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[2012] ZASCA 170
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Chetty v Italtile Ceramics Ltd (668/2011) [2012] ZASCA 170; 2013 (3) SA 374 (SCA) (28 November 2012)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 668/2011
In the matter between:
DHAYALAN CHOCKANATHAN CHETTY
.......................................................................
APPELLANT
and
ITALTILE CERAMICS LTD
............................................................................................
RESPONDENT
Neutral citation:
CHETTY v ITALTILE
(668/2011)
[2012]
ZASCA 170
(28 November 2012)
Coram:
Brand, Malan, Pillay JJA and Southwood and Erasmus AJJA
Heard:
16 November 2012
Delivered: 28 November 2012
Summary: Delictual liability for
furtum usus
–
whether defendant used missing stock when stock rolled over –
whether defendant used stock when selling it in breach
of contract –
causation.
__________________________________________________________________
ORDER
On appeal from:
the North
Gauteng High Court, Pretoria (T M Makgoka J sitting as court of first
instance):
The appeal is upheld with costs.
The order of the court below is set aside and replaced
by the following:
‘
The plaintiff’s claim is
dismissed with costs.’
__________________________________________________________________
JUDGMENT
Malan JA
(Brand and Pillay JJA and Southwood and
Erasmus AJJA concurring):
[1] This is an appeal against the judgment and order of
Makgoka J in the North Gauteng High Court, Pretoria that the
appellant (Mr
D C Chetty) pay the amount of R1 168 340,26
as damages together with interest and costs to the respondent
(Italtile Ceramics
Ltd). The remedy relied upon was the
condictio
furtiva
. The appeal is with leave of the court below.
[2] Italtile is a retailer in ceramics. It has numerous
branches and franchises and conducts business under the names of both
Italtile
and CTM. During 2004 Mr Chetty was a trainee manager at
Italtile’s CTM branch in Gezina, Pretoria. On 8 June 2006 he
personally
and through his close corporation (the second defendant in
the court below), entered into a joint venture and franchise
agreement
with Italtile which commenced on 11 February 2006. He
became the manager of both the combined warehouse and the CTM retail
store
in Gezina. The CTM brand is directed at the middle range of the
tile and sanitaryware market. It operates (with a minor exception)
on
a strictly cash and carry basis. Italtile remained owner of all the
goods in the Gezina store. Its policy was that none of the
goods in
the store could be taken without payment first having been made. Mr
Chetty was aware of this policy, and that it was required
of him to
manage the store in accordance with Italtile’s procedures and
targets.
[3] Mr Chetty, as a joint venture partner, was entitled
to share with the respondent in the profits made at the store. If,
however,
the profits declined his remuneration would have been
correspondingly less. By 2008 the Gezina store was not meeting the
performance
targets set by Italtile. The executive chairman of
Italtile, Mr G A M Ravazzotti, then instructed Ms T Govender, a head
office
official responsible for monitoring joint venture and
franchise stores, to investigate the situation at the Gezina store.
She performed
a mini audit of the store on 18 and 19 September 2008.
She had stock sheets printed, did some stock counting and checked
whether
certain stock was correctly stored in the areas demarcated.
She also discussed the management of the store with Mr Chetty.
[4] Her mini audit indicated that management of the
store was poor and a cause for concern. Moreover, she ascertained
that there
were large variances between stock which was recorded on
Italtile’s SAP computerised stock and accounting system as
being
present at the store and what was in fact there. Furthermore,
during her mini audit, Mr Chetty admitted to her that he was running
a manual delivery book system (which involved the granting of credit)
which he had not disclosed to Italtile, the details of which
were
kept outside the SAP stock and accounting system. Mr Chetty knew that
Mr Ravazzotti was unaware of the delivery book system
and also that
he would not be happy to hear that stock had left the store without
payment pursuant to the delivery book system.
He preferred to tell
the latter about the system himself and not leave it to Ms Govender
to do so.
[5] Mr Chetty’s evidence was that the delivery
book system was designed to allow his favoured customers to purchase
merchandise
on credit. This, he knew, contravened company policy. Mr
Chetty had longstanding relationships with these customers and the
arrangement
was that they would buy large quatities of stock, obtain
delivery and settle their accounts at month’s end. He did this
without
the knowledge or consent of Italtile which remained owner of
the stock held by the store.
[6] Ms Govender’s mini audit led to a full stock
count to be done to determine the extent of the stock losses. In 2008
the
Gezina store would carry stock of about R5 million on the
premises. Stock losses should have been in the region of no more than
0,5 per cent of the stock delivered to the store. A report by Mr Mark
Prior which was given to Ms Govender showed stock variances
of R1
million for a three month period. It was during this stock count that
Ms Govender ascertained that Mr Chetty was rolling
stock. He had
started doing this late in 2007. He would take the missing stock off
the system on the first day of a month (by posting
it to eg breakages
or customer claims) and reverse it back onto the system on the last
day of that month. The management accounts
which were automatically
generated on the last day of the month would therefore reflect that
the missing stock was still held in
the store. On discovering Mr
Chetty’s stock rolling, Italtile, on 17 October 2008,
terminated the joint venture and his management
of the store.
[7] Italtile originally claimed an amount of R1 477 081
from Mr Chetty. This amount was to a large extent based on the
stock
count performed by Mr Prior during October 2008. Mr Prior did not
give evidence but Ms Govender prepared a summary of all
stock
movements showing the amount of missing stock. During her
cross-examination Italtile applied for an amendment reducing the
claim to R568 374,30 which was made up as follows: R542 318,70
in respect of stock rolling and R26 055,62 lost as
a result of
the book delivery system. These figures were not in dispute. Italtile
later applied for a further amendment to increase
the amount claimed
to R1 168 340,26, being the retail value of the stock and
not its cost. This was the amount awarded
by the court below.
[8] Italtile relied on the
condictio furtiva
. It
alleged in its particulars of claim that subsequent to the conclusion
of the agreement it saw to it that the store was stocked
and that Mr
Chetty, as the sole member of the second defendant, controlled the
warehousing and the stock in the store. It alleged
that between
February and October 2008, Mr Chetty, with the intention to steal,
directed or procured or caused the unlawful removal
of certain items
of stock from the premises. The stock so removed was not removed in
the course of the management and operation
of the business nor in the
ordinary course of the business. The plaintiff was at all times the
owner of the missing stock. Mr Chetty,
the particulars of claim
concluded, failed to return the missing stock and was unable to do
so.
[9] Makgoka J found for Italtile on all aspects. He held
that Italtile had established that it was the owner of the stock in
the
store; that large quantities of the stock went missing during the
time Mr Chetty was in charge; that he, contrary to company policy,
extended credit to selected customers; that he rolled stock by making
false entries on the SAP system and that the stock that was
rolled
could not be found. Makgoba J found that Mr Chetty did not furnish a
coherent, plausible reason why he had rolled stock
and that he
misrepresented the true state of affairs to Italtile. The inference
he drew from these facts was that Mr Chetty’s
conduct amounted
to theft as defined in the common law. He said that Mr Chetty’s
delivery book system, false write-off’s
and reversals of
missing stock resulted in Italtile’s suffering patrimonial
loss. But, with respect to the learned judge,
this was not the issue.
The question was whether Mr Chetty could be held liable on account of
furtum usus
both in respect of the manual delivery system and
his stock rolling. This required an investigation into whether the
requirements
of theft of this kind had been met.
[10] The
c
ondictio
furtiva
is a remedy the owner of, or someone
with an interest in,
1
a thing has against a thief and his heirs for damages.
2
It is generally characterised as a delictual action.
3
It is, of course, required that the object involved be
stolen before the
condictio
can
find application. The law requires for the crime of theft –
‘
not only that the thing should have been
taken without belief that the owner ... had consented or would have
consented to the taking,
but also that the taker should have intended
to terminate the owner’s enjoyment of his rights or, in other
words, to deprive
him of the whole benefit of his ownership.’
4
However, at common law ‘theft’ has a wider
meaning and includes
furtum usus
,
or the appropriation of the use of another’s thing.
5
Theft of the use of another person’s thing is no
longer a crime.
6
The
condictio furtiva
lies in all cases of theft: ‘whether the theft
wreaked was one of proprietorship or of use or possession ... makes
no difference
to the possibility of the action being available.’
7
In
Clifford v Farinha
it
was stated with regard to the
condictio
furtiva
:
8
‘
[T]he “benemer” – to use
the term of De Groot 3.37.3 – does something which he is not
permitted by law to
do, namely, to arrogate to himself the power to
deal with another’s property. Thereby he incurs an obligation
of the thief
immediately to undo what he has done. Whether the
obligation of the thief immediately to restore what he has stolen is
classified
as part of the
mora
doctrine ... or as simply arising from the delict ... the thief is
... regarded as being in default ... and the obligation to restore
–
“is perpetuated ...”.’
The intention to appropriate the thing permanently, as
in the case of criminal theft, is not a requirement of the
condictio
where
furtum usus
is
concerned. The
condictio furtiva
will be available where, for example, the defendant
withdraws the thing from the possession of another, or ‘takes’
it,
and uses it while intending to restore possession after use.
9
The
condictio
entitles
the owner to the highest value of the thing between the time it was
stolen and
litis contestatio
.
10
The
rei vindicatio
and
the
condictio furtiva
are
alternative remedies.
11
Where the thing stolen was lost or destroyed the
condictio
is the
owner’s only remedy.
12
[11] I will first consider the claim of
furtum usus
based on stock rolling. Mr Rome, who appeared for Italtile, submitted
that the ‘inexorable’ inference to be drawn from
the
facts was that Mr Chetty used the stock in an unauthorised manner and
to camouflage his misuse he concealed the missing stock
by posting
fraudulent entries to accounts such as the breakages account. He then
concealed the disappearance of the stock at month
end to mislead
Italtile further. This, Mr Rome submitted, constituted the use of
another’s property without his consent.
In support of his
contention, counsel referred to Mr Chetty’s reversal of the
write-off’s at month end to ensure that
his take home pay would
not be affected; his misuse of the breakages account and, generally,
his failure to provide a proper explanation
for his conduct.
[12] I do not agree that the conduct complained of
constituted the
use
of another’s property. What Mr
Chetty did was to post false entries to the accounts to mislead
Italtile. This could well
have amounted to fraud in as much as it
would have caused an increase in Mr Chetty’s profits, but it is
not
use
of the stock. Most of the stock, in any event, went
missing prior to the false entries so that no use of it was possible.
The question
is rather whether Mr Chetty’s conduct was
calculated to conceal any unlawful taking of the stock. There is no
direct evidence
of theft nor of Mr Chetty’s participation in
theft. Nor is such an inference the most plausible or the most likely
one to
be drawn from the proven facts.
[13] Mr Chetty was not a good manager. This was found by
Ms Govender as soon as she commenced her mini audit. The 2006
financial
year’s results were in line with the targets set. The
following year things deteriorated. The store underwent extensive
renovations
and became, as Mr Chetty testified, a virtual
construction site with hundreds of people including contractors and
builders walking
in and out all the time. All of this impacted
negatively on the stock control systems. Mr Chetty was concerned
about stock going
missing. He had suspicions about his staff members
and arranged for polygraph tests to be done during February 2008. He
had informed
Mr Ravazzotti about these tests. He wanted to ascertain
the reasons for the stock losses. The write-off’s and
subsequent
reversals, so he said, would give him time to investigate
the reasons for the stock losses. Some losses resulted from the
changed
packaging of the supplier, Pegasus. At best it can be said
that Mr Chetty implemented inappropriate mechanisms to protect his
equity
in the business pending his investigations as to the stock
losses, not that he intended to and did steal the missing stock.
[14] Italtile’s claim relating to the book
delivery system is also based on
furtum usus
.
The introduction and operation of the book delivery system was a
contravention of company policy and could well have exposed Mr
Chetty
or his close corporation to claims for breach of contract. Whether it
amounts to
furtum usus
is
a different matter. There was no ‘taking’ or withdrawal
from Italtile of the goods sold on credit: the stock was
lawfully
under Mr Chetty’s control. Its sale by Mr Chetty could well
have founded a complaint of another form of theft
13
(which is not relied upon by Italtile) but is difficult
to fit it into the rubric of
furtum usus
.
Mr Chetty never intended to return the stock sold on credit to
Italtile. He did not intend using it temporarily, as in most cases
of
furtum usus
, but sold
it intending to benefit both his own corporation and Italtile.
However, it seems that his making the stock available
for sale
pursuant to the book delivery system could be regarded as the
use
of the goods. The act of selling the goods, necessarily,
includes their use.
[15] The monthly turnover on the delivery book system
was between R300 000 and R400 000. Sales were made to major
customers
with whom Mr Chetty had formed commercial relationships. No
bad debts were incurred by him except the amount of R26 055 referred
to below. All amounts received was credited to the store. Despite
this, it cannot be said that Mr Chetty’s use of the goods
in
this manner was in good faith in the expectation that consent would
be provided:
14
he knew that he was not entitled to sell on credit; he
knew that if he had sought permission it would have been refused; and
he
conceded that he would not have stopped the book delivery system
had he not been caught by Ms Govender.
[16] When Mr Chetty’s employment was terminated he
left the premises with only his diary and no information as to
outstanding
debts. All the reconciliations he had done he gave to Ms
Govender. He had little or no opportunity to collect the debts
outstanding
after leaving his employment. Ms Govender collected all
of them with only a relatively small amount of R26 055
outstanding.
For no specific reason she decided not to pursue
collecting the latter amount. Mr Chetty’s undisputed evidence
is that he
would have been able to collect whatever was outstanding
had he been granted the opportunity to do so. Payment, he said, would
have been forthcoming immediately. He himself never had a bad debt on
the manual delivery system. It is difficult to conclude that
he could
have foreseen this specific loss. The loss arose, not directly from
the use of the goods, but from the failure of Italtile
to collect the
outstanding debt. As between the parties Italtile was clearly better
placed to recover the outstanding amount. It
was the only party able
to do so. The debt was that of Italtile, not that of the dismissed Mr
Chetty. It could but did not request
Mr Chetty’s assistance. It
is clear that Mr Chetty’s conduct is a factual cause of the
loss suffered by Italtile. However,
in these circumstances it cannot
be said that his conduct is sufficiently closely or directly linked
to the loss for legal liability
to ensue.
15
Italtile caused its own loss.
[17] In the result the following order is made:
The appeal is upheld with costs.
The order of the court below is set aside and replaced
by the following:
‘
The plaintiff’s claim is
dismissed with costs.’
__________
F R Malan
Judge of Appeal
APPEARANCES:
For Appellant: F du Toit SC
Instructed by:
Ron Lippi Attorneys
Pretoria
Lovius Block
Bloemfontein
For Appellant: G B Rome
Instructed by:
Edward Nathan Sonnenbergs
C/o Edelstein Bosman Inc
Pretoria
McIntyre & Van der Post
Bloemfontein
1
Clifford
v Farinha
1988 (4) SA 315
(W).
2
Kruger
v Navratil
1952 (4) SA 405
(SWA) at 408;
John Bell & Co
Ltd v Esselen
1954 (1) SA 147
(A) at 151E-152B:
Minister van
Verdediging v Van Wyk & Andere
1976 (1) SA 397
(T) at 400C;
Crots v Pretorius
2010 (6) SA 512
(SCA) para 3.
3
Cf
J Voet
Commentarius ad Pandectas
translated by P Gane
The
Selective Voet
(1955) 13.1.2;
Minister van Verdediging v Van
Wyk & Andere
at 400C-D;
Clifford v Farinha
at
320H-322D;
Crots v Pretorius
para 3. On the nature of and
need for the
condictio furtiva
, see John Blackie and Ian
Farlam ‘Enrichment by act of the party enriched’ in
Reinhard Zimmermann, Daniel Visser
and Kenneth Reid (eds)
Mixed
legal systems
(2004) 469 at 488-9; P C Pauw ‘Historical
notes on the nature of the
condictio furtiva
’
(1976) 93
SALJ
395
at 399-400; J C Sonnekus
Ongegronde verryking in
die Suid-Afrikaanse reg
(2007) at 149 ff; Daniel Visser
Unjustified enrichment
(2008) at 661 ff and Jacques du
Plessis
The South African law of unjustified enrichment
(2012)
at 338-9.
4
R
v Sibiya
1955
(4) SA 247
(A) at 257B-D and see
S v
Van Coller
1970 (1) SA 417
(A) at
424G-F.
5
Visser
at 661 ff; Du Plessis at 336-9;
Minister van Verdediging v Van
Wyk & Andere
at 402G-403C;
Clifford v Farinha
at
322E-323E.
6
R
v Sibiya
1955 (4) SA 247
(A).
7
Voet
13.1.7.
8
Clifford
v Farinha
at 321F-H.
Hugo de Groot
The
jurisprudence of Holland
(1953)
(translated by R W Lee) at 3.37.3: ‘Door goed-beneming werden
verbonden alle dieven, geweldigers, grondroovers, oock
die door
valsche oorkonde ofte andere quade middelen iemand van ‘t
sijne helpen, die eens anders beest quetsen, ende diergelijcken.’
As was remarked in
Smit v Saipem
1974
(4) SA 918
(A) at 929H-930C, at the time De Groot wrote his
Introduction
there
was no significant difference between the
actio
furti
and the
actio
legis Aquiliae
. See also Pauw at 400.
9
Clifford
v Farinha
at 322C-D.
10
Pauw
at 400; Visser at 661-5; Du Plessis at 338 but see M D Blecher ‘The
owner’s actions against persons who fraudulently
ceased to
possess his
res
(
qui dolo desierunt possidere
)’
(1978) 95
SALJ
341
at 358.
11
Conradie
v Jones
1917 OPD 112
at 119; 8(1)
Lawsa
2
ed para 34
.
12
See
8(1)
Lawsa
2 ed
para 34 and 27
Lawsa
para
387 for further particulars.
13
Cf
R v Kinsella
1961
(1) SA 230
(C).
14
First
National Bank of Southern Africa Ltd v East Coast Design CC &
others
2000 (4) SA 137
(D&CLD) at
145E ff and see
LAWSA
27
para 387 n 3 and C R Snyman
Criminal
law
(2008) 5 ed at 493.
15
International
Shipping Co (Pty) Ltd v Bentley
1990 (1) SA 680
(A) at
700E-I and see
Fourway Haulage (Pty) Ltd v SA National Roads
Agency Ltd
[2008] ZASCA 134
;
2009 (2) SA 150
(SCA) paras 34 and 35.