the
functions of director –
(a)
in good faith and for a proper
purpose;
(b)
in the best interest of the company;
and
(c)
with a degree of care, skill, and
diligence that may reasonably be expected of a person –
(i)
carrying out the same functions in
relation to the company as those carried out by that director; and
(ii)
having the general knowledge, skill
and experience of that director.”
In
essence, Section 22(1) prohibits a company from conducting its
affairs in a reckless or fraudulent manner, and Section 76(3)
provides that the director of a company must exercise the powers and
perform the functions of a director in good faith and for
proper
purpose, in the best interest of the company as the directors manage
the company. Should the directors allow the company
to conduct
its affairs in a reckless or fraudulent manner and with the intent to
defraud third party creditors, such directors
would be breaching
their fiduciary duties as provided in Section 76. In turn, that
would allow the third party creditor who
have suffered loss to
institute action against the directors through Section 218(2) of the
Act, that is the enabling provision.
The approach adopted in
Grancy
(
supra
)
should have been the correct approach to be adopted by the
plaintiff. The approach in
Grancy
(
supra
)
was further followed in
Sanlam
Capital Markets (Pty) Ltd v Mettle Manco (Pty) Ltd and Others [2014]
3 All 454 (GJ)
at para [40] –
[43]. Defendants argued that this exception should be upheld.
[15]
Plaintiff’s Counsel in turn submitted that, central to the
determination of the second ground of exception is the meaning
of
Section 77(3)(b), and whether it can be a basis to found the personal
liability of a director in favour of the creditor of a
company.
Primary to this inquiry is the requirement for statutory
interpretation. The Supreme Court of Appeal in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA)
para
18
stated that:
“
Interpretation
is the process of attributing meaning to the words used in a document
… having regard to
the
context
provided by reading the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant
upon its coming into existence.
Where
more than one meaning is possible each possibility must be weighed in
the light of all these factors.
A
sensible meaning is to be preferred to one that leads to insensible
or unbusinesslike results or undermines the apparent purpose
of the
document.”
Mr
Howie contended that, if the words used must be considered in context
and, in terms of s39(2) of the Constitution of the Republic
of South
Africa, Act 108 of 1996, the statute must be construed in a manner
which promotes the spirit, purport and objects of the
Bill of Rights,
which protect everybody’s rights – See -
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs 2004 (4)
490 (CC) para [87] to [91].
[16]
All that plaintiff needs to show is that the meaning it attributes to
s77(3)(b), read with Sections 22(1) and 77(6) is a reasonably
possible one. This principle was set out in
Fairlands
(Pty) Ltd v Inter-Continental Motors (Pty) Ltd
1972 (2) SA 270
(A)
,
the Appellate Division dismissed an exception taken by the respondent
on the basis that:
“
As
we are dealing with the matter at the exception stage, the question
is not whether the meaning contended for by the appellant
[the
plaintiff in this case] is necessarily the correct one, but whether
it is a reasonably possible one. If the suggested
meaning
is
a reasonably possible one
, the
exception should not be upheld …”
The
interpretation and construction of this section is to be found in the
case of
Rabinowitz v Van Graan and
Others
2013 (5) SA 315
(GSJ)
when analysing Section 77(3) of the 2008
Companies Act, it
was held
at paragraph [22] that:
“
[22]
… third party can hold a director personally liable in terms
of the Act for acquiescing in or knowing about conduct
that falls
within the ambit of Section 22(1) thereof.”
[17]
Therefore defendants reliance on Sections 76 and 218 is misplaced.
What was stated by Fourie, J in
Grancy
(
supra
)
in respect of Sections 77(3), 76 and 218 was clear
obiter
and, was not the result of a thorough investigation as to their
meaning and operation in the context of the provisions themselves
or
the Act as a whole, and the meaning which the directors seek to give
to these sections fails to take into account the provisions
of
Section 158(a) and a series of binding presumptions applicable to
statutory interpretation. Section 76 deals with the
standards
of conduct which directors must adhere to. The Legislature did
not make any reference to reckless trading or fraudulent
conduct,
which is expressly reserved for Sections 77(3)(b) and (c) as
being the basis upon which a director
is
liable.
[18]
The other section in the Act which makes reference to reckless
trading or fraudulent conduct in connection with directors is
Section
162(5)(c)(iv)(bb), which provides that a Court must make an order
declaring a person to be a delinquent director if that
person, while
a director, acted in a manner contemplated in Sections 77(3)(a), (b)
or (c). Even from this section, when it
comes to a director
being personally liable for the losses or damages of a company which
is
not in liquidation
,
the Legislature has expressly indicated that the applicable sections
are Section 77(3)(b) and (c), and not Section 76.
[19]
Defendants in turn submitted that Section 162(5)(c)(iv)(bb) has
nothing to do with the directors vis-à-vis third parties
(or
even the company) for reckless or fraudulent trading.
Plaintiff’s argument in this regard is misplaced.
[20]
It was plaintiff’s submission that the defendant’s
argument on Section 218(1) is without merit. On proper
interpretation and construction of the section, it is nothing more
than an enabling section which allows third parties such as
a
creditor (in this case, the plaintiff) from instituting civil
proceedings to recover monies. It cannot be involved in order
to have a director held personally liable.
[21]
Even if Section 218 is applicable to this instance, which plaintiff
do not admit, the fact that it need not be expressly relied
upon in
the particulars of claim is borne out by the judgment in
Fundstrust
(Pty) Ltd (in liquidation) v Van Deventer
1997 (1) SA 710
(A)
which was approved by the Constitutional Court in
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs
[2004] ZACC 15
;
2004 (4)
SA 490
(CC) at 507 C – D.
The principle laid down by Hefer JA in
Fundstrust
(Pty) Ltd
(
supra
)
was that:
“
What
he does not seem to have realised, because the particulars of claim
did not tell him so, was the
the
allegations in para 26.1
, in
particular the allegation that the company’s memorandum of
association provided for the liability of directors, were
aimed at
Section 53(b) of the 1973
Companies Act, which
provided for the joint
and several liability of directors in the event that it was provided
for in the memorandum of the company.”
Hefer
JA held further that although it was apparent that the particulars of
claim were lacking a specific reference to
Section 53(b)
, express
reliance to the section need not be made in that the facts alleged in
the particulars of claim bring this section into
operation. The
exception was refused, and the same principle was confirmed in
Bato
Star Fishing
(supra) at
507 C – D
, where O’Regan
J held that:
“
Where
a litigant relies upon a statutory provision,
it
is not necessary to specify it
,
but it must be clear from the
facts
alleged by the litigant
that the
section is relevant and operative.”
[22]
It was plaintiff’s contention that in its particulars of claim,
it has instituted a civil action against the directors,
and claims
that they be personally held liable for a loss or damage (US$414
665.90) because they were knowingly party to the reckless
or
fraudulent conduct of the company’s business as provided for in
Section 77(3)(b)
and (c). The absence of an express reliance by
the plaintiff on
Section 218
does not result in the particulars of
claim disclosing no cause of action.
[23]
In the alternative, plaintiff argued that
Section 218
need not be
expressly relied upon because it is simply an enabling provision
allowing for the institution of civil actions and
not a section in
terms of which the personal liability of directors is expressly
provided for. So, defendants’ reliance
on
Section 218
as
a basis of exception must fail as plaintiff’s interpretation of
the section is a reasonably possible one.
[24]
It was denied by the plaintiff that in order to seek this kind of
relief, it should have relied on Section 424 of the Companies
Act 61
of 1973. Plaintiffs submitted that in terms of Section 9 of
Schedule 5, it is expressly provided that the 1973 Act
only applies
to liquidations. This section could not be applicable in the
present dispute.
[25]
Lastly, it was contended by plaintiff that it has a right to pursue
the directors personally for them being party to the carrying-on
of
the business of the first defendant recklessly and in a manner
calculated to defraud the plaintiff as a creditor. Further,
since this is a matter that involves interpretation of statute, where
two (2) meanings may be given to a section (in this case
Section
77(3)), and the one meaning leads to harshness and injustice, while
the other does not, the Court must hold that the Legislature
rather
intended the milder than the harsher meaning – See (
Principal
Immigration Officer v Bhula
1931 AD 323
at 336 in fin
).
Also, the Supreme Court of Appeal in
Chetty
v Hart (20323/14)
[2015] ZASCA 112
(4 September 2015)
at para [8] – where it was stated that the words used are
reasonably capable of bearing more than one meaning, the consequences
of the divergent interpretations must be examined so that a meaning
that is likely to further rather than hinder its purpose is
adopted.
In this regard, a meaning that is more sensible and businesslike is
to be preferred over one that has a contrary
effect. For these
reasons, plaintiff submitted that the meaning that the defendants
request is a harsh one which would lead
to the injustice of depriving
a creditor such as the plaintiff, the right to pursue them for
personal liability, whereas the interpretation
placed upon the
section by the plaintiff is the milder one. The plaintiff’s
interpretation also leads to the more sensible
and businesslike
result. Plaintiff submitted that the first ground of exception
should be dismissed with costs as it was
in any event not pursued by
the directors in argument at the hearing, and further dismiss the
second exception with costs.
F
ANALYSIS OF EVIDENCE AND
APPLICABLE LEGISLATION
[26]
In essence this exception turns on the interpretation of the
statutory provisions. The defendants objected to the
plaintiff’s
particulars of claim on the basis that it is not
entitled as a third party creditor to rely on the provisions of
Sections 77(3)(b),
22(1) and 77(6) of the Act to hold the directors
of the company personally liable for a debt allegedly due to it by
the company
of which they are directors. Section 77(3) of the
Act was compared by the defendants with Section 424 of the 1973 Act.
Plaintiff correctly stated that section 424 is not applicable in this
matter, as this is not a liquidation matter, I agree with
plaintiff’s
submission in this regard. It would therefore, not be worth
analysing this comparison.
[27]
I will now turn to Section 77(3)(b) that plaintiff relied on in its
pleading. For the purpose of deciding an exception,
it is trite
that the Court must assume the correctness of the factual averments
made in the relevant pleading, unless they are
palpably untrue or so
improbable that they cannot be accepted – See
Francis
v Sharp and Others
2004 (3) SA 230
(C).
This
therefore means that this Court should interpret the objects of
Section 77(3)(b) as pleaded by the plaintiff.
At this point, it
would not be necessary to deal with alternative reliance on Sections
77(3)(c) and 77(6). According to plaintiff,
central to the
determination of this ground of exception is the meaning of Section
77(3)(b), and whether it can be a basis to found
the personal
liability of a director in favour of a creditor of the company.
Plaintiff submitted that the interpretation
of Section 77(3)(b) is
not only a reasonably possible one, but one of a number of reasonably
possible ones, and it reads as follows:-
“
77
-
Liability of directors
and prescribed officers
…
(3)
A director of a company is liable for any loss,
damages or
costs sustained by the company
as a direct or indirect consequence
of the director having
–
(b)
acquiesced in the carrying on of the company’s business
despite knowing that it was being conducted in a manner prohibited
by
section 22(1)
;
(c)
being a party to an act or
omission by the company despite knowing that the act or omission was
calculated to defraud a creditor
… or had another fraudulent purpose;”
[28]
It is indeed so that this is a matter for the interpretation of
statute. On consideration of plaintiff’s submission,
it
would appear that they acknowledged that this section of the statute
is capable of more than one meaning. Although it
opposes this
exception, it does not completely discard the interpretation by the
defendants. This therefore means that this
section has an
ambiguous meaning, including the meaning employed by the defendant.
On
first cursory reading
of this section, one may conclude that the section relates to the
liability of directors as a result of damages sustained by the
company as a result of having acquiesced in the carrying on of
company’s business, knowing very well that such conduct is
prohibited by Section 22(1). Whereas on the
second
reading
of this section, one may
conclude that a director of a company is liable for any
loss
,
damages
or
costs
sustained by the company itself, as a direct or indirect consequence
of the director having acted in the manner set out in that
subsection.
[29]
G E Devenish, in his book, Interpretation of Statues at page [61]
suggested two (2) different approaches in the interpretation
of
statutes - that is narrow and wider approach:-
“
(a)
The first (a narrow approach) provides that only where the language
is ambiguous can the Court construe it so as to avoid an
absurd
result …”
(b)
The second (a wider approach) permits a departure from the clear,
unambiguous language of a statute, if to do otherwise would
lead to
an absurdity so glaring that it could never have been contemplated by
the legislature, or where it could lead to a result
contrary to the
intention of the legislature as shown by the context or by such other
considerations as the Court is justified
in taking into account.”
[30]
In interpreting this section, it would be born in mind that a company
is a juristic person. It cannot incur losses, damages
or cost
without the actions of its directors. It might be so that the
section envisages the directors being accountable to
the company.
In the circumstances of this case, the directors made orders of the
clothing, accepted delivery of the same
and thereafter did not pay on
behalf of the company. In my view, they acted recklessly with the
possibility of intent to defraud
plaintiff and cannot escape
liability for their actions.
[31]
In my opinion, the approach to be adopted when interpreting this
section is the narrow approach because of the ambiguity of
the
section. This Court can only interpret this section to mean
that directors of a company are liable for
loss
,
damages
or
costs
sustained by the company as a direct or indirect consequence of the
director having acquiesced in the carrying on of the company’s
business despite knowing that such conduct is prohibited by Section
22(1). Otherwise, if one were to adopt the second reading,
it
would result into wider meaning that would result in an absurdity and
or further inquiry into the section itself. For
instance, if
the director is liable for the loss, damages or costs
sustained
by the company
– who would
ordinarily enforce the civil claim against the directors, as that is
not provided for in the Act. This
approach would create a
lacuna.
Such enforcement is only provided for when the company is
sequestrated and or in liquidation. In such circumstances,
the
liquidator will inadvertently proceed against the director if
necessary. In a case such as the present – damages
claim,
the meaning employed by the defendants is not desirable as it is not
sensible or practicable.
[32]
In the present instance, I am therefore satisfied that the
legislature never intended or contemplated the interpretation as
argued for by the defendants, as this will create a
lacuna.
If this Court were to adopt such an approach, it would lead to absurd
results.
[33]
Besides, plaintiff’s pleadings are not constructed in such a
way that defendants would not be able to plead. Defendants
are fully
aware of the case to meet. Having said so, I agree with the plaintiff
that defendants’ exception should be dismissed.
[34]
In the result, I make the following order.
-
The exception is dismissed with costs.
MANTAME,
J