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[2021] ZAWCHC 17
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AJVH Holdings (Pty) Ltd and Others v Steinhoff International Holdings N.V and Others (8276/2018) [2021] ZAWCHC 17 (27 January 2021)
THE REPUBLIC OF SOUTH
AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No: 8276/2018
In
the matter between:
AJVH HOLDINGS (PTY)
LTD
1st Plaintiff
FULL TEAM SURE TRADE
(PTY) LTD
2nd Plaintiff
AQUILAM HOLDINGS (PTY)
LTD
3rd Plaintiff
LIBER DECIMUS (PTY)
LTD
4th Plaintiff
XANADO
TRADE AND INVEST 327 (PTY)
LTD
5th Plaintiff
and
STEINHOFF
INTERNATIONAL HOLDINGS N.V.
1st Defendant
TOWN INVESTMENTS (PTY)
LTD
2nd Defendant
PEPKOR HOLDINGS
LTD
3rd Defendant
PEPKOR SPECIALITY
(PTY) LTD
4th Defendant
TEKKIE
TOWN (PTY)
LTD
5th Defendant
Coram: Bozalek J
Heard: 29
October 2020
Delivered:
27 January 2021
JUDGMENT
BOZALEK
J
[1]
This is an exception brought by the third, fourth
and fifth
defendants to the plaintiffs’ amended particulars of claim on
the basis that it lacks the averments necessary to
sustain a cause of
action. The third and fourth defendants/excipients are two Pepkor
companies, Pepkor Holdings Limited (‘Pepkor
Holdings’)
and Pepkor Speciality (Pty) Ltd (‘Pepkor Speciality’)
with the fifth defendant, Tekkie Town (Pty)
Ltd (‘Tekkie
Town’), being the remaining excipient.
[2]
The plaintiffs are four companies which were the
erstwhile owners of
the shares in and claims against Tekkie Town which conducted a
nation-wide retail shoe outlet business known
as Tekkie Town. The
plaintiffs’ cause of action lies in the first place against the
first defendant, Steinhoff International
Holdings NV (‘Steinhoff
NV’), and arises out of an agreement of sale concluded on 29
August 2016 in terms of which
the plaintiffs and the second defendant
sold all of the issued share capital of Tekkie Town and ceded all
claims of whatever nature
they had against that company to Steinhoff
NV in return for shares in that latter company. The plaintiffs plead
that on a proper
construction of the contract its subject matter was
the whole of Tekkie Town including its business as a going concern.
[3]
The plaintiffs’ primary cause of action arises
from a series of
alleged fraudulent misrepresentations made by Steinhoff NV,
represented by its then CEO, Mr Marcus Jooste. They
allege that these
misrepresentations induced the contract in terms of which the issued
share capital of Tekkie Town (‘the
sale shares’) and all
claims which they held against that company (‘the sale claims’)
were sold and delivered
to Steinhoff NV. The plaintiffs plead further
that as a result of those misrepresentations they elected to resile
from the contract
which they did on 11 May 2018.
[4]
The plaintiffs’ case against the excipients
arises from the
post-contract transfers from Steinhoff NV of the sale shares and sale
claims to Pepkor Holdings, and of the South
African business of
Tekkie Town to Pepkor Speciality. The main relief sought by the
plaintiffs is firstly the restitution by Steinhoff
NV and Pepkor
Holdings of the subject matter of the sale i.e. the sale shares and
the sale claims ‘
in the condition and with the values,
rights and exigibility’
as these instruments had at the
date of conclusion of the contract. Secondly, the plaintiffs seek the
delivery by Steinhoff NV
and Pepkor Speciality to Tekkie Town of the
business that was transferred as a going concern pursuant to the sale
agreement.
[5]
Under prayer E the plaintiffs further seek payment
by Pepkor
Speciality to Tekkie Town of a sum to compensate the latter for any
reduction of its nett asset value in the event of
Pepkor Speciality
not making return of any part of the business that was transferred as
a going concern. The plaintiffs also seek
ancillary relief under
prayers A and B, namely, a declaration that the Pepkor companies are
deemed not to be juristic persons ‘
in respect of any right,
obligation or liability’
of those companies or of Steinhoff
NV to any of the plaintiffs and further that, for the purposes of
giving effect to the main relief
set out above, the Pepkor companies
and Steinhoff NV are to be regarded ‘
as a single juristic
entity’
. In the alternative to all the main relief
sought the plaintiffs seek the payment of various sums to each of
them by Steinhoff
NV and Pepkor Holdings to the extent that full
restitution is not made.
[6]
The exception is based on three grounds. The
first
ground
relates to the basis upon which plaintiffs attribute to the third,
fourth and fifth defendants the ‘
reckless conduct of
Steinhoff NV’
and certain knowledge which Steinhoff NV
allegedly had, essentially knowledge of concealed facts, which
constitutes the subject
matter of the alleged misrepresentations made
by Steinhoff to the plaintiffs. The attribution of this knowledge to
the Pepkor companies
is clearly critical for the relief which the
plaintiffs seek against those parties.
[7]
The
second
ground of exception concerns the plaintiffs’
allegation that the transfer by Steinhoff NV of the sale shares and
claims and
the business of Tekkie Town to various of its subsidiary
companies and ultimately to the Pepkor companies constituted the use
by
Steinhoff NV of, or acts by or on behalf of, one or more of its
wholly owned subsidiaries. The plaintiffs plead that to the extent
that Steinhoff or any one of the defendants relies on the separate
juristic personality of one or more companies in the Steinhoff
group
in opposing the relief sought by plaintiffs, ‘
that is an
unconscionable abuse of the juristic personality of that or those
companies as contemplated in
sec 20(9)
of the
Companies Act, 71 of
2008
’
. In other words, the plaintiffs purport to ‘
pierce
the corporate veil’
in relation to any such acts or use of
those companies.
[8]
The
third
ground of exception relates to the relief sought by
the plaintiffs, more particularly the claim that in the event of the
sale shares
and sale claims not being returned to the plaintiffs at
all or with a reduced value to that which they had at the time of
delivery,
Steinhoff NV and/or the Pepkor companies would be
unjustifiably enriched and the applicable plaintiffs correspondingly
impoverished
and to such extent each plaintiff will be entitled to
payment of a sum proportionate to the extent of the non-restitution.
The
first ground of exception
[9]
In paragraph 35 of the particulars of claim the
plaintiffs plead that
after delivery of the sale shares and sales claims, also referred to
as ‘
the equity’
, Steinhoff NV caused the sale
shares and the business of Tekkie Town to be delivered to various of
its subsidiary companies in
the period February to October 2017.
[10]
Amongst these averments are that:
‘
35.3.
With effect from 1 July 2017, the Sale shares were transferred by SAH
(Steinhoff Africa Holdings Ltd) to Pepkor Holdings,
since which date
Tekkie Town has been a wholly owned subsidiary of Pepkor Holdings
35.4. With
effect from 1 October 2017, the South African Business of Tekkie Town
was transferred to Pepkor Speciality
which is now in possession and
de facto control of the South African assets and business of Tekkie
Town’.
[11]
In paragraph 36 the plaintiffs plead that at the time of each of the
transfers
the Pepkor companies and Tekkie Town were wholly owned
subsidiaries of Steinhoff NV; furthermore, that at the said time
Steinhoff
NV ‘
had knowledge of the misrepresentations and
that the plaintiffs had relied on the truth of the misrepresentations
in concluding
the contract and delivering the Equity to Steinhoff
NV’.
[12]
In paragraph 36.3 the plaintiffs plead that Steinhoff NV foresaw or
should
reasonably have foreseen that the plaintiffs would cancel the
contract and seek restitution on the grounds of the
misrepresentations.
There follows the key paragraph:
‘
37.
The aforesaid knowledge or reckless conduct of Steinhoff NV was and
remains attributable to each of
the other defendants, and in the case
of Tekkie Town, from the date on which the Equity was delivered to
Steinhoff NV’.
[13]
In their exception the excipients note that the pleaded causes of
action for
relief against them are extensions of the centrally
pleaded cause of action against Steinhoff NV for
restitutio in
integrum
following their resiling from the contract based on
Steinhoff NV’s alleged fraudulent misrepresentations. The case
against
the excipients arises from the subsequent transfers of the
sale shares and Tekkie Town’s business to Pepkor Holdings and
Pepkor Speciality respectively as well as the corporate relationship
between Steinhoff NV and those companies at the time of those
transfers.
General
Principles
[14]
In terms of
Uniform Rule of Court 23(1) where any pleading lacks averments which
are necessary to sustain an action or defence the
opposing party may
deliver an exception thereto. The object of an exception is to
dispose of the case or a portion thereof thereby
providing a useful
mechanism for weeding out cases without legal merit
[1]
.
The Court must look at the pleading excepted to as it stands on the
basis that the allegations made therein are true. An exception
can be
taken to particular sections of a pleading provided that they are
self-contained and amount in themselves to a separate
claim or a
separate defence
[2]
. If the same
claim is based on alternative causes of action, an exception can be
taken against one or more of the alternatives
[3]
.
The pleading must be looked at as a whole
[4]
and an excipient has the duty to persuade the Court that upon every
interpretation which the particulars of claim could reasonably
bear,
no cause of action is disclosed
[5]
.
The
first ground of exception
[15]
Following the key averments in paragraph 37 that Steinhoff NV’s
knowledge
(of the misrepresentations) or reckless conduct was
attributable to the excipients the plaintiffs plead in paragraph 38:
‘
38.
SIH, SAH
(other Steinhoff companies)
and Pepkor Holdings
acquired the shares in Tekkie Town and, Pepkor Speciality acquired
the South African business of Tekkie Town,
with such knowledge’.
[16]
In the following paragraph they plead that, in the premises, Pepkor
Holdings,
(which ultimately acquired the shares) jointly and
severally with Steinhoff NV, is obliged to make restitution to each
of the plaintiffs,
in the appropriate portions, of the sale shares
and sale claims as are presently under their control and that Pepkor
Speciality
is obliged to restore to Tekkie Town, again jointly and
severally with Steinhoff NV, the business and assets it acquired from
Tekkie
Town.
[17]
Thus a key linking element for the liability of the excipients to
make restitution
of the sale shares, sales claims and business of
Tekkie Town to the plaintiffs is the attribution to them of Steinhoff
NV’s
knowledge or reckless conduct.
[18]
The excipients aver however that the plaintiffs have failed to plead
the facts
necessary to sustain the pleaded conclusion that such
knowledge or conduct was attributable to them. They contend that it
is insufficient
to rely only on the fact of their alleged status as
wholly owned subsidiaries of Steinhoff NV at the relevant time and
the fact
of the transfers to sustain the conclusion sought to be
drawn. They argue that more must be pleaded in relation to the
‘
directing mind and will’
of the excipients since
these are corporations and can only function through human agency,
ultimately its board of directors or
a director or person with
delegated authority to act on its behalf. Such a person or persons
would have to be identified as possessing
such knowledge or, one
presumes, at least having knowingly assented to such conduct.
[19]
In
Mostert
NO v Old Mutual Life Assurance Co
[6]
Blignault J quoted with approval the following passage from LAWSA,
First Re-issue, Vol 4 (1) sv Company para 35:
‘
Acts and
states of mind
The acts and
omissions, intentions, purposes and knowledge of certain persons are
the company’s act and omissions, intentions,
purposes and
knowledge. That is to say, because the company as such – as a
mere legal
persona –
has no physical existence and hence
cannot act and has no mind or will of its own, the law attributes
acts and states of mind of
certain persons to the company. Such
persons do not act or think on behalf of, or for, the company, that
is as representatives,
agents or delegates or servants. Rather,
within their appropriate sphere they are an embodiment of the
company: they act and know
and form intentions through the
persona
of the company. Their minds are its mind; their knowledge its
knowledge, their intentions its intention. This theory, ‘
the
directing mind’
or
‘alter ego’
doctrine,
has been developed, with no divergence of approach, in both civil and
criminal jurisdictions, the authorities in each
being cited
indifferently in the other.
The need for the
doctrine always arises where the law requires personal fault as a
condition for liability. Whenever liability depends
upon the
performance of an act or an omission by the company itself, or
possession by the company of a particular state of mind,
the law
treats the acts or states of mind of those who represent and control
the company as the acts and states of mind as the
company itself. …
The doctrine is however not limited to questions of criminal or
delictual liability. It is of general
application, and applies
whenever it is necessary to attribute acts and states of mind to a
company’.
This
statement of law is repeated in LAWSA, 2
nd
Edition Vol 4
part 1
, para 79.
[20]
The excipients contend that the fact that they are wholly owned
subsidiaries
of Steinhoff NV does not alter the fact that they are
separately registered companies with their own boards of directors.
Ultimately,
they argue, the plaintiffs have not pleaded any factual
basis for the attribution of the knowledge which Steinhoff NV
allegedly
had to its subsidiaries and as such have not pleaded the
necessary factual averments to make out a cause of action to hold the
excipients liable on the basis of the attribution of such knowledge
or conduct.
[21]
The plaintiffs seek to counter these arguments by submitting that the
relevant
factum probandum
is that the Pepkor companies
acquired the sale shares and business with the knowledge pleaded in
relation to Steinhoff NV and that
the basis for the principal relief
against the Pepkor companies is the fact that they knew of the
misrepresentations (and their
impact on the plaintiffs) when those
acquisitions took place. They contend that these allegations are
pleaded in paragraph 38 of
the particulars of claim and for present
purposes they must be taken as proven. The means by which those
subsidiaries acquired
that knowledge, they contend, is a matter for
evidence.
[22]
When the plaintiffs use the word or the concept ‘
attribute’
in the particulars however they are clearly saying something other
than that the relevant party had direct knowledge. The primary
meaning of ‘
attribute’
, as in ‘
attribute
something to’
, in the Concise Oxford English dictionary,
tenth edition revised, is to ‘
regard
something
as belonging to or being caused by’
[my underlining], a
meaning which highlights the presumptive nature of the process.
[23]
The difficulty I have with the plaintiffs’ argument is that
neither paragraph
37 nor 38, nor the two taken together can
reasonably be understood as pleading that the Pepkor companies
actually had the knowledge
in question nor do they set up a basis for
the averment that Steinhoff NV’s alleged reckless conduct is
‘
attributable’
to each or either of them.
Paragraph 37 uses the concept of the attribution of knowledge (a
presumptive process) and does not state
that the Pepkor companies
had
the knowledge in question. Nor in my view does paragraph 38 save the
situation for the plaintiffs insofar as it pleads, more directly,
that Pepkor Holdings acquired the shares and Pepkor Speciality
acquired the business of Tekkie Town ‘
with such knowledge’
.
Mr Duminy SC, on behalf of the plaintiffs, contended this was a clear
statement to the effect that the Pepkor companies had actual
knowledge of the misrepresentations or reckless conduct of Steinhoff
NV and thus that any difficulty arising from the bald assertion
in
the preceding paragraph that such knowledge or conduct was
‘
attributable’
to the Pepkor companies was moot.
[24]
However, the two paragraphs must be read in context and together. In
paragraph
37 the plaintiffs base their case on the ‘
attribution’
of knowledge or conduct to the Pepkor companies, an averment which
would be superfluous if paragraph 38 is read as an averment
of actual
knowledge on the part of the Pepkor companies. Furthermore, the
‘
knowledge’
referred to in paragraph 38 as ‘
such
knowledge’
is not specified therein and logically must be
read as the knowledge of the misrepresentations or reckless conduct
imputed to Steinhoff
NV at the time of the various transfers as
referred to in paragraphs 23, 26 and 36.2 of the particulars of
claim. It is also of
significance that para 36 does not aver that the
Pepkor companies had such knowledge at such time. Finally, and in any
event, even
if paragraph 38 were to be read as asserting that the
Pepkor companies had actual knowledge of the alleged
misrepresentations and
reckless conduct on the part of Steinhoff NV
at the relevant time, no factual or legal basis is laid for this
assertion. As such
the pleading offends a basic rule of pleading,
namely, that it ‘
shall contain a clear and concise statement
of the material facts upon which the pleader relies for his claim …
with sufficient
particularity to enable to opposite party to reply
thereto’
.
[25]
In the absence of a clear statement that the Pepkor companies
acquired the
shares and business with direct knowledge of the alleged
misrepresentations and reckless conduct the only reasonable
interpretation
of paragraphs 37 and 38 is that the plaintiffs rely on
that knowledge being
attributed
to such companies. In my view,
in the absence of any allegation as to the basis upon which such
knowledge is attributed to the
Pepkor companies, the basis for their
liability is unclear and as such fails to disclose a cause of action.
The
second ground of exception
[26]
The second ground of exception focuses on paragraphs 40 and 41 of the
particulars
of claim which, under the heading of
‘
Abuse
of corporate personality’
, invoke the provisions of
20(9) of the
Companies Act, 71 of 2008
with a view to ‘
piercing
the veil’
in regard to Steinhoff NV’s conduct in
transferring the sale shares and the business of Tekkie Town to the
Pepkor companies.
[27]
Insofar as they are relevant paragraphs 40 and 41 reads as follows:
‘
40.
The conduct set out in paragraphs 35 and 36 above constitutes the use
by Steinhoff NV of, alternatively
acts by or on behalf of, one or
more or all of SIH, SAH, Pepkor Holdings, and Pepkor Speciality (the
Steinhoff Africa group) and
Tekkie Town.
41.
To the extent that Steinhoff NV or any one of the defendants relies
on the separate juristic
personalities of any one or more of the
companies in the Steinhoff Africa group in opposing any of the relief
sought by the plaintiffs
herein, that is an unconscionable abuse of
the juristic personality of (such companies), as contemplated in
sec
20(9)
of the
Companies Act, 71 of 2008
’.
[28]
By way of relief it is pleaded in paragraph 42 that:
‘
42.
In the premises in terms of
sec 20(9)
of the
Companies Act 71 of
2008
:
42.1
Pepkor Holdings and Pepkor Speciality should be deemed not to be
juristic persons in respect of any right,
obligation, or liability of
those companies or of Steinhoff NV to any of the plaintiffs; and
42.2
Steinhoff NV, jointly and severally with Pepkor Holdings and Pepkor
Speciality (where applicable) should
be directed to deliver:
42.2.1 To the
plaintiffs, the Equity, … and (
in the condition in which
they were delivered in or about between August 2016 and October
2017)
;
42.2.2. … the
business acquired from Tekkie Town …’
[29]
The conduct set out in paragraphs 35 and 36 refers to the transfer of
the sales
shares and the South African business of Tekkie Town to
various of Steinhoff NV’s subsidiary companies and ultimately
to
one or other of the excipients. Paragraph 36 avers that Steinhoff
NV, having knowledge of the misrepresentations and that the
plaintiffs
had relied thereon in concluding the contract, foresaw or
should have reasonably have foreseen that the plaintiffs would cancel
the contract and seek restitution or had reconciled itself with that
prospect.
[30]
In their
notice of exception the excipients contend that in alleging in
paragraph 41 that the separate juristic personalities of
companies
within the ‘
Steinhoff
Africa group’
must be disregarded, the plaintiffs had pleaded a conclusion of law,
alternatively a conclusion of fact and law, without having
pleaded
the necessary facts in order to sustain that conclusion. In making
this contention the excipients rely on the basic principle
of company
law that a company is a legal persona distinct from the members who
compose it, a principle which applies also where
the company is a
subsidiary of another company. In
Wambach
v Maizecor
[7]
it was contended that, because the plaintiff’s board of
directors held a full right of disposal of an asset, the ownership
thereof vested in the plaintiff. The Court held however that the fact
that the board of a controlling company could effectively
take
decisions concerning an asset of a subsidiary did not entail the
asset thereby becoming an asset of the controlling company:
as far as
alienation specifically was concerned, the property in question
remained an asset of the subsidiary until effect was
given to a
decision to alienate it.
[31]
Our Courts
have reaffirmed at the highest level the importance of keeping the
property rights of a company and those of its shareholders
distinct.
In
Shipping
Corporation of India Limited v Evdomon Corporation and Another
[8]
Corbett CJ confirmed that the only permissible deviation from this
rule is where the circumstances justify piercing or lifting
the
corporate veil. Crucially, the learned judge held that doing so
‘
would
generally have to include an element of fraud or other improper
conduct in the establishment or use of the company or the
conduct of
its affairs. In this connection the words
“device”,
“stratagem”, “cloak”
and
“sham”
have
been used’
.
[32]
The Court
in
Shipping
Corporation of India Limited
also referred to the then recent decision in the case of
Adams
and Others v Cape Industries PLC and Another
[9]
where at page 1022 the following passage appears: ‘
If
and so far as the judge intended to say that the motive behind the
new arrangements was irrelevant as a matter of law, we would
respectfully differ from him. In our judgment, as Mr Morison
submitted, whenever a device or sham or cloak is alleged in cases
such as this, the motive of the alleged perpetrator must be legally
relevant, and indeed this no doubt is the reason why the question
of
motive was examined extensively at the trial’
.
In the same passage the Court quoted with approval the
following passage from the judgment in
Woolfson
v Strathclyde Regional Council
1978 SLT 159
to the following effect: ‘
I
have some doubts whether in this respect the Court of Appeal properly
applied the principle that it is appropriate to pierce the
corporate
veil only where special circumstances exist indicating that it is a
mere façade concealing the true facts’.
[33]
The test
for ‘
piercing
the corporate veil’
was formulated in
Hulse-Reutter
v Godde
[10]
as follows: ‘
There
must at least be some misuse or abuse of the distinction between the
corporate entity and those who control it which results
in an unfair
advantage being afforded to the latter’
.
As was held in
Ex
Parte Gore NO and Others
[11]
ownership and control of a company are not of themselves sufficient
to justify piercing the veil and a Court cannot do so, even
when no
unconnected third party is involved, merely because it is perceived
that to do so is necessary in the interests of justice.
The
Court went further, adding the following criteria for piercing the
corporate veil:
‘
31.3 The
corporate veil can only be pierced when there is some impropriety;
31.4 The
company’s involvement in an impropriety will not by itself
justify a piercing of its veil: (furthermore)
the impropriety must be
linked to use of the company structure to avoid or conceal liability;
31.5
If the Court is to pierce the veil, it is necessary to show both
control of the company by the wrongdoer
and impropriety in a sense of
a misuse of the company as a device or façade to conceal
wrongdoings;’.
[34]
Section
20(9)
of the
Companies Act was
recently discussed in
City
Capital SA Property Holdings Ltd v Chavonnes Badenhorst St. Clair
Cooper and Others
[12]
where the following was stated:
‘
[28]
On its plain wording,
sec 20(9)
permits a court to disregard the
separate juristic personality of the company where its incorporation,
use or an act performed
by or on its behalf
“constitutes an
unconscionable abuse of the juristic personality of the company as a
separate entity”.
The term
“unconscionable abuse”
is not defined in the 2008 Act and must therefore be given its
ordinary meaning.
[29]
The meaning of
“unconscionable”
in the Oxford
English Dictionary includes,
“Showing no regard for
conscience … Unreasonably excessive … egregious,
blatant … unscrupulous.”
It is in my view undesirable
to attempt to lay down any definition of
“unconscionable
abuse”.
It suffices to say that the unconscionable
abuse of the juristic personality of a company within the meaning of
sec 20(9) of the
2008 Act, includes the use of, or an act by, a
company to commit fraud; or for a dishonest or improper purpose; or
where the company
is used as a device or facade to conceal the true
facts’.
[35]
In support of their argument that the plaintiffs failed to plead
sufficient
factual allegations to warrant the conclusion that an
unconscionable abuse had taken place as contemplated by
sec 20(9)
of
the
Companies Act, th
e excipients noted that an assertion of separate
juristic personality per se can never constitute an ‘
unconscionable
abuse’
and that it was for the plaintiffs to plead conduct
alleged to constitute such an abuse. In essence, they contend, the
particulars
do not allege that the transfers to the wholly owned
subsidiaries were effected by Steinhoff NV or the Steinhoff Africa
group for
a fraudulent or improper purpose.
[36]
The plaintiffs’ response to the complaint and the supporting
arguments
based on this ground of the exception was that in the first
place the key allegation, namely, the unconscionable abuse of
juristic
personality, was not even predicated on the allegation or
fact that the excipients were wholly owned subsidiaries of Steinhoff
NV at the time of the transfers or that they were members of the
Steinhoff Africa group. They contend further that whether the facts
warrant a piercing of the veil is something to be decided on the
evidence in the trial. This, however, begs the question as to
what
the material facts the evidence must cover. Put differently, the
plaintiffs’ argument is that the circumstances in which
a
company’s juristic personality may be disregarded need not
necessarily involve fraud or improper conduct although these
may be
important considerations. In this regard the plaintiffs contend that
the nature of the corporate structure is also a relevant
factor. None
of this, however, answers the excipients’ essential complaint
which is that no material facts other than the
status of the Pepkor
companies as wholly owned subsidiaries of Steinhoff NV were pleaded
as a possible basis for the invocation
of
sec 20(9)
of the Act.
Ironically, as mentioned, the plaintiffs disavow reliance even on
that status as a basis for the Court to intervene
or pierce the veil
in terms of
sec 20(9)
of the Act.
[37]
On behalf of the plaintiffs’ counsel argued that to the extent
that this
ground of the exception required the plaintiffs to allege
that the use of the Pepkor companies constituted an evasion or a
concealment
on the part of Steinhoff NV, this unjustifiably required
the plaintiffs to plead
facto probantia
rather than no more
than was necessary, namely, the
factum probandum
that such use
of the companies was an unconscionable abuse of their corporate
personality. In support of this argument counsel
referred to the
terms of
sec 20(9)
and contended that the jurisdictional requirements
set out therein were adequately pleaded in the relevant portion of
the particulars
of claim. In my view, however, it does not follow
that simply because the basic requirements for the invocation of the
piercing
of the veil doctrine (as statutorily incorporated in
sec
20(9)
of 2008 Act) have been pleaded that this is sufficient to
constitute a cause of action. Regard must be had to the provisions of
Rule 23(1) which require that every material fact must be pleaded, as
well as the case law which has developed around the concept
of the
piercing of the veil.
[38]
The cases
cited by the plaintiffs’ counsel in this regard,
Ex
Parte Gore
and
Prest
v Petrodel Resources Ltd
[13]
lend no support to his argument. As far as
Ex
Parte Gore
is concerned the extract cited in paragraph 35 above clearly
illustrates the point, namely, that ownership and control of a
company
are not of themselves sufficient to piercing the veil nor
will a Court pierce the veil based simply on the perception that this
will serve the interests of justice.
[39]
In
Prest v Petrodel
Lord Sumption dwelt on the difficulty of
identifying irrelevant wrongdoings and concluded ‘
it seems
to me that two distinct principles lie behind these protean terms
(
“façade”
or
“sham”)
and
that much confusion has been caused by failure to distinguish between
them. They can conveniently be called the concealment
principle and
the evasion principle’
. In his speech Lord Neuberger
largely agreed with the conclusions reached by Lord Sumption stating
as follows: ‘
Having read what Lord Sumption says in his
judgment … I am persuaded by his formulation in para 35,
namely, that the doctrine
should only be invoked where “a
person is under an existing legal obligation or liability or subject
to an existing legal
restriction which he
deliberately
evades
or whose enforcement he deliberately frustrates by
interposing a company under his control’
.
[40]
In my view the statements in
Prest v Petrodel
to which I have
referred lend support to the proposition that the piercing of the
veil doctrine is not properly pleaded by merely
making a bald
allegation that such a step is justified or by simply reciting the
requirements set out in
sec 20(9)
of the
Companies Act. The
element
of a deliberate evasion, frustration or concealment must necessarily
be pleaded in order that the party against whom it
is invoked can
know and meet the case made against it.
[41]
Further
support for the excipients on this ground is be found in a leading
case dealing with piercing or lifting of the veil:
Cape
Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and
Others
[14]
.
There it was held, through the judgment of Smalberger JA, that it is
a salutary principle that the Court should not lightly disregard
a
company’s separate personality and should strive to give effect
to it but where fraud, dishonesty or other improper conduct
is found
to be present, other considerations come into play. If a company,
otherwise legitimately established and operated, is
misused in a
particular instance to perpetuate a fraud or for a dishonest or
improper purpose, there is no reason in principle
or logic why its
separate personality cannot be disregarded in relation to the
transaction in question.
[42]
In my view in order to establish a cause of action it is insufficient
for the
plaintiffs to merely allege that the use of the companies or
acts on their behalf constituted an unconscionable abuse of their
juristic personality. That is a conclusion of law and fact to be
determined upon a hearing of the evidence. The doctrine of piercing
the veil cannot be successfully invoked in the absence of some
underlying improper motive, purpose or intent to abuse the corporate
personality of the relevant company. In the circumstances I find that
this ground of the exception is also well-founded.
The
third ground of exception
[43]
This ground focuses on an alternative basis of claim, namely, that of
unjustified
enrichment which is pleaded in paragraph 43 under that
heading, the relevant part reading: ‘
In the event of the
applicable proportion of the Sale Shares and Sale Claims not being
returned to any of the plaintiffs as aforesaid,
either wholly or in
part or the South African business and assets of Tekkie Town as at 1
October 2017 not being returned to Tekkie
Town at all or with less
than the value they had at the time of delivery (“the
non-restitution”), the plaintiffs plead
as follows:
’.
[44]
There follow allegations that to the extent of any non-restitution:
Steinhoff
NV or Pepkor Holdings, in respect of the Tekkie Town
shares, will have been unjustifiably enriched and the applicable
plaintiff
correspondingly impoverished in proportion to its purchase
price aliquot share; or in respect of the South African business and
assets of Tekkie Town, that Steinhoff NV or Pepkor Speciality will
have been unjustifiably enriched and each plaintiff impoverished
in
the same proportions as above in respect of the reduction in Tekkie
Town’s nett asset value. It is further pleaded that
each
plaintiff will be entitled to payment by Steinhoff NV and Pepkor
Holdings, jointly and severally, of sums proportionate to
the extent
of such non-restitution and, in the case of Tekkie Town, to payment
by Pepkor Speciality to it of a sum to compensate
it for any
resultant reduction in its nett asset value.
[45]
A further alternative is then pleaded to the effect that, to the
extent there
is less that complete restitution, each plaintiff will
be entitled to compensation by Steinhoff NV (but not the excipients)
in
an amount deemed fair and reasonable by the Court.
[46]
In its notice of exception, the excipients contend that the
plaintiffs’
claim for
restitutio in integrum
, the basis
of its principal claim arising from their decision to rescind the
contract, is a separate and distinct remedy from that
of an
unjustified enrichment. They contend further that the plaintiffs have
not pleaded the necessary facts to justify a claim
based against the
excipients based on unjustified enrichment. In particular, they
contend that delivery of the sale shares and
sale claims by the
plaintiffs to Steinhoff NV are not pleaded to have been ‘
sine
causa’
but rather to have been made pursuant to the
contract from which the plaintiffs alleged they ‘
were
entitled to resile … which they did on 11 May 2018’
;
nor was it pleaded that the excipients’ alleged enrichment was
at the expense of the plaintiffs.
[47]
The
excipients’ counsel contended that the plaintiffs had failed to
heed the warning in
Davidson
v Bonafede
[15]
and
Yarona
Health Care v Medshield
[16]
emphasising the distinction between a claim for
restitutio
in integrum
and unjustified enrichment.
[48]
In disputing this ground of the exception the plaintiffs argue that
it is based
on a misreading of the particulars of claim inasmuch as
the primary relief sought is restitution based on allegations of
fraud
whilst the principles of enrichment are invoked only to the
extent that full restitution could not be made by one or more of the
defendants. This, it was submitted, is clearly expressed in the
introductory wording used in paragraph 43 of the particulars of
claim
quoted above, whereupon follows the claim based on principles of
unjustified enrichment. Accordingly, contend the plaintiffs,
on a
proper reading a conditional, ancillary ground for relief was pleaded
to address any failure to make full restitution and
not
as an
alternative for restitution.
[49]
At this level the plaintiffs’ contentions in this regard are
correct
but the question remains whether, in the event of their main
claim succeeding but yielding less than full restitution, they are
entitled to claim the difference by way of relief as framed in the
form of a (conditional) unjustified enrichment action.
[50]
It is indeed so that our courts have repeatedly emphasised the
distinction
between an action for restitution and a claim for
unjustified enrichment. In
Davidson v Bonafede
Marais AJ (as
he then was) cited with approval an academic authority to the effect
that the action for
restitutio in integrum
is a separate and
distinct remedy and not an enrichment action. More recently this
distinction was emphasised by the Supreme Court
of Appeal in
Yarona
Health Care v Medshield
where the Court stated as follows at
paragraph 8:
‘
It is as well
to begin by emphasising that Medshield’s claim was not a claim
for restitutio in integrum. That is a special
remedy accorded by our
law when contracts are rescinded on certain recognised grounds’.
[51]
It is uncontroversial that where a Court has ordered
restitutio in
integrum
the Court is expected to do the best it can to restore
the parties to their respective positions
ante quo
(as was
expressed by Marais AJ in
Davidson v Bonafede)
. In so doing it
can award compensation or damages. The learned judge said in this
regard:
‘
In a sense, I
suppose, it could be said that the award of damages is really only
one facet of an entire process, namely, the process
of restoring the
parties to their pre-contractual positions but it is probably more
correct to regard such an award as a separate
and distinct claim for
damages. In the end it seems to me to be a question of degree as to
whether any particular financial adjustment
that falls to be made is
one which is an integral element in the granting of restitutio in
integrum, or is one which is collateral
to it, and so should form the
subject of distinct claim for damages’
.
[52]
In the present case the plaintiffs plead (in paragraph 43 and prayer
G) a fall-back
claim against Steinhoff NV for compensation in a sum
that the Court ‘
deems fair and reasonable’
in the
event of less than full restitution. As I have noted however this
alternative basis for ‘top up’ relief is not
asserted
against the excipients. The only basis upon which the plaintiffs seek
so-called ‘top up’ relief against them
is by way of a
claim for unjustified enrichment. However, such a claim is not
brought as an alternative to the plaintiffs’
main claim for
restitutio in integrum
but is framed as co-existing with it.
Given the frequent statements by our Courts that these are two
distinct remedies, a distinction
which should not be lost, I consider
that these claims cannot co-exist except as full alternatives i.e. in
the event that the claim
for restitution fails on its merits. Put
differently, it is not open to the plaintiffs to claim restitution
based on their resiling
from a contract allegedly induced by fraud
and, on the other hand, whilst relying on the same factual matrix, to
claim (albeit
conditionally) a portion of their damage based on a
claim for unjustified enrichment. This is particularly so where our
law does
provide for a ‘top up’ claim for damages in
cases where restitution is claimed but falls short of full
restitution.
[53]
Besides contending that the plaintiffs are not entitled to rely on a
conditional
claim based on unjustified enrichment for the balance of
any damages they have suffered where their main claim is based on
restitutio in integrum
, the excipients advance other reasons
why they contend the unjustified enrichment claim is excipiable,
namely, in that on its own
terms it has not been properly pleaded.
[54]
Although there is no general action based on enrichment in our law
there are
nonetheless certain general requirements for any such
action which are as follows: firstly, the defendant must be enriched;
secondly,
the plaintiff must be impoverished; thirdly, the
defendant’s enrichment must be at the expense of the plaintiff;
and, fourthly,
the enrichment must be unjustified (
sine causa
).
[55]
In explaining this ground of their exception the excipients identify
the first
shortcoming as being that the delivery of the sale shares
and sale claims by the plaintiffs to Steinhoff NV were not, and are
not
pleaded to be,
sine causa
, but rather to have been made
pursuant to the contract from which the plaintiffs allegedly were
‘
entitled to resile …’
. This in indeed so –
no such averment was made vis-à-vis Steinhoff NV, let alone in
relation to the excipients. As
is stated in the discussion in LAWSA
on this topic if the mere fact that one person was enriched at the
expense of another were
to give rise to an enrichment action,
liability would be so wide as to put an end to all profit making. It
is consequently required
that the enrichment must be unjustified
(
sine causa
) i.e. without any sufficient ground recognised by
law to justify the transfer or retention of value which has passed
from the plaintiff
to the defendant.
[56]
The second shortcoming identified by the excipients is that the
plaintiffs
have not pleaded that the excipients’ alleged
enrichment was at the expense of the plaintiffs. This argument was
met by the
plaintiffs pointing out that the averments that they were
impoverished and the defendants/excipients commensurately enriched
were
in fact made. This is so but, as I understand the excipients’
criticism, the plaintiffs have failed to plead a causal link
between
the plaintiffs’ impoverishment and the enrichment of those
defendants. Again it is stated in LAWSA that it is not
sufficient
that the defendant has been enriched and the plaintiff impoverished.
There must be a causal link between the enrichment
and the
impoverishment. I am not persuaded that such a causal link has been
pleaded by the plaintiffs either directly or by implication.
Furthermore, the claim for unjustified enrichment is based on the
eventuality that the subject matter of the sale agreement i.e.
the
sale shares and claims and the nett asset value of Tekkie Town’s
business may, on restitution, be found to be worth less
than their
value at the time of the sale agreement. It is left unexplained why
any such reduction in these values should inevitably
lead to
liability on the parts of the excipients based on unjustified
enrichment.
General
[57]
In the exception as originally filed the excipients included no
prayer for
relief. At the hearing, however, they successfully moved
for an amendment to their notice of exception adding a prayer for
relief,
namely, dismissing the plaintiffs’ claim/s
alternatively granting them leave to amend their particulars within
ten (10) days
of such order as this Court may grant in order to
render their particulars unexcipiable, as well as a prayer for costs.
Some argument
followed this amendment, the point being made by
plaintiffs’ counsel that such a generalised prayer for relief
did not necessarily
meet the situation where not all of the grounds
of exception impacted equally on all the defendants or were upheld.
Counsel for
the excipients undertook to furnish a draft order to meet
the differing situations and to afford plaintiffs’ counsel an
opportunity
to comment thereon if needs be. Draft orders based on
which grounds of exception might be upheld were placed before me by
both
the excipients and the plaintiffs. Many of the variations
identified which paragraphs of the particulars required amendment
failing
which identified prayers for relief would be dismissed.
[58]
I do not consider it necessary, particularly where the particulars of
claim
involve multiple parties and claims, to identify precisely
which paragraphs require to be amended by the plaintiffs since this
can be determined by the pleader having regard to this judgment. It
is sufficient to identify which claims fall to be dismissed
in the
event that any amendment by the plaintiffs fails to render such claim
unexcipiable. The upholding of the first ground of
the exception
renders the plaintiffs’ claim in respect of prayers C, D, E
and, arguably, F excipiable. Prayers A and B are
hit by the upholding
of the second ground of the exception. The upholding of the third
ground of the exception also affects prayers
E and F. Since in sum
the successful grounds of exception affect all of the claims against
the third to fifth defendants, I consider
that the standard form of
relief should apply.
[59]
Having been successful in respect of all three grounds of their
exception the
excipients are entitled to their costs. Each of the
contending parties used more than one counsel and in the
circumstances there
can be no quarrel with an order that the costs
will include those of two counsel.
Order
[60]
In the result the following order is made:
1.
The exception is upheld with costs, including the costs of two
counsel;
2.
The plaintiffs are afforded a period of 20 days from the date of this
order within which to amend
their particulars of claim, failing which
the plaintiffs’ claims against the third, fourth and fifth
defendants are dismissed
with costs, including the costs of two
counsel.
______________________
BOZALEK
J
For
Excipients/Third to Fifth Defendants
Adv Sholto-Douglas SC
Adv BJ Vaughn
As
Instructed
by
Bowman Gilfillan Inc
For
Plaintiffs/Respondents
Adv W Duminy SC
Adv D Irish SC
Adv N Traverso
As
Instructed by
C
& A Friedlander
[1]
Telematrix
(Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards
Authority SA
2006
461 (SCA) at 465 H and see generally the commentary on
Rule 23
at D1
– 294/5 in Erasmus, Superior Court Practice.
[2]
Barret
v Rewi Bulawayo Development Syndicate
1922
AD 457
at 459.
[3]
Du
Preez v Boetsap Stores (Pty) Ltd
1978
(2) SA 177
(NC) at 181 F.
[4]
Nel
and Others NNO v McArthur
2003
(4) SA 142
(T) at 149 F.
[5]
Amalgamated
Footwear and Leather Industries v Jordan and Co Ltd
1948 (2) SA 891
(C) at 893.
[6]
[2001] 2 All SA 465
(C) at paragraph 25.
[7]
[1993] ZASCA 28
;
1993
(2) SA 669
(A) at 647 – 675.
[8]
[1993] ZASCA 167
;
1994
(1) SA 550
(A) at 565 I – 566 F.
[9]
[1991] 1 ALL ER 929
(CH and CA).
[10]
2001
(4) SA 1336 (SCA).
[11]
2013
(3) SA 382 (WCC).
[12]
2018
(4) SA 71 (SCA).
[13]
[2013] UKSC 34.
[14]
1995
(4) SA 790 (A).
[15]
1981
(2) SA 501 (CPD).
[16]
2018
(1) SA 513
(SCA).