About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2013
>>
[2013] ZAGPJHC 322
|
|
Derbigum Manufacturing (Pty) Ltd v Callegaro and Others (21041/2009, 17893/2011) [2013] ZAGPJHC 322 (17 May 2013)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CONSOLIDATED
CASE NUMBERS: 21041/2009
17893/2011
DATE:
17 MAY 2013
In
the matter between:
DERBIGUM
MANUFACTURING (PTY)
LTD
.........................................
PLAINTIFF
AND
VINCENZO
CALLEGARO
..............................................................
1
ST
DEFENDANT
CORNELIA
JACOBA CALLEGARO
.............................................
2
ND
DEFENDANT
POLYTENO
TRADE
CC
..................................................................
3
RD
DEFENDANT
JUDGMENT
Windell
AJ:
Introduction.
[1]
The issue before me is whether a plea of
res judicata
should
succeed with the result that the action be dismissed. This issue is
decided separately in terms of Rule 33(4) of the Uniform
Rules of
Court.
Background
[2]
The plaintiff company is a manufacturer and distributor of
waterproofing systems. The first defendant (Callegaro) was the
managing
director of the plaintiff company and as such owed the
plaintiff fiduciary duties to act in its best interest. Callegaro,
whilst
employed by the plaintiff, established the third defendant, a
Close Corporation, by the name of Polyteno Trade CC (Polyteno).
He was the sole member of Polyteno until 2005 when his wife (second
defendant) became the sole member.
[3]
Polyteno purchased raw materials and products required by the
plaintiff from plaintiff’s existing and new suppliers and
sold
it to the plaintiff at an increased price and at a profit. It is
common cause that this conduct constituted a breach of Callegaro’s
fiduciary duties to the plaintiff. Callegaro resigned as director of
the Company in November 2008.
[4]
The plaintiff only obtained knowledge about Polyteno after
Callegaro’s resignation. The plaintiff then investigated the
connection between Callegaro and Polyteno and tried to assess the
profits Callegaro have received and the losses that the plaintiff
had
suffered. After its investigation the plaintiff estimated the secret
profit to be between R 10 million and R 30 million.
[5]
The plaintiff then instituted an action (the first action) against
Callegaro in May 2009, claiming a statement and debatement
of the
account and payment of all amounts found to be due by Callegaro.
Callegaro initially denied that he had a fiduciary duty
towards the
plaintiff and that Polyteno made a profit at the expense of the
plaintiff. At the pre- trial conference Callegaro however
admitted
that Polyteno had sold raw materials to the plaintiff at a profit and
on the day of the trial, Callegaro also conceded
to the relief sought
against him. A Court Order ( the court order) was granted
against him wherein the Court ordered
Callegaro to render an account,
supported by vouchers, of all the income and profits derived by him
as a result of his interest
in Polyteno during the period 13 July
2000 until 30 November 2009.
[6]
Callegaro complied with the court order and rendered an account
consisting of cheque payments made by Polyteno to Callegaro
amounting
to R 1,113,466.84. The plaintiff was not satisfied with this account
and subsequently brought a contempt of court application.
The reason
furnished was that the particulars of claim was clear in that the
plaintiff not only wanted a schedule of payments made
directly to
Callegaro, but also sought proof of the secret profits received by
Callegaro
through the use of Polyteno as an alter ego
.
(my
emphasis)
.
[7]
The plaintiff also brought, as an alternative, an application to
amplify the court order in the event of it not succeeding with
the
contempt of court application. In this application plaintiff
requested the Court to add the words “
under the name and
guise of the third respondent Polyteno”
to the court order
so that it should read:
“
the
defendant is to render an account, supported by vouchers, of all the
income and profits derived under the name and guise of
Polyteno CC
during the period 13 July 2000 until 30 November 2009.”
[8]
Both applications were opposed by Callegaro. In his answering
affidavit he submitted that he had complied with the court order
in
that he was obliged to account to the plaintiff for the secret profit
he
made and to render an account supported by vouchers of all
profits derived by
him
as a result of his interest in
Polyteno. He also submitted that his interest in Polyteno came to an
end in March 2005 when his
wife became the sole member.
(my
emphasis)
[9]
The contempt of court application as well as the alternative
application to amplify the court order was dismissed on 29 October
2010. Blieden J found that the court order was clear and unambiguous
and only referred to the first defendant’s interest
as a
member
in Polyteno.
[10]
The plaintiff then instituted the second action in May 2011 against
Callegaro, his wife and Polyteno as joint wrongdoers for
damages. It
is in this second action that Callegaro raised the plea of
res
judicata
.
The
pleadings
[11]
In the first action the plaintiff set out its case in paragraphs 10
-15 of the particulars of claim. Therein the plaintiff
alleged that
Callegaro breached his contractual obligations and fiduciary duty to
the plaintiff by making a secret profit at the
expense of the
plaintiff through his interest in Polyteno. Callegaro is therefore
obliged to account to the plaintiff the secret
profit made by him and
to pay the plaintiff the amount of the secret profit.
[12]
In the particulars of claim of the second action the plaintiff set
out the details of the first action, the details of the
court order
obtained in the first action and the subsequent contempt of court
application. In paragraph 14 the plaintiff stated
that the secret
profits made at the plaintiff’s expense were not limited to the
payments made by Polyteno to Callegaro and
accounted for in terms of
the order. It was alleged in consequence of the fraudulent stratagem
devised by Callegaro and his wife
(set out in paragraphs 6 and 15 of
the particulars of claim), the plaintiff sustained estimated damages
in the sum of R14 million.
This amount consisted of the mark-up
levied by Polyteno on the supply of raw materials and products
utilised by the plaintiff during
the period 13 July 2000 to January
2009. The precise quantification of the damages sustained can only be
determined on a full and
proper discovery, which the plaintiff will
seek to enforce in terms of the rules of court.
[13]
In the second action the plaintiff seeks an order for payment of
R 14 million, or such amount as may be found to
be due, against all
three defendants as joint or several wrongdoers. The plaintiff also
has an alternative claim against Callegaro
only, based on his
contract of employment and fiduciary duty owed to the plaintiff. The
relief plaintiff seeks against Callegaro
is to render a full account,
supported by vouchers, of all the business activities conducted by
Polyteno, detailing all secret
profits made pursuant to the
on-selling of products and raw materials from suppliers by Polyteno
to the plaintiff, a debatement
of such account and payment of
whatever amount is found to be due to plaintiff. The plaintiff stated
that it will not apply for
the relief in the first action set out in
prayers (c) and (d). (payment of the amount found to be due and
interest) .
Arguments
[14]
Counsel for Callegaro submitted that the first action that was
instituted against him was based upon the breach of his fiduciary
duty and was for disgorgement of profits. The second action is
founded in delict and is a claim for damages which is also based
on
the breach of the fiduciary duties. It is submitted that a director’s
breach of his fiduciary duty can give rise to either
a claim of
disgorgement of profit or to a claim of damages. The plaintiff is not
entitled to claim both.
[15]
Counsel for plaintiff submitted that the cause of action in the first
action was based on the breach of Callegaro’s contractual
obligations and fiduciary duty to the plaintiff. The second action is
based on a fraudulent concealment of the unlawful activities
of the
three defendants and the unlawful inducement of the suppliers to
supply material to Polyteno thereby enabling Polyteno to
sell it to
plaintiff at a profit. In addition the relief sought in these actions
is different. In the second action the secret
profits made by the
defendants were not those limited to the payments made by Polyteno to
Callegaro. Plaintiff seeks a full account
of all the business
activities conducted by Polyteno detailing all the secret profits
made by selling the raw materials and products
to the plaintiff.
Res
judicata
[16]
It is trite that a party relying on a defence of
res judicata
must prove that a final and definite judgment has been granted by a
competent court, on the same cause of action, with respect
to the
same subject matter, or thing, as between the same parties.
[17]
In
National Sorghum Breweries Ltd (t/a Vivo African Breweries) v
International Liquor Distributors (Pty) Ltd
[2000] ZASCA 159
;
2001 (2) SA 232
(SCA)
damages and restitution was claimed in two separate actions,
resulting from the breach of one contract. The court found that
damages
and restitution was two distinguishable concepts and that the
same thing was not claimed nor was the same cause of action relied
upon. At page 239 I and page 240 D Olivier J.A , said:
"The
fundamental question in the appeal is whether the same issue is
involved in the two actions: in other words, is the same
thing
demanded on the same ground, or, which comes to the same, is the same
relief claimed on the same cause, or, to put it more
succinctly, has
the same issue now before the Court been finally disposed of in the
first action”
[18]
In
Custom Credit Corporation (Pty)
Ltd v Shembe
1972 (3) SA 462
(A)
the
plea of
res judicata
was upheld. The seller obtained an order for cancellation of the
agreement, repossession of the bus sold and forfeiture of all
payments made by the purchaser. The forfeiture was claimed by virtue
of a specific forfeiture clause in the contract. Later, after
obtaining possession of the bus, the seller claimed, in a second
action, damages in the form of the difference between the
balance of
the purchase price owing at the time of cancellation and the value of
the bus after its return to the seller. The question
was whether it
was competent for the seller to recover the said damages. The Court,
per Van Winsen AJA, held that it was not, because
as soon as
the plaintiff made an election in terms of the contract (in this case
either forfeiture or damages), and he chooses forfeiture,
it would be
unfair to the defendant if he is subsequently faced with a second
action for damages. The court further reiterated
that t
he
law requires a party with a single cause of action to claim in one
and the same action whatever remedies the law accords him
upon such
cause, ( the once and for all rule). The plaintiff was also
prohibited by the provisions of sec. 2 (1) of the Conventional
Penalties Act, 15 of 1962, from granting an award of damages.
[19]
In studying the cases that deals with
res judicata
it became
clear that because the circumstances of each case differs, the
applicability of this defence has to be developed
to provide for the
demands of our modern society. In
Janse van Rensburg and Others
NNO v Steenkamp and Another; Janse van Rensburg and Others NNO v
Myburgh and Others 2010(1) SA 649
(SCA)
it was stated by Heher JA
on page 658 that:
“
Each case
must be decided according to its own facts. It is not practical to
try to formulate guidelines in abstract terms which
can be made
applicable to all situations. For example, one of the facts in
Boshoff v Union Government was that default judgment
was taken in the
previous case. From a passing remark of Greenberg J at 351 it
appears that that fact was not raised by the
plaintiff in answer to
the defence of res judicata. In a future case it may well be
necessary to consider whether it is advisable
to recognise an
extended application of the defence in such circumstances”.
[20]
In
Smith v Porritt 2008 (6) SA 303 (SCA)
Scott
JA summarized it as follows:
Each case will
depend on its own facts and any extension of the defence will be on a
case-by-case basis. (Kommissaris van Binnelandse
Inkomste v Absa Bank
Bpk (supra) at 670E–F.) Relevant considerations will include
questions of equity and fairness not only
to the parties themselves
but also to others. As pointed out by De Villiers CJ as long ago as
1893 in Bertram v Wood
(1893) 10 SC 177
at 180, 'unless carefully
circumscribed, [the defence of res judicata] is capable of producing
great hardship and even positive
injustice to individuals'."
[21] It is common
cause that both actions are against the same party, Callegaro. It is
also common cause that both actions are founded
on the same factual
circumstances and that the witnesses in both actions are the same.
The first action is for disgorgement of
funds and the second action
is for damages. Both are based on
inter alia
the breach of the
director’s fiduciary duty towards the plaintiff.
The
"threefold test” was applied in the case of
Mitford's
Executor
v Ebdens Executors
1917 AD 682
at 686
where
Maasdorp JA found:
"To
determine that action it will be necessary to enquire whether that
judgment was given in an action (1) with respect to
the same subject
matter, (2) based on the same ground, and (3) between the same
parties."
[22]
If the court strictly applied the threefold test
in casu
, an
argument could certainly be made out that the causes of action differ
in various aspects and
res judicata
is not applicable. The
issue is not that simplistic. The first order of business in deciding
the issue of
res judicata
is to compare the particulars of
claim in both actions and to establish what the cause of action is in
both these actions.
Cause
of action
[23]
The relationship between a company director and his company is one of
the well established examples of commercial fiduciary
relationships
accepted in South African Law. It is also an established principle in
our law and had been recognized on our courts,
that where a director
obtains a secret profit, the company could claim such profit from him
without alleging fault. In
Robinson v Randfontein Estates
Gold Mining Co Ltd
1921 AD 168
Solomon JA noted that the
Appellate Division held that the action was neither one for breach of
contract nor for damages arising
from a delict or a breach of
contract. At page 242 he stated:
“
The
action indeed is, as the Judges in the Court below held, one sui
generis.
.
. .”
[24]
This nature of the claim was reiterated in the matter of
Du
Plessis v Phelps 1995(4) SA 165 (C)
where Friedman JP stated the
following on page 171:
“
In
my judgment it is correct to state that a breach of fiduciary duties
does not necessarily involve fault. For example, if a director
were
to obtain a secret profit, the company could claim such profit from
him without alleging fault. An action of that kind could
be described
as sui generis. The claim would arise merely by virtue of the fact
that the director, in breach of his fiduciary duty,
obtained for
himself a secret profit which he should have obtained for the
company.”
[25]
A company can also institute a delictual claim against the director
based on the
lex Aquiliae
,
based on the breach of the director’s duty of care and skill.
In
Du Plessis NO v Phelps supra
on
page 170 B-D it was stated that:
“
Liability
in the event of a director failing to take reasonable care in the
management of the company's affairs is based upon the
principles of
the lex Aquilia. The basic requisite for liability under the lex
Aquilia is fault (dolus or culpa), which results
in loss to the
claimant. Liability for a breach by a director of his fiduciary
duties, on the other hand, does not necessarily
involve dolus or
culpa. Nor does such breach necessarily involve a right of recourse
by the company against its director - the
breach may simply render
the transaction voidable at the instance of the company.”
[26]
This issue was examined in great detail in
Symington and Others v
Pretoria- Oos Privaat Hospitaal Bedryfs (Pty) Ltd
2005 (5) SA 550
(SCA)
on page 564 where Brand JA stated the following:
“
It
was also accepted by all parties that a director's breach of
fiduciary duty can in principle give rise either to a claim for
disgorgement of profits or to a claim for damages. Again I think the
assumption was rightly made. It is directly supported by the
judgment
of Friedman JP (Van Zyl J concurring) in Du Plessis NO v Phelps
1995
(4) SA 165
(C) at 171 and, in the absence of any argument
to the contrary, I can think of no reason why this principle should
not be accepted. Though the common element of the two actions would
be a breach of fiduciary duty, the other requirements would,
of
course, be quite different. While, for example, it is not a
requirement of a claim for disgorgement of profits that the company
suffer any damages, such damages would by its very nature be the
central requirement of a damages claim. On the other hand,
while
the question whether the director had received any profit from the
breach of his fiduciary duty would be of no consequence
in a claim
for damages, this would be the essential requirement in a
disgorgement of profits claim”.
[27]
There is no precedent for the facts
in casu
. At first glance
the question before me seems therefore quite complexed. Can a company
claim from a director disgorgement of funds
in one action and then
claim for damages in a second action. It is trite that disgorgement
of funds is
sui generis
and plaintiff need not proof fault. A
claim for damages on the other hand is based on the
lex Aquiliae
and one needs to prove fault and a nexus between the wrongful act and
the damages.
[28]
In
African Farms & Townships v Cape Town Municipality
1963 (2)
SA 555
(A)
the old Roman Dutch and Roman Law authorities were
consulted and Steyn CJ noted on page 562 as follows:
“
In
regard to the requirement that the ground of the demand must be the
same, the authorities refer to the causa petendi or origo
petitionis. According to Voet, 44.2.4, it is not the form of
action which determines the sameness of the causa petendi, but
the
identity of the question which is again raised or set in motion. (Cf.
Vinnius, Inst. 4.13.5). That was also the Roman law.
(Dig. 44.2.3;
44.2.7 paras. 1 and 4). Huber, Praelectiones 44.2.6, indicates
that, if the merits of the action (meritum actionis)
which is
instituted, were not examined in previous proceedings, that may be an
answer to the judicati exceptio,”
[29]
I find that the question that should be asked in the circumstances of
the case
in casu
should rather be: Has the same issue now
before the court been finally disposed of in the first action? See
National Sorghum Breweries v International Liquor Distributors
supra
. The answer does not lie in whether a claim for
disgorgement of profits and a claim for damages are the same cause of
action but
the identity of the question which is again raised or set
in motion.
[30]
In
Bafokeng Tribe v Impala Platinum Ltd 1995(1) SA 653 (SCA)
it was found that some of the essentials of the
exeptio res
judicata
are not requirements set in stone. If there is
likelihood that a litigant will be denied access to the courts in a
second
action, it could be necessary that all the requirements for
res judicata
should be met. Conversely, in order to ensure
fairness the requirements especially the requirement that it should
be the same subject
matter and based on the same ground may be
relaxed.
[31]
In the first action no evidence was led. Callegaro conceded to the
relief that was claimed and the court order was granted.
The contempt
of court application was dismissed as Blieden J found that Callegaro
had complied with the court order. Blieden J
did not go into the
merits of the first action but was asked to interpret the court order
as it stands. He compared the particulars
of claim and the relief
that was claimed with the court order and in effect found that
Callegaro complied with the order (and the
relief claimed) by
disclosing only the cheque payments received from Polyteno. The
result of Blieden’s judgment is
that it was found by the court
that the plaintiff’s claim in the first action did not cover
the payments Callegaro received
under the guise of Polyteno. The
plaintiff is not intending to claim in the second action that which
they omitted to claim in the
first action. They claim in the second
action that which a court found was not the cause of the complaint in
the first action.
[32]
In the first action Callegaro disclosed the total amount that he
received by way of direct payment (in the form of cheques)
from
Polyteno, as an amount of R 1 113 486.84. The only issue outstanding
in the first action is the debatement of such account.
In the second
action the plaintiff is not claiming this amount, but claims the
profits that were realized through the guise of
Polyteno by
calculating the difference between the prices paid by Polyteno for
the raw materials and the prices at which the raw
materials was
sold to the plaintiff. The plaintiff alleges that the difference is
in the vicinity of R 14 million. The calculation
of the amounts owed
differs in the two actions.
[33]
I find that the case was not finally disposed of in the first action.
As was stated in the matter of
National Sorghum Breweries v
National Liquor Distributors supra
in paragraph 5:
"The
mere fact that there are common elements in the allegations made in
the two suits does not justify the exceptio –
one must look at
the claim in its entirety and compare it with the first claim in its
entirety. If this is done in the present
case, the differences are so
wide and obvious that one simply cannot say that the same thing was
claimed in both suits or that
the claims were brought on the same
grounds."
[34]
Although some of the factual issues to be determined in these actions
overlap, I cannot find that the same thing is claimed
in the
respective suits
plea
should be upheld.
If the particulars of claim are
compared, it is clear that the issue now under consideration has not
been finally laid to rest.
What
remains, thus, is whether or not it is appropriate in the exercise of
a judicial discretion that the claim should be allowed
to stand or
plea should be upheld. This discretion does exist and is discussed in
Scott v
Porrit supra
where it was held that the discretion involves considerations of
fairness and equity.
In light of
the above and the fact that the merits of the first action was never
examined, mindful of the fact that a litigant should
not be denied
access to courts, the plea of
res
judicata
cannot stand.
[35]
In
Bafokeng Tribe v Impala Platinum
supra
on page 567
Friedman JP noted:
“
In
evaluating the exceptio res judicata and issue estoppel the
courts are involved in a process and a search for a just juridic
interpretation and decision. It is an open-ended process of
elucidation and commentary, which explores, derives, reads into, and
gives significance to the essentials referred to. It causes one to
think in terms of grays. It is not an unchanging closed process”
Estoppel.
[36] The issue of
estoppel and the “once and for all” rule was briefly
mentioned by counsel for defendant during argument.
The courts had
accepted that issue estoppel is useful in those cases which do not
strictly conform to the threefold requirements
of
res judicata
.
In the
Bafokeng supra
on page 566 it was stated:
“
Issue
estoppel is also founded on public policy to avoid a multiplicity of
actions in order 'inter alia to conserve the resources
of the courts
and litigants'. There is a tension between a multiplicity of actions
and the palpable realities of injustice. It
must be determined on a
case by case foundation without rigidity and the overriding or
paramount consideration being overall fairness
and equity.
”
[37]
I have found that there is a difference between the issues to be
determined in the two actions. In these circumstances the
plea of
issue estoppel must also fail.
[38]
In the result the following order is made:
The
plea of
res judicata
is dismissed.
Cost
is awarded to plaintiff that includes the costs of senior and junior
counsel.
L
WINDELL
ACTING
JUDGE OF THE HIGH COURT
Counsel
for the Plaintiff
…......................
Adv
JG Wasserman SC
…
...................................................................................
Adv
GJ Nel
Counsel
for the Defendant
......................................
Adv
JF Steyn
Date
of hearing
.......................................................
8
March 2013
Date
of judgment
......................................................
17
May 2013