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[2020] ZAWCHC 96
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Eclipse Systems and Another v He & She Investments (Pty) Ltd; Tyremac Tyres & Tubes CC and Another v He & She Investments (Pty) Ltd (A294/19) [2020] ZAWCHC 96; 2020 (6) SA 497 (WCC) (4 September 2020)
IN
THE HIGH COURT OF SOUTH AFRCA
[WESTERN CAPE DIVISION, CAPE TOWN]
Case
no: A 294/19
In
the matter between:
ECLIPSE
SYSTEMS
First
Appellant
BRIAN
RILEY
Second
Appellant
and
HE
& SHE INVESTMENTS (PTY)
LTD
Respondent
AND
In
the matter between:
TYREMAC
TYRES & TUBES
CC
Third
Appellant
MOGAMAD
FIROZ
ABRAHAMS
Fourth
Appellant
and
HE
& SHE INVESTMENTS (PTY)
LTD
Respondent
Heard:
31 July 2020
JUDGMENT DELIVERED
(VIA EMAIL) ON 4 SEPTEMBER 2020
SHER, J (LE GRANGE J
et ROGERS J concurring):
1.
We have before us two
related appeals against the grant of summary judgment, in terms of
which the appellants were held liable to
pay to the respondent,
jointly and severally, an amount of R 4 034 806.47 in a matter under
case no. 23198/18, and R 2 446 735.29
and R 504 410.22 in a second
matter, under case no. 23199/18.
The background
2.
The respondent is a
company which operates a well-known driving school in Cape Town. Its
business was jointly administered by a
family of 3 sisters, who were
co-directors: Sandra van der Westhuizen was responsible for the
business’ financial affairs
and Elize Korf for its marketing,
and until her death Joyce Goosen was responsible for its day-to-day
operations. Van der Westhuizen’s
son was employed as the
company’s bookkeeper and Goosen’s son Meyer was also
employed by it, in an unknown capacity.
3.
On 18 December 2018 the
respondent caused summonses to be issued in the two matters referred
to. In both of these the executor of
the estate of Joyce Goosen was
cited as the 1
st
defendant and her son Meyer as the 2
nd
defendant. By this time the respondent’s sole directors were
Van der Westhuizen and Korf. They signed joint affidavits in
support
of the applications for summary judgment.
4.
In the matter under
case number 23198/18 (the ‘Eclipse’ matter), a firm known
as Eclipse Systems (the first appellant),
and Brian Riley (the second
appellant), who operated the said firm, were cited as 3
rd
and 4
th
defendants, whilst in the matter under case number 23199/18 (the
‘Tyremac’ matter) a close corporation known as Tyremac
Tyres and Tubes CC (the third appellant) and its sole member Mogamad
Abrahams (the fourth appellant), were cited as 3
rd
and 4
th
defendants.
5.
The cause of action in
both matters, insofar as the appellants are concerned, was the same.
The respondent alleged that Joyce Goosen
and her son Meyer had,
together with Riley and Abrahams and their respective entities,
‘misappropriated’ the various
sums which are referred to
in the introductory paragraph, from it. In the ‘Eclipse’
matter it was alleged that the
misappropriations occurred between
September 2015 and November 2018, whilst in the ‘Tyremac’
matter it was alleged
they took place between February 2014 and
November 2018.
6.
The misappropriations
were allegedly effected by means of an arrangement whereby, at the
instance of the Goosens, Riley and Abrahams
processed a large number
of fictitious motor vehicle expense transactions, via fleet
management bank cards which had been issued
to the respondent by Absa
and Standard Bank.
7.
The respondent claimed
that a ‘substantial’ portion of the monies that were paid
over to Eclipse Systems and Tyremac
in satisfaction of the charges
which were levied in this manner, was in turn paid over, by
arrangement with the Goosens, into a
bank account which was operated
by Meyer.
8.
Curiously, and
notwithstanding the central averment that the alleged
‘misappropriations’ had been effected at the instance
of
Joyce Goosen, the respondent only applied for summary judgment
against her son and the appellants, and not against her estate.
9.
Meyer
Goosen and the appellants duly filed opposing affidavits. Upon
considering these the Court a
quo
held that they lacked particularity sufficient to sustain valid
defences, and such defences as had been raised therein were in
any
event not
bona
fide
or valid in law. It accordingly granted summary judgment against the
appellants, in the terms prayed for.
[1]
Meyer did not seek leave to appeal the judgments and the Orders which
were made against him. Leave to appeal to this Court was
granted to
the appellants by the Supreme Court of Appeal, on petition to it,
after the Court a
quo
refused such leave.
The relevant
principles
10.
It
is trite that summary judgment, a procedure which was adopted
into our law from English law,
[2]
is aimed at allowing a plaintiff to obtain a final judgment summarily
ie without a trial, in instances where a defendant does not
have a
legitimate defence to an action and has sought to defend it merely
for the purpose of delay. It is aimed at preventing a
defendant from
raising a bogus or sham defence, which is bad in law, in order to
unjustifiably delay a plaintiff from obtaining
what is due to it.
[3]
11.
Given
its summary and final nature it has frequently been described as an
‘extraordinary’ and stringent remedy which
makes drastic
inroads on a defendant’s right to present its case to a
Court.
[4]
As a result, the
Supreme Court of Appeal has warned that it is a remedy which is not
intended to ‘shut’ a defendant
out of defending a matter
unless it is ‘very clear indeed’ that it has ‘no
case’, and it is not to be utilized
to prevent a defendant who
has a ‘triable issue or a sustainable defence’ from
having its day in Court.
[5]
12.
The
applications for summary judgment in this matter were brought and
heard before the amendments to the relevant rule
[6]
came into effect on 1 July 2019.
[7]
As the rule now stands an application for summary judgment can only
be brought after a defendant has filed its plea, and in doing
so the
plaintiff must not only verify the cause of action and the amount
claimed but must, in addition, also identify any point
of law which
it relies upon and the facts upon which its claim is based, and
must also briefly explain why the defence which
has been pleaded by
the defendant does not ‘raise any issue’ for trial.
[8]
What the precise ambit and effect of the amendment is and how it
differs from the previous requirements and the applicable test
in
summary judgment matters has not yet been definitively determined,
but need not be decided by us.
[9]
13.
As it stood at the
time, the rule simply required the plaintiff to verify the cause of
action and the amount claimed, and to state
that the defendant did
not have a
bona fide
defence and had entered an appearance to defend solely for the
purposes of delay; and (just as the subrule currently provides)
in
order to ward off summary judgment the defendant was required to
satisfy the Court, by affidavit, that it had such a defence,
by
disclosing ‘fully’ the nature and grounds thereof and the
material facts upon which it was based.
i)
Ad the defendant’s
duty of disclosure
14.
In
the seminal decision in
Breitenbach
v Fiat
[10]
a full bench held that the obligation on a defendant to ‘fully’
disclose the nature and grounds of its defence and
the material facts
upon which it is based should not be taken literally, for to do so
would require the defendant to set out, in
full, all the evidence
which it intended to rely on in order to resist the plaintiff’s
claim at trial.
15.
Thus,
what a defendant can reasonably be expected to set out in its
affidavit depends upon the manner in which the plaintiff’s
claim has been formulated
[11]
and the defendant need not deal ‘exhaustively’ with the
facts and the evidence which it relies upon in order to substantiate
them.
[12]
16.
All
that is required is for it to set out its defence with ‘sufficient
particularity’
[13]
and
in a manner which is not ‘needlessly bald, vague or
sketchy’.
[14]
To this
end the material facts upon which the defence is based should be set
out in a manner which is ‘sufficiently full’
and complete
enough to persuade the Court that, if what is alleged is proved at
trial, it would constitute a defence to the claim.
[15]
If the stated material facts are equivocal, ambiguous or
contradictory, or fail to canvass matters which are essential to the
defence which has been raised, then the affidavit will not comply
with the rule and summary judgment will be granted.
[16]
17.
Importantly,
the defendant is not obliged to set out what is required of it with
the same exactitude as would be required of a plea,
and the Court is
not required to evaluate what is set out, against the standards
required of a pleading.
[17]
18.
Finally,
the defendant is also not required to persuade the Court of the truth
or correctness of the facts which are set out by
it, nor, where these
are disputed, that there is a ‘preponderance of probability’
in its favour in respect of them,
and the Court is not to ‘endeavour
to weigh or decide’ disputed factual issues.
[18]
ii)
Ad a
bona
fide
defence
19.
As
far as setting out a
bona
fide
defence is concerned, the subrule does not require the defendant to
establish
its
bona
fides
:
it is the defence which must be
bona
fide
and in this regard once again it has been held that the requirement
must not be taken literally, for to do so would be to demand
the
impossible.
[19]
As was
explained in
Breitenbach
:
[20]
‘
On
the face of it
bona
fides
is a separate
element relating to the state of the defendant’s mind. A man
may believe in perfect good faith that he has a
defence, and may
state honestly the facts which he relies upon, yet the law may be
against him, or he may be honestly mistaken
about the facts. He is
bona fide
,
but he has no defence. Another man may make averments which, if they
were true, would be an answer, in law, to the plaintiff’s
claim; but, to his knowledge, the averments may be false. He is not
bona fide
.
If, therefore, the averments
in
the defendant’s affidavit
disclose a defence, the question whether the defence is
bona
fide
or not, in the
ordinary sense of that expression, will depend upon his belief as to
the truth or falsity of his factual statements,
and as to their legal
consequences. It is difficult to see how the defendant can be
expected, in his affidavit to ‘satisfy
the court’…
not only that what he alleges is an answer to the plaintiff’s
claim, but also that his allegations
are believed by him to be true.
There is no magic whereby the veracity of an honest deponent can be
made to shine out of his affidavit.
It must be accepted that the
sub-rule was not intended to demand the impossible. It cannot,
therefore, be given its literal meaning
when it requires the
defendant to satisfy the Court of the
bona
fides
of his
defence. It will suffice, it seems to me, if the defendant swears to
a defence, valid in law, in a manner which is not inherently
and
seriously unconvincing.’
21.
As to the requirement that the defendant must set out the
nature
of its defence Erasmus
[21]
is
of the view that the defendant is required to (merely) set out the
‘character or kind’ (sic) of defence which it
intends to
raise at trial. Such an approach is consonant with an understanding
that a defendant is not required to set out its
defence with the same
degree of exactitude as would be required in a pleading.
The defendants’
case
22. In his opposing
affidavit Riley (who is an IT consultant who performed genuine work
for the respondent) alleged that during
2014, whilst he was at the
respondent’s premises, Goosen informed him that the respondent
required ‘cash liquidity’
(sic) and she asked him to find
someone who had a card machine which could be used to put through
certain EFT charges as company
expenses.
23. She advised him that
the transactions were to be effected in order to ‘assist’
the company with its ‘finances
and cash flow’. The
potential ‘vendor’ would be required to deposit 80% of
the ‘funds’ which were
generated in this manner into her
son’s (Meyer’s) bank account and could retain the
remaining 20% thereof as a commission,
and to cover the costs of the
transactions.
24. Riley consequently
approached Abrahams, who agreed to assist. During the meeting
which Riley held with him, Meyer was
present and Abrahams conferred
telephonically with Goosen.
25. In 2015 Goosen asked
him to secure another card machine which could similarly be used to
put through EFT charges as company
expenses. She again advised him
that this would ‘greatly benefit’ the respondent. Riley
accordingly obtained his own
card machine and proceeded to put
through charges utilizing the fleet bank cards which Goosen or Meyer
provided him with. They
advised him when charges should be put
through and what the amounts concerned should be. As was previously
done by Abrahams 80%
of the ‘funds’ which were generated
in this manner were in turn paid into Meyer’s account and Riley
retained
the remaining 20% in lieu of commission and expenses.
26. These transactions
continued until Goosen passed away, at which time Van der Westhuizen
and Korf called Riley to a meeting at
the offices of the company’s
attorneys where he was accused of misappropriating funds belonging to
the respondent and they
allegedly attempted to ‘bully’
him into admitting this. He said that these accusations came as a
complete shock to
him as he was always under the impression that Van
der Westhuizen and Korf knew of the transactions, given that Van der
Westhuizen’s
son was the company bookkeeper and she oversaw the
financial aspects of the business. As such, she would have had
‘intimate’
knowledge of all the transactions which had
been effected over a number of years, in respect of which she had
never raised a single
query.
27. Consequently, Riley
denied that he had ever had any intention of misappropriating any
funds belonging to the respondent. He
said that he had at all times
believed that he was assisting the respondent and was doing so at its
request and on its instructions,
in terms of an agreement which he
had entered into with it at Goosen’s behest, in her capacity as
a director.
28. In his affidavit
Abrahams confirmed that he had been approached by Riley and Goosen in
2014 and was informed by her that she
was looking for a vendor to
process card transactions in order to create ‘cash liquidity’
for the company. If he was
willing to do so he would be required to
deposit 80% of the ‘funds’ generated into Meyer’s
bank account and could
keep the remaining 20% as a commission, and to
cover any expenses.
29. Goosen’s
proposal was acceptable to him as he understood he would be
‘assisting’ the respondent with its ‘finances
and
cash flow’. At the time he dealt with Goosen he understood she
was acting as a director of the respondent and had made
the request
on its behalf.
30. Pursuant to the
agreement Meyer and later Riley brought the fleet cards to his
(Abrahams’) premises and instructed him
to pass certain
transactions in accordance with their instructions from the
respondent via Goosen.
31. In the premises
Abrahams similarly denied any intention of misappropriating funds
from the respondent. He said that after Goosen’s
death Van der
Westhuizen and Korf had also tried to intimidate him into admitting
that he had misappropriated monies from the respondent
and had also
tried to obtain an undertaking from him to repay such monies.
32. For the sake of
completeness, I mention that Meyer Goosen, in his affidavit opposing
the summary judgment application against
him, stated that he was told
by his late mother to use the funds generated in the aforesaid manner
to maintain, repair and upgrade
the family farm, after the
respondent’s directors had resolved to maintain the farm on
which their parents and the family
members lived. Riley and Abrahams,
however, do not allege that this information was conveyed to them.
33.
Lastly, in their affidavits both Riley and Abrams pointed out that
the summonses in the two matters were issued on 18 December
2018 and
had been served on them the following day. They contended that, in
the circumstances, those portions of the respondent’s
claims
which pertained to transactions which had been effected more than
three years before this ie before 18 December 2015, had
prescribed.
The
findings of the Court a
quo
34. As previously pointed
out the Court a
quo
held that the appellants had failed to set
out their defences with sufficient particularity, and such defences
as had been raised
were not
bona fide
or valid in law.
35. As far as Riley and
his firm Eclipse Systems were concerned it held that his version of
the agreement that he had entered into
with Goosen was ‘remarkably
scant’ and he had not set out the ‘bare bones’
thereof, and his averment that
he did not think that he was
committing a ‘fraud’ was conveniently bald, as it lacked
sufficient particularity.
36. In like vein, the
Court a
quo
held that Abrahams’s affidavit was sparse as
details as to when and where the agreement with Goosen had been
entered into
were not set out therein and, in addition, he had failed
to explain the ‘exorbitant’ commission which he received,
or how payment into Meyer’s bank account could assist the
respondent. The ‘convenient’ lack of particularity in
his
version undermined his bald assertion that he was not intentionally
party to a misappropriation of the respondent’s monies.
37. As far as the
invalidity and alleged lack of
bona fides
of the appellants’
defences are concerned it is apparent that the Court’s
conclusions were underpinned by a finding
that a fraud had been
perpetrated, both on the banks, and on the respondent. The Court
pointed out that from the appellants’
affidavits it was evident
that none of the transactions were in respect of the actual supply of
any goods or services, whilst they
were represented to be so. Thus,
in its view the transactions were clearly illegal and fraudulent and
all the appellants ‘knew
this to be the case’. In the
circumstances any agreement which existed between the parties was
illegal and
contra bonos mores
and the defences relied upon by
the appellants constituted an impermissible attempt to rely on, or to
enforce, an illegal agreement.
38. In addition, the
Court was critical of the appellants’ contentions that they had
entered into the agreement with Goosen
in order to assist the
respondent with its ‘cash liquidity’ and its ‘finances’.
It held that the fact that
the proceeds, less the commission the
appellants were entitled to, were paid into Meyer’s bank
account made a mockery of
these contentions. It also held that the
retention of 20% of the value of the charges that had been levied, in
lieu of commission
and expenses was ‘exorbitant’ and ‘did
not make sense’.
39.
Finally, the Court held that there was no merit in the defence of
prescription because, in terms of the Prescription Act
[22]
a debt only became due when a creditor had knowledge of the identity
of the debtor and the facts from which the debt arose, and
the
respondent had prosecuted its claims ‘well within’ the
requisite three year period of becoming aware thereof.
An evaluation
40. In my view, the Court
a
quo
misdirected itself in a number of material respects. In
the first place, as far as the defence of prescription is concerned
the
respondent did not make any allegation in its particulars of
claim, in either matter, in relation to when it became aware of the
identity of the appellants, or the facts which gave rise to the
underlying debts which gave rise to its claims. The respondent
was
not, of course, required to make such allegations, because a
plaintiff is not required in its particulars of claim to anticipate
a
defence of prescription, and to do so may even be bad pleading. But
the result, nevertheless, is that the Court’s finding
that the
respondent had prosecuted its claims ‘well within’ three
years of becoming aware thereof, was not based on
any factual
underpinning.
41.
Whilst it is so that
[23]
prescription in respect of a debt only commences to run when a
creditor has knowledge of the identity of the debtor and the facts
from which the debt arises, ordinarily a debt will be understood to
have prescribed within three years from the date when it arose,
as it
is generally assumed that the creditor would be aware of such facts,
particularly in a matter such as the one before us,
where it is
alleged by the respondent in its particulars of claim that the
transactions which gave rise to the losses it suffered
were effected
with the appellants, at the instance of one of its directors,
pursuant to agreements that were concluded in this
regard.
Although
ultimately the onus will rest on the appellants to prove when the
respondent did, or could reasonably have become, aware
of their
identity and of the facts giving rise to the alleged indebtedness, on
the limited information available at this stage
it cannot be said
that there is no reasonable prospect of the appellants discharging
this onus.
42. In the circumstances,
in the absence of any allegations in the particulars of claim, in
either of the two matters, that the
respondent was not aware of the
identity of the appellants and the underlying facts from which the
debts arose in respect of these
transactions, until a date later than
the date when each of these transactions was effected, the right to
prosecute a claim in
respect of them would
prima facie
have
prescribed three years from such date.
43. From an examination
of the schedules which are attached to the respondent’s
particulars of claim in both matters it appears
that some 469
transactions were effected pursuant to the arrangement between
the parties via various ABSA bank cards, between
26 January 2015 and
30 November 2018 (433 transactions in the Eclipse matter and 66
transactions in the Tyremac matter), and some
283 transactions were
effected utilizing a Standard bank card (in the Tyremac matter)
between February 2014 and November 2018.
44. This means that in
respect of the Eclipse matter the claim in respect of some 55
transactions which were allegedly effected
via ABSA bank cards
between 4 September and 18 December 2015 (a period more than three
years from date of service of the summons),
totalling R 411 490.95 in
value had, on the face of it, prescribed and
prima facie
the appellants had a
bona fid
e and valid defence in respect
thereof.
45. Equally, in respect
of the Tyremac matter the claim in respect of some 66 transactions
which were allegedly effected via ABSA
bank cards between 26 January
and 28 August 2015 totalling R 504 360.22 in value (ie R 50 short of
the entire second claim which
is set out in annexure ‘TT2’)
similarly appears to have prescribed and the appellants also
prima
facie
had a
bona fid
e and valid defence in respect
thereof.
46. In addition, in
respect of the Tyremac matter the claim in respect of some 75
transactions which were allegedly effected via
a Standard bank card
between 10 February 2014 and 4 December 2015 (as set out in annexure
‘TT1’), totalling R 592 736.27
in value, had also
apparently prescribed, and judgment in such amount should accordingly
also not have been granted.
47. Of course, as was
pointed out in argument before us, in the event that the respondent
can properly aver that it was not aware
of either the identity of the
appellants or the underlying facts which gave rise to the debts which
form the subject of its claims,
until some date later than the date
when the respective transactions which are referred to in the
preceding paragraphs were entered
into, it would be entitled to make
the necessary allegations in its replication in order to meet the
prescription point at trial.
Whether this will be possible depends
inter alia
on whether the knowledge which Goosen had, of the
underlying transactions, and whether her alleged acts as an agent of
the respondent,
can be attributed to it. This is a question which
also impacts on the appellants’ principal defence that the
transactions
were effected by them in terms of an agreement which
they had entered into with the respondent, represented by Goosen.
48.
In this regard it is a fundamental and well-established principle of
company law that a company is a separate juristic person
which has an
identity and legal personality which is separate and distinct, not
only from its members, but also from its directors,
who are
responsible for its management.
[24]
As a result of this separation it is possible for a company to hold a
director liable for defrauding or stealing from it, even
if he is its
sole director and shareholder.
[25]
49.
In
Jetivia
[26]
the UK Supreme Court
held
[27]
that whether legal
responsibility for the acts of an agent, or her knowledge and state
of mind, can be attributed to a company
depends on the purpose for
which the attribution is sought to be made, and the context in which
the question arises.
50. In most instances the
acts and the state of mind of its directors and agents can be
attributed to it, and are, by applying the
principles of the law of
agency (including those applicable to actual or ostensible authority
and any estoppel which may be raised
in respect thereof); and whether
the company will be liable to third parties in respect of such
attribution will depend on such
principles, and any applicable
legislation and the company’s memorandum and articles of
association.
51.
Generally, it can be said that in instances involving actions by
innocent third parties against a company, or by a company against
such parties, the acts and knowledge of its agents will ordinarily be
attributed to it. This will also be the case where a company
is
charged with a criminal offence.
[28]
On the other hand, as was held in
Jetivia
[29]
in cases where a company sues its agents or directors for loss caused
to it by their conduct, such as in matters involving a breach
of
fiduciary duty, or fraud,
[30]
it would be obviously be inappropriate for them to seek to avoid
liability on the basis that their own culpable knowledge and state
of
mind, and their acts, should be attributed to it.
52.
In
Jetivia
a company in liquidation, Bilta (UK) Ltd, lodged claims against its
former directors and against Jetivia, a Swiss company, and
its sole
director, on the grounds that they were parties to a fraudulent
scheme involving VAT frauds pertaining to so-called ‘carbon
credits’.
[31]
It was
alleged that Bilta had been deliberately set up to serve as a vehicle
for perpetrating VAT fraud on the fiscus.
53. The Supreme Court
rejected an appeal which was lodged against the decision of the Court
a
quo
, and confirmed its ruling that in the action by the
company against its directors (one of whom was its sole shareholder)
and third
party co-conspirators it would be inappropriate to
attribute to it the wrongdoing of its directors, as a defence to the
claims
which had been brought against them.
54. In this matter the
respondent company has sought to sue not only its erstwhile director
Goosen and her son Meyer, who according
to its allegations were the
originators of an allegedly unlawful scheme which caused it to suffer
financial loss, but also the
appellants, as outsiders who were
parties thereto. On the face of it the adversarial relationship
between the parties in this matter
is similar in nature, if not on
all fours, with that in
Jetivia
, and the principle laid down
in it would therefore appear to be applicable. But, in my view the
circumstances of this matter are
such that what actually happened and
how and why the transactions were effected is highly suspect, and the
Court a
quo
was not in a position finally to decide whether
the acts and knowledge of Goosen (or any of the other directors for
that matter)
should, or should not, be attributed to the respondent.
55. In their opposing
affidavits the appellants allege that the arrangement which was
proposed to them by Goosen, and which they
agreed to, must have been
known to her co-directors, and they must have consented to it. As was
pointed out by the appellants’
counsel, some 750 transactions
involving a total of just under R 7 million were effected utilizing a
number of bank cards, over
a period of just short of five years,
between February 2014 and November 2018. According to the particulars
of claim and the annexures
thereto the transactions which were put
through were in respect of the alleged servicing, repair and
maintenance of specified motor
vehicles, belonging to the respondent.
One would assume that the financial statements would have
revealed the nature and
extent of these transactions over the years,
at least insofar as the company’s bottom line was concerned.
56. It is not unlikely,
in such circumstances, that Van der Westhuizen, who was responsible
for the respondent’s financial
affairs, and her son who was its
bookkeeper, would have known what was going on, unless they
deliberately turned a blind eye to
what was happening under their
very noses, or were party to it.
57. One is left with a
sense of disquiet that in such circumstances not only was summary
judgment not sought against Goosen’s
estate, but no attempt was
apparently made to hold either Van der Westhuizen senior and junior,
or Korf to account, yet judgment
was taken against the appellants in
full, although they only profited in respect of 20% of the losses
that were sustained, less
any expenses that would have been incurred.
(In this regard the appellants would obviously have incurred bank
charges for processing
these transactions).
58. This disquiet is
increased if one has regard for what is said by Meyer in his opposing
affidavits. As mentioned earlier he was
instructed by his mother to
effect the transactions and to utilize the monies which were
generated by them, for the maintenance,
repairs and upgrading of a
farm, on which he and his grandparents (ie the parents of the
respondent’s directors) and various
other family members lived,
after the directors had taken a resolution to this effect. These
averments provide some context to
the appellants’ averments
that they were informed by Goosen that the transactions would
‘assist’ the respondent
with its ‘liquidity’
and ‘finances’.
59.
Be that as it may, in my view, in the light of these circumstances
(including the appellants’ at least
prima
facie
partial defence to the claims on the grounds of prescription), this
was pre-eminently a matter in which justice and fairness required
that the Court should, in the exercise of its discretion, have
refused to grant summary judgment and it should have directed that
the matter proceed to trial, in order that these issues could be
ventilated irrespective of any consideration of the appellants’
principal defence ie that the transactions were passed in terms of
agreements that were entered into, or any alleged deficiencies
in
respect thereof. In
Breitenbach
[32]
it was held that if, on the material before a Court, there is a
reasonable possibility that an injustice might be done if summary
judgment were to be granted, it would constitute a sufficient basis
for the Court to refuse it, in the exercise of its discretion.
60. There are, in my
view, a number of further reasons why the Court a
quo
erred
and why summary judgment should not have been granted. In my view, it
was not possible, on the limited basis of the curt
allegations in the
particulars of claim and the responses thereto in the appellants’
opposing affidavits, to safely and definitively
conclude that what
occurred either constituted a misappropriation of the respondent’s
monies, or if it did, that the appellants
had no principal defence
thereto, which might succeed at trial.
61. It is important to
remember that the respondent’s claims were formulated on the
basis of an alleged misappropriation and
not on the basis of an
alleged fraud ie on the basis that the appellants had stolen monies
from the respondent and not that they
deceived it by fraudulently
misrepresenting the nature of the transactions which they effected.
The scheme may well have constituted
a fraud on the fiscus, or the
banks, or even on the respondent, but in my view in this respect the
Court a
quo
erred insofar as it repeatedly referred to the
existence of a fraud which the appellants knowingly perpetrated on
the respondent,
as this was not the claim which was before it, and it
is evident that it was heavily swayed by its views in this regard,
and in
large part its rejection of the explanations which were given
by the appellants was based on this misdirection.
62. It is common cause
that, in order to succeed in its claims, the respondent needed to
establish that the appellants had the necessary
intention to steal ie
to deprive it of ownership of the monies that were allegedly
misappropriated from it. In this regard the
appellants alleged that
they never had any such intention, as they acted on the instructions
of the respondent, as conveyed to
them by Goosen and her son, and in
doing so they believed that they were assisting the respondent.
63. The respondent
contends, much as the Court a
quo
did, that the version which
the appellants have offered in this regard is highly improbable and
implausible. But, as was pointed
out previously, when considering and
weighing up a defendant’s version in a summary judgment
application a Court does not
determine the probabilities thereof, for
doing so would effectively be to determine the merits of its defence.
There is indeed
cause to be cynical and sceptical of much of the
appellants’ versions, and they may well flounder at trial. But
the simple
question at this stage of the litigation is merely whether
it can be said that their versions are ‘inherently and
seriously
unconvincing’ to the extent that they can be rejected
out of hand, and as I have previously attempted to point out, the
answer
to this question depends on, and can only be determined by,
what comes out in evidence at the trial. In my view, as implausible
as the appellants’ averments may appear to be, they cannot be
rejected out of hand at this stage.
64. Assuming, for the
moment, that the respondent proves at trial that Goosen and Meyer
stole money from the respondent by perpetrating
a fraud on it, the
appellants would only be jointly and severally liable if it were
proved that they were co-conspirators ie that
they, too, were
dishonest. Dishonesty requires that the appellants should have known
that the transactions in question were dishonest
in relation to the
respondent. A case of a dishonest misappropriation from the
respondent would not be established by proving that
the appellants
knew that the transactions were bogus, and thus potentially
fraudulent, in relation to the banks and/or the fiscus.
65. The appellants may
not have carefully thought through the way in which the respondent
might benefit commercially from the arrangement.
They may simply have
accepted at face value the representation to them by Goosen and Meyer
that the transactions would benefit
the respondent. But even if they
had thought this through, and even if they knew that the respondent
as a separate entity could
not realistically benefit from the
arrangement, they might – as lay people unacquainted with the
legal principles relating
to the attribution of knowledge and the
strict distinction in law between a corporate entity and its
controllers – have genuinely
believed that everything was in
order if the directors approved the arrangement. This belief, if
genuine, would – however
misguided it was – rule out
dolus
.
66. Lastly, insofar as
the Court a
quo
held that the versions which they gave were
‘conveniently’ bald and scant, and thus did not provide
sufficient particularity,
I respectfully differ. In its particulars
of claim the respondent alleged that, with the knowledge and consent
of Goosen the appellants
processed the transactions in the Eclipse
matter ‘during or about’ September 2015 and November
2018, and the transactions
in the Tyremac matter ‘during or
about’ February 2014 and November 2018. In response, the
appellants admitted
that the transactions had indeed been processed
in the periods alleged, with the knowledge and consent of Goosen, and
averred that
this had occurred pursuant to agreements which they had
concluded with her during 2014 and 2015, and they provided
particulars
of where the agreements were concluded, and the terms
thereof. In the circumstances they provided the material particulars
required
for their defence. Whether it was a good defence is
something else, but in my view they cannot be said not to have
provided sufficient
particularity thereof.
67. In the result, for
these reasons I would uphold the appeal, and make the following
Order:
67.1
The appeal is upheld, with costs.
67.2
The Orders of the Court a
quo
are set aside, and substituted with an Order in the following terms:
‘
1.
The applications for summary judgment in the matters under case nos.
23198/18 and 23199/18 are refused.
2.
The defendants are granted leave to defend.
3.Costs
of the applications for summary judgment in both matters shall be
costs in the cause.‘
M
SHER
Judge
of the High Court
I agree, and it is so
ordered.
A
LE GRANGE
Judge
of the High Court
I agree.
O
ROGERS
Judge
of the High Court
Attendances
:
Appellants’
counsel: Adv A Kantor SC
Appellants’
attorneys: Coulters Van Der Walt (Cape Town)
Respondents’
counsel: Adv IC Bremridge SC
Respondents’
attorneys: Marais Muller Hendricks Inc (Cape Town)
[1]
The
judgment is reported
sub
nom
He
& She Investments (Pty) Ltd v Brand NO & Ors
2019 (5) SA 492 (WCC).
[2]
Joob Joob Investments (Pty)
Ltd v Stocks Mavundla ZEK Joint Venture
2009 (5) SA 1
(SCA) at para [29].
[3]
Id
at [31];
Arend & Ano v
Astra Furnishers
1974 (1)
SA 298
(C) at 304G.
[4]
Id
.
[5]
Per Navsa
JA in
Joob
n 2 at paras [31]-[32].
[6]
Rule 32 of
the Uniform rules.
[7]
By way of
GN R 842 in
GG
42497 of 31 May 2019.
[8]
R 32(1).
[9]
In
Tumileng
Trading CC v National Security & Fire (Pty) Ltd; E & D
Security Systems CC v National Security & Fire (Pty)
Ltd
[2020]
ZAWCHC 28
Binns-Ward J held
obiter
at paras [24] and [40] that inasmuch as the provisions of R32(3)(b)
have remained essentially the same and still require
a
defendant to satisfy the court by affidavit that it has a
bona
fide
defence, the requirement in R 32(2)(b) that the plaintiff must show
that the defence as pleaded does not raise an issue for trial
cannot
be taken literally, for a plea that did that would be excipiable,
and unless the obligations on each of the parties as
set out in the
subrules referred to were harmonized the respective supporting
and opposing affidavits ‘would pass
each other like ships in
the night’.
[10]
1976 (2) SA
226
(T) at 228C-D.
[11]
Id,
at 229B.
[12]
Maharaj v Barclays National
Bank Ltd
1976 (1) SA 418
(A) at 426D.
[13]
Id
.
[14]
Breitenbach
n 10
at 228E.
[15]
Id.
[16]
Arend
n
3 at 304A-B.
[17]
Maharaj
n 12 at 426E.
[18]
Arend
n
3,
at 303H;
Maharaj
n 12 at 426A.
[19]
Breitenbach
n
10 at 228B.
[20]
Id
,
at 227H-228B.
[21]
Superior Court Practice
(Van Loggerenberg
et al
Rev Serv 13) at D1-415.
[22]
Act 68 of
1969.
[23]
In terms of
s 12(3) of the Act.
[24]
Salomon v A Salomon
& Co Ltd
[1897]
AC 22.
[25]
S v Hepker & Ano
1973 (1) SA 475
(W) at 475G-H.
[26]
Jetivia
SA & Ano v Bilta (UK) Ltd & Ors
[2015] 2 All ER 1083.
[27]
Per Lord Sumption at paras [87] and [92] and Lords Toulson and Hodge
at para [181]. In its recent decision in
Daiwa
Capital Markets Europe Ltd v
Singularis
Holdings Ltd
[2019]
UKSC 50
the Supreme Court re-affirmed these principles.
[28]
S v Van Den Berg & Ors
1979 (1) SA 208 (D).
[29]
Note 26 a
t
paras [42]-[43], and [89].
[30]
Vide
S
v Smith
1985 (2) SA 70
(T)
at 72C.
[31]
The scheme involved the purchase in the EU of ‘EUAs’ ie
Emissions Trading Scheme Allowances which were zero-rated
for VAT,
which were then sold in the UK with VAT to a related company at a
price lower than the price at which they were bought,
which on-sold
them to entities outside the UK , thereby enabling the defendants to
lodge claims for VAT refunds in the UK.
[32]
Note 10 at 229F-H.