Jukuda v African Pioneer Investments Ltd and Another (1770/2008) [2009] ZAECPEHC 2 (5 March 2009)

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[2009] ZAECPEHC 2
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Jukuda v African Pioneer Investments Ltd and Another (1770/2008) [2009] ZAECPEHC 2 (5 March 2009)

FORM A
FILING SHEET FOR SOUTH EASTERN
CAPE LOCAL DIVISION JUDGMENT
ECJ:
PARTIES
:
MFUNDO JUKUDA
And
AFRICAN
PIONEER INVESTMENTS LTD &
STEPHEN
MZUKISI DONDOLO
Registrar:
1770/08
Magistrate:
High
Court:
SOUTH
EASTERN CAPE LOCAL DIVISION
DATE
HEARD:
19/02/09
DATE
DELIVERED:
05/03/09
JUDGE(S):
JONES
J
LEGAL
REPRESENTATIVES –
Appearances:
for
the Plaintiff(s):
ADV:
N. Vusani
for
the Defendant(s):
ADV:
A. Beyleveld
Instructing
attorneys:
for
the Plaintiff
(s):
ANDILE
NGQAKAYI INCORPORATED
for
the Defendant
(s):
BOQWANA
LOON & CONNELLAN
CASE
INFORMATION -
Nature
of proceedings
:
CLAIM
– MONIES OWED
Not
reportable
In the High Court of
South Africa
(South Eastern Cape Local Division,
Port Elizabeth) Case No 1770/2008
In the matter between
MFUNDO
JUKUDA Plaintiff/ Respondent
and
AFRICAN PIONEER INVESTMENTS LTD 1
st
Defendant/
Applicant/ Excipient
STEPHEN MZUKISI DONDOLO 2
nd
Defendant/ Applicant/Excipient
SUMMARY:
Claim
by a shareholder jointly and severally against a company and its
chairman and chief executive officer for payment of dividends
and
repayment of a loan – further claim against them for patrimonial
and non-patrimonial damages – application to dismiss the
claim as
an irregular proceeding in terms of rule 30(1) for failure to comply
with the rules of pleading– exception to the claim
in terms of rule
23 on the ground that it did not disclose a cause of action –
further exception in terms of rule 23 on the ground
that the claim
was vague and embarrassing – application and exceptions upheld and
particulars of claim set aside.
JUDGMENT
JONES J:
[1] The plaintiff, who describes
himself as a businessman of Port Elizabeth, issued summons against
the 1
st
defendant, African Pioneer Investment Holdings Limited, and the 2
nd
defendant, its executive director and chairperson, for payment of the
sum of R12 090 000-00 with interest and costs. The sum of
R12 000
000-00 is alleged to include repayment of an amount R29 000-00 paid
by the plaintiff to the company. The rest is alleged
to be dividends
and interest since 1994. The amount of R90 000-00 is claimed as
patrimonial and non patrimonial damages.
[2] On 4 November 2008 the plaintiff
applied for summary judgment in this amount. The defendants opposed
the application on the
strength of an affidavit in terms of rule
32(3)(b) filed by the 2
nd
defendant. The affidavit set out certain defences on the merits, and
incorporated by reference three notices of objection to the

particulars of claim. The first was an application lodged in terms of
rule 30 to dismiss the particulars of claim as an irregular

proceeding. There were also two notices of exception to the
particulars of claim on the ground that they failed to disclose a
cause of action and that they were vague and embarrassing. After
argument, I dismissed the application for summary judgment, and
gave
the defendants leave to defend.
[3] The three objections to the
particulars of claim are now before me. The plaintiff has in addition
filed an application to join
a third defendant, which is opposed. The
four matters were set down together. All were strictly speaking not
properly before me
because both parties had filed their heads of
argument late. But the 2
nd
defendant was granted condonation because he had filed an application
for condonation in proper form which gave what I considered
to be a
reasonable explanation and apology, which stated that the heads were
only marginally late (by half a day) and which satisfied
me that
there was no prejudice to the parties and no inconvenience to the
court arising from the default. There was, however, no
application
for condonation by the plaintiff, and consequently no explanation. In
those circumstances his application for joinder
was struck off the
roll with costs. The plaintiff will have to have it re-enrolled in
due course, if so advised.
[4] I turn then to the objections to
the particulars of claim which are attached to the plaintiff’s
combined summons and which
comprise 13 paragraphs. Paragraphs 1, 2
and 3 describe the parties as in paragraph 1 above, and paragraph 4
alleges that the 1
st
defendant was incorporated on 14 January 1994 under registration
number 1994/000181/06, and that the 2
nd
defendant is cited in his official capacity as its executive director
and chairperson. Paragraph 5 alleges that ‘the plaintiff
is a
director and shareholder in the 1
st
defendant since 1994 and by virtue thereof is entitled to receive
dividends and interest thereof (See Annexure MJ 1)’. MJ 1 is
in
fact two documents – the first is a share certificate in a company
called African Pioneer Limited (reg No 97/01153/06) reflecting
the
plaintiff as the registered proprietor of 14950 shares on 24 March
1998; and the second reflecting him as the registered proprietor
of
367387 shares in the same company on 10 November 2000. Paragraph 6
alleges that on registration of the 1
st
defendant the plaintiff put in the amount of R29 000-00 as a
contribution towards the capital of the company ‘which was a
greater
contribution as compared to other shareholders including the
2
nd
defendant’. The inference from this allegation is that this amount
was or should have been reflected as a credit in the plaintiff’s

loan account. The plaintiff seemed to suggest in argument that he did
not regard this as a loan but ‘a capital contribution’,
but I
can think of no basis upon which he can recover the amount of R29
000-00 if it was not a loan. Paragraph 7 alleges that the
1
st
defendant incorporated and developed a number of other businesses
with the assistance of the 2
nd
defendant as executive director, and these businesses generated a
considerable profit for the benefit of the 1
st
defendant, of which the plaintiff is a shareholder. According to
paragraph 8 there was a misunderstanding between 2
nd
defendant and the other directors which led to a decision by the
plaintiff to withdraw from participation in the management of
the 1
st
defendant, leaving it to the 2
nd
defendant to carry on without his consent as a director. Paragraph 9
alleges that since 1994 the plaintiff has not received his
dividends
plus interest, did not have a say in the running of the company, and
heard nothing about his contribution and shareholding.
Paragraph 10,
11, 12 and 13 read:
10
As a consequence of facts set out above, at all material times up to
now the 1
st
and 2
nd
defendant are jointly and severally liable to the plaintiff for a
considerable amount of R12 000 000-00 which includes the capital

amount and dividends from 1994 to date; together with a fair amount
of damages being of both patrimonial and non patrimonial nature

amounting to R90 000-00.
11
The defendants acted wrongfully and unlawfully by omitting to pay
the monies due to plaintiff for such a long period as above
and
therefore [are] indebted to pay the amount together with interest to
the plaintiff.
12 The
defendants currently remain in possession of the said sum of R12 090
000-00 which is due to the plaintiff.
13
Despite demand, the defendants refuse, fail or neglect to pay the
said sum to the plaintiff.
There follow prayers for judgment
against the 1
st
and 2
nd
defendant jointly and severally, the one paying the other to be
absolved, for payment of R12 090 000-00, and for interest, costs
and
alternative relief.
[5] The three objections to the
particulars of claim contain a measure of overlap and were argued
together as one. The particulars
are said to be irregular in terms of
rule 30 because of non-compliance with the provisions of rule 18(4)
and rule 18(10). Rule
18(4) requires a pleader to set out a clear and
concise statement of the material facts upon which the plaintiff
relies for the
relief he seeks. The 2
nd
defendant’s complaint is that there is no clear and concise
statement of facts for the conclusion of law in paragraph 10 of the

particulars of claim that the 2
nd
defendant is jointly and severally liable with the company for
payment of the amount of a loan account and dividends, which are
prima facie
for the account of the company and not its servants or directors.
There are, further, no facts alleged by the plaintiff which justify
a
conclusion of joint and several liability for patrimonial or non
patrimonial damages. The next complaint is that there is no
clear and
concise allegation of the facts which lie at the root of the alleged
conclusion that the 2
nd
defendant’s omission to pay the money to the plaintiff was wrongful
and unlawful, where, once again, the obligation to pay, if
there is
one, is
prima facie
that
of the company and not of its servants and directors. Rule 18(10)
requires a pleader to set out his damages so that the defendant
can
reasonably assess the quantum. To do so he must allege facts which
show what the patrimonial and non patrimonial damages are,
the
amounts claimed for each, and how they are made up. Rule 18(12) says
that if a party fails to comply with the rule, the pleading
shall be
deemed to be an irregular step, and his opponent may act in terms of
rule 30. Rule 30 permits an irregular step in the
proceedings to be
set aside.
[6] The first notice of exception is
brought on the ground that the particulars of claim fail to disclose
a cause of action because
insofar as the claim against the 2
nd
defendant includes a claim for payment of a loan of R29 000-00,
there is no allegation that the loan is repayable;
there are no facts setting out a
legal basis for the plaintiff to recover the sum of R12 090 000-00
from the 2
nd
defendant jointly and severally with the 1
st
defendant, the one being a servant and director and other his
company;
insofar as the claim is for payment
of the amount of dividends, there are no allegations that dividends
were ever declared.
[7] The second exception, based upon
the allegation that the particulars of claim are vague and
embarrassing, raise these complaints
as well, and in addition point
to further anomalies in the way in which the pleadings are
formulated. In summary, embarrassment
is said to be caused to the
defendants
by the variance in the name and
registration numbers of the 1
st
defendant as revealed in the summons, the particulars of claim, and
the share certificates annexed to the particulars of claim
MJ1;
by the contradiction in citing the
2
nd
defendant in his representative capacity as executive director and
chairperson of the 1
st
defendant, in failing to allege grounds that make him personally
liable, and then in seeking relief against the defendants jointly

and severally;
by failing to allege any grounds upon
which the 1
st
and 2
nd
defendant are alleged to be liable jointly and severally;
by the anomaly of suing both the 1
st
and 2
nd
defendant. A plaintiff is normally required to sue a company in its
own name for its own obligations because it has juristic

personality. If proper allegations are made, this might justify
these claims against the 1
st
defendant. No facts are set out in the pleadings to disclose a basis
for recovering the amount of company debts in respect of
a loan or
dividends from the 2
nd
defendant;
by the failure to allege facts which
amount to wrongful and unlawful conduct by the 2
nd
defendant in paragraph 11 in omitting to pay the sums claimed by the
plaintiff;
by failing to set out in what
respects the plaintiff suffered damages, what his patrimonial
damages are, and what his non patrimonial
damages are.
[8] All three objections are well
taken. In my judgment, the grounds of exception summarised in
paragraph 7. 1, 2, 3, 4, 5 and 6
of this judgment are sound, and give
rise to acute embarrassment in the legal sense because it is apparent
from them that the defendants
are quite unable to fathom what the
cause of action is. They are therefore unable to plead. An
examination of the particulars of
claim reveals that the pleading
patently fails to make allegations in the manner required by rule
18(4) and 18(10), and that the
document is on the face of it
deficient in the respects set out in the rule 30 notice. The fact
that the 1
st
defendant is a company in which the plaintiff holds shares, and the
fact that the 2
nd
defendant is its executive director and chairperson and hence under a
duty to manage the company, do not provide a factual background
for
the legal conclusion that the amounts claimed, or any amounts, are
due and payable. I can find no factual allegations in the
particulars
of claim which take the matter any further. Reading the particulars
of claim and the first notice of exception together
establishes the
shortcomings in the former, and shows on the face of it that the
grounds of exception are sound. It is fundamental
that a loan cannot
be recovered if it is not repayable. It must therefore be alleged to
be due, owing and payable. Furthermore,
it must be claimed from the
debtor and not from his servant or agent, unless some basis is laid
for the servant or agent’s liability.
Likewise, liability for
payment of dividends is the liability of the company. Payment of
dividends is normally regulated by the
articles of association. They
may become payable out of distributable profits. Ordinarily,
dividends, if any, are declared at an
annual general meeting of
shareholders in a particular amount, usually the amount recommended
by the directors, in which event
they become payable in due course.
But they need not be declared at all unless the articles say
otherwise. These particulars of
claim make no allegation that
dividends were declared, or, if they were, when and in what amounts.
The fact of the matter is that
dividends may never have become
payable by this company. The particulars make a general allegation
that the 1
st
defendant generated considerable profits for its benefit and, by
implication, the benefit of its shareholders. But that does not
give
shareholders an automatic entitlement to share in the profits by
receipt of a dividend. All that the plaintiff’s pleadings
say is
that by virtue of his shareholding he is entitled to receive
dividends, that he never received his dividends, and that the
1
st
and 2
nd
defendant are therefore jointly and severally liable to him for a
considerable amount of R12 000 000-00. This is a legal
non
sequitur.
Missing is the
factual basis for liability. This would involve at least an
allegation that dividends were declared, and were therefore
payable
(
Utopia Vakansie-Oorde Bpk
v
Du Plessis
1974
(3) SA 148
(A) 175B-D;
Cohen
NO
v
Segal
1970 (3) SA 702
(W) 705E-G; Cilliers & Benade,
Corporate
Law
3
rd
ed 355); that an amount can be put to it which is not a mere thumb
suck; and that there is some legal basis upon which the 2
nd
defendant can be held personally liable for what is
prima
facie
an obligation that
can only be that of the 1
st
defendant, and that his liability is in consequence joint and several
with that of the 1
st
defendant.
[9] In my view the plaintiff has not
been able to advance any valid legal argument to support the
conclusions of law which are made
in his particulars of claim. His
procedural argument, furthermore, that the plaintiff was not given
the time laid down in the rules
to remedy the respects in which his
pleadings are said to be irregular or vague and embarrassing is
misplaced. There was no short
service of the first notice of
exception because an excipient is not required by the rules to give
the plaintiff an opportunity
to remove the cause of a complaint which
is grounded on the failure to set out a cause of action. On the other
hand, the rule 30
application and the second notice of exception
alleging that the pleading was vague and embarrassing were filed only
after the
plaintiff had been afforded a proper opportunity to remedy
the respects in which the pleading was said to be defective. In the
result I am obliged to conclude that the rule 30 objection and the
exceptions are sound, and the particulars of claim cannot stand.
[10] There will be the following
order:
The application in terms of rule 30
to set aside the particulars of claim is granted, and both
exceptions to the particulars of
claim are allowed, with costs.
The particulars of claim are set
aside.
The plaintiff is given leave, if so
advised, to file amended particulars of claim within 10 court days
of the date of this order.
The plaintiff’s application for the
joinder of a third defendant is struck off the roll, and the
plaintiff is ordered to pay
the defendants’ wasted costs, if any,
arising from the hearing on 19 February 2009.
RJW JONES
Judge of the High Court
26 February 2009