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[2016] ZAGPJHC 267
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Constantia Insurance Holdings (Pty) Ltd v Towsey and Others (25283/2013) [2016] ZAGPJHC 267 (16 September 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO:
25283/2013
Not
reportable
Not
of interest to other judges
Revised.
In
the matter between:
CONSTANTIA
INSURANCE HOLDINGS (PTY)
LTD
Plaintiff
and
TOWSEY,
JOHN
WINGFIELD
First
Defendant
MILLBANK,
PAMELA
JEAN
Second
Defendant
MOGASHOA,
RAYMOND
SELLO
Third
Defendant
BRUGMAN,
DEBBIE-LEE
Fourth
Defendant
JUDGMENT
Van
der Linde, J
Introduction
[1]
The trial
of this matter has been enrolled for 9 November 2016. The plaintiff’s
case against the four defendants is that they
breached their common
law fiduciary duties, and their duties in terms of
s.76(2)
of the
Companies Act 71 of 2008
, and should be declared delinquent directors
as contemplated in
s.162
of the Act.
[1]
The plaintiff has, under
rule 21(2)
, requested further particulars
from the defendants, but they have refused some of these; hence this
application.
[2]
The rule concerned provides that “…
only such further
particulars as are strictly necessary to enable … (the
requester) to prepare for trial …”
may be requested.
The defendants say that the plaintiff’s request is overbroad,
and so it is necessary first to understand
more about the pleadings,
and how the parties have squared up their respective positions.
Thereafter the appropriate contents of
the phrase “
strictly
necessary”
should be identified and, finally, the
particulars sought may then be considered.
The
pleadings
[3]
The plaintiff’s claim is as follows. It was a 20% shareholder
in Wheels Underwriting Managers (Pty) Ltd (in liquidation),
referred
to simply as “Wheels”. The four defendants were, with the
plaintiff, also shareholders of Wheels, and also
at all material
times directors.
[4]
Its business was that of a short-term insurance underwriting manager
of short-term insurance products. Wheels was finally wound
up on a
creditor’s friendly application on 6 September 2013, although
one does not know when winding up commenced.
[5]
On 1 January 2013 New Wheels Underwriting Agency (Pty) Ltd, referred
to a “New Wheels”, commenced conducting business
that was
the same as (or similar to) the business that Wheels had conducted;
all of the business of New Wheels fell within the
line of business of
Wheels.
[6]
The plaintiff asserts that the four defendants, all shareholders of
New Wheels, in breach of their directors’ fiduciary
duties to
Wheels, and in breach of
s.76(2)(a)
of the Act, misappropriated
benefits in relation to transactions that fell within the line of
business of Wheels, and that this
produced the commercial existence
of New Wheels.
[7]
Some five months later, on 23 May 2013, the defendants were party to
deciding that Wheels should cease all of its major trading.
The
defendants then used the infrastructure, premises, goodwill and staff
of Wheels to conduct the business of New Wheels. This
conduct too,
says the plaintiff, involved a breach by the defendants of
s.76(2)(a)
of the Act and of their fiduciary duties owed to Wheels. In
short, in the Judeo-Christian tradition, the case is one of breaching
the eighth commandment.
[8]
The defendants, for their part, accept that New Wheels, like Wheels,
is also a short-term insurance underwriting manager, but
say the
following. First, they say they disclosed New Wheels to the plaintiff
on 20 September 2012. Second, they say Wheels’
business was
strictly limited to acting in terms of a written binder agreement
with the plaintiff’s associate company, Constantia
Insurance
Company Limited, and New Wheels’ purpose was to pursue
opportunities not available to Wheels; it did not use any
corporate
opportunity available to Wheels.
[9]
Third, as directors of Wheels the defendants did resolve on 21 May
2013 that Wheels would stop trading, because otherwise wheels
would
have been unable to pay its debts. Fourth, they say that New Wheels
took over most of the Wheels staff else they would be
retrenched;
that Wheels retained a small staff contingent to deal with run-off
claims; that Wheels sub-let its offices to New Wheels
for June 2013;
and that Wheels sold its computer hardware and office equipment to
New Wheels.
[10]Finally,
the defendants say that
ss.162(5)
and (6) of the Act, if these were
not interpreted to afford a court a discretion to declare a person a
delinquent director (as
distinct from being obliged to do so)
if the circumstances prevail, are inconsistent with s.22 and
s.25 of the Constitution,
and are invalid.
[2]
[11]For
the rest, the plaintiff’s assertions are denied.
What
does the phrase “
strictly necessary”
mean?
[12]The
defendants referred to the Supreme Court of Appeal judgment of Heher,
JA in Ruslyn Mining and Plant Hire (Pty) Ltd v Alexkor
Ltd
[3]
to underscore the general propositions that further particulars are
not pleadings; that they do not set up a cause of action or
defence;
and that they do not limit or extend the scope of the case of the
party supplying them.
[13]The
cases through the years have also laid down the following principles
that assist. First, a party is not entitled to request
particulars
about its own case. Put differently, a party may not request
particulars without which that party will not be able
to prove its
own case. This is really self-evident, and derives probably from the
notion, trite in the context of onus discussions,
that the person who
asserts must prove that assertion, implicitly without the help of the
other person.
[4]
[14]But
it must not be viewed as restricted to matters in respect of which
the requester has the onus in the strict sense. A party
who intends
to advance a particular conception at the hearing, whether or not in
the discharge of an onus or even a rebuttal onus,
is not entitled to
compel the other party to provide it with particulars without which
the requester’s conception will not
succeed; or which stand in
the way of the requester’s conception succeeding.
[15]Second,
the mere fact that the particulars sought constitute evidence does
not disqualify it from disclosure, provided only
they are strictly
necessary to enable the requester to prepare for trial.
[5]
[16]Third,
and as an important qualifier to the first proposition, the requester
is entitled to know what positive case the other
party will advance
at the trial.
[6]
This is
justified, so as to prevent the requester from being caught unawares
at the trial. It must be appreciated, as alluded to
above, that what
positive case the particular respondent (plaintiff or defendant) will
advance at the trial is not limited to issues
in respect of which the
respondent has the onus, such as elements of the claim in convention,
or special defences, or claims in
reconvention, or a rebuttal onus.
[17]The
particular respondent, depending on the pleadings, may also intend
advancing a positive case,
[7]
on
the facts, in respect of which it bears no onus, to counter the case
which the requester will be advancing, and in respect of
which the
requester has the onus. In such a case the requester is nonetheless
entitled to know what the respondent will advance
at the hearing.
[18]Fourth,
it is of course possible that the particulars requested concern not
only the positive case that the particular respondent
will be
advancing, but at the same time, by virtue of overlap or contrary
assertion, also the case of the requester. In that event
the
respondent may argue that the particulars may be declined, because
they will advance the requester’s case. But that would
be
wrong. The respondent cannot decline to tell the requester what the
former will be advancing, merely because that information
will assist
the requester in advancing its own case.
[19]Finally,
where the respondent has not advanced a positive case, but has
instead simply denied an assertion of the requester,
the requester is
not entitled to ask the respondent for particulars of that denial.
[8]
This proposition does not apply where what presents as a denial is in
truth not that. Ambiguity in this context often arises where
the
denial responds to more than one positive averment, and it is not
clear whether the denial was intended to cover each averment
independently, or where it could be read as covering only the
ultimate conclusion of the composite averment.
[20]This
is usually the case where the denial is of say an assertion that the
defendant attended a meeting on a certain date at
which three others
were present. Unless the denial makes it clear, a blanket denial
could be understood to be a denial only of
the presence of other
people (or some of them) at the meeting; or only of the date of the
meeting; and so on.
[21]As
a footnote to these propositions, it is worthwhile adding that in
deciding whether or not particulars should be furnished,
the
endeavour does not view each formulated request ring-fenced in
isolation with the paragraph in the opposing pleading at which
it is
directed. The respective parties’ cases as a whole are
considered; substance over form.
[22]When
all is said and done, trials are about establishing the truth; and
our conception of the way to get there lies in the accusatorial
system of litigation. But it can only work if the protagonists are
fairly juxtaposed, issue by issue.
[23]The
temptation might, in the light of these observations, be freely to
allow all requests. But the constraining cap lies in
the words of the
rule, and for good reason. The rule-maker will have been aware that
trial preparation involves increasingly greater
refinement the nearer
the trial. (S)he will have been aware that parties ought not to be
tied down unfairly to particularity furnished
for trial.
[24]And
(s)he will have wished to prevent the request for trial particulars
becoming an interrogation or a dry run at cross-examination.
These
two endeavours are not per se verboten; indeed, they are the very
means by which the credibility of witnesses are made or
destroyed.
But they are designed to function in open court, where the judge too
is party to observing them in action, because factual
findings may
very well involve credibility findings.
[9]
The
specific questions
[25]Applying
these principles to the specific questions posed, chronologically,
the result is the following.
Question 6
is not being persisted
in, since the documents (the MOI and Articles of New Wheels) were
made available as part of the discovery
process.
Question 20
asks the defendants to tell the plaintiff what they disclosed to the
plaintiff, with specific reference to ten identified aspects
of the
New Wheels business. A response is furnished at paragraphs 8.1 to
8.5, the last sub-paragraph being the usual residual denial.
[26]But
the first four paragraphs provided the form of disclosure, the dates
of disclosure, the extent of the disclosure, and the
person on behalf
of the plaintiff to whom the disclosure was made. In my view this
furnishes sufficient particulars of the case
to be advanced by the
defendants; beyond that the questions cross the line to being
interrogatories.
[27]
Questions
22 to 26
go to the same topic. The defendants’ response is
the same. In my view, for the same reason advanced above, the
particulars
that have been furnished are sufficient to enable the
plaintiff to prepare for trial.
[28]
Question
32
requires a copy of the binder agreement that New Wheels has
concluded with Zurich. This has been supplied, but redacted. No
legitimate
justification has been put for the protection of the
redacted information, and I believe the plaintiff is entitled to the
entire
document in unredacted form.
[29]
Questions
38 and 39
go to the business conducted by New Wheels. The
particularity requested concern the case which the defendants advance
in their
plea, namely that New Wheels’ purpose was to pursue
opportunities not available to Wheels. The plaintiff is, in
principle,
entitled to particularity of the business which New Wheels
in fact conducted. Proper responses should be furnished to these two
paragraphs.
[30]
Question
48
asks what debts Wheels would not be able to pay. But the
assertion was a general one, and should be so understood. Specific
debts
were not intended; rather, the solvency of Wheels generally was
intended. Balance sheets and management accounts would be relevant
here, not specific debts. The particulars were correctly refused.
[31]
Questions
67 to 71
concern the assets of Wheels that were taken over by New
Wheels. The defendants’ responses do not address the
plaintiff’s
questions. The defendants intend to advance a
positive, exculpatory case for the take-over of the Wheels assets;
the plaintiff
is entitled to know what the form and contents of that
case will be.
[32]
Questions
74 to 76
go to the goodwill of Wheels that was subsumed in New
Wheels. Otherwise than in the case of the tangibles that were taken
over,
the defendants do not advance any positive, exculpatory case
concerning goodwill. They do not say that they took over the
goodwill.
They deny that they took over the goodwill. In my view
further particularity is not required to prepare for trial.
[33]
Questions
77 to 80
go to the take-over of clients and employees of Wheels
by New Wheels. The questions are cast in a form intended to
illustrate that
New Wheels had few if any clients and employees that
were not derived from Wheels; all to show in turn the complete
gutting by
New Wheels of Wheels. The particulars assist both sides’
cases. I believe therefore, on balance, that the particulars should
be furnished, but only those in
Questions 77 and 78
.
[34]
Questions
81, 82 and 83
go to the constitutional point. The defendants are
here advancing a positive case of renowned complexity and the
plaintiff is entitled
to be informed of its extent. The particulars
are required to be furnished.
[35]
Question
94
goes to what property is at issue in the context of the
constitutional point. The response has been given as being the
defendants’
use, enjoyment or exploitation of the right of
ownership of companies. In my view that goes far enough to enable the
plaintiff
to prepare for the trial, and no further particularity is
strictly necessary.
Conclusion
and costs
[36]The
particulars that ought to be furnished have been identified above and
are included in the order below. The plaintiff has
been substantially
successful. Both sides instructed two counsel, and I believe this was
a reasonable precaution.
[37]In
the result I make the following order:
(a) The defendants are
directed to furnish the particulars sought in paragraphs 32, 38, 39,
67 to 71, 77, 78, 81, 82 and 83 of the
plaintiff’s request for
further particulars dated 11 March 2016, within ten days of service
of this order on them.
(b) If the particulars
are not so furnished, the plaintiff is entitled to apply, on these
papers duly supplemented, for an order
striking out the defendants’
defence and granting judgment for the plaintiff.
(c) The defendants are to
pay the costs of this application jointly and severally, such costs
to include the costs occasioned by
the employment of two counsel.
WHG
van der Linde
Judge,
High Court
Johannesburg
For
the plaintiff: Adv. FA Snyckers, SC
Adv.
P Bosman
Instructed
by: Cliffe Dekker Hofmeyr Inc.
1
Protea Place, Sandown
Sandton
Johannesburg
Tel:
011 562 1146
Ref:
J M Witts-Hewinson/01947742
For
the first – fourth defendants: Adv. SC Vivian
Adv.
J Bhima
Instructed
by: T. G. Fine
39
The Avenue
(Corner
African Street)
Gardens
Johannesburg
Tel:
011 728 9804/5/6/7
Ref:
Mr Fine/SW
Date
argued: 13 September, 2016
Date
of judgment: 16 September, 2016
[1]
Para 27 of the POC refers to s.78(2) but that is an obvious error.
The only relief sought is a declaration and costs; see prayers
A and
B.
[2]
They actually say that the offending sections are “in conflict
with” those sections of the Constitution, and “fall
to
be set aside”. There is no claim for a declaration of
invalidity under s.172 of the Constitution.
[3]
[2012]1 All SA 317 (SCA) at [18].
[4]
Compare Pillay v Krishna,
1946 AD 946
at 951 – 952.
[5]
Annandale v Bates, 1956(3)SA 549 at 551.
[6]
Thompson v Barclays Bank, DCO,
1965 (1) SA 365
(WLD) at 369 D.
[7]
Of course, if the defendant intends advancing a positive case, then
it is obliged to plead that case.
[8]
Swart v De Beer, 1989(3) SA 622 (ECD) at 625 D ff.
[9]
Stellenbosch Farmers’ Winery Group Ltd and Another v Martell
Et Cie and Others, 2003(1) SA 11 SCA at [5], per Nienaber,
JA.