Bayett and Others v Bennettt and Another (2007/9251) [2012] ZAGPJHC 9 (17 February 2012)

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[2012] ZAGPJHC 9
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Bayett and Others v Bennettt and Another (2007/9251) [2012] ZAGPJHC 9 (17 February 2012)

REPORTABLE
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
CASE NO
:
2007/9251
DATE:17/02/2012
In the matter between:
BAYETT,
JOHN
HENRY
.......................................................................
First
Plaintiff
FOUCHE,
TRACY
JOAN
.................................................................
Second
Plaintiff
THOMAZ,
FRANKLIN
CLIFFORD
......................................................
Third
Plaintiff
and
BENNETTT
GEORGE SYDNEY JOHN
........................................
First
Defendant
WALES,
JAMES
PETER
............................................................
Second
Defendant
J U D G M E
N T
KGOMO, J
:
INTRODUCTION
[1] Initially, there were three
(3) independent suits, each with its own plaintiff and defendants
under different case numbers.
They were all for malicious prosecution
against the defendants herein. The defendants also instituted a
counterclaim against the
first plaintiff premised on delictual
fraudulent misrepresentation.
[2] The first case instituted by the first plaintiff against both
defendants was recorded under Case Number 2007/9251. The second
suit
by the third plaintiff was opened under Case Number 2007/12177 and
the third, by the second plaintiff was recorded under Case
Number
2007/12178.
[3] All three malicious prosecution cases were consolidated as one
under Case Number 2007/9251.
[4] Consequently, when the trial herein started, there was one
consolidated case instituted by all the plaintiffs under the case

number previously allocated to the first plaintiff, John Henry Bayett
and the counterclaim lodged by the defendants fell to be
heard and
decided at the same time.
[5] The allegations and issues material to the determination of all
the disputes herein are in my considered view so intertwined
that
justice will be served adequately if they should be assessed as a
whole or holistic unit rather than as separate facts in
respect of
each set of original individual or separate cases, thus
compartmentalising same. It is my further view and finding
that
similar factual evidence and evidential material in many instances
overlapped all of them.
THE ALLEGATIONS
[6]
By the first
plaintiff:
In the summons issued on 2 May 2007 against both the defendants, the
first plaintiff sued for –
R100 000,00 for falsely
accusing the first plaintiff of fraudulently misrepresenting the
gross profit percentage of Melville
Spar to them and at the same
time attempting to extort the sum of R7,1 million from the first
plaintiff, thereby acting wrongfully,
unlawfully and with the
intention of injuries him, i.e. with the requisite
animus
injuriandi
.
R1 154 541,80 being special damages arising out of the costs the
first plaintiff reasonably expended in defending himself against

criminal proceedings instituted maliciously or without probable
cause by the defendants by laying charges against him with
the
police of fraudulently misrepresenting the truth about the
financial affairs of Melville Spar, and
R500 000,00 general damages for contumelia, among others, great
humiliation, degradation and injury to his self-esteem and
to his
esteem in the eyes of others and his own family.
[7]
By the second
plaintiff
:
Her claim against the defendants
was for the sum of R100 000,00 plus costs and interest
a
tempore morae
for the
malicious prosecution and the consequences thereof.
[8]
By the third
plaintiff
:
He claimed R400 000,00 plus
costs, plus interest
a
tempore morae
against
the defendants for malicious prosecution and its
sequelae
.
[9] The defendant’s
counterclaim to the first plaintiff’s particulars of claim was
for the amount of R5 373 707,00
plus costs plus interest at 15,5% per
annum
a tempore morae
for fraudulent misrepresentation of percentage profits at Melville
Spar.
FACTUAL MATRIX AND CHRONOLOGY
[10] The first plaintiff was at
all relevant times, especially around 2004, the sole shareholder and
managing director of a company
called Quantum Leap Investments 123
(Pty) Ltd, (“
Quantum
Leap
”). Quantum
Leap was the conductor of a business known as Melville Spar.
[11] The franchise owner, Spar
Ltd, offered the first plaintiff two other or separate Spar
businesses, which prompted the latter
to decide to sell Melville
Spar.
[12] In preparation for this
intended sale, with the assistance of his in-house bookkeeper, Tracy
Joan Fouche, the second plaintiff
herein, the first plaintiff
prepared a document entitled “
Melville
Spar - - Monthly Expenses 2004
”.
This document was commonly referred to at the trial hereof as
“
Annexure B
”
and I will refer to it as such hereinafter.
[13] For convenience sake the
principals refers herein will henceforth be referred to by their
names, e.g. first plaintiff as “
Bayett
”,
second plaintiff as “
Tracy
”
or “
Fouche
”
or by both name and surname; third plaintiff as “
Thomaz
”;
first defendant as “
Bennett
”
and second defendant as “
Wales
”.
[14] Following up on an
advertisement for the sale of Melville Spar in a local publication
the two defendants entered into negotiations
with Bayett with a view
to purchasing same.
[15] Annexure B showed the
turnover and expenses of Melville Spar for the period March 2004 to
August 2004.
[16] According to Bayett, he
initially compiled Annexure B in order to show “
some
”
of the expenses and turnover a prospective purchaser could expect to
have from the business. He had been involved in an
illegal practice
of skimming on the finances of Melville Spar. Skimming meant taking
money out of the business without declaring
and paying tax thereon to
the South African Revenue Services (“
SARS
”).
During a previous tax amnesty period declared by SARS, he (Bayett)
had applied for and was granted amnesty in regard to
the skimming.
That was before he contemplated the sale.
[17] His external accountant at
Melville Spar, Thomaz, advised him to include the amounts skimmed in
the turnover figures in the
management accounts because the
management accounts were drawn solely for the benefit of the owner of
the business and that as
such it was important that those management
accounts should reflect the true position. He accepted the advice
and did so. As
a result, since the skimmed amounts were part of the
management accounts from which he prepared Annexure B, Annexure B’s
figures therefore included the skimmed amounts.
[18] Bayett entered into an
Agreement of Sale over Melville Spar with the defendants on the 21
October 2004. Clause 4.2 of the
Agreement of sale provided that the
purchasers were at liberty to verify the accuracy of Annexure B
between March and October 2004
to satisfy themselves before
committing themselves. This period, i.e. March 2004 to October 2004
was thus referred to as the “
verification
period
”.
[19] The purchasers, (Bennett
and Wales) elected to verify the accuracy of Annexure B by way of a
due diligence. After the due
diligence the parties agreed to an
Addendum in terms of which clause 4.2 of the Agreement was amended to
provide for a closing
stock take at the end of January 2005 in order
to determine the gross profit percentage. The Addendum provided
further that if
the gross profit percentage was less than 21,3% the
purchasers were at liberty walk away from the deal without any
consequences
to them but that however, they were not obliged to
resile from the Agreement. The gross profit percentage was to be
calculated
for the period March 2004 to January 2005.
[20] It is my considered view
and finding that the two periods that have added relevance,
importance and materiality to issues
to be decided herein are
the
verification
period (March 2004
to August 2004) and
the gross profit percentage period
(March 2004 to January 2005).
[21] According to evidence led
through Thomaz and Greyling, who both testified as experts on behalf
of the plaintiffs in this trial,
the total amount skimmed during or
in the verification period amounted to R350 000,00.
[22] According to Bayett in his
testimony in the trial he did not show all the actual expenses in
Annexure B as the latter was
not meant to be a document including all
expenses. To illustrate his point he referred to the following
expenses which were not
part of Annexure B:
Repairs and maintenance
[23] The budgeted figure for
repairs and maintenance in Annexure B was given as R8 000,00. He
stated that as the narrative showed,
it was not an actual figure but
an estimated or budget amount. His explanation of this disparity was
that the budget amount was
estimated on what he thought a new owner
might have had to spend as by that time he had already spent a lot of
money in getting
almost everything ship-shape. It emerged in the
analysis given by Greyling in court that the actual average monthly
figure for
repairs and maintenance for the months following on the
verification period i.e. September 2004 to January 2005; was
approximately
R10 700,00.
Salaries
[24] Bayett excluded from
Annexure B his salary, that of his wife Claire, Fouche’s who
was about to leave Melville Spar’s
employ and those of two of
his managers who were to join him in his new ventures or leave with
him because he felt that and as
established practice, the new owners
would have preferred their own management team and that he expected
them to allocate their
own structures for salary purposes.
Depreciation, leases, travelling and bank charges
[25] According to Bayett he did
not include these expenses in Annexure B, his reasons therefor being
that depreciation was an audit
calculation and that the other
expenses would normally be personal to a new purchaser and not a
reflection of expected monthly
expenses of the business itself.
[26] Bayett testified that he
stated the gross profit percentage on Annexure B as 21,9 percent ,
the basis being that he assumed
that the gross profit would be in
that region. He submitted that this was not fatal to the deal
because it was not in dispute
that the gross profit percentage could
only be calculated after a closing stock take and that in any event
Bayett did not guarantee
the gross profit percentage for that very
reason. He did not state any nett profit as Annexure B did not
provide for a column
to show same.
[27] It was Bayett’s
further testimony that he gave Annexure B to one Brian Mendelson
(“
Mendelson
”)
of Mel Abro Brokers CC who was mandated to find a purchaser for the
Melville Spar business. When the latter advertised
the sale, he
mentioned the following among others:
“
…
Nett R350K p.m.
”
It was this advert that attracted
the attention of Bennett and Wales.
[28] When he testified, Bennett
confirmed that he met Mendelson on 19 October 2004 and the latter
made him aware of the additional
amounts of R50 000,00 per month that
were skimmed. He further mentioned that handwritten notes mentioning
the R50 000,00 skimmed
amounts were made on the Annexure B copy they
had on hand. Bennett also confirmed that Mendelson also told him that
the salary
figures on Annexure B included an amount of R40 000,00
which represented salaries of two of the Melville Spar managers who
would
be leaving with Bayett. He also made manuscript notes hereof on
the Annexure B copy at hand. He (Bennett) then made some calculations

based on the Annexure B given expenses and deducted the R40 000,00 he
was told was the salaries of the two managers who were leaving
and
then arrived at a nett profit of R330 000,00.
[29] On 20 October 2004 Bennett
and Wales met with Bayett and Mendelson at the Melville Spar. The
former had allegedly taken a
decision:
“
…
to look at the store as a viable proposition
…”
(Bennett’s statement at
paragraph 5.)
[30] After this
“
inspection-in-loco
”
Bennett and Wales concluded the Agreement of sale of Melville Spar in
their capacities as trustees for a private company
to be formed. The
purchase price was R9,1 million excluding stock. Annexure B, not one
with handwritten notes by Bennett which
he effected or made when
discussing the details of the deal with Mendelson on 19 October 2004
but a “
clean
”
Annexure B was incorporated in clause 4.2 of the Agreement. This is
confirmed by paragraph 6 of the defendants’ counterclaim
as
well as Bennett’s own evidence at page 1155 of the Transcript
of the proceedings.
[31] As already stated
hereinbefore, clause 4.2 of the Agreement provided that Bennett and
Wales could verify the accuracy of Annexure
B and that should it
occur during the verification that the turnover and expenses in
Annexure B showed a difference of more than
10 percent of the
verified turnover and expenses, they could resile from the Agreement.
[32] Bennett and Wales
instructed an auditor, Lomnitz to do the due diligence to verify the
accuracy of Annexure B. The latter
delegated that function to
another auditor, Robinson.
[33] There were certain
variances that were discovered during the due diligence, which in my
view may have prompted Bennettt and
Wales to act in the manner they
did as would become clearer as this judgment proceeds.
[34] It is a fact that Bennett
and Wales elected not to resile from the Agreement but instead agreed
to amend clause 4.2 of the
Agreement as set out above. As already
stated again, this amendment was incorporated in an Addendum to the
Agreement which was
executed on 21 December 2004. In terms of this
Addendum, the amendment provided for a closing stock take by or on 31
January 2005
and for the calculation of the gross profit percentage.
The nett results of the amendment among others amounted to the
following:
If the gross profit percentage after the stock take of 31
January 2005 was less than 21,3 percent, then Bennett and Wales could

but would not be obliged to resile from the Agreement. I therefore
cannot disagree with the plaintiff’s averments and contention

hereon that the Agreement’s amendment had superseded any
previous reliance on the accuracy of Annexure B for a possible
reliance on an agreed or given gross profit percentage as an option
to resile from the Agreement.
[35] In January 2005, prior to
the take-over date being 1 February 2005, one Mr Laas, seemingly a
partner or business associate
of Bennett and Wales instructed one
Sean Tanzer (“
Tanzer
”),
a labour consultant, to do an assessment relating to the staff at
Melville Spar as well as the control structures. Tanzer
tabled his
report on 15 January 2005. In that report Tanzer drew attention to
the following:
incorrect sectoral payments for some of the employees and
payment of overtime in cash,
which aspect was already known to Bennett and Wales by virtue of the
due diligence.
[36] The closing stock take was
performed on 31 January 2005 and the agreed upon amount was R1 438
458,00. The gross profit percentage
was stated then as 22,26% and
Thomaz, as the accountant for Melville Spar, issued a certificate to
that effect.
[37] After the take over date,
which was between 1 and 2 February 2005, Bennett and Wales opted not
to be personally involved in
the day-to-day operations of the
business and appointed operators including a new manager on a
profit-share basis.
[38] The issue of hidden files
also came to the fore around August 2005, which is one of the aspects
the defendants contend Bayett
did not play open cards with them :
When Fouche testified, she made mention of the fact that the new
manager at Melville Spar,
one Panyiotou, did not need the information
relating to gross revenue verifications (GRV’s) for the
verification period.
One Yolande Reyneke (“
Reyneke
”)
had furtively or surreptitiously kept information relating to same in
a hidden file at a time when she was allegedly told
by Fouche that
she (Fouche) was going to delete that information from the computer
as part of a cleansing process. During August
2005, most possibly
for purposes of buying favour or patronage Reyneke made the GRV
information for the verification period available
to Bennett. As
fate would have it, nothing ultimately turned on this aspect and
disclosure as the GRV’s ultimately found
by the plaintiffs and
used by Greyling for his analysis of the gross profit percentage and
expenses were similar or the same as
the GRV’s hidden by
Reyneke. This rendered the reference to those GRV’s allegedly
as the hidden files or part of the
hidden files not being capable to
advance the defendants’ case any further.
KNOWLEDGE BY BAYETT OF ALLEGATIONS AGAINST HIM
[39] According to evidence
during the latter part of 2005, around September or October, Bayett
came across information that rumours
or allegations were flying
around that he had defrauded Bennett and Wales during the Melville
Spar sale. He accordingly telephoned
Wales about the allegation.
Wales requested a meeting at which they agreed that they could attend
with their attorneys. Bayett
requested Wales to send him written
representations of his alleged complaints. The latter agreed but
never complied to date.
[40] During the beginning of
December 2005 Bayett contacted his attorney, Brian Kahn (“
Kahn
”)
to inform him that there were rumours flying around that Bennett and
Wales intended laying criminal charges against him
relating to the
sale of Melville Spar, allegedly on account of fraudulent
misrepresentations made by him. Kahn contact an attorney,
a Mr
Nowitz (“
Nowitz
”),
assuming he was Bennett and Wales’ attorney. It emerged that
at the time he was not and he thus did not have any
instructions on
those allegations. He, (Nowitz) contacted Bennett and Wales and they
set up a meeting for 13 December 2005 at 14h00.
Bennett disputes the
time of this meeting : he avers it was scheduled for 12h00 on that
day. After their meeting they met with
Kahn that very same day.
According to Kahn’s evidence he was told at that meeting that
Bayett had made fraudulent misrepresentations
to the defendants and
that he if he (Bayett) did not repay to them an amount of R7,100
million of the R9,100 million purchase price
they paid to him, the
two would proceed with criminal charges for fraud against him.
According to Kahn, he complained to them that
he did not have
sufficient information to meaningfully respond to those allegations.
During his cross-examination it was put to
him that he (Kahn) in fact
demanded the appointment of a forensic auditor at that meeting.
[41] Kahn confirmed the
deliberations at this meeting in a letter addressed to Nowitz dated
20 December 2005. Nowitz only responded
to this letter in February
2006 and did not deny any of the contents thereof save to state that
he would take instructions from
his “
clients
”.
I assume that at this stage Bennett and Wales were now his clients.
This is an interesting, if not strange turn of events,
because Nowitz
was present at the meetings whose outcomes were confirmed by Kahn’s
letter and thus did not need an instruction
to respond or reply to
most if not all of the contents thereof, most of all, those
allegations that dealt with his own personal
involvement at that
meeting.
[42] When he was cross-examined
further it was put to him (Kahn) that Nowitz did not meaningfully
respond to the letter because
he did not want to get embroiled in an
exchange of correspondence in a matter that he was not involved in.
This was also strange
because he exchanged further correspondence
with the plaintiff’s attorneys subsequent to his short response
but he did not
once attempt to deny or disown the allegations made by
Kahn in his letter dated 20 December 2005.
[43] On 26 June 2006 Bayett,
Thomaz and Fouche were charged with fraud in the Specialised
Commercial Crimes Court in Johannesburg.
When they appeared in court
Bayett and Thomaz were in leg irons like common robbers or murderers.
The charge against them was
that they had misrepresented the gross
profit percentage to be 22,26 percent well knowing that it was in
fact 19,47 percent.
[44] They appeared again in
court on 31 August 2006, 2 October 2006, 23 November 2006, 28
November 2006, 9 January 2007 and 30
March 2007. On 30 March 2007 the
State withdrew the charges against him.
[45] They instituted these
proceedings against the defendants in three separate actions on 23
April 2007. As already stated hereinbefore,
the actions were
subsequently consolidated, hence it is one matter in this trial.
REQUIREMENTS FOR ACTION FOR FRAUDULENT MISREPRESENTATION
[46] In order to successfully
rely on a delictual claim premised on an alleged prior fraudulent
misrepresentation inducing an agreement,
the claimants, in this case,
Bennett and Wales, had to prove the following on a balance of
probabilities:
46.1 A representation by Bayett
and/or his agent;
46.2 The representation must
have been made fraudulently, which should have involved knowledge by
Bayett that the representation
was false;
46.3 It must be shown that the
fraudulent misrepresentation was made with the actual or constructive
intent to injure the misrepresentee
or to benefit the misrepresentor.
See:
Berkemeyer
v Woolf
1929 CPD 235
at 242-3
46.4 Bennett and Wales must show
that they were in fact induced by the misrepresentation to enter into
the contract.
See:
Pathescope
(Union) of SA Ltd v Mallinick
1927 AD 292
at 300.
Kahn
v Naidoo
1989 (3) SA
724
(N).
46.5 The misrepresentation must
be material in the sense that it is not incidental or unimportant.
See:
Service
v Pondart-Dianna
1964
(3) SA 277
(B) at 279A-D.
46.6 It must be proven that Full
Swing has suffered damages as a result of the fraud and that the
claim of Full Swing on account
of such damages was ceded to Bennett
and Wales.
THE COUNTERCLAIM
[47] The trial herein was long
or protracted and the volume of evidence adduced thereat not only
voluminous but also involved and
complicated. It is my considered
view and finding that it is prudent and desirable that I start with
the counterclaim.
[48] In the counterclaim and for
purposes of the alleged prior fraudulent misrepresentations, it is
alleged that –
48.1 On 19 October 2004
Mendelson represented to both Bennett and Wales that over and above
the turnover showed on Annexure B,
the Melville Spar generated an
additional R50 000,00 per month in undeclared income;
48.2 That on the basis of such
representations, Bennett calculated a nett profit of R330 000,00 per
month, which amount was later
amended to R340 000,00;
48.3 That on 20 October 2004,
Bennett and Wales met with Bayett who represented that:
48.3.1 the figures provided by
Mendelson were correct;
48.3.2 he was selling a
cash-positive store;
48.3.3 he would guarantee a
gross profit of 21,9% for the Melville Spar but could only confirm
same after a final stock taking
at the end of January 2005.
[49] It was further alleged that
the above representations were false, were known to Bayett to be
false and were done to induce
Bennett and Wales to purchase the
Melville Spar for R9,1 million, which they acted upon and did
purchase it.
[50] A closer look at the
alleged misrepresentations relied upon in the counterclaim the
following in my view emerges:
50.1 No specific allegation is
made that Annexure B was ever represented to Bennett and Wales as
being the sum total of all the
expenses. This is corroborated by all
the experts who testified in this trial who stated that a nett profit
could only be calculated
or arrived at after all expenses have been
considered;
50.2 The allegations that the
gross profit percentage was guaranteed at the time they allege
subject to a stock take at the end
of January 2005 does not tally
with the chronology of events herein because the issue of stock take
and concomitant guarantee was
only agreed to in the Addendum that was
signed on 21 December 2004;
50.3 The defendants contend that
the amount of R330 000,00 initially claimed, which was ultimately
amended upwards to R340 000,00,
which is claimed as being the alleged
misrepresentation in regard to the nett profit was calculated on the
expenses shown on Annexure
B minus the R40 000,00 expenses in respect
of the salaries of the two managers who were to leave with Bayett.
The plaintiff’s
version is that the R340 000,00 was calculated
on a totally different basis, namely, the turnover on Annexure B
minus the expenses
plus the R50 000,00 that was skimmed. Should this
Court accept the defendants’ version as set out above, then the
alleged
misrepresentation in regard to each of the two different
calculations would have yielded different results or been very
different
and would not be reconcilable into one alleged
misrepresentation for both calculations. The plaintiffs submit and
contend that
the probable inference to be drawn is that Bennett has
now changed the basis of his earlier or original allegation in regard
to
the alleged misrepresentation of the nett profit and/or has
decided to substitute the initial alleged misrepresentation
allegations
with one more convenient to him or his fellow defendant
or claimant in the counterclaim.
[51] What is also apparent in my
view is that the allegations of prior misrepresentation are not
premised on the advertisement
posted by Mendelson.
[52] In their counterclaim
further, Bennett and Wales rely on an alleged cession from Full Swing
Trading 357 CC and alleged in
that respect that Full Swing ceded to
them –
“
…
all right, title and interest in and to such claims as it enjoys
against John Henry Bayett and Quantum Leap Investments 123 (Pty)

Limited, arising out of the purchase and sale of the Melville Spar …
’
(See paginated folio 54 of the pleadings.)
[53] It is common cause that
Full Swing was registered on 19 August 2004. (See page 70 of
Plaintiffs’ Bundle.) It is not
clear how the defendants arrive
at the above conclusion because there was no evidence led in this
trial as to how, on what basis
and when, if ever at all, such a
transfer of the business took place from Bennett and Wales to Full
Swing as the plaintiffs herein
were not party to such a deal or
transaction. A perusal of the trial bundles yielded the following:
53.1 The offer to purchase
Melville Spar was between Bennett and Wales, who were purchasing the
business only, i.e. Melville Spar,
from Quantum Leap Investments 123
(Pty) Ltd represented by John Henry Bayett, which agreement was
signed by the parties on 21 October
2004. No cession of rights is
mentioned between Full Swing and any of the defendants involving
Bayett.
(See: Plaintiffs’ Bundle File 1 at pages 263 to 274.)
53.2 The next agreement in the
papers herein is the Addendum to the Agreement of Sale of Melville
Spar dated 21 October 2004 which
is also between Bennett and Wales as
purchasers and Quantum Leap as the seller. Herein also no mention is
made of any cession.
(See: Plaintiffs’ Bundle 1 pages 278 to 285.)
53.3 At folio 296 of the same
Plaintiffs’ Bundle 1 is an agreement between Full Swing Trading
357 CC represented by Bennett
and Wales on the one hand as the
purchaser and Quantum Leap on the other. This agreement only deals
with notification that all
suspensive conditions recorded in the
original Agreement and the Addendum had been fulfilled and the
attorney and Mel Abro Brokers
were authorised to release the funds
held in trust and deduct their commissions. No mention is made of any
cession.
53.4 The next agreement on
record is a sale of business (Melville Spar) entered into between
Full Swing Trading 357 CC as sellers
and Wild Goose Trading and
Services 39 CC which was signed on 24 April 2008. This agreement is
irrelevant to what we are dealing
with as it does not involve Bayett.
Suffice to mention here that Full Swing sold Melville Spar to Wild
Goose Trading for a total
of R10,5 million as a going concern
inclusive of stock whose value was placed at R2 million.
[54] As such I found no evidence
was led by any of the parties to the effect that there was such a
cession, and if there was, that
such a cession could have any legal
consequences.
[55] What this Court is called
upon to do is not only to determine whether or not the alleged
misrepresentations were made, and
if so made, whether they induced
the Agreement, but also whether or not the alleged misrepresentations
remained relevant and material
in the light of the agreed upon events
envisaged by the Agreement as qualified by its Addendum and agreed on
amendments or as agreed
to subsequently by the parties.
[56] To be able to determine
issues relating to the counterclaim in their correct perspective I
agree that an assessment of the
chronology of the events again can
and will best paint the correct colours to the picture caricatures
that have been sketched by
the evidence of the respective parties in
this trial, duly supplemented by the papers generally filed of record
in the case. In
my assessment the chronology of events reads as
follows:
56.1 On 18 October 2004 Bennett
and Wales become aware of the advertisement of the sale of Melville
Spar;
56.2 On 19 October 2004 Bennett
meets with Mendelson and he (Bennett), on his own version, states
that Mendelson represented to
him that Annexure B was accurate except
for the turnover which did not include the additional amount of R50
000,00 per month due
to skimming;
56.3 On 20 October 2004 Bennett
and Wales met with Bayett and Mendelson and according to Bennett,
Bayett confirmed that the store
(business) was cash positive and that
subject to a closing stock take at the end of January 2005 he would
guarantee a gross profit
percentage of 21,9%;
56.4 On 21 October 2004 the main
Agreement was concluded. Clause 4.2 thereof provided that Bennett and
Wales could verify the accuracy
of Annexure B and that if during such
a verification Annexure B was shown to be inaccurate by more than
10%, then Bennett and Wales
had a choice of continuing with the deal
on such terms as may be mutually agreed upon or resile from the
Agreement without any
consequences to them;
56.5 The mere fact that the
accuracy of Annexure B could be verified and that Bennett and Wales
chose to do such verification through
a due diligence performed by
experts of their choice in my view limited even to the extent of
nullifying or neutralising any purported
reliance by the defendants
on alleged prior misrepresentations as well as the materiality
thereof to the time period prior to the
verification;
56.6 The purported reliance on
the alleged prior misrepresentations and the reliance thereon was
further eroded or adulterated
by the facts that the Annexure B
document without the notes thereon by either Bennett or Mendelson or
both was incorporated into
the Agreement, thereby meaning that
reliance was had on a document which did not contemporaneously
reflect all that it should have
represented;
56.7 Clause 7 of the Agreement
provided that the seller would not be bound by prior representations
and furthermore excluded reliance
on the purported prior
misrepresentations. It is our law however that such a clause would
not generally protect a seller against
prior “
fraudulent
”
misrepresentations. That is why it did not protect Bayett against the
perceived inconsistencies noted by Bennett on a copy
of Annexure B
the day he met with Mendelson. The fact of the matter is that the
parties herein consciously and with open eyes agreed
that the
document which had Bennett’s notes on it should not form part
of the Agreement. They preferred a copy that did
not have Bennett’s
handwritten notes or comments on it.
56.8 Clause 10 of the Agreement
provided expressly and specifically that the Agreement that was to be
respected as enshrining the
parties’ intentions is the one in
writing and signed by the parties. It is my further view and finding
that this operative
Agreement, when read as a whole, excluded
reliance on any representations which would invariably include those
noted on Annexure
B by Bennett. What really puts the matter at or to
rest is Bennett’s testimony in the trial to the effect that the
prior
representations did not form part of the agreement and that he
was willing and ready to enter into the agreement on the basis of
the
Annexure B copy which did not have his notes on it.
(See page 1157 of the
Transcript.)
56.9 The above concession alone
in my view brings to an end the debate in relation to alleged prior
representations inducing the
Agreement.
56.10 Robinson conducted a due
diligence on the defendant’s instructions or bidding. He did so
for a whole two to three weeks.
This process exposed quite a number
of fallacies surrounding Annexure B.
56.11 Bennett and Wales had all
opportunity to resile from the Agreement without any consequences to
them if they genuinely had
justifiable grounds to do so. They instead
agreed to have the Agreement’s clause 4.2 amended through the
instrumentality
of the Addendum. The requirement that a
misrepresentation must be material in the sense that it was not
incidental or unimportant
was seriously compromised.
56.12 Finally, but not least,
the Addendum substituted any possible initial reliance on Annexure B
with an agreement on the gross
profit percentage after the final
stock take.
[57] A closer scrutiny of the
above events demonstrates, in my view, that any purported reliance on
alleged prior misrepresentation
is not entirely supported by the
facts in this case. This becomes more pronounced when one takes into
account the ostensible situation
appearing from all the haze, that
the defendants’ counterclaim does not look to have been
premised on the allegation that
the issue of the certificate that the
gross profit was 22,26%, among others, was a prior misrepresentation.
Even if this Court
were to accept that fact as being so indicative,
the evidence of Greyling and Thomaz in my view would have pointed to
a contrary
view or scenario. The situation is compounded adversely
against the defendants when one accepts or notes that one of the
defendants’
witnesses, Davis, made material concessions
confirming or corroborating Greyling and Thomas’s evidence in
that regard.
[58] The abovementioned
regardless, it is still possible for the scenario to change if the
rest of the analysis of the evidence
is taken as a unit or
holistically. This Court should therefore continue to determine
whether or not, there may still be substance
in the defendants’
contentions in regard to the purported reliance on the alleged
misrepresentation. It should still be determined
whether or not,
despite the argument to the contrary, it may still be found that the
terms of the Agreement, the due diligence
and the existence of the
Addendum did not eliminate or terminate the materiality of the
alleged fraudulent misrepresentation.
SPECIAL ASPECTS THAT INFORM A DECISION
The advertisement
[59] As stated above, it is not
alleged in the counterclaim that the advertisement was a prior
misrepresentation that induced the
conclusion of the Agreement. In
our law, an advertisement in itself or on its own does not constitute
a firm offer which, in our
case, Bennett and Wales could accept.
[60] Wille and Millins put it as
follows in their works,
Mercantile
Law of South Africa,
18th
Edition at pages 10 and 11 thereof about the legal consequences of an
advertisement:
“
Such
an advertisement merely amounts to an invitation to the public to do
business, and every time a customer appears and tenders
the
advertised price of an article, it is he who is making the offer, and
the advertiser can either accept or reject it as he thinks
fit.
”
[61] In
Du
Toit v Atkinson Motors Bpk
1985 (2) SA 893
(A) the court held that if the advertisement was
aimed at creating an impression on a material term and the purchaser
was unaware
of a term excluding reliance on such impression and the
seller is silent in respect of such a provision, the seller may be
held
liable on account of such misrepresentation. In this case (
Du
Toit v Atkinson Motors
)
the advertisement described a motor vehicle on sale as a 1979 model.
The parties concluded a verbal agreement for the purchase
of the
vehicle which was based on the advert. Thereafter the seller
purported to reduce the oral agreement to writing and placed
that
instrument in front of the purchaser to sign. The purchaser signed
the written agreement without reading it, thus missing
the fact that
the document did not mention the year of manufacture of the vehicle.
The seller also did not invite the purchaser’s
attention to a
clause therein excluding any reliance on the year of manufacture.
When the purchaser went to court on the grounds
that the year of
manufacture of the vehicle was misrepresented to him, the court sided
with him and found that he (purchaser) was
misled by the seller’s
silence.
[62] The facts in the
Du
Toit
matter can be
distinguished from the facts of our present case : In this matter
(our present case) Annexure B was incorporated
in clause 4.2 of the
Agreement and the purchasers had the benefit of an option to verify
its accuracy. The purchasers chose to
embark on a verification
process which was in the form of a due diligence process. In the face
of this ostensible escape route
they elected to proceed with the deal
and to that effect agreed to an amendment of clause 4.2 in terms
whereof the relevance of
Annexure B was relegated to near irrelevance
and substituted by a gross profit percentage calculation. As
compared with the purchaser
in the
Du
Toit
matter, where the
former was not that business literate, the purchasers in this matter
are astute, experienced and accomplished
business persons who had no
difficulty reading and understanding what the Agreement and its
Addendum were all about. They also
had the benefit of being assisted
by qualified and until the contrary is shown, competent and
matter-knowledgeable legal practitioners.
[63] As a consequence it is my
considered view and finding that even if the defendants had relied
upon a misrepresentation through
the advert, which they have not done
in this matter, the advertisement could not have constituted a
misrepresentation which induced
the Agreement. In any event, it
played no role whatsoever because the Addendum which was subsequently
agreed to saw to that.
MEETING WITH MENDELSON ON 19 OCTOBER 2004 IN RELATION TO NETT PROFITS
[64] It is common cause between
the parties that when Bennett discussed the sale of the business with
Mendelson on 19 October 2004,
he (Bennett) made manuscript notes on
Annexure B, the gist whereof were as follows:
“
…
+ R50K (skimmed …
”
next to salaries as well as “
…
+R40K less a month for two managers …
”
alongside.
[65] Bennett’s statement
to the police dated 15 December 2007 becomes more insightful when
juxtaposed to the above. In his
evidence in this Court Bennett
conceded that his statement was more reliable than his
viva
voce
evidence. He was
struggling to reconcile the various scenarios the totality of his
testimony was bringing to the fore.
[66] In paragraph 4 of this
statement Bennett seemingly, after he had parted with Mendelson, made
some calculations : He arrived
at R3 317 000,00 as monthly turnover
and R396 000,00 as monthly expenses. He deducted the R40 000,00 for
salaries and arrived
at a profit of about R330 000,00.
[67] It is clear from the above
that Bennett had not at the time calculated the nett profit on the
turnover as shown on Annexure
B plus R50 000,00 skimmed. This was
contradicted by his testimony in court as well as the calculations of
his expert, Davis, when
he sought to state that he calculated the
nett profit on Annexure B in the amount of R290 000,00 and then added
the R50 000,00
skimmed amount. The above, in my view, are
irreconcilable. In the circumstances the plaintiffs’ argument
to the effect that
the defendants deliberately adapted their version
to introduce an alleged misrepresentation is lent more credence.
Furthermore,
when the defendants amended their counterclaim, they
came up with an amount of R340 000,00 (up from R330 000,00) as the
amount
allegedly represented to Bayett to Bennett. The problem is
that the basis for the calculations is not the same and the specifics

of the alleged representations are also different. It is tantamount
to substituting one representation for another in order by
better
suit the projected and changed circumstances, which is not or should
not be permitted to occur.
MEETINGS WITH BAYETT ON 20 OCTOBER 2005
[68] My understanding of
paragraph 5 of Bennett’s statement is that there was no
reference to the R50 000,00 having been
included in the turnover on
Annexure B. No reference is also made of the alleged R340 000,00 nett
profit.
[69] When confronted during
cross-examination he attempted to explain himself. However, in my
view, his explanation became fractured,
leading one to see several
answers : At first he stated that his previous calculations did not
include a calculation of nett profit
in the amount of R340 000,00.
Secondly, he stated that if he had been told that the R50 000,00 was
part of the R290 000,00 nett
profit calculated and shown on Annexure
B, he would have said so in paragraph 4 of his statement to the
police. He also stated
in the same breadth that if the R340 000,00
was a key factor, he would have expressly dealt with it in paragraph
5 of his statement.
[70] As against the above,
paragraph 5 of his statement mentions among others that –
“
…
the GP (gross profit) percentage was a key factor to me in the
viability of the store as a proposition …
”
[71] Of more importance in this
case, Bennett, in paragraph 5 of his statement, did not state that
Bayett had told him that the
monthly nett profit would be R340
000,00; that he (Bennett) was only willing to conclude the deal if
Bayett could guarantee to
him that the monthly nett profit was R340
000,00; that he was assured that Annexure B contained all the
expenses and that such
expenses had been taken into account in the
calculation of the nett profit as shown on Annexure B; and that
Mendelson told him
the R340 000,00 in Annexure B included all the
expenses.
[72] On the contrary, Bennett
states in paragraph 20 of his statement that –
“
Figures
that John and Brian produced created an impression that the store was
generating a nett profit, before interest and tax,
of R289 151,96 …
per month.
”
[73] The above, in my view, and
finding, refutes the defendants’ reliance on an alleged
representation of R340 000,00 nett
profit per month.
[74] A nett profit can only be
arrived at after including all expenses in the calculations. Annexure
B does not even have a column
for nett profit. It is my view and
finding therefore that with Annexure B as a basis, nett profit in
this instance could only
have been arrived at after a normal
calculation which should have included all expenses, not only those
seen on Annexure B, which
are not all the expenses.
[75] Annexure B showed “
Repairs
and Maintenance
”
expenses only as budget amounts, not actual expenses. The defendants’
expert, Davis, accepted or conceded to this
also. The item “
salaries
”
on Annexure B did not include the salaries of Bayett, his wife,
Fouche and the two managers Bayett wanted to leave with.
Davis also
acknowledged being told of this. “
Depreciation
”
which experts on both sides agreed was an important expense that must
have been included in the calculations was not included
in Annexure
B. Also not included were lease expenses as well as expenses
relating to transport and bank charges.
[76] What the defendants seem to
have overlooked in their testimony and submissions is that Annexure B
was subject to verification.
Its contents were not guaranteed.
[77] The above in my view also,
militate against any misrepresentation of a nett profit. A reading of
clause 4.2 of the Agreement
of Sale in my view and finding, negates
the materiality of or reliance on an alleged prior misrepresentation.
Furthermore, those
expenses that the defendants sought to rely on as
constituting prior misrepresentations were proven during evidence not
to have
been misrepresentations at all. The defendants’ experts
conceded as much.
[78] When the parties signed the
Agreement on 21 October 2004, the defendants had already met with
Bayett and Mendelson. If they
wanted to contract or were induced to
contract or bind themselves on the basis of the advertisement or the
alleged misrepresentations
made allegedly by Mendelson on 19 October
2004, they should or ought to have used a copy of Annexure B which
had the manuscript
notes made by Bennett on it. In any event, clause
4.2 of the Agreement clearly shows that the accuracy of Annexure B
was not guaranteed.
Worse still, Bennett and Wales were given the
opportunity to verify its contents and could resile from the signed
agreement if
there was a variance of 10% or more.
[79] It was demonstrated in this
case that Bennett and Wales were experienced and astute businessmen.
They conceded having read
and understood what they were binding
themselves to before they signed the Agreement. In evidence, Bennett
conceded that he knew
that the alleged prior misrepresentations did
not form part of the Agreement. He however also stated that he
assumed that Annexure
B contained all the expenses. He also stated
late in his testimony that he also assumed that Bayett and Mendelson
were guaranteeing
the expenses as being all the expenses. An
assumption is different from a fact.
[80] In
Van
Reenen Steel (Pty) Ltd v Smith NO and Another
2002 (4) SA 264
(SCA) the learned judge put it as follows in relation
to assumptions:
“
The
next problem the appellant faced was that it was common cause that
the written contract expressed the parties’ consensus.
It was
for these reasons that the appellant took refuse in the doctrine
relating to assumptions, arguing that a false common assumption

relating to a present or past fact vitiated a contract even if it was
not a term or condition of the contract. The appellant also
relied on
the doctrine of
error in substantia
.
”
The learned judge went on to state that –
“
…
assumptions or suppositions could have many forms and different
effects, depending on the circumstances. Assumptions relating to

present or past facts, if unilateral, went back to the effect of a
unilateral mistake on contract. If common, unless elevated to
terms
of the Agreement, they amounted to no more than common mistakes
relating to the motive for entering into the agreement.
Whether or
not a motive that induced a party into entering into an agreement was
based upon an assumption of fact it remained a
motive, and a party
was not entitled to vitiate a contract on the ground of a mistaken
motive even if the motive was common, unless
the contract was
expressly or impliedly made dependent upon the motive, or if the
requirements for misrepresentation were present.
”
[81] The principles of the above
case cannot avail or assist the defendants. The fact that Bennett
and Wales elected to perform
a due diligence on the store point to
them not trusting the contents of Annexure B. This negates reliance
on the assumptions.
This is also borne out by the fact that Annexure
B had R1 759 000,00 as opening stock but after the due diligence the
amount was
agreed to as R1 593 206,00.
ALLEGED PRIOR MISREPRESENTATION ON GROSS PROFIT PERCENTAGE
[82] Reliance by the defendants
on an alleged misrepresentation of a guaranteed gross profit
percentage of 21,9 percent is not
borne out by the evidence. Even
Bennett’s own evidence makes it clear that Bayett did not
guarantee the 21,9 percent gross
profit as he (Bayett) made it clear
that a gross profit percentage could only be guaranteed after a
closing stock take, which had
not yet been undertaken at the time.
As such the reference in Annexure B of a gross profit of 21,9 percent
could not have induced
the conclusion of the Agreement. It is thus
my considered view and finding that Bennett was telling a patent
untruth when he stated
in paragraph 6 of his statement that –
“
…
(A) clause (4) was included in the offer to purchase Agreement …
which
inter alia
guaranteed the GP and the information that had been presented to us
as true and correct …
”
[83] That reliance is further
refuted in the Addendum to the Agreement. This document provided for
a gross profit of 21,3 percent
as at the end of January 2005 on the
understanding that if the gross profit percentage was less than 21,3
percent at that point
and time, Bennett and Wales were entitled,
though not obliged to resile from the Agreement. The Addendum was
amending clause 4.2
of their Agreement, changing the gross profit
percentage from 21,9 percent to 21,3 percent .
[84] For the record, the
plaintiffs’ experts, Greyling and Thomaz convincingly showed in
evidence that the gross profit percentage
was in excess of 21,3
percent and the defendants’ own expert, Davis, conceded that
the gross profit percentage was at least
21,2 percent before account
was taken of the amount skimmed. Davis did not deny that he was told
of the skimming. He only stated
that he disregarded it as there was
no documentary evidence to substantiate it. This was contradictory
because the instructions
he accepted from Bennett and Wales were not
supported by documentary evidence either.
[85] When Davis realised that
the issue relating to skimmed amounts was not adding up, he shifted
is accusations to VAT manipulation
by the plaintiffs, especially
Bayett. However, at the end of the day Davis also conceded that he
could not substantiate the VAT
manipulation charge. He blamed lack of
source documents on his failure or inability to substantiate his VAT
manipulation charges.
He also conceded that the methodology used by
Frank Thomaz to extract the correct value of the non-vattable
purchases was correct.
He stated that he did not follow the same
methodology because he did not have access to source documents.
Unfortunately he ignored
the fact that all the experts including
himself had agreed that the gross revenue verifications (GRV’s)
were correct and
he also could have easily done re-calculation on the
same basis as Thomaz.
[86] This case was adjourned for
a long period while he was still on the witness stand and the above
aspects had been put to him.
The parties were at liberty to correct
and/or rectify their mistakes or supplement what they had testified
on. The plaintiff’s
witness did just that but Davis did not
attempt to do any re-calculations or explain his earlier incoherent
testimony after that
much time to do so. It is my view and finding
that the above points to the fact that Davis knew that a calculation
based on the
methodology used by Thomaz would destroy his own
evidence on alleged VAT manipulation.
[87] What compounds the
situation further for the defendants is that when Bennett testified,
he stated that he knew about the VAT
manipulation when he took the
business over and that, according to him, Bayett had told him that
the VAT manipulation was –
“
…
to the tune of between R12 000,00 and R15 000,00 per month.
”
The above evidence completely pulverises Davis’s calculations
of ± R52 000,00 per month arrived at by dividing R574
479,05
by 11 months.
[88] The defendants’
counterclaim was initially not based on alleged VAT manipulation.
This aspect was introduced later
by way of an amendment to the
pleadings. Under normal circumstances, an issue like VAT
manipulation which was not there initially
could not be introduced
retrospectively as a purported prior misrepresentation inducing an
Agreement. Extraordinary or special
or cogent circumstances have not
been brought forward to justify this introduction.
[89] Even the criminal complaint
the defendants laid against the plaintiffs did not rely on any
alleged VAT manipulation. Bennett’s
explanation during his
testimony that at the time he did not realise the significance or
relevance thereof is in my view and finding,
far-fetched. An issue
like VAT manipulation, if it was indeed relevant and present, should
not have been introduced, as it was
in this case, approximately three
(3) years after the conclusion of the Sale Agreement.
ALLEGED PRIOR MISREPRESENTATION OF EXPENSES INDUCING AGREEMENT
[90] I have already dealt with
Annexure B insofar as it relates to expenses. The defendants did not
substantiate their allegations
hereon. Although I have already
mentioned salaries, repairs and maintenance as well as depreciation
cursorily, I will briefly
deal with them as expenses hereunder.
Bennett agreed that there are expenses that are a cause for concern.
However, his expert,
Davis, conceded in evidence that these expenses
could not have been misrepresentations. He conceded that repairs and
maintenance
was given out as budget figures only. He further
conceded that he could not say that Bayett told him prior to or at
the signing
of the Agreement that the budget figures for repairs and
maintenance were in fact actual figures. What he said was that he in
fact
did not ask Bayett what the actual figure was as he left t hat
to the due diligence process. This thus in my view and finding
excludes repairs and maintenance figures as contained in Annexure B
from being validly relied upon as inducements or misrepresentations

that induced the singing of the Agreement.
[91] Depreciation was initially
not in the picture as a misrepresentation inducing the conclusion of
the Agreement. It was not
relied upon when the criminal complaint was
laid. I agree with the plaintiff’s submission that depreciation
in this instant
could only have constituted a misrepresentation if
there was evidence that Annexure B contained all the expenses and the
wording
of the Agreement itself as well as the due diligence process
were to be ignored.
[92] Davis testified that he
only realised that depreciation was not contained on Annexure B
during the forensic investigation
and that from that moment onwards
he regarded it as a misrepresentation inducing the conclusion of the
Agreement. He however conceded
during cross-examination that he was
wrong to do so. That concession is contained at page 886 of the
Transcript of this case at
lines 18-23 which is recorded as follows:
“
Q.
So should your answer not be now that I am asking you that you were
maybe not correct in accepting depreciation as a misrepresentation

for purposes of your calculations?
…
It is possible, yes,
I was not correct.
”
At page 887 lines 6-7 he went further to answer as follows:
“
…
At the time I made that statement I believed it to be correct. In
retrospect it might not be correct.
”
[93] Davis also conceded that
Robinson dealt with depreciation in the due diligence process he
conducted at the instance of the
defendants but for some unknown
reason his principal, Bennett had failed to disclose this fact to
him, making him to act in ignorance
of this fact.
[94] However, in his evidence,
contrary to the above facts, Bennett tried to revive this issue, of
depreciation as a factor inducing
the Agreement : He stated that
Bayett had told him that depreciation was not a concern as a Spar
owner made a monthly provision
therefor in the amount of R10 000,00
which was being paid into the Development Fund, with Spar mother body
matching the owner’s
contribution. This flew in the face of
Robinson’s due diligence process and one of its findings that
Bayett in fact owed
money on the Development Fund, at the same time
negating the aspect he testified to of equal contribution to the Fund
by Spar.
What made it worse is the fact that when Bayett was in the
witness box, this aspect was never put to him. In any event it is not

part of the counterclaim. It forms part of aspects which the
plaintiffs submitted are red-herrings or attempts to bring in new

allegations of misrepresentation through the back door.
[95] As regards the salaries of
Bayett, his wife, (Claire) Fouche (who was resigning) and the two
managers who were leaving with
Bayett, the plaintiffs contended that
they did not feature in the figures on Annexure B. Bennett’s
evidence was that those
salaries were in fact included in Annexure B.
However, Davis roundly contradicted him when he testified that
Bennett had instructed
him, at the time he conducted the forensic
audit, that those salaries, especially those of the two managers,
were not included
in Annexure B. He (Bennett) was also contradicted
on this aspect by Davis insofar as he stated that Mendelson had also
told him
this. In his own statement to the police at paragraph 10
thereof he also recorded that those salaries were not included.
WAGES OF WORKERS
[96] It is so that Annexure B
depicted that some of the workers were paid certain amounts whereas
in terms of the law and sectoral
determinations they ought to have
been paid more. This does not rhyme with the counterclaim that is
based on prior express fraudulent
misrepresentation.
[97] The defendants in my view
tried very hard to elevate the alleged payments of wages on an
incorrect scale and the payment of
cash to employees working on
Sundays and public holidays to be some misrepresentation. However, he
could not say whether or not
they induced the Agreement. As against
this, the reports of a labour expert, Tanzer of Sihlangene Brokers as
read with the pre-trial
or joint minute prepared by agreement of the
respective labour brokers revealed that the alleged underpayments
were reduced to
a labour dispute of whether or not a trainee should
be paid in accordance with the sectoral determination for the job
description
he or she was being trained in. According to Tanzer,
such a trainee, if under supervision, he/she should not be paid in
terms
of the sectoral determination – he/she is being trained
for. By January 2005, the above issue as well as the cash payments

for Sundays and public holidays were already known by Bennett and
Wales : Tanzer reported to them on 15 January 2005, well before
the
take-over date. Worse still, the short or underpayments were not
calculated by a labour expert, Tanzer or Laas, but by Davis.
He
based his calculations on the assumption that all the employees
worked on Sundays and public holidays, which was actually not
the
case.
[98] The labour experts could
not come up with cogent and verifiable evidence of any wrong doing,
thus leaving the aspect speculative
and inconclusive.
[99] As already stated above,
the defendants’ principal expert witness, Davis, conceded that
these expenses were not misrepresentations
and were proved by facts
not to be misrepresentations and definitely not misrepresentations
inducing the Agreement and the Addendum.
DUE DILIGENCE
[100] Even if it could be
accepted, which is contrary to the facts herein, that Bennett and
Wales were indeed induced to enter
into the Agreement as a result of
prior misrepresentations relevant to Annexure B, the issue still to
be decided is the materiality
of and the continued reliance upon such
representations.
[101]
Norman’s
Law of Purchase and Sale in South Africa
,
5
th
Edition, by Zulman and Kairinos, at 172, para 16.8.3 deals with the
unavailability of a redhibitory action where a party had knowledge
of
defects or where there was an inspection which identified the defects
and the learned authors state as follows:
“
(i)
If the purchaser knew of the defect at the time of the contract, the
redhibitory action will not assist him, and this is so,
whether he
has been warned by the vendor in plain words or by the state of the
thing sold, or whether he had obtained the knowledge
from other
sources before the sale. (Voet 21.1.9 – Gane’s
Translation, Volume III, pages 654-655).
‘
Knowledge’ therefore has an extensive meaning with
reference to the redhibitory action and includes:
where the vendor has informed the purchaser of the defect at or
before the time of the sale;
where the purchaser had knowledge of the defect from other
sources at the time of the sale;
where the purchaser discovers the defect by inspection on or
before the time of the sale and proceeds with the sale (Knight v
Trollip
1948 (3) SA 1009
(D+CLD) at 1013 approved in Sarembock v
Medical Leasing Services (Pty) Limited
1991 (1) SA 344
(A); Van der
Merwe v Meades
1991 (2) SA 1
(A); SA Wood Turning Mills v Price
Bros (Pty) Limited
1962 (4) SA 263
(T), per Kuper J at 266 and at
page 173 where the following is said:
‘
As regards knowledge on the part of the purchaser, …
Where there has been an inspection on or before the time of the sale,

the question whether knowledge of a defect will be imputed to the
purchaser or not is a question of fact in every case. (Knight
v
Hemming
1959 (1) SA 288Fc
at 291-292), and the enquiries directed at
the following elements:
the nature of the inspection made (Lakier v Hagar
1958 (4) SA 180
(T);
whether the purchaser was negligent at such inspection in not
noticing the defect;
whether the purchaser, whether an expert or not, relied upon his
own knowledge or upon the statement of the seller when making the

inspection (Corbett v Harris
1914 CPD 535)
;
whether the seller disclosed
a latent defect known to him;
”
and at 175:
“
(v)
On the other hand, where goods are carefully examined by an expert
utilising his skill and knowledge and the buyer purchases
on his
advice, he cannot afterwards, when sued for the purchase price, plead
that the goods are not suitable for the purpose for
which they are
required fortiori, when the goods are purchased ‘as they
stand’ or ‘with all faults’.
The same is the case
where the buyer, though he may state his purpose, selects the goods
he requires after a cautious inspection
as would be made by any
reasonable person relying on his own skill and judgment.
”
Although the above refers to a
redhibitory action, the same principles will apply in respect of an
alleged prior misrepresentation
where the Agreement provides for an
inspection and where there was an inspection.
See also
Van
Reenen Steel (supra)
where the purchaser performed a due diligence and thereafter
unsuccessfully tried to rely on a contractual term relevant to the

quality of the goods contrary to what was found at the due diligence.
See also in this regard
Imprefed
(Pty) Limited v National Transport Commission
1993 (3) SA 94
(A) and
Papadopoulos
v Trans-State Properties and Investments Ltd
1979 (1) SA 682
(W) where the facts in both cases (like in the case
of
Van Reenen Steel
)
showed that where a party conducted an inspection or due diligence he
cannot rely on a repudiation premised on the quality of
the goods as
stated in the agreement.
[102] There is no evidence to
suggest that at the time of the due diligence, Bayett concealed any
information or refused to co-operate
with Robinson. On the contrary,
the evidence of Bennett is that Robinson never complained to him that
he was not getting co-operation
from anyone at Melville Spar
including Frank Thomaz.
[103] In the due diligence,
Robinson:
103.1 verified the turnover by
inter alia
comparing the sales on Annexure B with the POS sales. He considered
the difference he found not to be material.
103.2 observed that in regard to
wages, that overtime and public holidays were paid in cash and were
not processed through the
VIP wages system;
103.3 observed that for the
verification period, leave pay and sick pay were not accounted for
and needed to be calculated as payments
had been made in cash. He
referred to work performed by him on the “
Salaries
File
” which file
was never discovered;
103.4 found casual wages to be
understated;
103.5 queried accommodation and
travel expenses which were not included in Annexure B;
103.6 observed that depreciation
was not taken into account on Annexure B;
103.7 performed tests on major
expenses and although he found a number of variances, he did not
consider the variances to be material,
but for depreciation;
103.8 was satisfied that there
were no major differences in the revenue stated in Annexure B and
tests performed by him;
103.9 calculated the average
nett monthly profit to be R240 000,00;
103.10 knew that the Development
Fund was a liability, i.e. money owed to Spar;
103.11 knew the business was in
overdraft;
103.12 knew the business had a
loan from Spar;
103.13 observed that bank
charges had been understated or were not shown correctly;
103.14 held the view that the
gross profit percentage could not be calculated pending a closing
stock take.
[104] Therefore, after the due
diligence, Bennett and Wales knew that the information on Annexure B
was not and could not be accurate,
inter
alia
that:
104.1 Annexure B did not
contain all the expenses;
104.2 a nett profit could not be
calculated on the information in Annexure B;
104.3 the gross profit
percentage could only be calculated after a closing stock take;
104.4 the information on
Annexure B was not accurate.
Addendum
[105] Instead of electing to
walk away from the deal, Bennett and Wales agreed to enter into the
Addendum which would make the
Agreement effective in an amended form
after a closing stock take.
[106] As such and at the time
when Bennett and Wales entered into the Addendum, they could have had
no reason to rely on the accuracy
of Annexure B or on any alleged
representation prior to the Agreement.
[107] The Addendum also does not
guarantee a future gross profit percentage of 21,3% but merely refers
to a gross profit percentage
as at the time of take-over.
EVENTS AFTER THE ADDENDUM BUT BEFORE TAKE OVER
[108] Notwithstanding receipt of
the report by Tanzer on 15 January 2005, Bennett and Wales (and/or
Laas) did not communicate any
concerns in regard to the wages to
Bayett before and at the time of take-over but rather opted to go
with a closing stocktaking
at the end of the month in order to
proceed with the operation of the business.
[109] Bennett appointed
Panyiotou to manage the business. Bennett, in an affidavit deposed
to by him on 5 February 2009, gives
the court insight into the
problems experienced by the business after take-over. In that
statement Bennett patently blames Panyiotou
for the demise of the
business although he later in his evidence tried to justify the
contents of that affidavit to have a meaning
inconsistent with the
plain language thereof. Suffice to say that these attempts were sad,
poor and disingenuous and displayed
a total disregard for the court
and a failure to take the court into his confidence.
[110] To compound the
difficulties already prominent in the counterclaim, Wales failed to
give evidence on matters where his evidence
could or would have been
material in corroborating the version of Bennett.
[111] In
Supreme
Service Station
(1969)
(Pvt) Ltd v Fox and Goodridge (Pvt) Ltd
Beadle CJ stated:
“
If
the defendant closes his case without giving evidence, in a proper
case, an inference may always be drawn against him from his
failure
to give evidence contradicting that of the plaintiff … the
fact that the defendant has not given evidence at all
to refute what
appears in the plaintiff’s evidence is often a cogent factor to
be taken into account.
”
[112] Bennett and Wales have a
further difficulty and that is that the
onus
rests on Bennett and Wales to prove not only that they were induced
into the agreement by an alleged fraudulent prior misrepresentation

which were and remained material and relevant but also whether or not
they were actually misled and would a reasonable man have
been misled
with due regard not only to the negotiations and the Agreement but
also with due regard to the due diligence. In
Pillay
and Another v Shaik and Others
2009 (4) SA 74
(SCA) the following was said:
“
[55]
The approach to be adopted in a case such as this was set out in
Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis, supra, at
239F-240B,
as follows:
‘
If regard is had to the
authorities referred to by the learned Judges (see Logan v Beit
7 SC
197
at 215; I Pieters and Company v Salomon
1911 AD 121
at 137;
Hodgson Bros v South African Railways
1928 CPD 257
at 261; Van Ryn
Wine and Spirit Co v Chandos Bar
1928 TPD 417
at 422-4; Irvin &
Johnson (SA) Ltd v Kaplan
1940 CPD 647
and, one could add, Collen v
Rietfontein Engineering Works
1948 (1) SA 413
(A) at 430 – 1),
I venture to suggest that what they did was to adapt, for the
purposes of the facts in their respective
cases, the well-known
dictum of Blackburn J in Smith v Hughes
(1871) LR 6 QB 597
at 607,
namely:
“
If, whatever a man’s
real intention may be, he so conducts himself that a reasonable man
would believe that he was assenting
to the terms proposed by the
other party, and that other party upon the belief enters into the
contract with him, the man thus
conducting himself would be equally
bound as if he had intended to agree to the other party’s
terms.”
In my view, therefore, the
decisive question in a case like the present is this: did the party
whose actual intention did not conform
to the common intention
expressed, lead the other party, as a reasonable man, to believe that
his declared intention represented
his actual intention? Compare
Corbin on Contracts (one volume edition) (1952) at 157. To answer
this question, a three-fold enquiry
is usually necessary, namely,
firstly, was there a misrepresentation as to one party’s
intention; secondly, who made that
representation; and thirdly, was
the other party misled thereby? See also Du Toit v Atkinson’s
Motors Bpk
1985 (2) SA 893
(A) at 906C-G; Spindrifter (Pty) Ltd v
Lester Donovan (Pty) Ltd
1986 (1) SA 303
(A) at 316I-317B. The last
question postulates two possibilities: Was he actually misled and
would a reasonable man have been
misled? Spes Bona Bank Ltd v Portals
Water Treatment South Africa (Pty) Ltd
1983 (1) SA 978
(A) at 984D-H,
985G-H.
’”
[113] It is clear that apart
from all the other shortcomings in defendants’ case, it can
never be suggested that having regard
to the terms of clause 4.2, the
format of Annexure B, the due diligence and amendment of the
Agreement thereafter, that a reasonable
man would still have had any
regard to the alleged prior misrepresentations and would and could
have relied on them or even regarded
them as relevant or applicable.
There is also no reason to prefer Bennett’s evidence to that of
Bayett (even leaving aside
the experts) and the absence of any
explanation in the defendants’ case why Lomnitz, Robinson and
Wales were not called as
witnesses is consequential to the further
demise of the acceptability, credibility and reliability of
defendants’ counterclaim
and defence to the action for
malicious prosecution.
The cash positive store
[114] As a last resort Bennett
and Wales sought to rely on an allegation that Bayett had told them
that the store on sale was a
cash positive store.
[115] The evidence of Davis that
the business was in trouble did not convince and he failed to meet
the standard of evidence expected
of an expert but rather came across
as a hired gun. His inappropriate conclusions on law in his expert
statement further exposed
his status as a hired gun.
(
Schneider
NO and Othes v AA and Another
2010 (5) SA 203
WCC.)
[116] Greyling, on the other
hand, convincingly explained that the business was in fact cash
positive and that periods of cash
flow difficulties did not detract
from the financial viability of the business.
[117] The non-impairment of the
goodwill by Full Swing in the financial statements in 2005/8 and
2006/7 (dealt with hereinlater)
confirmed that the business was
financially sound when it was sold to Bennett and Wales.
[118] In any event, the due
diligence eliminated any materiality of an alleged prior
misrepresentation as explained above.
The meeting of 13 December 2005
[119] The events leading up to
and at the meeting on 13 December 2005 are relevant to expose that
Bennett and Wales knew they could
not resort to any lawful claim in a
court of law for damages and as such not only expose the absence of a
claim for alleged damages
but also their malicious actions in regard
to the criminal complaint.
[120] Therefore, they had to
resort to an unlawful attempt to put pressure on Bayett to meet a
ridiculous demand to repay R7,1
million from a purchase price of R9,1
or face a criminal prosecution.
[121] The events at the meeting
on 13 December 2005 also expose that Bennett and Wales knew there was
no merit in a civil remedy
and therefore then rather opted to resort
to unlawful conduct.
[122] Consequently the events
leading up to and on 13 December 2005 will be dealt with herein later
under the heading “
Malicious
Prosecution
”.
DAMAGES
[123] Apart from all the
insurmountable difficulties relevant to the counterclaim referred to
above, the calculation of the damages
in any event does not make any
legal or logical sense.
[124] Bennett and Wales as
trustees for a private company to be formed paid R9,1 million for the
business of Melville Spar. They
claim Full Swing suffered patrimonial
damages in the amount of R5 373 707,00 which at least is not as
outrageous as the initial
R7,1 unlawfully demanded on 13 December
2005. If the amount of damages alleged to have been suffered is
deducted from the purchase
price R9.1 million, it leaves an amount
more or less equal to the value of the unencumbered assets
(Plaintiffs’ Bundle 1,
page 183) which was R3 623 559-00.
[125] This means in effect that
Bennett and Wales claimed that they or Full Swing should have paid
principally only for the assets
of the business and that the business
had no goodwill at the time when they purchased it.
[126] However, when one has
regard to the financial statements of Full Swing Trading for the
periods 2005 and 2006, it is significant
that Bennett and Wales as
members thereof did not impair the goodwill which shows that they
regarded the goodwill paid for the
business to be correct. Goodwill
was explained by Greyling to “
represent(s)
the payment made by the acquirer in anticipation of future economic
benefits from assets…”
(Expert
Volume 3, page 767). At Expert Volume 3, page 776, paragraph 4.16
Greyling stated that
“(T)
he definition of goodwill according to IFRS is the premium an
acquirer pays in a business combination over and above
the
identifiable assets (both tangible and intangible). The premium
arises from the acquirer paying in anticipation of future economic

benefits for assets which are not capable of being individually
recognised. By implication therefore the goodwill arises from the

expectation of future profits and for no other reason.”
[127] The goodwill was therefore
the difference between the value of the assets (± R3.6
million) and the purchase price paid
(R9.1 million). By not impairing
the goodwill in the 2005/6 and 2006/7 financial statements of Full
Swing, Bennett and Wales conceded
the purchase price paid for the
business (other than the assets and stock) was sound and remained for
the years following in good
standing.
[128] Notwithstanding, in the
counterclaim Full Swing purportedly suffered damages notwithstanding
the non-impairment.
[129] The alleged damages is
further suspect (and untenable) in view of the fact that in September
2009, Full Swing sold the business
to Wild Goose Trading for R10.5
million (including stock) (Transcript, page 1290). Regard must be had
to the fact the Bennett and
Wales or Full Swing paid for the business
of Melville Spar approximately R9.1 million (including stock) which
shows that they sold
the business for more or less the same amount,
if not for slightly more.
[130] Furthermore, when Bennett
and Wales took over the business they left the operation of the
business to Panyiotou, who according
to an affidavit deposed to by
Bennett in proceedings for the liquidation of the business, focussed
on his own business in stead
of the business of the Melville Spar
(Plaintiffs’ Bundle 3 700/403 to 700/406) A proper reading of
that affidavit makes it
clear that Bennett blamed the demise of the
business of the Melville Spar on Panyiotou and not on alleged
misrepresentations by
Bayett. However, in the present proceedings
Bennett attempted to blame Bayett and not Payiotou.
[131] As such, Bennett and Wales
failed to prove that the business suffered damages as a result of the
alleged misrepresentations
by Bayett. Bennett in his evidence
attempted to suggest that they successfully increased the turnover of
the business as a result
of which they could sell the business to
Wild Goose for an amount more or less equal the amount they had paid
for it. Apart from
the fact that this is contrary to his affidavit in
the liquidation proceedings, it does not avail Bennett to suggest
that he increased
the turnover by simply reducing prices. He conceded
in evidence that the business was making a loss at the time when he
sold it,
which renders meaningless the alleged increase in turnover.
[132] As such, Full Swing did not
build up the business before selling it but on the probabilities sold
the same business that Bennett
and Wales purchased from Bayett at
more or less the same price if not slightly more than they had paid
for the business, which
in itself negates any alleged damages.
[133] Moreover, Bennett in his
evidence conceded that Bayett had no control over their future
conduct of the business and that their
future profits would be
dependant inter alia on their policies, management and controls.
There is thus also no evidence to show
that the alleged damages are
causally connected to the alleged representations inducing the
Agreement including the Addendum.
[134] In addition, Bennett and
Wales failed to prove that Bayett had made any misrepresentation to
Full Swing and that Full Swing
suffered any damages as a result of
such an alleged misrepresentation.
The counterclaim of Bennett and
Wales was made dependent on a cession and in the absence of any proof
of a misrepresentation by
Bayett
vis-à-vis
Full Swing the cession is meaningless.
[135] It is respectfully
submitted that the counterclaim should be dismissed with costs.
THE ACTION PREMISED ON MALICIOUS PROSECUTION
[136] In
Rudolph
and Others v Minister of Safety and Security and Another
2009 (5) SA 94
SCA, the Supreme Court of Appeal referred with
approval to the requirements for successful claims for malicious
prosecutions as
follows:
“
[16] The
requirements for successful claims for malicious prosecution have
most recently been discussed in Minister of Justice and

Constitutional Development v Moleko 4 as follows:
‘
In order to succeed (on the merits) with a claim for
malicious prosecution, a claimant must allege and prove-
that the defendants set the law in motion (instigated or
instituted the proceedings);
that the defendants acted without reasonable and probable cause;
that the defendants acted with malice (or animo injuriandi); and
that the prosecution has
failed.
’”
[137] I will proceed to deal with
each of the requirements.
THAT THE DEFENDANT SET THE LAW IN MOTION (INSTIGATED OR INSTITUTED
THE PROCEEDINGS
[138] LAWSA at paragraph 318
deals with the following instances where the defendant was held to
have maliciously instigated proceedings:
“
A
defendant has been held to have instigated a prosecution where, for
instance, he or she makes a statement to the police which
is wilfully
false and without which a prosecution would not have ensued;
[1]
or where the defendant fails to make a full or fair statement of the
facts when placing the matter in the hands of the police and
has
threatened the plaintiff with imprisonment in so doing.
[2]
A defendant identifies him- or herself with the prosecution where he
or she is present at the arrest, makes suggestions for searching
the
plaintiff, provides a room for his or her detention and allows a
servant to take charge of the plaintiff while he or she is
in
custody;
[3]
or where the defendant makes a definite charge and indicates that he
or she is prepared to withdraw the charge under certain conditions.
[4]
A
person is actively instrumental in the prosecution where he or she
obtains the warrant, assists the police in locating the plaintiff,
is
present at the arrest, and employs his or her attorney to assist the
prosecutor,
[5]
or assists
with the arrest and sits with the prosecutor at the trial.
[6]
Where a person acts in such a
way that a reasonable person would conclude that he or she is acting
clearly with a specific view
to procuring the prosecution of the
plaintiff and such prosecution is a consequence of his or her
actions, that person is responsible
for the prosecution.
[7]
“
Authorities for the various
scenarios above are set out below in the consecutive numbers
annotated above;
1 Madnitsky
v Rosenberg 1949 1 ph j5 (W) 13 15; of Lederman v
Moharal Investments (Pty) Ltd
1969 1 All SA 297
(A);
1969 1 SA 190
(AD) 197; Prinsloo v Newman
1975
2 All SA 89
(A);
1975 1 SA 481
(AD) 492. But it would not be proper
to say that anyone who knowingly gives a piece of false information
to the police about a
case, however insignificant that information,
is responsible for the prosecution: Amerasinghe Aspects of Actio
Injuriarum 15.
2 Baker v Christiane
1920 WLD 14
17.
3 Moreno v Milner
(1880) 1 EDC 145
147.
4 Kroomer v Lobascher 1903 CTR 674 678.
5 Waterhouse v Shields
1924 CPD 155
161.
6 Heyns v Venter
2003 3 All SA 176
(T);
2004 3 SA 200
(T) 209-211.
7 Amerasinghe 20 et seq. It has been submitted that in Sri Lanka
a person will be liable as a prosecutor where he or she has (a)

formulated the charge; (b) solicited or requested the prosecution;
and (c) incited the prosecution: Saravanamuttu v Kanagasabai
(1942)
43 New LR 357 359; Amerasinghe 18. See also Neethling Law of
Personality 173”
[139] A case on point in this
regard is
Baker v
Christiane
1920 WLD
414
where the following was summarised in the headnote:
“
Where
a Defendant in an action for malicious prosecution was shown to have
had an indirect motive in putting the matter into the
hands of the
police, to have failed to make a full or fair statement of the facts
in doing so and to have threatened the Plaintiff
with imprisonment
prior to doing so, held sufficient evidence that Plaintiff had
instigated the prosecution.
”
And
see page 17 where the following was said:
“
On
all these authorities the test is whether the Defendant did more than
tell the detective the facts and leave him to act on his
own
judgment. That is all the Defendant says he did; and, on Tranter’s
case direct evidence to the contrary is impossible.
But there is good
deal of circumstantial evidence. In the first place the Defendant put
the matter into the detective hands, because
he wanted to get the
property back by indirect means, and not by civil proceedings. Then,
the Defendant failed to tell Clark, the
detective, all the facts. He
did not tell him that the Plaintiff claimed a right to retain the
goods, and he did not tell him what
he, the Defendant, knew perfectly
well, where the goods were kept by the Plaintiff. Instead of telling
the detective that, he allowed
him to go about for a whole fortnight
investigating the whereabouts of these things. There never was any
question of the things
being concealed. Then there is evidence that
the Defendant said to the Plaintiff, ‘I’ll have you put
in’. All
this is very strong circumstantial evidence showing
that the Defendant actually instigated and encouraged the
prosecution.
”
[140] Having regard to the
principles enunciated in our case law referred to above, it can with
respect never be suggested that
it was the decision of the police or
state to arrest, charge and/or prosecute the plaintiffs and
therefore the defendants did
not set he law in motion. It must be
borne in mind that in virtually every case of a malicious
prosecution, an accused was charged
and/or prosecuted. Sometimes the
matter was withdrawn and sometimes the accused was acquitted.
[141] Therefore it is rather a
question of whether or not Bennett and Wales instigated the criminal
proceedings by:
141.1 making false allegations in
their statements to the police
without which a prosecution would not have ensued; and/or
141.2 by failing to make a full
or fair statement of the facts in their statements to the
police; and/or
141.3 by threatening Bayett with
criminal proceedings if an amount of R7.1 million was not repaid;
and/or
141.4 by making a definitive and
unambiguous charge to the police without first requesting an
investigation; and/or
141.5 by being actively
instrumental in the investigation and prosecution; and/or
141.6 by acting in such a way
that the reasonable man would conclude that they are acting clearly
with the specific view to procuring
the prosecution of Bayett, Thomaz
and Fouche and such prosecution was a consequence of their actions.
[142] It is my considered view
and finding that on the facts as referred to above and hereunder,
Bennett and Wales’ actions
fall squarely within all the
instances of instigation referred to above.
[143] This becomes particularly
evident as it will be demonstrated that Bennett (and Wales)
deliberately made false and distorted
allegations in their respective
statements and deliberately omitted material facts in their
statements.
[144] The falsity, distortions
and omissions were designed to ensure an arrest and prosecution which
they hoped would pressurise
Bayett to pay the R7.1 million demanded
at the meeting of 13 December 2005.
[145] In order to ensure that the
false statements and deliberate omissions caused the desired outcome,
Bennett and Wales furthermore
used decisive legal language to prompt
an arrest and prosecution well knowing that the police could react
positively to the demands
of business persons that fraudsters be
prosecuted.
[146] Their designed
maliciousness and ulterior motives become evident when the statement
or Bennett to the police is examined.
(Wales’ statement is
similar if not identical in most respects). The statement contains so
many deliberate untruths and material
omissions that at the very
least the most probable inference, if not the only inference, is that
they instigated the prosecution
maliciously, without probable cause
and with an ulterior purpose to cause an arrest and prosecution which
would “
convince
”
Bayett to rather succumb to their financial demand.
[147] In examining the statement
it is prudent to have regard to the type of language used by Bennett
(and by Wales) in the police
statement to demonstrate that he acted
in such a way that a reasonable man would conclude that he was acting
clearly with the specific
view to procuring the prosecution of
Bayett, (and Thomaz and Fouche to put additional pressure on Bayett),
and that the prosecution
was a consequence of his (their) actions.
They resorted to the following decisive legal language with a view to
procure a definite charge and a prosecution
[148] See in this regard the
following with reference to his statement:
Paragraph 10 thereof:
“
The
figures that were then available to me gave me reason to suspect
beyond all reasonable doubt
that the figures presented to us by John or Brian were a
misrepresentation of the truth
.
”
(emphasis supplied)
Paragraph 13 thereof:
“
I
cannot think of
any acceptable lawful reason
…
and therefore the GP percentage supplied by John and Brian was also a
misrepresentation of the truth
.”
(emphasis supplied)
Paragraph 14:
“
I
have
no doubt
that John and possibly Brian made
a wilful unlawful
misrepresentation
that
led to my
prejudice
as well as an actual and potential loss in finances.
”
(emphasis supplied)
Paragraph 17:
“
I
cannot think of
any acceptable lawful reason
for
John and Brian not declaring the expenses accurately and truthfully.
”
(emphasis supplied)
Paragraph
18:
“
I
cannot think of any acceptable lawful reason for John and Thomaz not
declaring the expenses as I stated here above.
”
(emphasis supplied)
Paragraph
20:
“
I
cannot think of any acceptable lawful reason for John and Brian
making the representations…
”
(emphasis supplied)
Paragraph
21:
“
This
further leads me to believe that John did everything that he could to
further his
nefarious actions
to our determent (
sic
).
”
(emphasis supplied)
Paragraph
22 thereof:
“
I
am of the opinion that John’s actions were
wilful,
premeditated and designed with
the purpose to mislead and prejudice me and/or cause me potential
prejudice.
”
(emphasis supplied)
And further down:
“
I
therefore am of the opinion that the perpetrators of these acts
should be given an opportunity to answer the
charges of
Fraud and Defeating and/or Obstructing the Course of Justice in a
court of law
therefore
request prosecution
regarding this matter
.”
(emphasis supplied)
[149] Quite clearly Bennett’s
statement (and that of Wales) was designed to also cause the arrest
and prosecution of Thomaz
and Fouche (and in fact they were arrested
prosecuted). It is respectfully submitted that the inclusion of
Thomaz and Fouche was
not only designed to cause also their arrest
and prosecution but also with the ulterior purpose to put pressure on
Bayett to succumb
to their outrageous demand for payment of R7,1
million.
[150] The arrest and prosecution
of Thomaz and Fouche were the consequence of the following:
150.1 In paragraph 18 of his
statement, Bennett made it clear that he could not think of any
acceptable lawful reason for Bayett
and
Thomaz
not
declaring the expenses. This in itself introduced Thomaz as a
perpetrator and caused Thomaz to be associated with the
“fraudulent
acts”
of Bayett
.
150.2 In paragraph 10 of his
statement Bennett alleged that Fouche was going to destroy the
information and in paragraph 22 of
his statement he stated
inter
alia
the following
:
“
I
am further of the opinion that the differences in the figures were
not by mistake and it is by all indications clear
that
John and/or persons acting on his behalf
have
taken steps to conceal the act by destroying evidence that could have
reasonably been foreseen as being material evidence against
him.
”
It is clear that the above is a direct imputation that Fouche
concealed and destroyed evidence.
150.3 In paragraph 23 of his
statement Bennett in fact provides the particulars of also Fouche and
Thomas and there could only
be one reason for that, i.e. for purposes
of an arrest as Fouche was also now associated with the “
fraudulent
acts
” of Bayett.
[151] Bennett’s statement
(and similarly that of Wales) was in many instances false and/or
distorted and/or failed to be
a full or fair statement of the facts.
The consequences of the false and distorted statement (and supporting
false statements)
were the following:
151.1 The Police arrested
Bayett, Thomaz and Fouche without employing a forensic auditor.
151.2 The State prosecuted them
but before the trial commenced realised the absence of merits and
withdrew the matter.
If the Police (and prosecution)
were privy to the true and full facts they would never have arrested
them. This can be stated with
certainty as the full facts are
available now and should have been available then if it was not for
the untruths, distortions and
omissions in the pre-drafted statements
offered to the Police.
[152] Bennett and Wales
deliberately made it very easy for the Police to arrest and the State
to prosecute. They provided them
with all the statements they needed
without the need to do an in-depth independent investigation. This
was carefully designed
by drafting the statements in such a way that
they purportedly contained decisive facts leading to obvious
conclusions (unfortunately
based on untruths, distortions and
designed omissions).
[153] The contents and language
of the already drafted statements, designed omissions and the
corroborative style of the misleading
statements had the effect that
the Police did not appreciate the need to independently investigate.
Had they done so, the outcome
of such an investigation could only
have been:
153.1 that the due diligence was
the consequence of a contractual provision (clause 4.2); and
153.2 that there were no prior
misrepresentations. Even if there were, that the contractual
provisions eliminated any reliance
on prior misrepresentations;
153.3 that Annexure B on the
gross profit percentage was not guaranteed but rather that its
accuracy was subject to verification;
153.4 that Annexure B could
never have been an all-inclusive document;
153.5 and that Bennett and Wales
waived reliance on Annexure B by agreeing to the amendment contained
in the Addendum.
[154] As such the balance of
probabilities dictates that there would have been no basis for the
Police to accept the correctness
of the criminal complaint by Bennett
and Wales and to arrest and prosecute the plaintiffs.
[155]
Examples of false
allegations and allegations out of context or incomplete allegations
or serious omissions are the following
:
155.1 In paragraph 6 of his
statement Bennett refers to a due diligence as if it was an isolated
and insignificant occurrence removed
from the terms of the Agreement
and without disclosing that the due diligence in fact countered all
the alleged misrepresentations
or the materiality thereof.
155.2 In particular the
statement failed to direct the Police to the following:
155.2.1 that in fact a due
diligence was conducted;
155.2.2 that the due diligence
took 2-3 weeks and was done by an auditor;
155.2.3 that many differences
were found not to be material;
155.2.4 that at the due
diligence Robinson found a number of aspects to be at variance with
Annexure B which would have entitled
them to resile from the
Agreement but notwithstanding he, (Bennett) (and also Wales) elected
to proceed with the Agreement by amending
clause 4.2 thereof to
eliminate the reliance on Annexure B.
155.3 No doubt, had Bennett and
Wales told the Police about the due diligence, and more importantly
that as a result of the due
diligence they chose not to further rely
on Annexure B and entered into an Addendum, the Police (and State)
would have been very
careful to arrest and prosecute particularly
without a proper investigation and without the assistance of a
forensic auditor.
The State would have been in a position to far
earlier than the ultimate withdrawal, appreciate the total lack of
substance in
the criminal complaint. Unfortunately the State was
blinded by the veneer skilfully applied to the allegations in the
statements
to conceal the true facts.
155.4 In the same paragraph 6 of
his statement, Bennett stated that:
“
A
… clause was included in the offer to purchase Agreement which
guaranteed the GP and the information that had been presented
to us
as true and correct.
”
155.5 This is also patently
false as a clause was not included in the offer to purchase which
guaranteed the GP. On the contrary,
clause 4.2 makes it clear that
the contents of Annexure B were not guaranteed but indeed that the
accuracy thereof was made subject
to a verification process.
155.6 Furthermore, if one has
regard to paragraph 6 of the statement of Bennett and then considers
paragraph 7 of his statement,
it becomes patent that there is a huge
time gap. This is coincidentally the time period relevant to the due
diligence and the deliberate
concealment thereof is present.
155.7 In paragraph 7 of his
statement Bennett said that the only figure that they could verify
was the actual closing stocktaking
figure. This is a lie as Bennett
and Wales followed a verification process in the form of a due
diligence where a number of material
aspects were in fact verified.
155.8 In paragraph 8 of his
statement, Bennett stated that from the time of take-over, they
inter
alia
appointed labour
consultants (Tanzer) who then informed them that the majority of the
wages were either under paid or wrongfully
paid. However, the
correct position is that Tanzer had already furnished his report to
Laas on 15 January 2005 which was before
take-over. (See Expert
Volume 2, page 378.) As such, Bennett and Wales knew before
take-over about the alleged incorrect sectoral
payments and about
cash payments.
155.9 Moreover there was no
evidence at any stage by Tanzer that the “
…
majority of the staff
were either underpaid or wrongly paid
”
as alleged in paragraph 8 of his statement. Ultimately it turned out
in Tanzer’s evidence that such submission was
patently false
and that Davis was used to manipulate the wages identified by Tanzer
to create purportedly huge underpayments.
155.10 In paragraph 9 of his
statement, Bennett alleged that Bayett and Mendelson had guaranteed
the gross profit, which again
was false. The maliciousness of the
false statement becomes more pertinent if one is mindful of the fact
that Bennett and Wales
at the time were experienced and astute
businesspersons with vast experience in business. There was not even
a remote possibility
that Bennett (and Wales) could have read any
such guarantee in the Agreement. The wording of the relevant clauses
of the Agreement
is plain and makes it patently obvious that none of
the clauses provided for any guarantee.
155.11 In paragraph 11, Bennett
alleged that he had discovered in the hidden GRV’s, expenses
which were far above those that
were declared to them by Bayett and
Mendelson. What he deliberately omitted to tell the Police was that
Robinson had conducted
a due diligence also on expenses and that
Robinson had found certain differences but that Bennett and Wales
notwithstanding the
differences, opted to proceed with the purchase
and in fact waived reliance on
inter
alia, the
expenses.
This is so because all the experts agreed that expenses are
irrelevant in the determination of the gross profit percentage
and
the Addendum replaced any reliance on Annexure B with reliance on an
agreed gross profit percentage.
155.12 Apart from the fact that
Bennett failed to disclose the above, the figures for instance for
“
Repairs and
Maintenance
”
were budget figures but once again Bennett graciously omitted to tell
the Police in his statement that the figures for the
item “
Repairs
and Maintenance
”
in Annexure B were budget figures and not actual figures. It is also
known from his evidence that Bayett never represented
to him that the
budget amount was the same as the actual amount. As such, the
distortion of the truth was malicious and designed
to secure an
arrest and prosecution.
155.13 In paragraph 15 of his
statement Bennett alleged that the turnover was R350 000,00 lower and
amounted to R36 259 946,00.
What Bennett omitted to tell the Police
was that Robinson in the due diligence tested the turnover against
the POS system and found
the difference between the declared turnover
and the turnover as shown on the POS not to be material.
155.14 In paragraph 16 of his
statement Bennett alleged that the opening stock as at 1 March 2004
amounted to a value of R1 756
000,00. He failed to inform the Police
that at take-over they (Bennett and Wales) in fact agreed to an
opening stock for 1 March
2004 to be in the amount of R1 593 208,00.
He deliberately used the higher opening stock figure to create a
greater distortion
of the gross profit percentage.
155.15 In paragraph 16 of his
statement, Bennett also referred to a closing stock of R1 593 206,00
and said that figure was in
strong contrast with the original figure
given to him in October 2004. This allegation is simply false as
Bennett and Wales were
party to the closing stock take at the end of
January 2005 and knew and agreed the figure was R1 436 458,00. In
addition, Bennett
(and Wales) also knew that there was no closing
stock take at the end of August 2004 and therefore there could not
have been a
closing stock figure in “
strong
contrast
”.
Bennett well knew that the very reason why Robinson could not
calculate a gross profit percentage and why the parties agreed
to a
closing stock at the end of January 2005 was that there was no stock
take in October 2004.
155.16 In paragraph 17, Bennett
alleged that the purchases were also misrepresented. Apart from the
fact that this was not true
and that there was no substance in the
allegation, he failed to inform the Police once again about the due
diligence.
155.17 In paragraph 18 of his
statement, Bennett alleged that the cost of packaging material was
understated notwithstanding the
fact that he well knew at the time
that the costs calculation was for a different period and that he
calculated the costs for February
2004 to December 2004 and the
correct period was March 2004 to January 2005.
155.18 In paragraph 20 of his
statement, Bennett said Bayett had guaranteed a gross profit of
21,9%. Apart from the fact that
Bennett knew that the gross profit
percentage was not guaranteed to be 21,9%, he failed to inform the
Police that he and Wales
had in fact subsequently agreed to a gross
profit percentage of 21,3% in the Addendum.
155.19 Further in paragraph 20
of his statement Bennett alleged that the nett profit was presented
to be R289 151,96 per month
without informing the police that
Robinson in the due diligence calculated the nett profit to be R240
000,00 per month.
155.20 In paragraph 21 of his
statement, Bennett said that Bayett certified the due diligence to be
true and correct but he deliberately
failed to disclose any further
facts including those referred to above under the heading “
Due
Diligence
” to
the Police.
[156] Bennett and Wales also
filed a statement by Yolande Reyneke. This statement is in the same
font and style. A reading of
the contents thereof makes it clear
that it was designed to further their malicious ulterior conduct.
When she testified, I had
the privilege to observe the absolute poor
quality of her evidence and her inability to support facts upon which
she initially
sought to give evidence.
[157] If Reyneke’s
evidence and the absolutely poor quality thereof is for instance
compared to the contents of her statement,
it becomes more than clear
that allegations were incorporated in her statement which she could
factually not state. Instances of
such inclusions are to be found in
the last part of paragraph 4 and in paragraph 13 of her statement and
a mere reading of the
aforesaid two paragraphs in comparison with her
evidence in court, makes it abundantly clear that Reyneke’s
statement was
prepared for her and designed to obtain incriminating
evidence which she personally did not have any knowledge of and could
not
say.
[158] It does not avail Bennett
and Wales to have made available a short report of Lomnitz to the
Police (Plaintiffs’ Bundle
1, page 245). That was rather
another deliberate design by Bennett (and Wales). Bennett testified
that he (Bennett) was the one
who calculated the gross profit
percentage to be 19,47%. Lomnitz in his short report made it clear
that his report was limited
to “
an
analysis of certain information … did not constitute an audit
and may not necessarily have revealed all material facts
”
and that “
this
trading account
(was)
prepared by the
purchasers …
”
(Plaintiffs’ Bundle 1, pages 245/6.)
[159] Bennett and Wales did not
call Lomnitz as a witness as they appreciated that Lomnitz based his
“
report
”
on their say so and that Lomnitz did not even do the due diligence.
Therefore, they could not risk exposure of the above.
[160] However, it suited them to
present the “
report
”
to the Police as on the face of it, it would create the impression
that their complaints were supported by an auditor.
[161] Bennett and Wales did not
leave it to the Police to take their statements and the statement of
their witnesses as such investigation
by the Police would have
unearthed omitted facts and untruths. Instead they employed one Lobo
Das Neves to do the “
investigation
”.
(Pleadings : Further Particulars, paragraph 2 and paragraph 1.2,
page 321.)
[162] In addition to all of the
above, once the State had withdrawn the charges, Bennett and Wales
instructed (and paid) AIN to
further the investigation in an attempt
to achieve the reinstitution of the prosecution and at their costs
caused hundreds of subpoenae
to be issued. Ultimately the information
obtained as a result of all the subpoenae proved the GRV’s as
discovered on behalf
of Bayett to be correct. (Plaintiffs’
Bundle 2, page 601.)
[163] This in my view, further
exposes that Bennett and Wales instigated the proceedings with the
specific view to procuring the
prosecution of Bayett, Thomaz and
Fouche and there can be no doubt that such prosecution was a
consequence of the misrepresentations,
misstatements and omissions in
the affidavits of
inter
alia
Bennett, Wales
and Reyneke.
[164] It is not surprising that
Wales did not give evidence as he probably realised that he would not
have been able to defend
his statement at all.
[166] It is also significant
that Bennett and Wales did not seek to call Panyiotou as a witness as
they knew that Panyiotou’s
statement was similarly designed by
them to procure and secure a prosecution and more importantly, they
knew that Panyiotou would
not be able to substantiate the contents of
his statement (as was the case with Reyneke).
[165] It is my considered view
and finding that all the deliberate misrepresentations of the truth
and flagrant omissions in Bennett’s
statement (and the
statement of Wales) should be viewed cumulatively and as such justify
an inescapable inference that the statements
were designed to
instigate and secure an arrest and prosecution with the ulterior
purpose to put pressure on Bayett to pay to them
R7,1 million
demanded on 13 December 2005.
[166] If ever there was a clear
example of a (malicious) instigating of proceedings, this is the
case. Furthermore it will in my
further view become even more clear
when the other requirements for a malicious prosecution are dealt
with hereunder.
BENNETT AND WALES ACTED WITHOUT REASONABLE AND PROBABLE CAUSE
[167] LAWSA at paragraph 323
says the following about “
reasonable
and probable cause
”:
“
Reasonable
and probable cause means an honest belief based on reasonable grounds
that the institution of the proceedings complained
of was
justified.
[1]
There must be sufficient facts known to the defendant from which a
reasonable person could have concluded that the plaintiff had

committed the offence in question, and a mere honest belief that the
facts amount to an offence irrespective of the legal requirements
is
insufficient.
[2]
The defendant is only expected to have taken reasonable measures to
discover the facts upon which he or she bases a conclusion
that the
plaintiff was guilty of the offence: the defendant need not test all
the relevant facts.
[3]
Though the defendant had an honest belief in the charges where there
were no reasonable grounds for that belief, there can be no

reasonable and probable cause.
[4]
Mere honest belief in the truth of the facts upon which the
accusation is based is not conclusive of the presence of reasonable

and probable cause.
[5]
There may be absence of reasonable and probable cause irrespective
of whether there was an honest belief in the guilt of the accused.
[6]
If the defendant is found to have acted with reasonable and probable
cause an action for malicious prosecution will fail, no matter
what
his or her motive is for instituting the prosecution.
[7]
The test of reasonable and probable cause involves both subjective
and objective elements.
[8]
Not only must the defendant have subjectively had an honest belief in
the guilt of the plaintiff, but his or her belief and conduct
must
have been objectively reasonable, as would have been exercised by a
person using ordinary care and prudence.
[9]
”
See: the authorities below that
illustrate the various elements of this requirement which I have
highlighted with numbers corresponding
with the authorities;
1
Hotz
v Shapiro
1902 CTR 988
992;
William Temple
Nourse v The Farmers’ Co-operative Co Ltd, Guy Barber Nourse v
The Farmers’ Co-operative Co Ltd
(1905) 19 EDC 291
316 327;
Waterhouse
v Shields
1924 CPD 155
162;
Madnitsky v
Rosenberg
1949 1 PH J5
(W)
13
14;
May v Union
Government
1954 1 All
SA 76
(N);
1953 3 SA 899
(N);
1954 3 SA 120
(N) 129;
Beckenstrater
v Rottcher & Theunissen
1955 1 All SA 146
(A);
1955 1 SA 129
(AD) 135;
Van
der Merwe v Strydom
1967
3 All SA 281
(A);
1967 3 SA 460
(AD) 467;
Prinsloo
v Newman
1975 2 All SA
89
(A);
1975 1 SA 481
(AD) 495
et
seq; Landman v Minister of Police
1975
2 All SA 76
(E);
1975 2 SA 155
(E) 156;
Ochse
v King William’s Town Municipality
1990
2 SA 855
(E) 857;
Mthimkhulu
v Minister of Law & Order
1993 4 All SA 315
(E);
1993 2 SACR 206
(E);
1993 3 SA 432
(E) 439;
Heyns v Venter
2003
3 All SA 176
(T);
2004 3 SA 200
(T) 211.
2
Waterhouse
v Shields supra
162
168;
cf Ochse v King
William’s Town Municipality supra
858
et seq
;
Heyns v Venter supra
211.
3
Madnitsky
v Rosenberg supra 14.
4 Pyett v Francis
(1907) 28 NLR 194
200;
cf
Heyns v Venter supra
211.
5
Fyne
v The African Realty Trust Ltd
1906 EDC 248
256.
6
Maserowitz
v Richmond
1905 TS 342
344;
Pyett v Francis
supra
199
et
seq.
7
Ochse
v King William’s Town Municipality supra
857.
8
Van
Noorden v Wiese
(1882)
2 J 43 54;
Fyne v The
African Realty Trust Ltd supra
256;
Banbury v Watson
1911 CPD 449
460;
Madnitsky v Rosenberg
supra
14;
May
v Union Government supra
129.
[168] Bennett (and Wales) chose
to depose to affidavits for purposes of the criminal complaint by not
only making false and distorted
allegations but also by not
disclosing full and fair facts to the police as referred to above.
Bennett (and Wales) also omitted
material facts in their respective
statements as stated above.
[169] There can be no doubt that
Bennett and Wales did not have reasonable and probable cause to
believe, based on reasonable grounds,
that the institution of the
proceedings complained of was justified. In fact Davis conceded that
there was no substance in the
criminal complaint.
[170] That concession by Davis
was unavoidable as it was plain, simple and logical that:
170.1 the gross profit
percentage was never guaranteed;
170.2 the nett profit was never
guaranteed; and
170.3 the correctness of
Annexure B and the expenses therein was never guaranteed.
[171] On the contrary, the
Agreement made it clear that Annexure B dealing with turnover, gross
profit percentage and expenses
had to be verified and Bennett and
Wales opted to do that verification by means of a due diligence.
[172] Bennett and Wales were at
the time experienced and astute businessmen and Bennett conceded in
evidence that the contractual
terms were not foreign to him.
[173] As such there can be no
question that Bennett and Wales knew that they did not have
reasonable or probable cause to institute
the criminal proceedings
but as stated above, criminal proceedings were instituted for an
ulterior purpose. That also explains
why they did not institute
civil proceedings.
[174] Their unwillingness to
allow Nowitz to first further investigate and verify their
allegations and their unwillingness to
first agree to a forensic
audit before instituting criminal proceedings further corroborates
not only their absence of reasonable
cause but indeed the objective
absence of reasonable and probable cause.
THAT BENNETT AND WALES ACTED WITH MALICE (OR
ANIMO INIURIANDI
)
[175] LAWSA at 321 states the
following about the meaning of “
animus
iniuriandi
” in
this context;
“
An
action for malicious prosecution lies under the
actio
iniuriarum
and the element
of
animus iniuriandi
is therefore a requirement.
[1]
Apart from the other elements, the plaintiff must prove that the
defendant had the necessary
animus iniuriandi
.
[2]
Animus iniuriandi
includes not only the intention to injure but also consciousness of
wrongfulness,
[3]
and is distinguishable from improper motive or malice.
[4]
Malice is the
actuating impulse preceding intention.
[5]
A person who
lays a criminal complaint against another intends to injure him or
her. The complaint’s act, however, is lawful,
provided he or
she had reasonable and probable cause for laying the charge and was
not actuated by malice. Proof of
animus iniuriandi
satisfies the fault element, but the defendant’s act will not
be wrongful unless he or she abused the right to lay a complaint
with
the police by acting without reasonable and probable cause
and out of
malice.
See the authorities hereunder substantiating the numerical digit
accentuated above;
1
Prinsloo
v Newman
1975 2 All SA
889
(A);
1975 1 SA 481
(AD) 492: “
In
actions of this nature the plaintiff’s remedy is provided under
the action injuriarum, from which it follows that what
has to be
alleged and established is animus injuriandi.
”
Cf Lederman v Moharal
Investments (Pty) Ltd
1969 1 All SA 297
(A);
1969 1 SA 190
(AD) 196;
Ramakulukusha
v Commander, Venda National Force
1989
3 All SA 140
(V);
1989 2 SA 813
(V) 837;
Ochse
v King William’s Town Municipality
1990 2 SA 855
(E) 857;
Heyns
v Venter
2003 3 All SA
176
(T);
2004 3 SA 200
(T) 208;
Amerasinghe
Aspects of Actio Injuriarum 6.
2
Prinsloo
v Newman supra
492;
Moaki v Reckitt &
Colman (Africa) Ltd
1968 3 All SA 242
(A);
1968 3 SA 98
(AD) 105. See titles DEFAMATION;
DELICT; PERSONALITY INFRINGEMENT.
3
Maisel
v Van Naeren
1960 4
All SA 447
(C);
1960 4 SA 836
(C) 840 850
et
seq; Smit v Meyerton Outfitters
1971 1 All SA 102
(T);
1971 1 SA 137
(T) 139;
SA
Uitsaaikorporasie v O’Malley
1977 3 All SA 631
(A);
1977 3 SA 394
(AD) 403;
Ramsay
v Minister van Polisie
1981 4 All SA 692
(AD);
1981 4 SA 802
(AD) 818-819;
Dantex
Investment Holdings (Pty) Ltd v Brenner
[1988] ZASCA 122
;
1989
1 All SA 411
(A);
1989 1 SA 390
(AD) 396;
Minister
of Justice v Hofmeyr
[1993] ZASCA 40
;
1993 2 All SA 232
(A);
1993 3 SA 131
(AD) 154.
4
Basner
v Trigger
1946 AD 83
95;
Moaki v Reckitt &
Colman (Africa) Ltd supra
104;
SA Uitsaaikorporasie v
O’Malley supra
405.
5
Gluckman
v Schneider
1936 AD
151
159. See par 322
post
.
[176] The deliberate omissions
and false statements in Bennett and Wales’ respective
statements as stated above without a
doubt justify the probable
inference that they acted with malice.
[177] In addition, the following
acts by Bennett and Wales in my considered view corroborate that they
acted with malice:
177.1 Bennett and Wales prepared
statements for the criminal complaints without first meeting with
Bayett.
177.2 Bennett and Wales took
over the business and were unable to achieve the gross profit
percentage due to theft of stock, (R650
000) their non-involvement in
the operations of the business and the fact that their manager,
Panyiotou, rather focussed on his
own businesses Instead of seeking
the advice of Bayett or at least explanations from Bayett, Thomaz and
Fouche on the way foward,
they chose to blame Bayett. This behaviour
together with their conduct at the meetings on 13 December 2005
demonstrates they had
no real intention of settling the matter
through genuine discussions, but rather they chose to abuse the
criminal justice system
to further their own agenda.
177.3 When Bennett and Wales
attended the pre-meeting with Nowitz on 13 December 2005, Nowitz
understandably could not get a full
understanding of the facts in
that short period.
177.4 Nowitz was of the view
that if Bennett was correct then he could investigate it from his
(Nowitz’s) side and verify
what the position was.
177.5 Bennett and Wales did not
follow the advice but wanted R7,1 million repayment or else they
would proceed with the criminal
charges. This is clear from Kahn’s
evidence and more importantly from his letter addressed to Nowitz on
20 December 2005
which was addressed shortly after thatmeeting.
177.6 Nowitz in his reply to the
said letter (in February 2006) did not deny the correctness of the
allegations made by Kahn in
the letter. It would have been very easy
for Nowitz to deny the allegations as he (Nowitz) was privy to the
meeting and to a large
extent did not need instructions from Bennett
and Wales to determine whether or not the facts therein stated were
true or not.
177.7 It was put by Levin SC in
cross-examination to Kahn that Nowitz did not want to get embroiled
in an exchange of correspondence
in the matter that was pending and
which he was involved in. (Transcript, page 434.) This simply cannot
be correct. Nowitz was
at the meeting and he in any event responded
to the letter but in his response he did not deny the allegations
made by Kahn.
[178] It is respectfully
submitted that Kahn’s evidence and the contents of his letter
of 20 December 2005 should be accepted
on a balance of probabilities
as the correct version. That being so, the purpose of the meeting
was to demand payment of R7,1
million from the first plaintiff
failing which Bennett and Wales would proceed with a criminal
complaint. This unavoidable inference
is also compatible with what
was put to Kahn by Levin SC at Transcript, page 428, where the
following was put:
“
Now
you and he go out of this meeting, just you and he and he (Nowitz)
repeated to you that to resolve the matter, let your client
tell you
whether the complaints are wrong or whether he admits them. To the
extent that he admits them, the matter could be resolved
and if not,
well then the matter would have to follow its course …
”
[179] Bennett in his evidence
conceded that he wanted repayment of the amount of R7,1 million. He
did not institute civil proceedings
for the amount but rather used
the criminal justice system because, according to him, he paid his
taxes. (Transcript, pages 1182-5.)
It is my considered view that the
above response is in the circumstances that prevailed, not only
arrogant but condescending.
[180] He also admitted that when
the matter was not resolved, they proceeded with the criminal
complaint on 15 December which was
merely two days later.
[181] Bennett admitted in
cross-examination that the defendants’ plea in paragraph 4.3.3
was wrong where it was pleaded that
Bennett and Wales would have
proceeded with the criminal action whether or not settlement was
reached at the meeting of 13 December
2004. The plea in this regard
was obviously false and it was falsely pleaded in an attempt to avoid
any assertion or admission
of extortion.
[182] The objective facts in my
further view, show that Bennett and Wales were wrong in their
calculations and even more wrong
in the demand for R7,1 million. The
evidence as a whole shows that Bennett and Wales chose to manipulate
the facts to ensure a
prosecution with the purpose of putting
pressure on Bayett to meet their outrageous demand.
[183] Bennett and Wales could
never have genuinely or
bona
fide
believed that
they were entitled to request payment of the amount of R7,1 million
thereby in effect purchasing a business at a
price approximately half
its agreed unencumbered asset value.
[184] At the time they purchased
the business, the goodwill of the business was approximately R5,5
million and the agreed unencumbered
asset value was about R3,6
million (in order to make up the purchase price of R9,1 million).
[185] Bennett and Wales did not
impair the goodwill in 2005/2006 and 2006/2007 financial statements
of Full Swing and as such the
probable inference is that they
accepted the goodwill or value of the business as it was in 2004.
This is apart from the agreed
unencumbered asset value.
[186] In claiming R7,1 million
they erased all the accepted goodwill and nearly halved the agreed
unencumbered value of the assets.
This makes it clear that the
demand for R7,1 million could not have been
bona
fide
apart from the
fact t hat it was objectively proved to be wrong.
[187] This, in my view, explains
the need to try and enforce payment of the wrong amount by putting
pressure on Bayett by threatening
him with criminal proceedings.
[188] The
mala
fide
and malicious
conduct by Bennett and Wales further comes to the force by the fact
that they ignored the advice of Nowitz to allow
him to further
investigate and verify their allegations and their failure to proceed
with civil proceedings. They also ignored
the request for the
appointment of a forensic auditor before laying criminal charges.
[189] Bennett tried to explain
this by saying that he paid tax and the inescapable inference in that
is that he believed that he
was entitled to abuse the criminal
justice system to pressurise Bayett to succumb to his unjustified
demand.
[190] It is also significant
that:
190.1 Bennett knew that the
State was under pressure in terms of funding (i.e. to appoint a
forensic auditor); and
190.2 Bennett believed that
because he paid tax in the country that the criminal complaint and
thus the police would do his job
for him.
[191] Therefore it was not
necessary for Bennett to institute civil proceedings as the criminal
justice system would have resolved
the disputes and if necessary he
could have thereafter instituted civil proceedings.
[192] Bennett knew that the
State did not have the necessary funds and consequently he knew that
they would not investigate the
matter with the luxury of a forensic
auditor. This turned out to be an objective fact. Bennett and Wales
therefore knew that by
using strong language (as they did) their
statements would have sufficient persuasive value to cause Bayett and
the others to be
charged and prosecuted.
[193] The prosecution at some
point in time realised the lack of merit and withdrew the matter.
Such a withdrawal came as no surprise
as it is an objective fact that
there were no merits in the prosecution. This was also admitted by
Davis.
[194] Factually Bennett and
Wales only resorted to civil proceedings in the form of a
counterclaim after they had received the
summons for malicious
prosecution.
[195] It also comes as no
surprise that Bennett and Wales allowed or caused their expert Davis
to resort to inappropriate legal
conclusions in his expert report
(which is unheard of) such as:
“
8.1.1
The seller knowingly and intentionally misrepresented to the
purchasers the facts pertaining to the business as purchased
by the
purchasers.
8.1.2 The seller manipulated
the financial affairs …
”
“
8.1.5
… to cancel the information which supported his wrongful and
intentional misstating of the financial affairs of the
Melville
Spar.
”
.
“
…
there were misrepresentations, the gross profitability and level
of monthly expenses is incorrect and was wilfully misrepresented
by
the sellers.
”
“
8.1.4
… monthly expenses were incorrect and wilfully misrepresented
…
The net profitability as
stated by the seller was accordingly also wilfully misrepresented
…
”
Expert Bundle, Volume 2, page
346-348.
[196] The malice becomes further
evident in regard to the alleged VAT manipulation (premised on
Bennett’s version):
196.1 Bennett chose not to play
open cards with the Police by not telling them about his knowledge of
the alleged VAT manipulation.
This is apart from the fact that
Bennett and Wales were prepared to proceed with the purchase of the
business after hearing about
the skimming and the alleged VAT
manipulation.
196.2 The law is clear they had
the right to resile from the Agreement if those facts (i.e. the
skimming and the alleged VAT manipulation)
came to their knowledge
even after the Agreement.
[197] The contrary is true, even
assuming that Bennett was correct in his evidence that Bayett did not
only tell him about the
skimming but also about the VAT manipulation,
Bennett and Wales with the full knowledge of the disclosure opted not
to cancel the
Agreement or to claim damages but elected rather to
proceed with the Agreement. However, they deliberately did not share
this
crucial information with the Police under the guise that Bennett
thought it was irrelevant or that he purportedly did not understand

the significance thereof.
[198] It is clear that Bennett
and Wales knew that if they put correct facts and all the facts in
their criminal statements that
there could not and would not have
been a prosecution. They therefore resorted to the twisting of
facts, the telling of untruths
and the deliberate omission of crucial
facts as referred to above.
[199] As such the malice and the
motive for the malice is patent. See Baker v
Christiani (supra)
.
[200] In
Heyns
v Venter
2004 (3) SA
200
(T) the court went even so far as to state the following
inter
alia
in the headnote:
“
Held
,
further, that within the context of the
actio
iniuriarum
'malice'
meant
animus
iniuriandi
or
intent. The existence of a malicious motive could, however, show
intent and whether the person in question had acted unlawfully.

(Paragraph [12] at 208F.)
Held
,
further, as to the requirement of knowledge of unlawfulness, that the
Courts were constitutionally obliged to develop the common
law in
order to bring it in line with the spirit, purport and objects of the
Bill of Rights. The dignity of a person could be unreasonably

impaired if defendants were permitted to raise a defence of absence
of knowledge of unlawfulness in cases of malicious prosecution.
In
view of the constitutional protection of human dignity, the ambit of
the delict of malicious prosecution had to be extended:
if it was
clear that a defendant had as a result of gross negligence thought
that an act constituted a crime and had instigated
a charge, he
should not be allowed to raise as a defence that he was unaware that
it was
not a crime.
To ensure that this development did not go too far,
gross
negligence had to be required. (Paragraph [14] at
A
209C-D and
G-H.)
Held
,
further, that since the sale of a
res
aliena
was
permitted in law, there was no reasonable cause for the plaintiff's
prosecution. (Paragraph [16] at 211D-E.) The defendant's
attitude
that such conduct was a crime accordingly constituted a material
misconception of the law. (Paragraph [17] at 211H/I.)
Held
,
further, that the defendant had instigated the charge by actively
associating with the prosecution of the plaintiff. Prosecution
would
not have ensued had it not been for defendant's unreasonable conduct,
and accordingly the defendant's conduct was factually
connected to
the ensuing result. His conduct was for purposes of legal policy also
sufficiently connected to such conduct to constitute
legal causation.
(Paragraph [18] at 211I-212B.)
Held
,
further, that
animus
iniuriandi
was
present when there was insight into the material facts of the delict
coupled to a realisation that the conduct was unlawful.
In the
present case the defendant had complied with the
animus
iniuriandi
requirement as he ought to have realised that one was entitled to
sell the property of another and that this did not constitute
either
theft or fraud. He was a businessman in the motor industry and in
that capacity a higher level of knowledge could be expected
of him.
He should have known that the plaintiff's conduct was at most breach
of contract. (Paragraphs [20]-[21] at 212E/F-G.)
Held
,
further, that general damages had to be awarded for the indignity
suffered by the plaintiff, as well as for his legal costs and
loss of
earnings for six months. (Paragraphs [23]-[25] at 212J-214B.)
”
THAT THE PROSECUTION HAS FAILED
[201] It is common cause that on
30 March 2007 the State withdrew the charge against Bayett, Thomaz
and Fouche.
[202] During this trial it seems
that an attempt was made to suggest that the withdrawal was
provisional and thereby to suggest
that the action for malicious
prosecution was premature. However, Bennett and Wales did not
present any evidence that the withdrawal
was provisional but for the
fact that through AIN they have unsuccessfully attempted to revive
the criminal proceedings after its
withdrawal. The withdrawal
occurred on 30 March 2007 more than 3½ years ago and thus is
inconsistent with a “
provisional
”
withdrawal.
[203] In
Lemue
v Zwartbooi
(1896) 13
SC 403
at 405, De Villiers CJ said the following in this regard:
“
For
the first time the question has been raised in this court whether, in
an action for malicious prosecution, the refusal of the

Attorney-General or Solicitor-General to prosecute constitutes
sufficient proof of a termination of the prosecution in the
Plaintiff’s
favour. It has been urged on behalf of the
Defendant that such refusal is equivalent to a nolli prosequi which,
according to the
English law, has been held not to terminate the
prosecution. Considering, however, the wide difference between the
functions of
the Attorney-General, as well as the systems of criminal
prosecution in the two countries, the English precedent cannot be
regarded
as binding her.
”
And further at page 406:
“
In
this country the public prosecutor really performs the functions of a
grand jury in addition to his other duties. He indicts
where the
preliminary examination discloses a prima facie case against the
accused, but he declines to prosecute it there is no
reasonable
prospect of a conviction by an impartial jury. This refusal to
prosecute does not operate as res judicata so as to prevent
a future
prosecution for the offence charged, for it has been held that the
Attorney-General may indict in the case where the Solicitor-General

has declined to prosecute (which is not the position at present) and
the private party who has suffered injury by any crime or
offence
may, subject to the restrictions mentioned in Ordinance No. 40
prosecute (private prosecution now provided for in the Criminal

Procedure Act where the public prosecutor has declined to prosecute)
But so far as the original proceedings are concerned, they
are
terminated by the public prosecutor’s refusal to prosecute.
This view has been taken for granted in numerous actions
for
malicious prosecution which have been brought in this court.
”
And further at 407:
“
While
a prosecution is actually pending its results cannot be allowed to be
pre-judged by the civil action, but as soon as the Attorney-General,

in the exercise of his quasi judicial function, has decided not to
prosecute, there is sufficient termination of the original
proceedings to allow of the civil action being tried. A different
view of the law would lead to the extraordinary result that the

clearer the proof of a person’s innocence is, the greater
difficulty would he have in obtaining damages for false and unfounded

charges maliciously made against him. On the other hand, the law, as
I have stated it to be, need not lead to any hardship on the

Defendant in an action for malicious prosecution. If, after the
Solicitor-General has refused to prosecute, there is a reasonable

possibility that the Attorney-General will prosecute or an
undertaking by the Defendant himself to prosecute without delay, it

would be quite competent for the court to postpone the civil trial
until after the verdict in the fresh criminal proceedings.
In the
present case there was no suggestion that the Attorney-General was
likely to prosecute the Plaintiff for perjury, or that
the Defendant
himself intends to institute a private prosecution for that offence.
”
[204] In addition to the above,
it is simply not possible for the criminal charge as it stood at the
time to be reinstituted.
Davis as stated before, agreed there was no
substance in the criminal charge and that concession is in accordance
with the views
expressed also by Greyling and Thomaz that Bayett did
not falsely represent the gross profit percentage. Bennett and
Wales, through
Davis, at some point in time tried to introduce an
alleged VAT manipulation to demonstrate that the gross profit
percentage was
less than represented but those efforts also came to
nothing and as stated before Davis correctly conceded that his
approach to
the calculations of the alleged VAT manipulation
constituted a problem. In any event, this is irrelevant as the
alleged VAT manipulations
did not form part of the criminal
complaint. It is thus my considered view and finding that in the
peculiar circumstances in this
case the prosecution can and is being
regarded as having failed.
DAMAGES
[205] It is not in dispute that
Bayett, Thomaz and Fouche were arrested on 26 June 2006.
[206] It is not in dispute that
they appeared in court on 31 August 2006, 2 October 2006, 23 November
2006, 28 November 2006, 9
January 2007 and 30 March 2007 on which
date the charge was withdrawn.
[207] It is also not in dispute
that the legal costs incurred by Bayett in defending the criminal
matter amounted to R1 154 541,80.
[208] Bayett also claims general
damages for
contumelia
as a consequence of the malicious prosecution in the amount of R500
000,00.
[209] It is my considered view
and finding that the separate Claim A for R100 000,00 should rather
be included in the consideration
of the claim for general damages on
account of the malicious prosecution.
[210] Thomaz claims general
damages in the amount of R400 000,00 and Fouche claims general
damages in the amount of R100 000,00.
[211] A factor that must be
taken into account in assessing the amount for general damages to be
awarded to the plaintiffs is the
fact that notwithstanding the
withdrawal of the matter, Bennett and Wales still tried to revive the
matter to further a malicious
prosecution in order to try and avoid
the action instituted against them. They in fact went so far to
institute a counterclaim
to try and avoid the action against them.
[212] Moreover until this day,
they have not taken any steps to apologise to any of the plaintiffs
even at the point where it became
clear in this trial that there was
no merit in the criminal charges.
[213] What is further
aggravating as far as Bayett is concerned, is the fact that Bennett
and Wales knew Bayett and they moved
in the same social circles and
their children attended the same school. Bennett and Wales did not
care as their ulterior purpose
overshadowed expected moral, social
and legal decency.
[214] In
Minister
of Safety and Security v Seymour
2006 (6) SA 320
(SCA) an amount of R90 000,00 was awarded for general
damages. In that matter Seymour was detained for 5 days although the
majority
of the detention time was in a hospital bed. Seymour also
only appeared once in court.
[215] In this matter the
plaintiffs Bayett and Thomaz appeared in leg irons in the criminal
court and had to appear many more times
which caused huge
embarrassment and humiliation to them. The evidence of Bayett,
Thomaz and Fouche in regard to their embarrassment,
contumelia
and humiliation was not disputed. In respect of Thomaz and Fouche it
must be borne in mind that they had no interest in the sale
but they
were dragged in to pressurise Bayett.
CONCLUSION
[216] After listening to the
entirety of the evidence led in this matter and having taken into
consideration counsels’ closing
argument, it is my considered
view and finding that the plaintiffs have succeeded in making out a
case for the grant of the orders
sought in the particulars of claim.
What remains to be undertaken is what quantum of damages to award to
or in favour of the plaintiffs.
[217] The
modus
operandum
of the
defendants and their purported intentions have come out clearly out
of the evidence that had been led.
[218] It is clear in my view,
that the defendants either misconstrued the facts themselves or they
were ill-advised about the state
of affairs and circumstances
surrounding the sale of Melville Spar. This became apparent when the
defendants’ expert, Davis,
testified. He practically refuted
and negated whatever assertions the defendants were projecting as the
foundations of their case
against the plaintiffs. He conceded that
the basis of his report was wrong, mostly agreeing with or confirming
what Bayett and
his experts testified about. These concessions eroded
the very foundations of the defendants’ defence to the claims
as well
as de-legitimise the framework of their counterclaim.
[219] The defendants’
counterclaim consequently fall to be dismissed with costs.
[220] The plaintiffs thus
succeed with their claims against the defendants.
ORDER
[221] The following order is
thus made:
221.1
In respect of
Bayett (first plaintiff
)
221.1.1 The defendants are
ordered to pay to Bayett the amount of R1 154 501,80 as special
damages for legal costs he incurred
defending and prosecuting this
action;
221.1.2 The defendants to pay to
Bayett the amount of R200 000,00 as general damages;
221.1.3 Interest
a
tempore morae
at the
rate of 15,5% per annum calculated on the amount of R1 154 501,80
from 30 March 2007 until date of payment;
221.1.4 Interest
a
tempore morae
on the
amount of R200 000,00 awarded as general damages from date of issue
of summons herein until date of payment;
221.1.5 First defendant
(Bennett) and the second defendant (Wales) are further ordered to pay
the above amounts and the costs jointly
and severally, the one
paying, the other being absolved.
221.2
In respect of
Thomaz (second plaintiff
)
221.2.1 The defendants are
ordered to pay to the second plaintiff (Thomaz) the amount of R120
000,00 being general damages;
221.2.2 They are also to pay
interest on the above amount at the rate of 15,5% per annum
a
tempore morae
, payable
from the date of service of summons until date of payment;
221.2.3 Costs of suit, jointly
and severally, the one paying, the other being absolved.
221.3
In respect of
Fouche (third plaintiff
)
221.3.1 The defendants are
ordered to pay to the third plaintiff the amount of R80 000,00 as
general damages;
221.3.2 Interest on the above
amount at the rate of 15,5% per annum
a
tempore morae
payable
from the date of service of summons until date of payment;
221.3.3 Costs of suit, jointly
and severally, the one paying, the other being absolved.
______________________________
N G KGOMO
JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
FOR THE PLAINTIFFS ADV BARRY ROUX SC
INSTRUCTED BY EVERSHEDS
SCHREINER CHAMBERS,
JOHANNESBURG
TEL NO: 011 – 523 6088
FOR THE DEFENDANTS ADV LEVIN
INSTRUCTED BY NOWITZ ATTORNEYS
HYDE PARK
JOHANNESBURG
TEL NO: 011 – 325 5300
DATE OF FINAL ARGUMENT 22 NOVEMBER 2010
DATE OF JUDGMENT 17 FEBRUARY 2012