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[2013] ZASCA 123
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PriceWaterHouseCoopers Inc and Others v National Potato Co-Operative Ltd and Another (451/2012, 468/2012) [2013] ZASCA 123 (23 September 2013)
IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
CASE NO: 451/2012&
468/2012
Not Reportable
In the matter between:
PRICEWATERHOUSE
COOPERS INC
.......................................................
First
Appellant
HOEK & WIEHAHN
.................................................................................
Second
Appellant
WIEHAHN MEYERNEL
...............................................................................
Third
Appellant
PRICE WATERHOUSE
MEYERNEL
........................................................
Fourth
Appellant
PRICE WATERHOUSE
................................................................................
Fifth
Appellant
and
NATIONAL POTATO
CO-OPERATIVE LTD & ANOTHER
....................
First
Respondent
IMF (AUSTRALIA)
LIMITED
..............................................................
Second
Respondent
Neutral Citation:
PriceWater House Coopers & others v National Potato Co-Operative
Limited & another[2013] ZASCA 123 (23
September 2013).
Coram:
NAVSA ADP,
BRAND, TSHIQI & MAJIEDT JJA, SWAIN AJA
Heard:
20
August2013
Delivered:
23
September 2013
______________________________________________________________________
ORDER
______________________________________________________________________
On appeal from
:
The North Gauteng High Court, Pretoria (BothaJ sitting as court of
first instance).
The following order is
made:
Leave to appeal is
granted in terms of paras 1 to 5 of the application for leave to
appeal save that in relation to para 4 of
the application for leave
to appeal, leave to appeal is not granted,in respect of para 3 of
the order of the court below dated
14 March 2012.
______________________________________________________________________
JUDGMENT
______________________________________________________________________
THE COURT
[1] This is an
application by PriceWaterHouseCoopers Incorporated (PWC), an auditing
institution, and four auditing firms, to expand
the restricted
grounds on which leave to appeal was granted by the court below. In
essence, the claim in the court below, by the
first respondent,
National Potato Co-operative Limited (the NPCL), against the second
to fifth applicants, was one based principally
on the negligent
performance of their contractual duties as auditors, relating in the
main to the writing off of bad debts.The
second respondent IMF
(Australia) Limited provided the financial backing for the litigation
embarked on by the NPCL.
[2] PWC came into
existence during 1998 as a private company. It arose from an
amalgamation between two public accountants’
and auditors’
firms, Price Waterhouse and Coopers & Lybrand. PWC did not exist
at the time NPCL’s alleged causes
of action against the other
auditors arose and it was never the NPCL’s statutory auditor.
However, in its original summons
NPCL alleged that each of the
auditors and PWC had successively taken over the assets and
liabilities of its predecessor. NPCL
pleaded that:
‘
2.4.5 Met
elke oorname en/of amalgamasie soos voormeld, is die bates, laste en
aanspreeklikhede van die voorganger in titel deur
die opvolger in
titel oorgeneem.’
In fact, PWC was not in
existence at the time relevant to the trial.
[3] According to the
applicants the trial record is one of epic proportions. Apparently,
the particulars of claim on their own,
comprise 448 pages with 304
bundles of annexures, amounting to almost 100 000 pages. The
total number of documents in the
case appear to exceed 200 000
pages. The trial was conducted over a period of 200 court days. It
appears that the trial record
comprises tens of thousands of pages.
[4] It is common cause
that at the outset the parties were agreed that the trial should be
conducted in two stages, namely liability
and quantum. Subsequent to
a finding in favour of the NPCL at the conclusion of the first stage,
PWC applied for leave to appeal,
which was met with an application by
the former to have that application set aside as an irregular step.
The court below held in
favour of the NPCL on the basis that there
had been a firm agreement between the parties that there would be no
appeal, pending
a final decision on quantum.It found that the
application for leave to appeal was an irregular step as envisaged in
Uniform Rule
30. Costs in this regard was awarded against PWC.
[5] In the action in the
court below, the NPCL had sought judgment for R353 890 054.72
plus interest. The trial court
(Botha J) issued a declaratory order
in terms of which the second to fifth applicants were held liable for
damages sustained by
the NPCL and were ordered to pay the latter
R62 884 905.45, with interest at 15,5 per cent per annum.
As at 30 June 2012,
the amount due was R175 376 723.20. It
is important to note that in holding those applicants liable Botha J
dismissed
their defence on prescription in relation to a substantial
part of NPCL’s claim. Furthermore, in relation to his principal
finding the learned judge allowed the evidence of a crucial witness
on behalf of the NPCL, which the applicants contended was hearsay
and
ought not to have been permitted.
[6] For present purposes
it is necessary to record that in the court below there was a
contested application to compel the production
of certain documents.
The applicants succeeded in that application, but costs in respect
thereof were ultimately awarded against
them on the basis that their
defence of prescription in respect of which the documentation had
been sought, proved unsuccessful.
[7] In the court below
the applicants applied for leave to appeal the whole of the judgment
and related orders. Botha J granted
leave to appeal against his main
finding that the second to fifth applicants were liable for loss
suffered by NPCL. In respect
of the prescription point he refused the
second to fifth applicants leave to appeal. In respect of the
admission of the alleged
hearsay evidence, he granted leave to
appeal.
[8] During the second
stage of the trial and on two occasions, Botha J granted NPCL leave
to amend its pleadings and ordered all
five of the applicants to pay
the costs occasioned by their opposition to the amendments. The
learned judge granted the second
to fifth applicants leave to appeal
against these costs orders, but omitted to grant PWC leave to appeal.
[9] As stated above, PWC
had been joined by NPCL as a party to the action on the basis that it
was a successor in title to preceding
auditors. It is common cause
that it had not existed during the period relevant to the trial.It
appears that NPCL had not proven
any case against PWC and thus PWC
was not the subject of either the declaratory order or the order to
pay damages. The trial judge,
however, thought it proper to grant PWC
costson a limited basis only, reasoning that it could at an early
stage of proceedings
have excepted to the claim. Botha J refused
PWC’s application to appeal against the limited costs order.
Furthermore, the
learned judge refused all the applicants leave to
appeal against the costs order ultimately granted against them in
respect of
the production of documents. It will be recalled that he
had refused the costs of the application on the basis that the
defence
to which the documents related, namely prescription, had been
rejected. The applicants contend that it is clear from the order of
the court below, in relation to the application for leave to appeal,
that Botha J inadvertently omitted to grant them leave to
appeal
against the overall costs order granted against them.They contend
that, in the event of a successful appeal, they would
be entitled to
a costs order in their favour.
[10] Subsequent to Botha
J’s judgment in the application for leave to appeal, the
applicants petitioned this court for leave
to expand the grounds of
appeal
1
.
In terms of s 21(3)(c)(ii) of Act 59 of 1959 that application was
referred for oral argument,hence the hearing before us.
[11] This court is in the
invidious position of not having had the opportunity of scrutinising
the full record of proceedings in
the court below. Indeed it would
have proven impractical to have done so in the limited time
available. As can be seen from the
details provided above, a reading
of the full record will prove a Herculean taskand will probably
require the fulltime commitment
of an appeal panel for a year.
[12] It is necessary to
deal in turn with the points that arise from the application to
expand the grounds of appeal. First there
is the question of the
setting aside by the court below of an initial application for leave
to appeal on the basis that it had
been an irregular step, in that it
flew in the face of a firm agreement not to pursue an appeal before
both stages of the trial
had been finalised. There are conflicting
versions in relation to the agreement that had been reached. This
involves the question
of whether such an agreement was conditional
and whether those conditions had been met. It also involves the
exchange of correspondence
and discussions between legal
representatives. In our view, this issue is best dealt with by an
informed court with full knowledge
of the totality of relevant facts.
On this aspect, having regard to the submissions of the parties and
the available information,
we are of the viewthat there is a
reasonable prospect of success.
[13] The second issue is
the omission by the trial judge to grant PWC leave to appeal the
costs orders related to the amendments
referred to above. The NPCL
rightly conceded that the trial judge erred in this regard. Whilst
they proffer an abandonment of that
part of the judgment in their
favour, leave to appeal in this regard is in our view apposite.
[14] The third issue is
the limited costs order granted in favour of PWC on the basis that it
ought early on to have excepted NPCL’s
claim against it. The
relevant allegation made by NPCL in seeking to hold PWC liable is set
out earlier in this judgment. Had they
proved those allegations, a
basis for PWC’s liability would have been established. Thus an
exception would have been ill-founded
and would have had no prospect
of success. Similarly, on this issue we are of the view that there is
a reasonable prospect of success.
[15] The fourth issue
requires only brief attention. The issue of prescription is not dealt
with substantively in the affidavit
in support of the application for
leave to appeal. Although the deponent on behalf of the applicants
gave notice of his intention
to seek leave to include it as a further
ground of appeal, such an application has to date not yet been
brought. It will be recalled
that despite ordering the production of
documents sought by the applicants, the court below nonetheless
granted costs against them
in relation thereto on the basis that the
defence to which they were related had proven unsuccessful. In our
view it is premature
to make a decision in relation to that issue.
The order that follows is formulated to exclude leave to appeal being
granted on
the aspect that relates to prescription.
[16] The remaining issue
in the application for leave to appeal is that in relation to the
overall costs order on this aspect, it
appears to follow compellingly
that leave to appeal should be granted.
[17] The following order
is made:
Leave to appeal is
granted in terms of paras 1 to 5 of the application for leave to
appeal save that in relation to para 4 of
the application for leave
to appeal, leave to appeal is not granted,in respect of para 3 of
the order of the court below dated
14 March 2012.
_______________________
MS NAVSA
ACTING DEPUTY PRESIDENT
_________________________
F D J BRAND
JUDGE OF APPEAL
________________________
Z L L TSHIQI
JUDGE OF APPEAL
_______________________
S A MAJIEDT
JUDGE OF APPEAL
_______________________
K G B SWAIN
ACTING JUDGE OF APPEAL
APPEARANCES:
FOR APPELLANT: Adv F G Barrie S.C. (with him H C Bothma)
Instructed by:
Norton Rose South Africa,Johannesburg
Matsepes, Bloemfontein
FOR RESPONDENT: Adv. G W Alberts S.C. (with him Adv N C
Maritz)
Instructed by
Kirkcaldy Pereira, Pretoria
E G Cooper Majiedt, Bloemfontein
1
The
court below granted NPCL a conditional cross appeal, which for
present purposes need not be further discussed.