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[2015] ZAGPJHC 67
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Dracotas v Van Der Elst and Others (23870/2014) [2015] ZAGPJHC 67 (13 March 2015)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NUMBER: 23870/2014
DATE: 13 MARCH 2015
In the matter between:
GEORGE NICHOLAS
DRACOTAS
......................................................................................
Applicant
And
VAN DER ELST, GEORGE
NICHOLAS
..................................................................
First
Respondent
DE BRUYN , PIETER
SCHALK
............................................................................
Second
Respondent
BOKWA, IKABOTH RONNIE
OLEHILE
..............................................................
Third
Respondent
DE BRUYN VAN DER ELST AND BOKWA
INC
................................................
Fourth
Respondent
JUDGMENT
WINDELL J:
[1] The applicant obtained judgment
against the fourth respondent, De Bruyn, Van der Elst & Bokwa
Incorporated, an attorneys
firm, on 8 October 2013 for an amount of
R 298 935.36 plus interest. The fourth respondent has failed to pay
the judgment debt
or part thereof.
[2] It is common cause that the
indebtedness arose from an agreement entered into between the
applicant, NAMRU 89 CC and the fourth
respondent. The fourth
respondent was represented by one of its directors, the second
respondent, Mr Pieter Schalk De Bruyn.
[3] The first and third respondents are
also directors of the fourth respondent. The applicant now applies
for judgment against
the three directors, which judgment shall be
joint and several to the judgment against the fourth respondent. The
application is
not opposed by the second respondent Mr Pieter Schalk
De Bruyn.
[4] The applicant relies on the
articles of association of the fourth respondent, section 23(1)(a) of
the Attorneys Act, 52 of 1979,
section 53(b) of the Companies Act, 61
of 1973 and section 19(3) of the Companies Act ,71 of 2008.
[5] Section 23 (1) (a) of the Attorneys
Act, 53 of 1979 permits a private company to conduct an attorneys'
practice only if the
memorandum of association provides that all
directors, past and present, will be jointly and severally with the
company be liable
for the debts of the company contracted during
their periods of office.
[6] The articles of association of the
fourth respondent provides as follows:
“Direkteure en gewese direkteure
(is) gesamentlik en afsonderlik tesame met die maatskappy
aanspreeklik vir die skulde en
laste van die maatskappy wat gedurende
hul ampstermyn aangegaan word of is”
[7] The first and third respondents
dispute liability on the basis that they had no knowledge of the
agreement and that the debt
and/or transaction had not occurred in
the normal course and scope of the fourth respondent’ business.
They further contended
that it “should have been devoid of any
shortcoming in the ethics and prohibitions of the law society, more
so as the applicant
is also an attorney”
[8] The defences now raised by the
directors were not raised in the main application. Applicant
submitted that the respondents are
not entitled to raise any defence
at this stage as they should have raised it during the main
application. Applicant relied on
EA Gani (Pty) Ltd v Francis
1984
(1) SA 462
(T) and contended that the judgment against the firm is a
novation of the former debt and it therefore extinguished the
original
obligation and created a new debt. (novatio necessaria). The
facts of the Gani matter is the following: Gani concluded a written
agreement of lease with one F ( the principal debtor). On the same
day Francis signed a deed of suretyship providing a continuing
suretyship for all indebtedness for which the principal debtor was
then or thereafter liable. Gani obtained judgment against the
principal debtor under the lease and a year later instituted action
against the surety. The surety then raised a plea of prescription.
The court found that the judgment against the principal debtor had
created an independent cause of action and that the new cause
of
action of indebtedness created by the judgment fell within the wide
undertaking of the respondent in the deed, which had created
a
continuing security for all indebtedness for which the principal
debtor was then, or thereafter liable to Gani.
[9] In Trust Bank of Africa Ltd v
Dhooma
1970 (3) SA 304
(N) Fannin J came to the following conclusion
at page 310 as to the effect of novatio necessaria .
“It does seem to me to be a
somewhat artificial view of the position to regard a judgment as, in
all circumstances, having
the effect of a novation. In some cases, of
course, it does have precisely that effect, where, for example, a
plaintiff obtains
a judgment for cancellation of a contract and for
damages. Thus, in this case, had the judgment been one declaring the
contract
between the parties to have been at an end, with an order
that the defendant return the vehicle to the plaintiff and pay the
defendant
a sum of money, it could quite realistically be said that
the judgment wholly replaced and thus novated the contractual rights
and liabilities of the parties inter se. But in a case like the
present, where the only purpose of the judgment is to enable the
plaintiff to enforce certain rights, by means of execution if need
be, without in any way affecting other rights arising out of
the
contract, it seems more realistic to regard the judgment not as
novating the former but as strengthening or reinforcing them.
The
right of action will have been replaced by a right to execute, but
the enforceable right remains the same.”
[10] The matter of Natal Trading and
Milling Co Ltd v Inglis 1925 TPD dealt with the liability of an
undisclosed principal and his
agent on a contract made by the agent.
Appellant sued and obtained judgment against an agent in the belief
and upon the faith of
his being the principal. When he subsequently
discovered that the agent had acted on behalf of an undisclosed
principal, the respondent,
he sued the latter on the contract. It was
held that appellant, having taken judgment against the agent, had
exhausted his remedy,
and that he could not proceed against the
principal, even if the judgment remained unsatisfied. Curlewis JA
stated the following
at p. 743:
“. . . as the liability of agent
and principal is merely alternative, and not joint or joint and
several, only one action
can be maintained on that cause of action,
and when the creditor obtains judgment in such action, the only right
left to the creditor
is to enforce that judgment against the judgment
debtor, and, save for that, his remedy on the cause of action has
been exhausted.
No further action lies to him on that cause either
against the agent or against the principal. This must necessarily be
so, because
not only is the judgment regarded in our law as a form of
novation of the cause of action on which it is founded (Voet,
46.2.1.)
and to that extent extinguishes or supersedes the original
obligations, but if it were not so, the creditor would in effect have
not an alternative remedy, against the agent and the principal, but a
joint and several one.”
[11] In Swadif (Pty) Ltd v Dyke 1978(1)
SA 928 Trengrove AJA considered the effect of a judgment on the
original obligation of the
judgement debtor and after considering the
Natal Milling and Trust Bank matters, stated the following :
“So much for the authorities and
decided cases to which we have been referred. I respectfully agree
with the views expressed
by FANNIN, J., in Trust Bank of Africa Ltd v
Dhooma, supra, in the passage quoted above. In a case like the
present, where the
only purpose of taking judgment was to enable the
judgment creditor to enforce his right to payment of the debt under
the mortgage
bond, by means of execution, if need be, it seems
realistic, and in accordance with the views of the Roman-Dutch
writers, to regard
the judgment not as novating the obligation under
the bond, but rather as strengthening or reinforcing it. The right of
action,
as FANNIN, J., puts it, is replaced by the right to execute,
but the enforceable right remains the same. Mr. Berman contended that
the concept of “novation by judgment” was really an
aspect of our law relating to res judicata and some support for
this
line of reasoning may be found in De Groot, 3.49.1, Voet, 42.1.2,
42.1.29, 30, 31 and 32; De Wet and Yeats, op. cit., p. 216,
and
Caney, op. cit., pp. 69-70. On this approach to the nature and effect
of novatio necessaria, one can understand why a plaintiff,
who has a
judgment for specific performance in his favour, is not precluded
from suing in another action for cancellation and damages,
in lieu of
the decree of specific performance. (Ras and Others v Simpson,
1904
T.S 254
at p 256; Evans v. Hart,
1949 (4) S.A. 30
(C) at pp. 35-37;
Nieuwoudt, N.O., and Another v . Els,
1953 (3) S.A. 642
(O) at pp.
644-645.)
[12] The facts of the Gani matter can
be distinguished from the facts in casu. The applicant in casu
applies for judgment against
the respondents based on their liability
as co debtors. It is not necessary under these circumstances to
introduce the concept
of novation.
[13] Applicant also contended that the
judgment of the court in the main application is res judicata. It was
contended that the
requirement that the prior action be between the
same parties does not mean the identical parties but also persons who
are in law
identified with those who were parties in the proceedings.
Referring to Man Truck and Bus (SA) (Ltd) v Dusbus Leasing CC and
Others
2004(1) SA 454 (W) it was submitted that there was sufficient
privity of interest between the firm and the directors to uphold a
plea of res judicata.
[14] In Caesarstone Sdot-Yam Ltd v
World of Marble and Granite 2000 CC and Others 2013(6) SA 499 (SCA)
Wallis JA held the following
at par [43]:
“It may be that the requirement
of the ‘same persons’ is not confined to cases where
there is an identity of persons,
or where one of the litigants is a
privy of a party to the other litigation, deriving their rights from
that other person. Subject
to the person concerned having had a fair
opportunity to participate in the initial litigation where the
relevant issue was litigated
and decided, there seems to me to be
something odd in permitting that person to demand that the issue be
litigated all over again
with the same witnesses and the same
evidence in the hope of a different outcome, merely because there is
some difference in the
identity of the other litigating party.”
[15] The directors and more
specifically, the first and third respondents were not parties in the
proceedings against the fourth
respondent. There is no indication
that they were even aware of the proceedings instituted against the
firm. The only director
that was involved in the proceedings in the
main application was the second respondent, Mr De Bruyn. He opposed
the application
on behalf of the fourth respondent and deposed of the
answering affidavit.
[16] Section 53(b) of the Companies Act
provides that:
“(the) memorandum of a company
may, in addition to the requirements of s 52 –
(a) . . .
(b) in the case of a private company,
provide that the directors and past directors shall be liable jointly
and severally, together
with the company, for such debts and
liabilities of the company as are or were contracted during their
periods of office, in which
case the said directors and past
directors shall be so liable.” [Emphasis added]
[17] In Maritz and Another v Maritz &
Pieterse Inc ( In Liquidation)
2006 (3) SA 481
, Heher JA considered
the history of s 53(b) of the Companies Act and its application to
professional companies . With reference
to Fundstrust (Pty) Ltd (in
Liquidation) v Van Deventer
1997 (1) SA 710
(A) he found that the
protection provided by the section was directed at the company's
creditors. Heher JA stated that the effect
of the section is to
render the directors co-debtors with the company, conferring on the
creditors an independent right of action
against the directors and
the effect of including the statement in the memorandum is twofold:
creditors are able to hold the directors
liable singuli et in solidum
for company debts and liabilities, and if a director pays any of the
company debts, he has a right
of recourse against his fellow
directors for their proportionate shares.
[18] Res judicata is a special plea
pleaded by a party who is able to show that the point in dispute has
been adjudicated upon already
between the parties. Under the
circumstances of this case it is clear that in the present
circumstances a plea of res judicata
could not be successfully
raised.
[19] The directors are co- debtors and
are in light of the circumstances entitled to oppose this application
and to raise defences
not previously raised or decided upon by the
court in the main application. The question now arises whether the
defences now raised
by the directors are legally sound and if they
have any merit.
[20] The Fundstrust case concerned the
relationship between a stockbroker and an investor. The court held
that the investor is entitled
to recover “. . . any loss which
the latter might suffer as a result of his broker’s fraudulent
or negligent conduct,
. . . by way of a contractual action and the
directors would be liable”. Hefer JA held that the word
“contracted”
in section 53 refers only to contractual
debts and liabilities of a company. The learned Judge held that this
limited interpretation
of the word “contracted” will not
lead to the anomalous result that directors would be liable for a
contractual debt
owed to the company’s creditors but not for
monies stolen from such creditors. Hefer JA dealt with section 6A of
the Companies
Amendment 62 of 1968, the precursor to section 53(b) of
the Companies Act and stated as follows:
“It is clear that Parliament
intended to impose on them an entirely new statutory liability and to
provide creditors with
an entirely new remedy not hitherto available
to them which would enable them to hold the directors liable singuli
et in solidum
for company debts and liabilities before the company’s
liquidation.”
[21] The first issue is whether the
applicant is a creditor of the first respondent; secondly, whether
that relationship is contractual.
It is undisputed that the firm is
liable to the applicant. It is undisputed that the liability arises
from a contract entered into
between the applicant and the fourth
respondent. The first, second and third respondents are directors of
the firm and are as
co debtors liable for the debts of the company.
They cannot escape liability merely because they did not have any
knowledge of
the agreement. Their ignorance provides no defence to
their personal liability in terms of section 53(b) of the Companies
Act.
In terms of the articles of association the directors are liable
for “die skulde en laste van die maatskappy.” In terms
of section 53 (b) the directors are liable ( as co debtors) “or
such debts and liabilities of the company as are or were
contracted
during their periods of office”. There is no evidence that the
debt had not occurred in the normal course and
scope of the firm’s
business, but, it is in any event, in my view, irrelevant. The
directors are co debtors. To interpret
s 23(1)(a) of the Attorneys
Act and section 53(b) of the Companies Act as to make only provision
for certain contracts as this
case shows, would bring about
consequences directly opposed to the legislative intention. The
creditors of a professional company
would be deprived of the very
assurance that the section sets out to provide, which is the right to
claim in full from the directors.
See Maritz and Another v Maritz &
Pieterse Inc. ( In Liquidation) supra.
[22] There is further no factual basis
for the allegation of touting. The nature of the applicant’s
claim against the first
respondent is based in contract and the
applicant is a creditor of the fourth respondent. I am accordingly
satisfied that there
are no merits in any of the defences set out in
the answering affidavit.
[23] In the result the following order
is made:
21.1. Judgment is granted against the
first second and third respondents which judgment shall be joint and
several to the judgment
against De Bruyn Van Der Elst and Bokwa
Incorporated under case number 42153/2012 for :
a) Payment of the sum of R 298 935.36
b) Interest on the aforesaid amount at
the rate of 15,5% per annum as from 12 September 2012 to date of
payment.
c) Cost of the application.
L.WINDELL
Judge of the South Gauteng High
Court
Counsel for applicant : Adv Smit
Counsel for respondent : Adv.
Groenewald
Date of hearing : 9 March 2015
Date of judgment : 13 March 2015