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[2016] ZASCA 43
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Itzikowitz v Absa Bank Ltd (20729/2014) [2016] ZASCA 43; 2016 (4) SA 432 (SCA) (31 March 2016)
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THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Case
no: 20729/2014
REPORTABLE
DATE:
31 MARCH 2016
In the matter
between:
GARY
ITZIKOWITZ
.......................................................................................................
APPELLANT
And
ABSA BANK
LIMITED
.................................................................................................
RESPONDENT
Neutral citation:
Itzikowitz
v Absa Bank Ltd
(20729/2014)
[2016]
ZASCA 43
(31 March 2016)
Bench:
Ponnan,
Cachalia, Willis and Saldulker JJA and Fourie AJ
Heard:
15
March 2016
Delivered:
31
March 2016
Summary:
Delict
– pure economic loss – shareholder suing for diminution
in the value of his shareholding – wrong committed
against
company, not shareholder – shareholder not entitled to recover
loss.
ORDER
On appeal from
:
Gauteng Local Division High of the
Court, Johannesburg (Swartz AJ sitting as court of first instance):
Save for affording the appellant 15 days to
deliver a notice to amend counterclaim A, if so advised, the appeal
is dismissed and
the cross-appeal is struck from the roll in each
instance with costs.
JUDGMENT
Ponnan JA
(Cachalia, Willis and Saldulker JJA and Fourie AJA):
[1] This appeal and
cross-appeal arise from exceptions taken by the respondent, Absa Bank
Limited (Absa) to two counterclaims by
the appellant, Mr Gary
Itzikowitz. The appellant is the sole shareholder of Compass Projects
(Pty) Ltd (Compass). Compass, in turn,
holds 17.29 per cent of the
shares in a public company, Quantum Properties Group Limited (QPG).
QPG held 100 per cent of the shares
in A Million UP (Pty) Ltd (AMU),
a property development company. Compass has a loan account in AMU
from which it is owed R5 292 442.
Absa was the banker to
AMU and QPG and had extended loan facilities to AMU. After June 2010,
Absa increased the loan facilities
to AMU from R390 million to over
R500 million. According to Absa, as at 31 August 2011, it was owed a
total of R569 318 000 by
AMU.
[2] On 4 June 2012
the board of directors of AMU resolved that it voluntarily commence
business rescue. On 18 June 2012, and at
the instance of Absa, the
Western Cape High Court, Cape Town (the WCHC) issued an order setting
aside the resolution of the board
of AMU. On 29 June 2012 Absa
applied to the WCHC for an order that AMU be placed under provisional
winding-up. It alleged that
AMU was hopelessly insolvent and unable
to pay its debts. The provisional order was confirmed and made final
by the WCHC on 14
August 2012.
[3] On 30 August 2012
Absa caused a summons to be issued out of the South Gauteng High
Court, Johannesburg (the SGHC) against the
appellant for payment of
the sum of R20 million together with interest and costs on the
attorney and own client scale. Absa relied
for its cause of action on
a suretyship signed by the appellant on 9 January 2008 in terms of
which he bound himself ‘as
a surety and co-principal debtor
jointly and severally together with’ AMU in favour of Absa. The
suretyship was ‘Limited
to a maximum of R20 million together
with such further amounts in respect of interest and costs as have
already accrued or which
will accrue until date of payment of the
amount’. In response, the appellant filed a plea and two
counterclaims – the
subject of this appeal.
[4] In support of his
counterclaims the appellant alleged that AMU’s demise was a
result of intentional, reckless or negligent
conduct by Absa in: (a)
advancing funds to AMU when there was no reasonable prospect of the
monies being repaid; (b) colluding
with directors of QPG and AMU, and
the auditors of AMU, to ensure that they advanced Absa’s wishes
to the detriment of AMU;
(c) colluding with AMU’s joint venture
partner, Protea Hotels, in order to secure benefits for it at the
expense of AMU;
(d) ignoring the appellant’s written request in
September 2011 to cease advancing funds to AMU; and (e) setting aside
the
attempted business rescue and then applying for AMU’s
winding-up. As a result of AMU being wound up, so the allegation
goes:
(a) the value of QPG’s shareholding in AMU had reduced to
nil; (b) trading in QPG shares was suspended by the Johannesburg
Stock Exchange; (c) the value of Compass’ shareholding in QPG
was reduced to nil; and (d) Compass’ loan amount in AMU
amounting to R5 292 442 was rendered irrecoverable. By way
of his counterclaims the appellant seeks to recover from Absa
the
amount of the reduction in value of his shareholding in Compass,
alleged to be R50 002 338.
[5] The appellant’s
counterclaim A is founded in delict. The key allegations on which he
relies are that: (a) Absa knew that
he was a surety, who had a
financial interest as an indirect shareholder in QPG and AMU; and (b)
Absa knew (or more accurately
foresaw) that a winding-up of AMU would
materially impact upon the value of the QPG shares in AMU, the value
of Compass shares
in QPG and, correspondingly, the value of his
shares in Compass. The ‘legal duty’ for his asserted
delictual claim
is framed thus:
‘
In
the premises the plaintiff [Absa] owed the defendant [Mr Itzikowitz]
a legal duty to conduct itself towards AMU as a reasonable
banker and
not to take any decisions or to engage in any business conduct which
could adversely affect the value of shares in AMU
or the value of any
loan account in AMU in material respects. The said legal duty arose
directly as a result of the banker-customer
relationship between the
plaintiff and QPG and between the plaintiff and AMU.’
[6] In counterclaim
B, which was pleaded in the alternative, the appellant relies on the
same allegations of misconduct by Absa
as in counterclaim A.
However, here he relies on the provisions of s 218(2)
[1]
read with s 22(1)
[2]
of the
Companies Act 71 of 2008
. He alleges that
the devaluation of his shares in Compass qualifies as ‘any loss
or damage’ contemplated by
s 218(2)
and that Absa’s
conduct constitutes a breach of
s 22(1).
This, so the allegation
goes, permits him to recover the devaluation directly from Absa.
[7] The SGHC (per Swart AJ)
held:
‘
I
am satisfied that claim A does not disclose a cause of action against
the plaintiff and is bad in law as the legal duty relied
upon is
non-existent. The defendant’s claim A in reconvention is struck
out. Claim B in reconvention falls within the ambit
of s 218(2) read
with
s 22(1)
of the
Companies Act and
is valid. Claim B in
reconvention is allowed to proceed to trial in order for the
averments made in the claim to be proved.’
It accordingly issued the
following order:
‘
1.
The exception on claim A is upheld.
2.
Claim B in reconvention is allowed to proceed to trial.
3.
Each party is ordered to pay its own costs.’
The appellant appeals
against the order upholding Absa’s exception, whilst Absa
cross-appeals the dismissal of its exception
in relation to the
appellant’s counterclaim B.
[8] Counterclaim A is
a delictual claim for pure economic loss. It is well-established that
in contrast to cases of physical harm,
conduct causing pure economic
loss is not prima facie wrongful.
[3]
As it was recently put by the Constitutional Court
in
Country Cloud Trading CC v MEC,
Department of Infrastructure Development, Gauteng
[2014]
ZACC 28
;
2015 (1) SA 1
(CC) para 23:
‘
So
our law is generally reluctant to recognise pure economic loss
claims, especially where it would constitute an extension of the
law
of delict. Wrongfulness must be positively established.
It has thus
far been established in limited categories of cases, like intentional
interferences in contractual relations or negligent
misstatements,
where the plaintiff can show a right or legally recognised interest
that the defendant infringed.’ (Footnotes
omitted.)
Indeed, as the
Constitutional Court pertinently pointed out in
Country
Cloud
(
para
43):
‘
Until
we are satisfied the department
wronged
Country
Cloud, its claim does not get off the ground’.
[4]
[9] Absa’s
primary contention is, in principle, very simple: It is that damage,
if suffered at all, had been suffered by AMU
and that the appellant,
being no more than in the position of a shareholder thrice removed
from that company, could not sue to
recover its (AMU’s) loss or
in the language of
Country Cloud
,
that the appellant had not been ‘wronged’ by Absa. In
approaching this enquiry it is important to keep certain fundamental
principles of company law in mind.
[5]
The notion of a company as a distinct legal
personality is no mere technicality – a company is an entity
separate and distinct
from its members and property vested in a
company is not and cannot be, regarded as vested in all or any of its
members.
[6]
Generally, it is of cardinal importance to keep
distinct the property rights of a company and those of its
shareholders, even where
the latter is a single entity.
[7]
A company’s property belongs to the company
and not its shareholders. A shareholder’s general right of
participation
in the assets of the company is deferred until
winding-up, and then only subject to the claims of creditors.
[8]
In
Gohlke and
Schneider v Westies Minerale (Edms) Bpk
1970 (2) SA 685
(A) at 692E-G, Trollip JA observed:
‘
The
company and its members are bound only to the same extent
as
if
the articles had been signed by each member, that is, as if they have
contracted in terms of the articles. The articles, therefore,
merely
have the same force as a contract between the company and each and
every member as such to observe their provisions . .
.’
[10] Of particular
relevance to the present enquiry is the following statement in
Lawsa
:
‘
Since
the shareholder’s shares are merely the right to participate in
the company on the terms of the memorandum of incorporation,
which
right remains unaffected by a wrong done to the company, a personal
claim by a shareholder against the wrongdoer to recover
a sum equal
to the diminution in the market value of his or her shares, or equal
to the likely diminution in dividend, is misconceived.’
[9]
(Footnote
omitted.)
In support of that
proposition, reference is made to
Prudential Assurance Co Ltd v
Newman Industries Ltd (No 2)
[1982] 1 All ER 354
(CA) at 366-367,
in which it was pointed out that:
‘
Such
a “loss” is merely a reflection of the loss suffered by
the company. The shareholder does not suffer any personal
loss. His
only “loss” is through the company, in the diminution in
the value of the nett assets of the company . .
. The plaintiff’s
shares are merely a right of participation in the company on the
terms of the articles of association.
The shares themselves, his
right of participation, are not directly affected by the wrong doing.
The plaintiff still holds all
the shares as his own absolutely
unencumbered property.’
[11] More recently,
in
Johnson v Gore Wood & Co (a firm)
[2000] UKHL 65
;
[2001] 1 All ER 481
;
[2002] 2 AC 1
(HL), Lord Bingham
of Cornhill observed:
‘
(1)
Where a company suffers loss caused by a breach of duty owed to it,
only the company may sue in respect of that loss. No action
lies at
the suit of a shareholder suing in that capacity and no other to make
good a diminution in the value of the shareholder’s
shareholding where that merely reflects the loss suffered by the
company. A claim will not lie by a shareholder to make good a
loss
which would be made good if the company’s assets were
replenished through action against the party responsible for the
loss, even if the company, acting through its constitutional organs,
has declined or failed to make good that loss. So much is
clear from
Prudential
Assurance Co Ltd v Newman Industries Ltd (No 2)
[1982]
Ch 204
, particularly at 222-223 . . . (2) Where a company suffers
loss but has no cause of action to sue to recover that loss, the
shareholder
in the company may sue in respect of it (if the
shareholder has a cause of action to do so), even though the loss is
a diminution
in the value of the shareholding. . . . (3) Where
a company suffers loss caused by a breach of duty to it, and a
shareholder
suffers a loss separate and distinct from that suffered
by the company caused by breach of a duty independently owed to the
shareholder,
each may sue to recover the loss caused to it by breach
of the duty owed to it but neither may recover loss caused to the
other
by breach of the duty owed to that other. . . .’
[10]
[12] In my view,
counterclaim A falls squarely within the first category alluded to by
Lord Bingham. That being so, the following
dictum from
Prudential
Assurance
(at 222h-223b) is particularly apposite:
‘
But
what [a shareholder] cannot do is to recover damages merely because
the company in which he is interested has suffered damage.
He cannot
recover a sum equal to the diminution in the market value of his
shares, or equal to the likely diminution in dividend,
because such a
“loss” is merely a reflection of the loss suffered by the
company. The shareholder does not suffer any
personal loss. His only
“loss” is through the company, in the diminution in the
value of the net assets of the company,
in which he has (say) a 3 per
cent. shareholding. The plaintiff’s shares are merely a right
of participation in the company
on the terms of the articles of
association. The shares themselves, his right of participation, are
not directly affected by the
wrongdoing. The plaintiff still holds
all the shares as his own absolutely unencumbered property. The
deceit practised upon the
plaintiff does not affect the shares; it
merely enables the defendant to rob the company. A simple
illustration will prove the
logic of this approach. Suppose that the
sole asset of a company is a cash box containing £100 000. The
company has an issued
share capital of 100 shares, of which 99 are
held by the plaintiff. The plaintiff holds the key of the cash box.
The defendant
by a fraudulent misrepresentation persuades the
plaintiff to part with the key. The defendant then robs the company
of all its
money. The effect of the fraud and the subsequent robbery,
assuming that the defendant successfully flees with his plunder, is
(i) to denude the company of all its assets; and (ii) to reduce the
sale value of the plaintiff’s shares from a figure approaching
£100 000 to nil. There are two wrongs, the deceit practised on
the plaintiff and the robbery of the company. But the deceit
on the
plaintiff causes the plaintiff no loss which is separate and distinct
from the loss to the company. The deceit was merely
a step in the
robbery. The plaintiff obviously cannot recover personally some £100
000 damages in addition to the £100
000 damages recoverable by
the company.’
[13] According to the
appellant, this case is distinguishable from those authorities
because, so he asserts, Absa’s conduct
was ‘intentional’.
But, it matters not whether Absa’s conduct was intentional or
merely negligent for the wrong
was committed against AMU and not the
appellant. As
Country Cloud
(para
19) reminds us, the conduct must be wrongful, not in some general
sense, but vis-à-vis the appellant. As the relationship
between a company and shareholder is contractual in nature,
[11]
there can, it seems to me, be no basis for
distinguishing this case from
Country
Cloud
. Moreover, as
Country
Cloud
makes plain, intentional conduct
causing economic loss is not
per se
actionable and is certainly not unlawful where the conduct involved
is conduct permitted by law. Here, one of the key allegations
against
Absa is that it ‘intentionally’ applied to court to
liquidate AMU. The order was granted by the court and AMU
was finally
wound up. It can thus hardly be open to a shareholder thrice removed
to contend that Absa, the major creditor of AMU,
was legally not
entitled to have applied to court to liquidate the company. To once
again borrow from
Country Cloud
(para
43) ‘if [Absa] acted permissibly in causing [the appellant]
that loss, it does not matter that it did so intentionally’.
[14] The appellant
calls in aid three decisions of the High Court in support of his
claim. In the first,
McLelland v Hulett
1992 (1) SA 456
(D),
a
shareholder of a company sued two of its directors for negligence,
which had resulted in the diminution of the value of his shareholding
in the company. Despite recognising that the directors’ conduct
was a wrong committed against the company, Booysen J found
that the
shareholder had a personal claim against the directors. In that
regard he stated (at 467B-H):
‘
The
rule in
Foss
v Harbottle
[(1843)
[1843] EngR 478
;
67 ER 189]
is not an absolute rule . . . While it is clear
that the primary rule that a company must sue for a loss such as that
in question
in this case, and not a shareholder, is a logical
reflection of the concept of limited liability, in practice the real
reason why
the rule must exist is linked more fundamentally to the
separate existence of the company, with the result that, if the
shareholder
is allowed to sue, any wrongdoer will be subject to
“double jeopardy” . . . Where, as in the present case,
that risk
is non-existent, and a shareholder is left with a
diminished patrimony, the continued application of the rule would
amount to an
unwarranted and technical obstruction to the course of
justice.’
[15] In the second,
Kalinko v Nisbet & others
2002
(5) SA 766
(W),
a shareholder sued the
company’s directors for a breach of their fiduciary duty, which
allegedly resulted in the diminution
of the value of his shares in
the company. The shareholder sued personally, and not on behalf of
the company. The defendant directors
argued that the conduct
complained of, at best, established that the company may have a claim
against its directors to be pursued
at the election of the company’s
liquidator. Claassen J disagreed. He stated (at 778D-779C):
‘
It
has, however, been held that a shareholder should not be entitled to
institute a derivative action where he complains that as
a result of
a wrong done to the company his shares have diminished in value in
circumstances where the company itself has a claim
against the
wrongdoer for the loss suffered by it as a result of such wrong. This
is so because to allow the shareholder a right
to claim such loss
could result in “double recovery” by both the shareholder
and the company from the wrongdoer . .
. In my view the mischief of a
potential “double recovery” is not a matter which is to
be decided at the exception
stage . . . Furthermore, it must be
remembered that the rule in
Foss
v Harbottle
is not an absolute rule. Where the risk of double jeopardy is
non-existent and the shareholder is left with a diminished patrimony,
the continued application of the rule in
Foss
v Harbottle
would amount to an unwarranted and technical obstruction to the
course of justice. See
McLelland
v Hulett
1992
(1) SA 456
(D) at 467B-H.
’
[16] Both Booysen J
and Claassen J overlooked the
dictum
of Innes CJ in
Dadoo Ltd v Krugersdorp
Municipal Council,
that the conception
of the existence of a company as a separate entity distinct from its
shareholders is a matter of substance.
[12]
Instead they allowed the likelihood of double
recovery (a reason for the rule) – or more accurately its
absence – to
become the basis for a novel exception to the
rule. In
McCrae v Absa Bank Ltd
,
[13]
the third in the trilogy of cases relied upon by
the appellant, a shareholder of a company sued the defendant bank for
the diminution
of the value of his shareholdings in four companies
(where he was either the sole, or a substantial shareholder) caused
by wrongful
conduct of the bank in effecting unlawful transfers of
ring-fenced funds belonging to the companies. The loss, so it would
seem,
had been suffered by the companies, and the bank’s
obligation had been to the companies, not to the shareholder. That
notwithstanding,
the shareholder sued in his personal capacity, not
derivatively. Adopting the reasoning of Booysen J (in
McLelland
)
and Claassen J (in
Kalinko
),
Satchwell J dismissed the defendant’s exception. In doing so,
she made the same mistake as in the two earlier judgments
of failing
to first determine the logically anterior question, namely: into
which of the three categories alluded to by Lord Bingham
in
Johnson
v Gore
, did the claim fall. Since the
plaintiff in
McCrae
was not bringing a derivative action,
[14]
the rule in
Foss v
Harbottle
should have been irrelevant
to an evaluation of that claim. The key question in
McCrae
ought to have been whether the plaintiff had been independently
wronged by the defendant. Instead of first asking that question
and
determining into which category the claim fell, Satchwell J
considered the possibilities of double recovery and, being on
exception, held that she could not rule out the absence of a double
recovery without evidence.
[15]
In failing to first resolve the anterior
categorisation question, the learned judge allowed the enquiry into
whether there might
be a double recovery to determine whether there
was an actionable duty owed to the shareholder.
[17] In
Fourway
Haulage SA (Pty) Ltd v South African National Roads Agency Ltd
[2008] ZASCA 134
;
2009 (2) SA 150
(SCA) para 25, Brand JA pointed out
that: ‘But the absence of indeterminate liability itself will
not automatically give
rise to the imposition of liability.’
The same must hold true of the risk of double recovery. The fact that
a double recovery
may not be likely in a particular situation does
not create an entitlement in the hands of a shareholder which he or
she did not
have in the first place. Where there is only one wrong;
that was committed against the company, the risk of double recovery
simply
does not arise. The fact that the company has chosen not to
sue, or is unable to sue, does not convert that wrong into a wrong
against its shareholders. The risk of double recovery only becomes
relevant when both the company and its shareholder(s) have been
independently wronged (the third category in
Johnson
v Gore
). It is thus necessary to first
determine into which category a claim advanced by a shareholder
properly falls.
[18] The final string
to the appellant’s bow on this leg of the case is that a claim
such as this should not be decided on
exception. It seems to me,
however, that given the novelty of the claim and the clear legal
principles involved this is ‘quintessentially
a matter that is
capable of being decided on exception’.
[16]
In
Telematrix (Pty)
Ltd v Advertising Standards Authority SA
[2005] ZASCA 73
;
2006
(1) SA 461
para 3, Harms JA stated:
‘
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”.
[17]
Dealing with
an interpretation issue, he added:
“
Nor
do I think that the mere notional possibility that evidence of
surrounding circumstances may influence the issue should necessarily
operate to debar the Court from deciding such issue on exception.
There must, I think, be something more than a notional or remote
possibility. Usually that something more can be gathered from the
pleadings and the facts alleged or admitted therein. There may
be a
specific allegation in the pleadings showing the relevance of
extraneous facts, or there may be allegations from which it
may be
inferred that further facts affecting interpretation may reasonably
possibly exist. A measure of conjecture is undoubtedly
both
permissible and proper, but the shield should not be allowed to
protect the respondent where it is composed entirely of conjectural
and speculative hypotheses, lacking any real foundation in the
pleadings or in the obvious facts.”’ (Footnotes omitted.)
[19] Here, there
seems to be a fundamental illogicality to the litany of allegations
relied upon by the appellant. It is common
cause on the pleadings
that Absa had lent AMU hundreds of millions of rands. Absa was a
secured creditor with a pledge over the
AMU shares held by QPG. On
any reckoning, it had nothing to gain and everything to lose by a
failure of AMU. What is more is that
the focus of the appellant
appears to be on the entitlement of a shareholder (in AMU) to pursue
a claim for wrongs done to AMU.
The additional shareholder levels
(QPG and Compass) are simply ignored. But even if one were to assume
in the appellant’s
favour that QPG as the sole shareholder in
AMU had a right of action against Absa, it remains unclear on what
basis Compass (as
a 17.29 per cent shareholder in QPG) also acquired
such a right.
[20] In upholding Absa’s
exception to counterclaim A, the SGHC recognised that the wrongs
alleged to have been committed by
Absa were all supposedly committed
against AMU in breach of duties owed by Absa to AMU. It found no
facts to have been pleaded
that established a separate and
independent duty owed to the appellant, a shareholder in Compass
(three shareholding levels removed
from AMU), and that Absa’s
knowledge of his shareholding did not establish such duty.
Consequently, the court correctly found
that the appellant could not
proceed against Absa for wrongs done to AMU. This principle found
expression in the judgment of the
English Court of Appeal in
Walker
v Stones
[2001] QB 902
at 932-933;
[2000] 4 All ER 412
(CA) at
438-9. Sir Christopher Slade there stated that a claimant is entitled
to recover damages where:
‘
(a)
the plaintiff can establish that the defendant’s conduct has
constituted a breach of some legal duty owed to him personally
(whether under the law of contract, torts, trusts or any other branch
of the law) and (b) on its assessment of the facts, the court
is
satisfied that such breach of duty has caused him personal loss,
separate and distinct from any loss that may have been occasioned
to
any corporate body in which he may be financially interested. . .’
It follows that the
appellant’s appeal must fail with costs.
[21] Turning to
Absa’s cross-appeal:
It relates to
the dismissal of an exception. The question which at once suggests
itself is whether that decision is appealable.
According to
Maize
Board v Tiger Oats Ltd & others
[2002] ZASCA 74
;
2002 (5) SA 365
(SCA) para 14:
‘
In
the light of this court’s interpretation of
s 20
, the decisions
in
Blaauwbosch
,
Wellington
and
Kett
,
and the well-established principle that this court will not readily
depart from its previous decisions, it now has to be accepted
that a
dismissal of an exception (save an exception to the jurisdiction of
the court), presented and argued as nothing other than
an exception,
does not finally dispose of the issue raised by the exception and is
not appealable. Such acceptance would on the
present state of the law
and jurisprudence of this court create certainty and accordingly be
in the best interests of litigating
parties.’
[22] It is so that
Streicher JA said that in the context of
s 20
of the now repealed
Supreme Court Act 59 of 1959 and that
ss 16
and
17
of the
Superior Courts Act 10 of 2013
differ somewhat from
that provision. But it was not suggested by Absa that anything should
be made of the difference in language.
Rather, so the argument went,
whilst the
Maize Board
principle, the correctness of which has been accepted and followed by
a long line of cases in this court,
[18]
remained good under the new Act, it did not find
application to a cross-appeal.
[23] Howie JA pointed out
in
Guardian National Insurance Co Ltd v Searle NO
[1999] ZASCA
3
;
1999 (3) SA 296
(SCA) at 301, that:
‘
As
previous decisions of this Court indicate, there are still sound
grounds for a basic approach which avoids the piecemeal appellate
disposal of the issues in litigation. It is unnecessarily
expensive and generally it is desirable, for obvious reasons, that
such issues be resolved by the same Court and at one and the same
time. Where this approach has been relaxed it has been because
the
judicial decisions in question, whether referred to as judgments,
orders, rulings or declarations, had three attributes. First,
they
were final in effect and not susceptible of alteration by the
court of first instance. Secondly, they were definitive
of the rights
of the parties, for example, because they granted definite and
distinct relief. Thirdly, they had the effect of disposing
of at
least a substantial portion of the relief claimed. In this regard see
Zweni
v Minister of Law and Order
1993
(1) SA 523
(A)
at 532I-533B.’
[19]
[24] In
Blaauwbosch
Diamonds Ltd v Union Government (Minister of Finance)
1915 AD 599
at 601, Innes CJ said in respect of the question whether an
order dismissing an exception was final:
‘
It
was then laid down that a convenient test was to inquire whether the
final word in the suit had been spoken on the point;
or, as put
in another way, whether the order made was reparable at the final
stage. And regarding this matter from that standpoint,
one would say
that an order dismissing an exception is not the final word in the
suit on that point [in] that it may always be
repaired at the final
stage. All the Court does is to refuse to set aside the declaration;
the case proceeds; there is nothing
to prevent the same law points
being re-argued at the trial; and though the Court is hardly
likely to change its mind there
is no legal obstacle to its doing so
upon a consideration of fresh argument and further authority.’
[25]
I must confess to having some
difficulty in fully understanding the distinction sought to be drawn
by Absa.
Maize Board
laid down a general principle to the effect the
dismissal
of every exception (save an exception to the jurisdiction of the
court), presented and argued as nothing other than an
exception, is
not
appealable. Importantly,
Maize
Board
drew no distinction between
appeals and cross-appeals. A cross-appeal, as Schreiner JA pointed
out in
Goodrich v Botha
1954 (2) SA 540
(A) at 544, is ‘simply an appeal which is conveniently tacked
on to another appeal.’
[20]
And,
in general, the
rules applicable to appeals apply to cross-appeals.
Moreover,
the considerations of principle and policy alluded to above that
militate against entertaining an appeal against the dismissal
of an
exception, must no doubt, apply with equal force to a cross-appeal
against the dismissal of an exception. Any other approach
would in
effect mean that precisely the same issue, if raised by way of an
appeal would not be appealable but if raised by way
of a cross-appeal
would be appealable. Why, it must be asked,
should
a cross-appellant be treated more favourably than an appellant?
If,
indeed, the final word is yet to be spoken on the points raised in
counterclaim B, as both parties accepted before us, an appeal
can
hardly avail Absa at this stage.
It follows
that Absa’s cross-appeal must fail with costs.
[26] In the result:
Save for affording
the appellant 15 days to deliver a notice to amend counterclaim A, if
so advised, the appeal is dismissed and
the cross-appeal is struck
from the roll in each instance with costs.
V M Ponnan
Judge of
Appeal
APPEARANCES:
For
Appellant: M Dendy
Instructed
by:
Itzikowitz
Attorneys, Johannesburg
Lovius
Block, Bloemfontein
For
Respondent: D Turner
Instructed
by:
Webber
Wentzel Attorneys, Johannesburg
Honey
Attorneys, Bloemfontein
[1]
Section 218(2) reads: ‘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.’
[2]
Section 22(1) reads: ‘A company must not
carry on its business recklessly, with gross negligence, with intend
to defraud
any person or for any fraudulent purpose.’
[3]
Steenkamp NO v Provincial Tender Board,
Eastern Cape
[2005] ZASCA 120
;
2006
(3) SA 151
(SCA) para 1.
[4]
See also
Minister
for Safety and Security v Scott & another
[2014]
ZASCA 84; 2014 (6) SA 1 (SCA).
[5]
These principles are usefully discussed in 4(1)
Lawsa
2
ed (2012) paras 65-70 and 76.
[6]
Dadoo Ltd & others v Krugersdorp Municipal
Council
1920 AD 530
at 550.
[7]
The Shipping Corporation of India Ltd v
Evdomon Corporation & another
[1993]
ZASCA 167
;
1994 (1) SA 550
(A) at 566C-D.
[8]
S v De Jager
1965
(2) SA 616
(A) at 625.
[9]
4(1)
Lawsa
2 ed (2012) paras 67
.
[10]
Johnson v Gore Wood & Co (a firm)
[2000] UKHL 65
;
[2001]
1 All ER 481
(HL) at 502. See also the judgments of Lord Hutton at
517 (51C-55G) and Lord Millett at 522 (61-66).
[11]
With reference to
Gohlke
and Schneider v Westies Minerale (Edms) Bpk
1970
(2) SA 685
(A), and recently confirmed in
Communicare
& others v Khan & another
[2012]
ZASCA 180
;
2013 (4) SA 482
(SCA) para 11.
[12]
Dadoo Ltd v Krugersdorp Municipal Council
1920 AD 530
at 550.
[13]
McCrae v Absa Bank Limited
unreported case no. 42229/2008 of the SGHC
delivered on 7 April 2009.
[14]
Broadly stated, a derivative action
(also
referred to as the exception to the rule in
Foss
v Harbottle
)
arises
where a shareholder brings a claim on behalf of the company, to
recover for the company a loss which he alleges has been
sustained
at the hands of the individuals in control of the company. The
benefits of the action accrue to the company and not
the
shareholder. To the extent that the benefits improve the balance
sheet or prospects of the company, the reflective benefit
may be
realised in the value of his shares.
[15]
Paragraph 36.
[16]
AB Ventures Ltd v Siemens Ltd
[2011] ZASCA 58
;
2011 (4) SA 614
(SCA) para 5,
with reference to
Telematrix (Pty) Ltd
t/a Matrix Vehicle Tracking v Advertising Standards Authority SA
[2005] ZASCA 73
;
2006 (1) SA 461
(SCA)
para 3.
[17]
Davenport Corner Tea Room (Pty) Ltd v Joubert
1962 (2) SA 709
(D) at 715H.
[18]
See inter alia,
American
Natural Soda Corporation & another v Competition Commission &
others
2003 (5) SA 655
(SCA) para 12;
Ndamase v Functions 4 All
2004
(5) SA 602
(SCA);
B v S
2006 (5) SA 540
;
[2006] 4 All SA 515
(SCA) para 20;
Gutsche
Family Investments (Pty) Ltd & others v Mettle Equity Group
(Pty) Ltd & others
2007 (5) SA 491
para 12;
Van Niekerk & another v
Van Niekerk & another
2008 (1) SA
76
(SCA) para 4;
Charlton v Parliament
of the Republic of South Africa
2012
(1) SA 472
(SCA) para 19;
Carstens NO v
Carstens
[2012] ZASCA 62
(SCA) para 1;
Picbel Groep Voorsorgfonds (In
Liquidation) v Somerville & related matters
2013
(5) SA 496
(SCA) para 6 and
Thulamela
Municipality & another v T Tshivhase & others
[2015] ZASCA 57
(SCA) para 7.
[19]
Zweni
has been
cited with approval by the Constitutional Court in
International
Trade Administration Commission v SCAW South Africa (Pty) Ltd
[2010] ZACC 6
;
2012 (4) SA 618
(CC) para 49.
[20]
See also
Gentiruco
AG v Firestone SA
(
Pty
)
Ltd
1972 (1) SA 589 (A) at 606H-608A;
National
Union of Metalworkers of SA v Henred Fruehauf Trailers
[1994]
ZASCA 153
; 1995 (4) SA 456 (A) at 475F-G and 4
Lawsa
3 ed (2011) para 410.