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[2023] ZAKZPHC 4
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Tongaat Hulett Limited and Others v Staude and Others (6075/2020P) [2023] ZAKZPHC 4 (23 January 2023)

IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
no: 6075/2020P
In
the matter between:
TONGAAT
HULETT LIMITED

FIRST PLAINTIFF
TONGAAT
HULETT SUGAR SOUTH AFRICA LIMITED

SECOND PLAINTIFF
HIPPO
VALLEY ESTATES
LIMITED

THIRD PLAINTIFF
TRIANGLE
LIMITED

FOURTH PLAINTIFF
and
PETER
STAUDE

FIRST DEFENDANT
MURRAY
MUNRO

EXCIPIENT/ SECOND DEFENDANT
SEAN
SLABBERT

THIRD DEFENDANT
Coram:
Koen J
Heard:
21 October 2022
Delivered:
23 January 2023
ORDER
The
following order is granted:
(a) The exceptions in the
following numbered paragraphs of the notice of exception are upheld
to the extent indicated, and qualified
in the text of this judgment:
(i)
Paragraph 28, insofar as the plaintiffs are required in their
particulars of
claim to identify the terms of the accounting policy
which applied and which they allege should be complied with, to
identify each
of the backdated agreements involved, with reference to
the names of the parties thereto and the alleged date when each
agreement
was actually concluded; the date the plaintiffs will
contend the proceeds/revenue produced by each contract should have
been reflected
in the financials according to what the plaintiffs
contend was the existing accounting policy of the plaintiffs; the
dates to which
each of these agreements were allegedly backdated; and
in which financials the proceeds/revenue were wrongly reflected.
(ii)
Paragraph 30, insofar as the plaintiffs are required to allege
details of each of the sale
agreements which were structured in a way
to enable THD to conceal material suspensive conditions and to
recognise revenue earlier
than it ought to have been; to identify the
agreements in question, that is when they were concluded, and who the
parties to these
agreements were; and in what way each agreement was
structured to enable THD to conceal material suspensive conditions
and to recognise
revenue earlier than it ought to have been, and what
revenue was recognized in respect of each contract, when such revenue
in respect
of each contract was allegedly impermissibly recognized as
a result of the way the agreements were structured, to achieve the
result
alleged in paragraph 78, and when it is alleged such revenue
should have been recognized.
(iii)
Paragraphs 32 and 33, insofar as the plaintiffs are required to
identify the agreements not
timeously cancelled with sufficient
particularity to identify the parties to each agreement, the date of
conclusion thereof, when
it will be contended each purchaser became
unable to perform its obligations under the agreements in question,
and by when it is
alleged each agreement should have been cancelled.
Further, also what impact, if any, the alleged failure to timeously
cancel each
agreement had on stating the financial position of THD
and/or the plaintiffs, specifically where cancellation was allegedly
not
timeously done, or by a certain date, but cancellation
nevertheless followed within the same financial year or accounting
period.
(iv)
Paragraph 36, insofar as the plaintiffs are required to plead the
factual basis for the inference
that the second defendant had failed
to measure up to a standard of reasonableness or had constructive
knowledge of the three forms
of manipulation, including when and how
the three forms of manipulation occurring within THD would or should
have come to the second
defendant’s knowledge or attention, the
nature of the investigations which the second defendant should have
conducted and
which would have revealed that the three forms of
manipulation were taking place, and which he failed to do.
(v)
Paragraph 40, insofar as the plaintiffs are required to plead the
costs alleged to have
been impermissibly capitalised, when such
capitalisation occurred, and the quantum of those costs – that
is the amount of
the standard cost and actual cost per hectare, and
how these are calculated.
(vi)
Paragraph 50, insofar as the plaintiffs are required to adequately
particularise the calculation
of what the RV price should have been,
and what the overstated RV price was.
(vii)
Paragraph 55, insofar as the plaintiffs are required to plead the
factual basis for the inference
that the second defendant failed to
measure up to a standard of reasonableness or had constructive
knowledge of the improper valuation
practices, including when and how
these would or should have come to the second defendant’s
knowledge or attention, the nature
of the investigations which the
second defendant should have conducted and which would have revealed
that the improper valuation
practices were taking place, and which he
failed to do.
(viii)
Paragraph 59, insofar as the plaintiffs should have alleged the
nature of the projects identified as items
1-10 on the table
appearing at paragraph 123.1 of the particulars of claim, to enable
the second defendant to plead to the conclusion
that those projects
did not meet the capitalisation requirements of IAS16 and 38. The
plaintiffs should also have alleged the costs
not approved by the
boards of Tongaat Hulett or THS (see paragraph 123.2) for the second
defendant to be able to plead pertinently
to the allegation that
these costs were not approved.
(ix)
Paragraph 63, insofar as the plaintiffs are required to allege what
these costs were (the table
in annexure POC15A being inadequate) and
in what respects they did not meet the requirements for
capitalisation per IAS16 and 38.
(x)
Paragraph 65, insofar as the plaintiffs are required to allege the
expenses inappropriately
capitalised on the instructions of the
second defendant, and why it is alleged that they were
inappropriately capitalised, whether
that entails that there was ‘no
sound commercial or accounting basis’ for those costs to be
capitalised, or some other
reason. The plaintiffs are also required
to allege the ‘employee costs’ and the capital projects
‘across South
Africa and Mozambique between the 2012 and 2018
financial years’ referred to in paragraphs 126-127, and the
reasons why it
is alleged that these were inappropriately
capitalised. The plaintiffs are also required to allege when, where,
how and to whom
the second defendant is alleged to have issued the
instructions to capitalise those expenses.
(xi)
Paragraph 67, insofar as the plaintiffs are required to allege the
expenses inappropriately capitalised
on the instructions of the
second defendant, and why it is alleged that they were
inappropriately capitalised.
(xii)
Paragraph 68, insofar as the plaintiffs are required to plead the
factual basis for the inference
that the second defendant failed to
measure up to a standard of reasonableness or had constructive
knowledge of the third category
of misconduct, including when and how
it occurring would or should have come to the second defendant’s
knowledge or attention,
the nature of the investigations which the
second defendant should have conducted and which would have revealed
that the third
category of misconduct was taking place, and which he
failed to do.
(xiii)
Paragraph 70, insofar as the plaintiffs are required to particularise
the fictitious sales, beyond the
example identified in paragraph 140,
which they intend to rely upon.
(xiv)
Paragraphs 71 and 72, insofar as the plaintiffs are required to plead
the factual basis for the inference that
the second defendant failed
to measure up to a standard of reasonableness or had constructive
knowledge of the fourth category
of misconduct, including when and
how it occurring would or should have come to the second defendant’s
knowledge or attention,
the nature of the investigations which the
second defendant should have conducted and which would have revealed
that the fourth
category of misconduct was taking place, and which he
failed to do.
(xv)
Paragraph 21, the plaintiffs must plead clearly what amount exactly
is claimed in respect of external audits
relating to the financial
years affected by the need for restatement.
(b) The exceptions in
paragraphs 34, 37, 43, 44, 46, 48, 52, 53, 54, 55, and 61 of the
notice of exception relating to the first
and fifth exceptions, and
any portions of exceptions raised but not expressly allowed in terms
of paragraph (a) above, and the
second, third and fourth exceptions
are dismissed.
(c) The parties are
directed to each pay their own costs of the exception.
(d) The plaintiffs are
afforded the opportunity to amend their particulars of claim within
20 days from the date of the grant of
this order.
JUDGMENT
Koen
J
Introduction
[1]
This judgment deals with various exceptions taken by the second
defendant to claims
in the plaintiffs’ particulars of claim.
[2]
The
plaintiffs’ claims are alleged to have arisen from events which
occurred during the period from 2015 to 2019, when the
second
defendant was employed as the chief financial officer
[1]
of the first plaintiff, Tongaat Hulett Limited (Tongaat Hulett),
chaired its audit committee and those of other entities within
the
Tongaat group, and at various times was a member of the board of
directors of several entities within the group, being subsidiaries
of
Tongaat Hulett. The subsidiaries included inter alia the third
plaintiff, Hippo Valley Estates Limited (Hippo Valley), the fourth

plaintiff, Triangle Limited (Triangle), and the property development
arm of the group, Tongaat Hulett Developments (Pty) Ltd (THD).
It is
alleged that in these capacities, the second defendant signed,
consented to, or authorised the financial statements of the
first
plaintiff, and that these were inaccurate. The second plaintiff,
Tongaat Hulett Sugar South Africa Limited (THS), was at
all material
times also a subsidiary of Tongaat Hulett, but the second defendant
was not a director of THS.
The
plaintiffs’ particulars of claim
[3]
The plaintiffs’ claims against the second defendant are
contained in lengthy
particulars of claim of just over 100 pages,
excluding the annexures. In the interest of brevity, I shall
endeavour to avoid quoting
verbatim from the particulars of claim.
The particulars of claim will be available to the parties and this
judgment should be read
with reference thereto.
[4]
A narrative
form is often employed in the plaintiffs’ particulars of claim
and some paragraphs contain more than a single
distinct averment,
[2]
contrary to what is required by rule 18(3). As exception is often
taken on various grounds to the various allegations in a single

paragraph it has made my task in formulating this judgment all the
more difficult. But I shall endeavour to formulate my findings
as
clearly and with as little repetition as possible.
[5]
Briefly summarised, the claims against the second defendant are for:
(a)
payment of amounts equivalent to the cost the first plaintiff
incurred in restating certain
of its financial statements (R44,68
million), and fines imposed by the Johannesburg Stock Exchange (R7,5
million) and by the Financial
Sector Conduct Authority (R20 million)
(the economic damages claim);
(b)
payment of monies the second defendant received while employed by
Tongaat Hulett, comprising
his base salary for the financial years
2015 to 2019 (R24 546 540), accumulated leave pay (R92 889), pension
and medical aid contributions
(R3 658 438.68), STI bonuses for the
financial years 2015 to 2017 (R5 923 708) and LTI variable pay
benefits for the financial
years 2015 to 2019 (R10 170 115) (the
remuneration damages claim);
(c)
payment of certain losses allegedly suffered by Hippo Valley (USD3
899 778.34);
(d)
payment of certain losses allegedly suffered by Triangle (USD4 875
358.02); and
(e)
a declarator that the second defendant is a delinquent director (the
delinquency claim).
[6]
The
aforesaid relief is claimed on the following basis:
[3]
(a)
The economic damages claim, is formulated as a claim for damages
arising
from the second defendant’s alleged breaches of his
fiduciary duties to Tongaat Hulett.
(b)
The remuneration damages claim, is formulated on three grounds,
namely:
as a claim based on unjustified enrichment (the enrichment),
a claim for damages for breach of an implied term of the second
defendant’s
employment contract (the breach of contract claim),
and a claim for damages for fraudulently, alternatively negligently
causing
a misrepresentation to be made to Tongaat Hulett which
induced the payment of those amounts (the misrepresentation).
(c)
The Hippo Valley and Triangle claims are formulated as claims for
damages
arising from the second defendant’s alleged breaches of
his fiduciary duties to Tongaat Hulett, Hippo Valley, and Triangle.
(d)
The delinquency claim is based on the second defendant’s
breaches
of his fiduciary duties to Tongaat Hulett.
[7]
The plaintiffs’ causes of action therefore include an alleged
breach of fiduciary
duties, unjust enrichment, breach of (employment)
contract, fraudulent or negligent misrepresentation, and, as regards
delinquency,
a contravention of provisions of the Companies Act 71 of
2008 (‘the
Companies Act). The
second defendant has correctly
identified these causes of action and the basis for each in the
notice of exception and the heads
of argument filed on his behalf.
[8]
The
facta probanda
, or facts required to be proved, to found a
valid claim against the defendants in respect of each of the
aforesaid causes of action,
are trite. In brief and in so far as it
concerns specifically the second defendant:
(a)
In respect of the breach of fiduciary duties, the plaintiffs need to
prove that the second
defendant was party to conduct which, if
proved, would constitute a breach of fiduciary duties. What the
conduct might entail is
a factual issue that needs to be pleaded.
Whether those facts, if proved would amount to a breach of fiduciary
duties is a question
of law.
(b)
As regards unjust enrichment, the plaintiffs need to alleged that a
payment was made that
was not due, and that it was made bona fide and
in error, resulting in the second defendant being enriched and the
plaintiffs being
impoverished. That the payment was made, the factual
basis why it is alleged that it was not due, that it was nevertheless
paid
bona fide, and the extent of the enrichment need to be pleaded.
(c)
As regards the breach of contract, the conclusion of the contract
between the parties and
when and where it was concluded, the material
terms thereof, the breach of specific terms, and the consequence of
such breach,
must be alleged.
(d)
As regards fraudulent or negligent misrepresentation, the nature of
the misrepresentation,
the factual basis upon which it is contended
that the misrepresentation was fraudulent or negligent, and the
causative effect thereof
need to be pleaded.
(e)
As regards the delinquency claim, the factual conduct which it will
be contended would result
in a legal conclusion that the second
defendant had, as a director, been delinquent, needs to be pleaded.
The
evidence (
facta probantia
) to prove the
facta probanda
need not be pleaded.
[9]
Regarding the factual allegations required to be pleaded as the
facta
probanda
in support of the aforesaid causes of action, the
plaintiffs, rather than alleging specific facts separately in regard
to each
pleaded cause of action, collectively, and foundational to
their causes of action, alleged and relied on four categories of what

are alleged to be ‘misconduct’, giving rise to what has
been labelled ‘collective irregularities’. The
plaintiffs
allege that these had the effect, to the knowledge of the second
defendant, of overstating the value of assets and revenue
in the
first plaintiff’s financial statements as at 31 March 2018, in
a sum exceeding R5 billion.
[10]
The four categories of misconduct are identified in the notice of
exception. They will
be set out in more detail below.
[11]
The second defendant’s exceptions arise mainly in relation to
the particularity with
which these categories of misconduct and the
collective irregularities are pleaded. The exceptions are extensive,
the notice of
exception running to 34 pages. The individual
exceptions will need to be dealt with separately. It is often
impractical to deal
with them other than to repeat the material
portions of the notice of exception, and to reference the text of
this judgment to
the numbered paragraphs in the notice of exception.
That unfortunately has added to the length of this judgment, but
hopefully
will make a discussion of the individual exceptions more
self-contained.
The
notice of exception
[12]
The material parts of the notice of exception relevant to this
judgment read as follows:
‘
First
Exception
7. The defendant is
embarrassed to plead to the allegations that there were certain
accounting irregularities within the plaintiffs
and that he breached
his fiduciary duties in either participating in them or not detecting
them (which breaches underlie the
Economic damages claim
, the
Misrepresentation claim
, the
Hippo/Triangle damages claim
and the
Delinquency claim
) because the allegations in the
amended particulars of claim set out nothing more than:
7.1
vaguely formulated allegations of practices adopted within Tongaat
Hulett and its subsidiaries
over an extended period of time (referred
to in the particulars of claim as the four categories of misconduct);
7.2
vaguely formulated allegations concerning the impact those practices
had on the first plaintiffs
financial statements;
7.3
a general absence of particularity as to the identities of the
parties who carried out the four
categories of misconduct, and how
and when they did so;
7.4
conclusive statements that the second defendant encouraged those
practices, knew of them, ought
to have known of them and/or had
constructive knowledge of them, without sufficient substantive
factual allegations underpinning
those conclusions;
8. Details of the
deficiencies of the particulars of claim regarding the alleged
misconduct, its commission and effect, and the
second defendant’s
participation in and/or knowledge of it, are set out under the
heading “
Further
Particulars of First
Exception
” below.
Second Exception
9. The
Enrichment
claim
fails to disclose a cause of action, inasmuch as the
payments the plaintiffs aver were mistaken or
sine causa
were,
on the allegations made in the particulars of claim, due owing and
payable in terms of extant obligations between the first
plaintiff
and the second defendant.
10. In terms of the
employment agreement that had been concluded between the first
plaintiff and the second defendant on 19
May 2003, annexure POC3 to
the amended particulars of claim, the second defendant was, as an
employee of Tongaat Hulett, entitled
to receive,
inter alia,
a
basic salary, pension and medical aid benefits.
11. The plaintiffs have
also averred that certain other amounts were awarded and paid to the
second defendant by Tongaat Hulett
in accordance with the Share
Appreciation Rights Scheme and the Deferred Bonus Plan.
12. In paragraph 155.1 of
the particulars of claim, Tongaat Hulett alleges that certain
remuneration paid to the second defendant
was paid “
in
error”
, but such allegation is inconsistent and
irreconcilable with the terms of the employment agreement, annexure
POC3 and the allegations
that the second defendant received payments
pursuant to the Share Appreciation Rights Scheme and the Deferred
Bonus Plan.
13. The amended
particulars of claim fail to establish an essential averment relating
to the
Enrichment claim
, namely, that the payments sought to
be recovered were
indebiti
.
Third Exception
14. The
Breach of
contract claim
fails to disclose a cause of action, inasmuch as:
14.1   the
implied term alleged at paragraph 58 of the particulars of claim (and
in terms of which it is in essence alleged
that payment of
remuneration to the second defendant was conditional on the proper
discharge of his fiduciary duties) is not a
term implied by law; and,
in any event,
14.2   the
plaintiffs have failed to plead allegations to establish:
14.2.1  that the
second defendant breached that term, it being a legal impossibility
to breach a condition; or
14.2.2  that Tongaat
Hulett suffered any damages as a result of any such breach of that
term.
Fourth exception
15. In paragraphs 59.3
and 60.3 of the amended particulars of claim, the plaintiffs aver
that the second defendant owed certain
duties to some of the
subsidiaries of the first plaintiff by virtue of his directorship of
such subsidiaries.
16. In paragraph 59.4 of
the amended particulars of claim, the plaintiffs aver that since THS
was in substance a division of the
first plaintiff, alternatively an
agent of the latter for the business it conducted, the second
defendant owed the said fiduciary
duties to THS; however, the second
defendant is not alleged to have been a director of THS.
17. In paragraph 153 of
the particulars of claim the plaintiffs allege that the “
collective
irregularities
” constituted a breach of the second
defendant’s aforesaid duties.
18. The allegations
contained in paragraph 59.4 of the amended particulars of claim,
summarised in paragraph 16 above, do not constitute
a legal basis
upon which the second defendant owed the duties pleaded in paragraph
60.3 of the amended particulars of claim to
any of the subsidiaries
of the first plaintiff of which he was not a director, including THS,
and thus, the conduct constituting
the alleged “
collective
irregularities
”, insofar as they pertained to subsidiaries
of the first plaintiff of which the second defendant was not a
director, is not
actionable.
19. The second
plaintiff’s claims against the second defendant in relation to
suggested breaches by him of fiduciary duties
that he allegedly owed
to the second defendant are thus bad in law, and do not sustain a
cause of action against him.
Fifth Exception
20. It is alleged in
paragraph 154.2 of the amended particulars of claim that the first
plaintiff had to pay to have its financial
statements restated “
at
a cost of approximately R44,680,000”,
which amount is
alleged to represent:
“…
the
difference between the costs based on past invoicing for external
audits and the sums charged for the external audits for the
financial
years affected by the need for restatements, which amount was fair
and reasonable in the circumstances
.”
21. The allegations
quoted are so vague as to embarrass the second defendant to plead to
them, and fail to satisfactorily substantiate
the quantum of
R44,680,000.00 Tongaat Hulett avers it had to pay.
Further Particulars of
First Exception
22. In paragraphs 151 and
154 of the amended particulars of claim, the plaintiffs aver that
four “
categories
” of misconduct had certain
impacts on the financial statements of Tongaat Hulett that caused the
third and fourth plaintiffs
to suffer certain loss.
23. In paragraph 152 of
the amended particulars of claim, the plaintiffs aver that,
inter
alia
, the second defendant had knowledge of, and was involved in,
four “
categories
” of misconduct, and they define
that knowledge and involvement as “
the collective
irregularities
”.
24. The allegations
particularising the four categories of misconduct, the second
defendant’s alleged knowledge and involvement
in them and the
effect the four categories of misconduct are alleged to have had are
vague, and the second defendant is embarrassed
to plead to them, for
the reasons set out in this first exception.
Ad the First
Category of Misconduct (paragraphs 67-91 of the amended particulars)
25. The first category of
misconduct concerns the alleged manipulation of land sale agreements
concluded by Tongaat Hulett Developments
(Pty) Ltd, a subsidiary of
the first plaintiff, (“
THD
”) to reflect revenue
being earned earlier than it ought to have been.
26. The plaintiffs rely
on
three forms
of alleged manipulation.
27. The
first form of
alleged manipulation
concerns an accounting practice alleged to
have been adopted “…
across the 2013 to 2019
financial years
” (see paragraph 73 of the amended
particulars of claim) and that was “
contrary to accounting
policy in Tongaat Hulett and THD
” (see paragraph 71 of the
amended particulars of claim), which involved the recognition of
revenue on the dates land sale
agreements were signed or the dates to
which they were backdated, irrespective of whether the land in
question had been transferred,
sales revenue had been received and/or
the conditions precedent to the relevant agreement had been fulfilled
(paragraphs 70-74).
28. The allegations
concerning the
first form of alleged manipulation
are
impermissibly vague, as the plaintiffs have, save for furnishing a
table at paragraph 73 of the amended particulars of claim,
failed to
plead or annex the agreements they contend were manipulated in this
manner, leaving it impossible for the second defendant
to ascertain:
28.1   the
terms of those agreements;
28.2   which of
those agreements are alleged to have been back-dated, and the dates
to which any such back-dating occurred;
28.3   whether
the agreements contained any suspensive conditions and, if so,
whether and/or when they were fulfilled;
28.4   the
obligations of the parties to the agreements, including as regards
the passing of risk, the granting of possession,
payment of the
purchase price and transfer, those obligations being material to the
question of when revenue from those transactions
ought to have been
recognised, and thus whether the alleged manipulation occurred at
all;
28.5   the
persons who represented THD in concluding those agreements and the
persons within THD who implemented the alleged
accounting practice;
28.6   what the
accounting policy in Tongaat Hulett and THD was, and thus the extent
to which the alleged practice deviated
from it (if at all).
29. The
second form of
alleged manipulation
concerns the way certain land sale
agreements were structured, it being alleged the reason for doing so
was to,
inter alia
, enable THD to conceal material suspensive
conditions and to recognise revenue earlier than it ought to have
been (paragraphs 75-81
of the amended particulars of claim).
30. The allegations
concerning the
second form of alleged manipulation
are
impermissibly vague, as the plaintiffs have, save for furnishing the
table in annexure POC9 to the amended particulars of claim,
failed to
adequately plead or annex the “take-back” agreements they
rely on, leaving it impossible for the second defendant
to ascertain:
30.1   whether
the agreements were structured as alleged;
30.2   whether
such structuring is in any way impermissible;
30.3   whether
the way the agreements were structured achieved the results alleged
in paragraph 78, in particular, the
(impermissible) early recognition
of revenue;
30.4   the
persons who represented THD in concluding those agreements and the
persons within THD who implemented the alleged
accounting practice.
31. The
third form of
alleged manipulation
concerns an alleged practice within THD,
carried out over the period 21 December 2007 to 13 December 2018, of
not timeously cancelling
sale agreements in cases where the
purchasers could not perform, and treating the revenue from those
sales as unimpaired and unqualified
in its financial and accounting
records (paragraphs 82-85 of the amended particulars of claim).
32. The allegations
concerning the
third form of alleged manipulation
are
impermissibly vague, as the plaintiffs have, save for furnishing the
table in annexure POC10 to the amended particulars of
claim, failed
to:
32.1
adequately plead or annex the agreements they contend were not
timeously cancelled or impaired;
32.2   plead
when they contend each purchaser became unable to fulfil its
obligations under the agreement in question,
the factual basis
underlying that conclusion, and when those facts would have become
known to THD;
32.3   identify
the persons who represented THD in concluding those agreements;
32.4   identify
the persons within THD who implemented the decision not to not
timeously cancel the sale agreements;
32.5   indicate
when the decision not to cancel the sale agreements was taken.
33. In paragraphs 86-88
of the amended particulars of claim the plaintiffs allege the
collective consequences of the three forms
of manipulation
constituting the first form of misconduct, however, the second
defendant cannot meaningfully respond to those allegations
while the
vagaries identified above exist.
34. In paragraph 89.1 the
plaintiffs aver that the second defendant knew of and encouraged the
three forms of manipulation within
THD. These allegations are
impermissibly vague inasmuch as the plaintiffs have failed to aver:
34.1   when and
how the second defendant became aware of those practices;
34.2   when and
how he encouraged them to be carried out over the extended periods
addressed in the amended particulars
of claim.
35. Paragraph 89.2 of the
amended particulars of claim avers that the second defendant:
35.1   could
and should have known about the three forms of manipulation within
THD through the exercise of reasonable
care, by virtue of the
positions he held and via investigations into THD’s affairs.
35.2   had
constructive knowledge of the three forms of manipulation within THD.
36. The allegations
concerning the second defendant’s knowledge and encouragement
of the alleged misconduct are impermissibly
vague, as the plaintiffs
have failed to adequately particularise:
36.1   when and
how the three forms of manipulation allegedly occurring within THD
would or should have come to the second
defendant’s knowledge
or attention (the allegations in paragraphs 90.2 - 90.4 concern a
very limited number of the impugned
transactions and are inadequate
to enable the second defendant to plead to all of them);
36.2   the
nature of the investigations the second defendant was expected to
have conducted and which would have revealed
that the three forms of
manipulation within THD were taking place, and when those
investigations ought to have been conducted;
36.3   the
factual basis on which it is alleged that the second defendant had
constructive knowledge of the three forms
of manipulation within THD.
37. In paragraph 91 of
the amended particulars of claim it is alleged that the second
defendant participated in the three forms
of manipulation within THD,
did not take steps to prevent them, and permitted the financial
statements of THD and Tongaat Hulett
to be prepared knowing them to
be inaccurate however, the plaintiffs have failed to particularise:
37.1   the
facts underlying the conclusion that the second defendant
participated in the three forms of manipulation within
THD, in
particular, how and when that participation occurred;
37.2   the
steps the second defendant ought to have taken to prevent the three
forms of manipulation within THD taking
place, and when they ought to
have been taken;
37.3   the
facts underlying the conclusion that the second defendant permitted
the financial statements of THD and Tongaat
Hulett to be prepared
knowing them to be inaccurate.
Ad the Second
Category of Misconduct (paragraphs 92-120 of the amended particulars)
38. The second category
of misconduct concerns an alleged practice that developed throughout
Tongaat Hulett and its sugar subsidiaries
to overstate the value of
cane assets through the
manipulation of the costs
and
valuations
attributable to them (see paragraph 97 of the
amended particulars of claim).
39. As regards the
manipulation of costs
, the plaintiffs allege that:
39.1   “
At
all material times
”, costs were impermissibly capitalised
to the establishment cost of cane roots (paragraph 101);
39.2   the
establishment costs of cane roots were calculated at a standard cost
per hectare that far exceeded the actual
establishment costs,
particularly regarding re-planted cane (paragraphs 102-104).
40. The allegations
regarding the manipulation of costs are impermissibly vague in that:
40.1   the
plaintiffs have failed to identify who carried out the alleged
improper capitalisation of costs, who decided
to implement the
practice, and when they did so;
40.2   the
second defendant cannot adequately identify the costs alleged to have
been impermissibly capitalised, the quantum
of those costs or when
such capitalisation occurred, and he thus cannot respond to the
conclusion that those costs were impermissibly
capitalised;
40.3   the
second defendant cannot respond to the conclusions that the
establishment costs of cane roots were calculated
at a standard cost
per hectare, and/or that that standard cost far exceeded the actual
cost (particularly regarding re-planted
areas) in the absence of
allegations by the plaintiffs as to:
40.3.1
how the alleged standard cost per hectare was constituted;
40.3.2
how the plaintiffs calculate the actual costs they consider could
legitimately
have been capitalised to the establishment of cane
roots;
40.4   the
plaintiffs have failed to adequately particularise the impact the
alleged manipulation of costs had on the
claims advanced against the
second defendant in this action.
41. As regards the
valuations
, the plaintiffs rely on
four practices
.
42. The
first improper
valuation practice
is the alleged overstatement of cane root
values in the 2017 financial year as a result of including (i)
certain completely fallow
land and (ii) certain land for which no
valid lease existed in that financial year, as land containing cane
root assets (paragraphs
106-107 of the amended particulars of claim).
43. The allegations
concerning the
first improper valuation practice
are
impermissibly vague, as the plaintiffs have failed to adequately
particularise:
43.1   who
carried out the alleged improper valuation practice, who decided to
implement the practice, and when they did
so;
43.2   the
“
completely fallow
” land they refer to;
43.3   how the
standard rate at which land was allegedly valued, and how it compared
to the actual value of all fallow
land in the 2017 financial year;
43.4   the
lease between THS and the Ntwashini Community Trust referred to in
paragraph 107.2.
44. In the circumstances,
the second defendant is unable to respond to the allegations that
completely fallow land existed, that
it was improper for a standard
establishment cost to be applied to it, or to the conclusion that the
lease between THS and the
Ntwashini Community Trust was only valid
once signed by both parties and/or should be treated as such for
purposes of valuing cane
roots in the 2017 financial year.
45. The
second
improper valuation practice
is the alleged exclusion in the 2018
financial year of the “
managed farm rental cost
”
from the “
costs to sell
” in the standing cane
valuation, thereby increasing the valuation of standing cane
(paragraph 110).
46. The allegations
concerning the
second improper valuation practice
are
impermissibly vague, as the plaintiffs have failed to adequately
particularise:
46.1   who
decided to exclude managed farm rental costs in financial year 2018
and who implemented that decision (see
paragraph 110.3 of the amended
particulars of claim);
46.2   the
variables and calculations used for standing cane valuations in the
2018 financial year, with the result that
the second defendant is
thus unable to plead to the conclusion that “
managed farm
rental cost
” was impermissibly excluded from that
calculation.
47. The
third improper
valuation practice
is the alleged abuse of the equivalent
hectares formula by:
47.1   using an
actual cane age greater than the average age of cane at harvest in
the 2016, 2017 and 2018 financial years
(paragraphs 111.4-111.7);
47.2   using an
unreasonably low average age of cane at harvest (the years when this
occurred are not particularised)
(paragraph 112);
47.3   removing
the age-limit cap of 16 months on the actual age of cane during the
2018 financial year (paragraph 113.1-113.4);
47.4
increasing the age of all standing cane by one month (as opposed to
by 0.5 months) in the 2017 financial year (paragraphs
113.5-113.9);
48. The allegations
concerning the
third improper valuation practice
are
impermissibly vague, as the plaintiffs have failed to adequately
particularise:
48.1   which
representatives of Tongaat Hulett decided to adopt the practices
referred to in paragraphs 47.1 to 47.4 above
and when they did so;
48.2   the
facts relied upon for the conclusion that an “
unreasonably
low average age of cane
” was used in the equivalent
hectares formula;
48.3   the
calculations used in the application of the equivalent hectares
formula in the years in respect of which that
formula is alleged to
have been abused.
49. The
fourth
improper valuation practice
is the alleged “
regular
”
overstatement of the “
RV price
” when valuing
standing cane in accordance with IAS41 (paragraph 114 read with
paragraph 108).
50. The allegations
concerning the
fourth improper valuation practice
are
impermissibly vague, as the plaintiffs have failed to:
50.1
adequately particularise or furnish the variables and calculations
used for standing cane valuations, and the second
defendant is thus
unable to plead to the conclusion that the “
RV price
”
was overstated in that calculation;
50.2
particularise which representatives of the plaintiffs implemented the
decision to regularly estimate excessive
RV price estimates used by
the South African Sugar Association and when that decision was taken.
51. The
fifth improper
valuation practice
is the alleged decision “
at some
point
” to include the full value of share crop standing
cane in the standing cane valuation, reversing a decision taken
during
or about June 2011 to exclude such cane (paragraph 115).
52. The allegations
concerning the
fifth improper valuation practice
are
impermissibly vague, as the plaintiffs have failed to adequately
particularise or furnish:
52.1   which
representatives of the plaintiffs took the decision to include the
full value of share crop standing cane
in the standing cane valuation
(per paragraph 115.2) and when that decision was taken (the
allegation in paragraph 115.3 that it
was done “
at some
point between 2011 and 2014
” is inadequate);
52.2   the
variables and calculations used for standing cane valuations.
53. In paragraphs 116-117
of the amended particulars of claim, the plaintiffs set out the
alleged impact the five improper valuation
practices had. Those
allegations are impermissibly vague, in that:
53.1   the
calculations by PricewaterhouseCoopers referred to in paragraph 116.2
have not been supplied, and the second
defendant is thus unable to
plead to the conclusions in paragraph 116.3;
53.2   The
basis on which the external auditors referred to in paragraph 117
drew the conclusions pleaded in paragraphs
117.1 and 117.2 have not
been supplied, and the second defendant is embarrassed to plead to
the conclusions in paragraph 117.
54. In paragraph 118.1
the second defendant is alleged to have known of the practices
outlined in the second category of misconduct.
This is impermissibly
vague, for the reasons set out in paragraph 36 above,
mutatis
mutandis
.
55. The second
defendant’s alleged role in the second category of misconduct
is also pleaded in paragraphs 118.2-118.3 and
120, which is a
verbatim repetition of paragraphs 89.2-89.3 and 91 respectively.
These allegations are impermissibly vague for
the reasons set out in
paragraphs 36 and 37 above,
mutatis mutandis
.
Ad the Third
Category of Misconduct (paragraphs 121-137 of the amended
particulars)
56. The third category of
misconduct concerns the alleged inappropriate capitalisation of
operating expenses and maintenance and
repair costs within “
Tongaat
Hulett
” (paragraph 121).
57. The plaintiffs rely
on
five instances
of alleged inappropriate capitalisation.
58. The
first instance
of inappropriate capitalisation
concerns the capitalisation of
costs in respect of projects that allegedly did not meet the
capitalisation requirements of IAS16
and 38 and, in some instances,
were not approved by the Board of Tongaat Hulett or THS (paragraphs
123.1-123.5).
59. The allegations
concerning the
first instance of inappropriate capitalisation
are impermissibly vague, as the plaintiffs have failed to adequately
particularise:
59.1   the
nature of the projects identified as items 1-10 on the table
appearing at paragraph 123.1, and the second defendant
is accordingly
unable to plead to the conclusion that those projects did not meet
the capitalisation requirements of IAS16 and
38;
59.2   which
costs were allegedly not approved by the boards of Tongaat Hulett or
THS (see paragraph 123.2) and the relevant
members of those boards,
leaving the second defendant embarrassed to plead to the allegation
that they did not approve the costs
in question.
60. The
second
instance of inappropriate capitalisation
concerns the alleged
failure to impair the asset value of the WSM project when it was
abandoned “
in around 2009/2010
” (the costs in
respect of that project having been properly capitalised), with the
result that the capitalised costs remained
reflected at full value in
the financial statements of Tongaat Hulett in the financial years
2010 to 2017 (paragraph 123.5).
61. The allegations
concerning the
second instance of inappropriate capitalisation
are impermissibly vague, as the plaintiffs have failed to adequately
particularise the factual basis on which the conclusion is
pleaded,
in paragraph 123.5.3, that the WSM project was abandoned in around
2009/2010, the identities of the parties who made that
decisions who
made that decision, and/or how or when the second defendant was aware
of those facts, as alleged in paragraph 123.6,
and the second
defendant is accordingly embarrassed to plead to those conclusions.
62. The
third instance
of inappropriate capitalisation
concerns the alleged
capitalisation of costs in respect of two projects, GNU and Xinavane
Refinery. The plaintiffs aver that costs
capitalised in respect of
those two projects were not budgeted for nor approved and “
in
some instances did not meet the requirements for capitalisation per
IAS 16 and 38
” (paragraph 124).
63. The allegations
concerning the
third instance of inappropriate capitalisation
are impermissibly vague, as the plaintiffs have failed to adequately
particularise:
63.1   the
nature of the GNU and Xinavane Refinery projects, the costs
capitalised in respect of those projects (the table
in annexure
POC15A being inadequate) and which of those costs the plaintiffs
contend “
did not meet the requirements for capitalisation
per IAS 16 and 38
”, leaving the second defendant
embarrassed to plead to the conclusion that those projects did not
meet the capitalisation
requirements of IAS16 and 38;
63.2   the
names of the project managers, referred to in paragraph 125, who are
alleged not to have approved the costs
in question, leaving the
second defendant embarrassed to plead to the allegation that they did
not do so.
64. The
fourth
instance of inappropriate capitalisation
concerns the alleged
capitalisation of “
expenses
” to “
capital
works in progress
” and “
completed capital
projects
” from the income statements of “
operational
entities or divisions
” and that “
appear to have
related to the day-to-day running costs of the business
”
(paragraph 125). Those expenses included employee costs totalling
R295 million capitalised to capital projects “
across South
Africa and Mozambique between the 2012 and 2018 financial years
”
(paragraphs 126-127). Those capitalisations are alleged to have been
effected “
purely on the instructions of Munro [the second
defendant]
” (paragraph 128).
65. The allegations
concerning the
fourth instance of inappropriate capitalisation
are impermissibly vague, as the plaintiffs have failed to adequately
particularise:
65.1   the
“
expenses
”, the “
capital works in
progress
”, the “
completed capital projects
”
and the “
operational entities or divisions
”
referred to in paragraph 125, and the defendant is accordingly
embarrassed to plead to those allegations, and to the allegations

that the expenses were inappropriately capitalised and that such
capitalisation was done “
purely on his instructions
”;
65.2   the
factual basis upon which the conclusion is based that the expenses
referred to in paragraph 125 “
appear to have related to the
day-to-day running costs of the business
”, and the second
defendant is thus embarrassed to plead to the conclusion in paragraph
128 that there was “
no sound commercial or accounting basis
”
for those costs (whatever they may entail) to be capitalised;
65.3   the
“
employee costs
” and the capital projects “
across
South Africa and Mozambique between the 2012 and 2018 financial
years
” referred to in paragraphs 126-127, and the defendant
is accordingly embarrassed to plead to those allegations, and to the

allegations that the expenses were inappropriately capitalised and
that such capitalisation was done “
purely on his
instructions
”;
65.4   when,
where, how and to whom the second defendant is alleged to have issued
the instructions to capitalise those
expenses.
66. The
fifth instance
of inappropriate capitalisation
concerns the alleged
capitalisation of certain maintenance and repair work in respect of
four mills (Amatikulu, Darnall, Felixton
and Maidstone) (paragraph
130). The plaintiff alleges, “
by way of example
”
in respect of each mill, that:
66.1
approximately 98% of certain costs incurred in respect of Amatikulu
between 1 April 2014 and 31 March 2018 constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 131);
66.2
approximately 81% of certain costs incurred in respect of Darnall
between 1 August 2014 and 27 February 2018 constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 132);
66.3
approximately 74% of certain costs incurred in respect of Felixton
between 1 April 2014 and 1 Apr 2017 constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 133);
66.4
approximately 79% of certain costs incurred in respect of Maidstone
during the 2015 2018 financial years constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 134).
67. The allegations
concerning the
fifth instance of inappropriate capitalisation
are impermissibly vague, as the plaintiffs have failed to
particularise:
67.1   the
costs capitalised in respect of each mill with sufficient detail to
enable the second defendant to assess the
conclusion that they were
improperly capitalised;
67.2   the
basis and calculations underlying the plaintiffs’ conclusions
regarding the percentage of costs that
were allegedly legitimately
capitalised, and those that were not;
67.3   the
costs capitalised and the basis underlying the plaintiffs’
conclusions regarding the percentage costs
that were allegedly
legitimately capitalised, and those that were not, other than those
provided “
by way of example”
;
67.4   the
identities of the parties who decided to capitalise the costs in
question, and when they decided to do so.
68. The second
defendant’s alleged role in the third category of misconduct is
also pleaded in paragraphs 136 and 137, which
is a repetition of
paragraphs 89.1-89.3 and 91 respectively. These allegations are
impermissibly vague for the reasons set out
in paragraphs 36 and 37
above,
mutatis mutandis
.
Ad the Fourth
Category of Misconduct (paragraphs 138-150 of the amended
particulars)
69. The fourth category
of misconduct concerns the alleged conclusion of fictitious sugar
sales between the third and fourth plaintiffs
(“
Hippo
Valley
” and “
Triangle
”) as sellers and
special purpose vehicles (“SPVs”) as purchasers, which
sales are alleged:
69.1   to have
occurred between 2015 and 2018 (paragraph 147.1).
69.2   to have
been financing transactions (paragraph 138).
69.3   to have
been concluded with a view to generating cashflow, reducing debt and
reflecting sales before they had occurred
(paragraph 143).
70. The allegations
concerning the fourth category of misconduct are impermissibly vague,
as the plaintiffs have failed to adequately
particularise the
fictitious sales relied on (save for the one example tendered in
paragraph 140), leaving the second defendant
embarrassed to plead to
the allegations regarding those transactions and the conclusions the
plaintiffs draw from them, including
the conclusions expressed in the
table at paragraph 145.8 and in paragraph 147.
71. In paragraph 148.1
the second defendant is alleged to have known of the practices
outlined in the second category of misconduct.
This is impermissibly
vague, for the reasons set out in paragraph 36 above,
mutatis
mutandis
.
The
second defendant’s alleged role in the fourth category of
misconduct is also pleaded in paragraphs 148.2 and 150, which
is a
verbatim repetition of paragraphs 89.2-89.3 and 91 respectively.
These allegations are impermissibly vague for the reasons
set out in
paragraphs 36 and 37 above,
mutatis mutandis
.’
[13]
As appears from the aforegoing paragraph, five exceptions are raised
to the particulars
of claim. The first and fifth exceptions are
raised on the basis that the particulars of claim and annexures are
vague and embarrassing
in the sense that they lack particularity
sufficient to enable the second defendant to plead thereto
[14]
. The second exception (the failure to allege that the alleged
enrichment was
indebiti
), the third exception (that what is
alleged is a condition, not a term of the agreement) and the fourth
exception (the second defendant
as a matter of law did not owe
fiduciary duties to THS) are based on these causes of action being
legally incompetent and not disclosing
valid causes of action.
[15]
The plaintiffs’ brief answer to the exceptions is as follows:
in respect of the complaints
of vagueness and embarrassment, that the
second defendant does not claim to be unable to understand the nature
of the plaintiffs’
claims, and that the particulars of claim
are therefore not ambiguous. The plaintiffs further contend that the
second defendant’s
complaints are insufficient to sustain an
exception that the particulars of claim are vague and embarrassing,
and rather constitute
an incompetent demand to plead the
facta
probantia
required to prove the facts necessary to succeed with
the pleaded causes of action. In respect of the no cause of action
exceptions,
the plaintiffs contend that these are not based on a fair
or benevolent reading of the particulars of claim, but instead rely
on
a construction of what the second defendant asserts those claims
to be, which construction the plaintiffs contend is incompatible
with
their pleaded case.
Applicable
legal principles
[16]
The legal principles which determine whether a pleading is excipiable
are well established.
Challenges arise from having to apply these
principles to the peculiar circumstances of a particular pleading. A
brief summary
of the applicable legal principles will suffice for the
purpose of this judgment.
[17]
The object
of all pleadings is to provide a succinct statement of the grounds,
set forth shortly and concisely, upon which a claim
is made or
resisted. Allegations pleaded as fact must be taken as true for the
purposes of an exception.
[4]
A
charitable test is generally used on exception and the pleader is
entitled to a benevolent interpretation.
[5]
A court may uphold an exception only if it is satisfied that the
cause of action or conclusion of law cannot be sustained on every

interpretation that can be placed on the pleaded facts.
[6]
[18]
If a
statement in a pleading is meaningless, it is vague. A pleading would
also be vague if it has a particular meaning, but the
allegations
have no material content.
[7]
It
is embarrassing if it cannot be gathered from the statement what
grounds are relied upon by the pleader. It is said that the

information pleaded must be reasonably sufficient.
[8]
In the context of a plea it has been held that it must be ‘in
an intelligible form’ so that the plaintiff ‘may
not be
embarrassed in meeting it’, or ‘leave one guessing as to
what it means’.
[9]
[19]
Nel and
others NNO v McArthur and others
quoting
from
Trope
v South African Reserve Bank and another
[10]
held that:
‘
An
exception to a pleading on the ground that it is vague and
embarrassing involves a two-fold consideration. The first is whether

the pleading lacks particularity to the extent that it is vague. The
second is whether the vagueness causes embarrassment
of such a
nature that the excipient is prejudiced . . .
As
to whether there is prejudice, the ability of the excipient to
produce an exception-proof plea is not the only, nor indeed the
most
important, test . . . Thus it may be possible to plead to particulars
of claim which can be read in any one of a number
of ways by
simply denying the allegations made; likewise to a pleading which
leaves one guessing as to its actual meaning. Yet
there can be no
doubt that such a pleading is excipiable as being vague and
embarrassing. . .’
[11]
[20]
On the particularity required, it was held in
Jowell v
Bramwell-Jones
that:
‘
The
plaintiff is required to furnish an outline of his case. That does
not mean that the defendant is entitled to a framework
like a
cross-word puzzle in which every gap can be filled by logical
deduction. The outline may be asymmetrical and possess rough
edges
not obvious until actually explored by evidence. Provided the
defendant is given
a
clear idea of the material facts which are necessary to make the
cause of action intelligible
,
the plaintiff will have satisfied the requirements
.
[12]
‘
It
is therefore incumbent upon a plaintiff only to
plead
a complete cause of action
which identifies the issues upon which the plaintiff seeks to
rely, and on which evidence will be led, in intelligible and
lucid
form and which allows the defendant to plead to it
.’
[13]
(emphasis added)
[21]
In the specific context of an allegation in a pleading that the one
party had acted in
a manner which failed to comply with a specific
accounting practice, it was held that:
‘
absent
the identification of the particular accounting practice which was
being offended by the accounting treatment asserted in
para 24 of the
particulars of claim, the particulars of claim are rendered
vague and embarrassing . . . and it seems to me
that one is left with
vagueness and embarrassment which goes to the whole cause of action,
as envisaged in
Jowell
v Bramwell-Jones
.
. .
’
[14]
[22]
A distinction must be drawn between
facta probanda
and
facta
probantia
. The distinction was summarized as follows in
JSS
Industrial Coatings CC
:
‘
[6] . . .
In
McKenzie v
Farmers’ Co-operative Meat Industries Ltd
,
the Appellate Division defined
facta
probanda
as:
“
Every
fact which it would be necessary for the Plaintiff to prove, if
traversed, in order to support his right to the judgment of
the
court. It does not comprise every piece of evidence which is
necessary to prove each fact, but every fact which is necessary
to be
proved.”
[7]
Facta
probantia
on
the other hand, are facts that are related to the
facta
probanda
and
are necessary to prove the
facta
probanda
.
Put differently,
facta
probantia
are
different pieces of evidence that must be led in order to prove
the
facta
probanda
.
It is trite that only
facta
probanda
must
be pleaded.
Factor
probantia
are
led as evidence during trial
.’
[15]
(Footnotes omitted.)
[23]
Apart from
the distinction between
facta
probanda
and
facta
probantia
,
a distinction must also be made between the degree of particularity
required for a pleading, in terms of the provisions of
rule 18
, as
opposed to where an exception is adjudicated. Where
rule 18(4)
refers
to material facts ‘… it … require[s] that a
plaintiff shall furnish only those particulars which are
strictly
necessary to enable the defendant to plead’.
[16]
Thus, it has been held, that a defendant cannot object to particulars
of claim in terms of
rule 18(4)
on the basis that they lack
sufficient particulars, where he contends that he is faced with an
‘inability to foresee how
the plaintiff will play his hand at
the trial and what must be done to meet it’.
[17]
As was said in
Venter
v Barritt Venter:
[18]
‘
The
exception stage is not the time for the defendant to complain that he
does not have enough information to prepare for trial
or may be
taken by surprise at the trial. That comes later . . . after, inter
alia, discovery of documents and requests for
trial particulars
had been made
.’
[24]
The distinction between
rule 23
and
rule 30
is that
‘
(a)
an exception [
in
terms of
rule 23]
that
the pleading is vague and embarrassing may only be taken when the
vagueness and embarrassment strikes at the root of the cause
of
action as pleaded; whereas
(b)
Rule
30
[
following
a failure to comply with the provisions of
rule 18]
may
be invoked to strike out the claim pleaded when individual
averments do not contain sufficient particularity; it is not

necessary that the failure to plead material facts goes to the root
of the cause of action.’
[19]
[25]
Consequently, an exception that a pleading is vague and embarrassing
cannot be directed
to a particular paragraph within a cause of action
but needs to go to the whole cause of action, which must be
demonstrated to
be vague and embarrassing. Given the nature of an
exception (which goes to the root of a cause of action pleaded): it
follows that
an exception is not appropriate in a case which can
fairly be met by particulars
‘…
where a
defendant can obtain the desired information by asking for further
particulars, he should do so. He can only employ the
exception that
the summons is vague and embarrassing when it goes to the root of the
action, and when the cause of action is not
clearly set forth in the
declaration, and he is therefore embarrassed in that way.’
[20]
[26]
Consequently, where a claim of lack of particularity relates to ‘
mere
detail
’ (in other words, detail which extends beyond the
‘bare minimum’ or ‘material facts’ required
in
terms in
rule 18)
,
‘
the
remedy of the defendant is to plead to the averment made and to
obtain the particularity he requires:
(i) either by means of
the discovery/inspection of document procedure in terms of the Rules;
or
(ii)
by means of a request for particulars for trial of those particulars
which are strictly necessary to enable the defendant to
prepare for
trial.
’
[21]
But
the bare minimum, or material facts still need to be pleaded.
[27]
Although
there was a suggestion in the second defendant’s heads of
argument that his notice of exception is a ‘composite’

one to also include non-compliance with the provisions of
rule 18
, a
reading of the exception demonstrates that is not so, and the matter
will be adjudicated as an exception only.
[22]
[28]
In the
final analysis, it is ‘incumbent upon a plaintiff only to plead
a complete cause of action which identifies the
issues upon
which the plaintiff seeks to rely, and on which evidence will be led,
in intelligible and lucid form and which allows
the defendant to
plead to it’,
[23]
that
is whether the particulars of claim make sense, such that the
defendant is able to plead.
[29]
Vagueness and embarrassment are connected, in the sense that
embarrassment arises from
vagueness: the onus is on the excipient to
show both vagueness amounting to embarrassment and embarrassment
amounting to prejudice.
Thus, the ultimate question is whether or not
the defendant is unable to plead by reason of the fact that he is
unable to distil
a single, clear meaning from the particulars.
[30]
An exception is also not about whether an excipient might have
accessed certain factual
evidence through a discovery process, more
particularly
rules 35(12)
and (14). If an allegation is necessary to
sustain a valid cause of action, or to not render the particulars of
claim vague and
embarrassing, then the allegation is required to be
made, and if not made, then the particulars of claim are excipiable.
[31]
In the final analysis, whether a pleading is excipiable is largely an
issue of discretion
as to whether the allegations have been pleaded
with sufficient particularity, that is the
facta probanda
required to be pleaded by a plaintiff to properly appraise the other
party of the case he has to meet, which is not vague and
embarrassing, and which if established at the trial by the
facta
probantia
, or the evidence, could result in judgment in favour of
the plaintiff.
Discussion
[32]
As so often happens in exceptions, the debate in the present matter,
insofar as it concerns
the first and fifth exceptions, centres around
the sufficiency of the particularity with which the allegations
should be pleaded
by the plaintiffs.
[33]
The plaintiffs contend that the second defendant has in many
instances characterised statements
in the particulars of claim as
conclusions, when they are instead allegations pleaded as fact, which
must be accepted as such.
They provided as an example the allegation
that had the board of Tongaat Hulett and Remco (remuneration
committee) known the true
facts, they would not have paid bonuses to
the second defendant. This, it was argued, is an assertion of fact
which must be accepted
as true for the purposes of determining the
exceptions. As a general principle, that contention is correct,
provided that what
is alleged is truly a statement of fact rather
than a conclusion or inference drawn in respect of facts which will
need to be established
to justify the conclusion asserted. Every case
will depend on its own peculiar facts and circumstances.
The
exceptions that the particulars of claim are vague and embarrassing
The
first exception
[34]
Paragraph 7 of the notice of exception has been quoted above. It
references four categories
of misconduct, which it is alleged the
second defendant encouraged, knew of, ought to have known of, or had
constructive knowledge
of, and what impact these categories of
misconduct had on the financial statements of Tongaat Hulett. Details
of the misconduct,
and the second defendant’s participation in
and/or knowledge thereof are then introduced under the heading
‘Further
Particulars of First Exception’ in paragraphs 22
to 24 of the second defendant’s notice of exception.
[35]
The notice of exception then deals with the four categories of
misconduct and the complaints
in respect of each separately in
paragraphs 25 to 72 thereof. I shall similarly deal with each of
these seriatim.
The
first category of misconduct (paragraphs 67-91 of the amended
particulars) – manipulation of land sale agreements concluded

by THD
[36]
The first category of misconduct is dealt with in paragraph 25 of the
notice of exception.
It relates to the alleged manipulation of land
sale agreements concluded by THD, a subsidiary of Tongaat Hulett to
reflect revenue
being earned earlier than it ought to have been. The
plaintiffs rely on three forms of alleged ‘manipulation’.
These
will be dealt with in turn.
The
first from of manipulation – backdating of sale agreements
[37]
The first form of alleged manipulation, dealt with in paragraphs 27
to 28 of the notice
of exception, is quoted earlier in this judgment.
[38]
It is contended by the second defendant that these allegations are
‘
impermissibly
vague, as the plaintiffs have, save for furnishing a table at
paragraph 73 of the amended particulars of claim, failed
to plead or
annex the agreements they contend were manipulated in this manner,
leaving it impossible for the second defendant to
ascertain:
28.1   the
terms of those agreements;
28.2   which of
those agreements are alleged to have been back-dated, and the dates
to which any such back-dating occurred;
28.3   whether
the agreements contained any suspensive conditions and, if so,
whether and/or when they were fulfilled;
28.4   the
obligations of the parties to the agreements, including as regards
the passing of risk, the granting of possession,
payment of the
purchase price and transfer, those obligations being material to the
question of when revenue from those transactions
ought to have been
recognised, and thus whether the alleged manipulation occurred at
all;
28.5   the
persons who represented THD in concluding those agreements and the
persons within THD who implemented the alleged
accounting practice;
28.6   what the
accounting policy in Tongaat Hulett and THD was, and thus the extent
to which the alleged practice deviated
from it (if at all).’
[39]
The accounting practice alleged to have been adopted ‘[a]cross
the 2013 to 2019 financial
years’ has not been identified, save
for the result it allegedly produced, namely the recognition of
revenue on the dates
land sale agreements were signed or the dates to
which they were backdated, irrespective of whether the land in
question had been
transferred, sales revenue had been received and/or
the conditions precedent to the relevant agreement had been
fulfilled. It is
alleged that this policy was ‘contrary to the
accounting policy’ of the first plaintiff and THD, but the
particulars
of claim do not identify that accounting policy, what it
required, and in what respects the accounting practice allegedly
adopted
from 2013 to 2019 differed from that policy.
[40]
The second defendant argues that revenue from sales would not only be
recognized upon transfer,
or similar events, when payment might
usually occur, but would be recognized in accordance with principles
established by the International
Financial Reporting Standards
(IFRS).
[41]
That the appropriate standard to be applied might be the IFRS is
obviously a defence that
could be pleaded. But that is not the issue
in the exception. The second defendant would be entitled to be
appraised of the specific
complaint against him with sufficient
particularity to determine the extent of any alleged default to
comply with the accounting
policy which the plaintiffs allege should
have been complied with (should it be found that such policy
applied), and which they
allege was not, and the respects in which it
was not complied with.
[42]
The plaintiffs are required in their particulars of claim to identify
the terms of the
accounting policy which they contend applied and
which they allege should be complied with, to identify each of the
backdated agreements
involved with reference to the names of the
parties thereto and the alleged date when each agreement was actually
concluded; the
date the plaintiffs will contend the proceeds/revenue
produced by each contract should have been reflected in the
financials according
to what the plaintiffs contend was the existing
accounting policy of the plaintiffs; the dates to which each of these
agreements
was allegedly backdated; and in which financials the
proceeds/revenue were wrongly reflected. Insofar as the table at
paragraph
73 lacks those details, the particulars are excipiable.
Copies of the agreements are however not required to be annexed at
the
stage of pleading, as the cause of action against the second
defendant is not founded on those agreements. They simply serve as

evidence. Their production is an issue for discovery. Whether the
agreements contained any suspensive conditions and, if so, whether

and/or when they were fulfilled; details of the obligations of the
parties to the agreements including the passing of risk, the
granting
of possession, payment of the purchase price and transfer, the
identity of the persons who represented THD in concluding
those
agreements and the persons within THD who implemented the alleged
accounting practice, and the extent to which the plaintiffs’

alleged accounting practice was deviated from (if at all), are
matters for evidence, or possibly, in part, the subject of an
appropriate
request for further particulars for trial. The exception
accordingly succeeds to the extent indicated above only.
The
second form of alleged manipulation
[43]
The second form of alleged manipulation is dealt with in paragraphs
29 and 30 of the notice
of exception.
[44]
The second defendant complains that the allegations concerning the
second form of alleged
manipulation are
‘
impermissibly
vague, as the plaintiffs have, save for furnishing the table in
annexure POC9 to the amended particulars of claim,
failed to
adequately plead or annex the “take-back” agreements they
rely on, leaving it impossible for the second defendant
to ascertain:
30.1   whether
the agreements were structured as alleged;
30.2   whether
such structuring is in any way impermissible;
30.3   whether
the way the agreements were structured achieved the results alleged
in paragraph 78, in particular, the
(impermissible) early recognition
of revenue;
30.4   the
persons who represented THD in concluding those agreements and the
persons within THD who implemented the alleged
accounting practice.’
[45]
The second defendant is entitled to details of each of the sale
agreements which were structured
in a way to enable THD to conceal
material suspensive conditions and to recognise revenue earlier than
it ought to have been; to
be able to identify the agreements in
question, that is when they were concluded, and who the parties to
these agreements are.
The table POC9 does not reflect all this
information and is to that extent vague and embarrassing. It must
also be alleged in what
way each agreement was structured to enable
THD to conceal material suspensive conditions and to recognise
revenue earlier than
it ought to have been; what revenue was
recognized in respect of each contract; when such revenue in respect
of each contract was
allegedly impermissibly recognized as a result
of the way the agreements were structured, to achieve the result
alleged in paragraph
78; and when it is alleged that such revenue
should have been recognized. The identity of the persons who
represented THD in concluding
those agreements and the persons within
THD who implemented the alleged accounting practice, are matters for
evidence, or possibly
further particulars to be requested for trial,
if appropriate, and do not require to be pleaded. The exception is
therefore upheld
to the extent indicated above.
The
third form of alleged manipulation – not cancelling sale
agreements
[46]
The third form of alleged manipulation is dealt with in paragraphs 31
and 32 of the notice
of exception (paragraph 33 seemingly being
simply a reference to ‘the vagaries above’, that is the
exceptions raised
in paragraphs 31 and 32).
[47]
The second defendant complains that the allegations concerning the
third form of alleged
manipulation are
‘
impermissibly
vague, as the plaintiffs have, save for furnishing the table in
annexure POC10 to the amended particulars of claim,
failed to:
32.1
adequately plead or annex the agreements they contend were not
timeously cancelled or impaired;
32.2   plead
when they contend each purchaser became unable to fulfil its
obligations under the agreement in question,
the factual basis
underlying that conclusion, and when those facts would have become
known to THD;
32.3   identify
the persons who represented THD in concluding those agreements;
32.4   identify
the persons within THD who implemented the decision not to not
timeously cancel the sale agreements;
32.5   indicate
when the decision not to cancel the sale agreements was taken.’
[48]
The plaintiffs are required to identify the agreements which were not
timeously cancelled
with sufficient particularity with regard to the
identity of the parties to each agreement, and the date of conclusion
thereof.
They also need to allege when they contend each purchaser
became unable to perform its obligations under the agreements in
question,
and by when it is alleged each agreement should have been
cancelled. Further, the plaintiffs are required to allege what
impact,
if any, the alleged failure to timeously cancel each
agreement had on stating the financial position of THD and/or the
plaintiffs.
This is specifically required where cancellation was
allegedly not timeously done, as the plaintiffs allege, by a certain
date,
but cancellation nevertheless followed within that same
financial year or accounting period, which would seem not to affect
what
is recorded in the financial statements.
[49]
The agreements not timeously cancelled need not be annexed. That is a
matter for discovery.
POC10 did not adequately identify the
agreements. They need to be identified with reference to the parties
to each agreement and
the date of conclusion thereof. The factual
basis underlying the conclusion as to when the agreements should have
been cancelled,
when those facts would have become known to THD, the
identity of the persons who represented THD in concluding those
agreements,
and the identity of the persons within THD who
implemented the decision not to timeously cancel the sale agreements,
are matters
for evidence, or possibly a request for particulars for
trial, if appropriate. The exception succeeds to the extent set out
above.
The
knowledge of the second defendant of the three forms of alleged
manipulation
[50]
The plaintiffs aver in paragraphs 89.1 of the amended particulars of
claim, that the second
defendant knew of and encouraged the three
forms of manipulation within THD. In paragraph 34 of the notice of
exception, the second
defendant excepts to these allegations. He does
so on the basis that these allegations are
‘
impermissibly
vague inasmuch as the plaintiffs have failed to aver:
34.1   when and
how the second defendant became aware of those practices;
34.2   when and
how he encouraged them to be carried out over the extended periods
addressed in the amended particulars
of claim.’
[51]
The plaintiffs need not aver when and how the second defendant became
aware of those practices.
The second defendant either knew of them or
he did not. He can plead to those allegations without being
embarrassed.
[52]
As regards when and how the second defendant ‘encouraged’
the practices to
be carried out over the extended periods addressed
in the amended particulars of claim, the second defendant similarly
either encouraged
the three forms of manipulation, or he did not. He
might complain that he is entitled to be appraised of how he did so,
and hence
to prepare, on how the plaintiffs may allege that he
encouraged the three forms of manipulation. Although a marginal call,
I am
of the view that the second defendant can plead to the
allegations without embarrassment. The details of when and how he
allegedly
encouraged the practices may be requested by way of a
request for further particulars for trial, if and when appropriate.
[53]
The allegations in paragraph 89.1 of the amended particulars of claim
are not excipiable
and the exception raised in paragraph 34 of the
exception accordingly falls to be dismissed.
[54]
The plaintiffs in paragraph 89.2 of the amended particulars of claim
aver
‘
that the second
defendant:
35.1   could
and should have known about the three forms of manipulation within
THD through the exercise of reasonable
care, by virtue of the
positions he held and via investigations into THD’s affairs.
35.2   had
constructive knowledge of the three forms of manipulation within
THD.’
In paragraph 36 of the
notice of exception the second defendant excepts to these allegations
as being
‘
impermissibly
vague, as the plaintiffs have failed to adequately particularise:
36.1   when and
how the three forms of manipulation allegedly occurring within THD
would or should have come to the second
defendant’s knowledge
or attention (the allegations in paragraphs 90.2 - 90.4 concern a
very limited number of the impugned
transactions and are inadequate
to enable the second defendant to plead to all of them);
36.2   the
nature of the investigations the second defendant was expected to
have conducted and which would have revealed
that the three forms of
manipulation within THD were taking place, and when those
investigations ought to have been conducted;
36.3   the
factual basis on which it is alleged that the second defendant had
constructive knowledge of the three forms
of manipulation within
THD.’
[55]
Whether the second defendant failed to measure up to a standard of
reasonableness or had
constructive knowledge of the manipulations are
matters of inferences and conclusions which must be based on facts
from which it
may be contended such inferences can be drawn. As much
as evidence will have to be adduced to say what these considerations
might
be, the factual basis for the inference must be alleged in the
particulars of claim to enable the second defendant to file a
properly
informed response to the conclusion contended for. Much as a
motorist accused of having failed to measure up to the standard of

reasonableness in causing a collision is entitled to be appraised of
the factual basis on which it will be contended that he failed
to
measure up to the standard of reasonableness, the second defendant
would be entitled to such particulars.
[56]
The plaintiffs are required to plead when and how the three forms of
manipulation occurring
within THD would or should reasonably have
come to the second defendant’s knowledge or attention; the
nature of the investigations
which the second defendant should have
conducted and which would have revealed that the three forms of
manipulation were taking
place, and which he failed to do; and the
factual basis on which it is alleged that the second defendant had
constructive knowledge.
To that extent, the particulars are
excipiable. When those investigations ought to have been conducted
will be apparent from the
nature of the investigations which it will
be pleaded were required to have been undertaken. How these should
have been undertaken
are part of the
facta probantia
which
need not be pleaded, and may form part of a request for particulars
for trial, if appropriate. The exception in paragraph
36 of the
notice of exception accordingly succeeds to that extent.
[57]
It is averred in paragraph 37 of the exception that
‘
In paragraph 91 of
the amended particulars of claim it is alleged that the second
defendant participated in the three forms of manipulation
within THD,
did not take steps to prevent them, and permitted the financial
statements of THD and Tongaat Hulett to be prepared
knowing them to
be inaccurate however, the plaintiffs have failed to particularise:
37.1   the
facts underlying the conclusion that the second defendant
participated in the three forms of manipulation within
THD, in
particular, how and when that participation occurred;
37.2   the
steps the second defendant ought to have taken to prevent the three
forms of manipulation within THD taking
place, and when they ought to
have been taken;
37.3   the
facts underlying the conclusion that the second defendant permitted
the financial statements of THD and Tongaat
Hulett to be prepared
knowing them to be inaccurate.’
[58]
These allegations relating to the actual knowledge on the part of the
second defendant
permitting the financial statements of THD and
Tongaat Hulett to be prepared, knowing them to be inaccurate, in
breach of his fiduciary
obligations, are pleaded with sufficient
particularity. The complaints raised by the second defendant relate
to the
facta probantia
. The exception in paragraph 37 is
accordingly dismissed.
The
second category of misconduct (paragraphs 92-120 of the amended
particulars)
–
alleged practice to overstate the
value of cane assets
[59]
The second category of misconduct is dealt with in paragraphs 38 to
55 of the notice of
exception. It
‘
concerns an
alleged practice that developed throughout Tongaat Hulett and its
sugar subsidiaries to overstate the value of cane
assets through the
manipulation of the costs
and
valuations
attributable
to them (see paragraph 97 of the amended particulars of claim).’
[60]
Two categories need to be dealt with, namely the manipulation of
costs and the manipulation
of values.
The
manipulation of costs
[61]
As regards this manipulation,
‘
the plaintiffs
allege that:
39.1   “
At
all material times
”, costs were impermissibly capitalised
to the establishment cost of cane roots (paragraph 101);
39.2   the
establishment costs of cane roots were calculated at a standard cost
per hectare that far exceeded the actual
establishment costs,
particularly regarding re-planted cane (paragraphs 102-104).’
[62]
The second defendant complains in paragraph 40 of the notice of
exception that the allegations
regarding the manipulation of costs
are
‘
impermissibly
vague in that:
40.1   the
plaintiffs have failed to identify who carried out the alleged
improper capitalisation of costs, who decided
to implement the
practice, and when they did so;
40.2   the
second defendant cannot adequately identify the costs alleged to have
been impermissibly capitalised, the quantum
of those costs or when
such capitalisation occurred, and he thus cannot respond to the
conclusion that those costs were impermissibly
capitalised;
40.3   the
second defendant cannot respond to the conclusions that the
establishment costs of cane roots were calculated
at a standard cost
per hectare, and/or that that standard cost far exceeded the actual
cost (particularly regarding re-planted
areas) in the absence of
allegations by the plaintiffs as to:
40.3.1
how the alleged standard cost per hectare was constituted;
40.3.2
how the plaintiffs calculate the actual costs they consider could
legitimately
have been capitalised to the establishment of cane
roots;
40.4   the
plaintiffs have failed to adequately particularise the impact the
alleged manipulation of costs had on the
claims advanced against the
second defendant in this action.’
[63]
The plaintiffs are required to identify the costs alleged to have
been impermissibly capitalised,
when such capitalisation occurred,
and the quantum of those costs, that is the standard cost per
hectare, and the actual costs,
and how these are calculated. The
plaintiffs need not identify who carried out the alleged improper
capitalisation of costs, who
decided to implement the practice and
when they did so, or the further issues complained of in paragraph 40
of the notice of exception.
[64]
The exception in paragraph 40 of the notice of exception is
accordingly upheld to the limited
extent set out above.
The
manipulation of valuations
[65]
As regards the manipulation of valuations, the plaintiffs rely on
four practices which
were followed: the overstatement of cane root
values in the 2017 financial statements as a result of including
certain completely
fallow land and land to which no valid lease
attached; the exclusion of farm rental costs from costs; the abuse of
the equivalent
hectares formula; and the overstatement of the ‘RV’
(recoverable value) price. The exception to the second defendant’s

alleged knowledge of these practices is dealt with in paragraphs 54
and 55 of the notice of exception.
The
first improper valuation practice – overstatement of cane root
values
[66]
The first improper valuation practice, dealt with in paragraphs 42 to
44 of the notice
of exception,
‘
is the alleged
overstatement of cane root values in the 2017 financial year as a
result of including (i) certain completely fallow
land and (ii)
certain land for which no valid lease existed in that financial year,
as land containing cane root assets (paragraphs
106-107 of the
amended particulars of claim).’
[67]
As regards the valuation of fallow land, in paragraphs 105 to 107 of
the particulars of
claim, the plaintiffs allege that ‘[t]he
total area of cane for valuation of cane roots was increased through
improper valuation
of fallow land’ by valuing fallow land ‘at
a standard rate, irrespective of what work had been done on the
land’,
resulting in completely fallow land being ‘valued
at the same rate per hectare as land where comprehensive land
preparation
had been undertaken’. This they contend, would have
the logical result that the fallow land total value would be
inflated.
[68]
In paragraphs 43 and 44 of the notice of exception, the second
defendant objects to the
paucity of these allegations. Specifically,
he contends that this pleaded case is objectionable because the
fallow land is described
vaguely in a table and the terms of the
lease are not particularised.
[69]
The specific area of fallow land and its description are included in
the table which forms
part of paragraph 106.2, hence the location of
the land and its extent is described with sufficient particularity in
order to enable
the second defendant to plead to these allegations.
Further particularity is a matter for evidence or a request for
particulars
where appropriate.
[70]
The objection to the terms of the lease not being pleaded is not
understood. The terms
of the lease cannot be pleaded as the pleaded
allegation is that there was no valid lease as at 31 March 2017,
being the date of
the relevant financial statements.
[71]
The exceptions in paragraphs 43 and 44 of the notice of exception
accordingly fall to be
dismissed.
The
second improper valuation practice
[72]
The second improper valuation practice is dealt with in paragraphs 45
and 46 of the notice
of exception and deals with ‘the alleged
exclusion in the 2018 financial year of the “
managed farm
rental cost
” from the “
costs to sell
” in
the standing cane valuation, thereby increasing the valuation of
standing cane (paragraph 110)’.
[73]
The second defendant complains in paragraphs 45 and 46 of the notice
of exception that
the allegations concerning the second improper
valuation practice are
‘
impermissibly
vague, as the plaintiffs have failed to adequately particularise:
46.1   who
decided to exclude managed farm rental costs in financial year 2018
and who implemented that decision (see
paragraph 110.3 of the amended
particulars of claim);
46.2   the
variables and calculations used for standing cane valuations in the
2018 financial year, with the result that
the second defendant is
thus unable to plead to the conclusion that “
managed farm
rental cost
” was impermissibly excluded from that
calculation.’
[74]
The particulars are pleaded sufficiently. Particulars of who decided
to exclude managed
farm rental costs in the 2018 financial year, and
who implemented that decision, are matters for evidence and not
necessary to
plead if the second defendant had no involvement
therein. The variables and calculations used for standing cane
valuations in the
2018 financial year are also not required. It is
the exclusion of the ‘managed farm rental cost’ that is
material,
not the amount thereof. The exception in paragraph 46 is
accordingly dismissed.
The
third improper valuation practice
[75]
The third improper valuation practice, dealt with in paragraphs 47
and 48 of the notice
of exception, relates to
‘
the alleged abuse
of the equivalent hectares formula by:
47.1   using an
actual cane age greater than the average age of cane at harvest in
the 2016, 2017 and 2018 financial years
(paragraphs 111.4-111.7);
47.2   using an
unreasonably low average age of cane at harvest (the years when this
occurred are not particularised)
(paragraph 112);
47.3   removing
the age-limit cap of 16 months on the actual age of cane during the
2018 financial year (paragraph 113.1-113.4);
47.4
increasing the age of all standing cane by one month (as opposed to
by 0.5 months) in the 2017 financial year (paragraphs
113.5-113.9).’
[76]
The second defendant excepts to these allegations concerning the
third improper valuation
practice as being
‘
impermissibly
vague, as the plaintiffs have failed to adequately particularise:
48.1   which
representatives of Tongaat Hulett decided to adopt the practices
referred to in paragraphs 47.1 to 47.4 above
and when they did so;
48.2   the
facts relied upon for the conclusion that an “
unreasonably
low average age of cane
” was used in the equivalent
hectares formula;
48.3   the
calculations used in the application of the equivalent hectares
formula in the years in respect of which that
formula is alleged to
have been abused.’
[77]
The particulars in the relevant paragraphs of the particulars of
claim were adequate for
the purpose of pleading. Any further
particulars are matters for evidence or possibly a request for
further particulars for trial,
if appropriate. The exception in
paragraph 48 of the notice of exception accordingly falls to be
dismissed.
The
fourth improper valuation practice
[78]
The fourth improper valuation practice, dealt with in paragraphs 49
and 50 of the notice
of exception, is the alleged “
regular
”
overstatement of the “
RV price
” when valuing
standing cane in accordance with IAS41 (paragraph 114 read with
paragraph 108).
[79]
The second defendant excepts to these allegations on the basis that
they are
impermissibly
vague, as the plaintiffs have failed to:
50.1
adequately particularise or furnish the variables and calculations
used for standing cane valuations, and the second
defendant is thus
unable to plead to the conclusion that the “
RV price
”
was overstated in that calculation;
50.2
particularise which representatives of the plaintiffs implemented the
decision to regularly estimate excessive
RV price estimates used by
the South African Sugar Association and when that decision was taken.
[80]
The plaintiffs are required to adequately particularise the
calculation of what the RV
price should have been, and what the
overstated RV price was. The plaintiffs are not required at the
exception stage to particularise
which representatives of the
plaintiffs implemented the decision and when that decision was taken.
[81]
The exception in paragraph 50 of the notice of exception accordingly
succeeds only to the
limited extent that the plaintiffs are required
to adequately particularise the calculation of what the RV price
should have been,
and what the overstated RV price was. Otherwise the
exception is dismissed.
The
fifth improper valuation practice
[82]
The fifth improper valuation practice, dealt with in paragraphs 51 to
52 of the notice
of exception, relates to the alleged decision “
at
some point
” to include the full value of share crop
standing cane in the standing cane valuation, reversing a decision
taken during
or about June 2011 to exclude such cane (paragraph 115).
[83]
The second defendant excepts to the allegations concerning the fifth
improper valuation
practice as being impermissibly vague, as the
plaintiffs have failed to adequately particularise or furnish:
52.1   which
representatives of the plaintiffs took the decision to include the
full value of share crop standing cane
in the standing cane valuation
(per paragraph 115.2) and when that decision was taken (the
allegation in paragraph 115.3 that it
was done “
at some
point between 2011 and 2014
” is inadequate);
52.2   the
variables and calculations used for standing cane valuations.
[84]
These are matters for evidence. Further, it is not the quantum of the
standing cane valuations
which is in issue, but the decision to
include the full value of share crop standing cane, whatever it may
be. The exception in
paragraph 52 accordingly falls to be dismissed.
The
impact of the five improper valuation practices
[85]
In paragraphs 116-117 of the amended particulars of claim, the
plaintiffs set out the alleged
impact the five improper valuation
practices had. In paragraphs 53 and 54 of the notice of exception the
second defendant contends
that these allegations are
impermissibly vague, in
that:
53.1   the
calculations by PricewaterhouseCoopers referred to in paragraph 116.2
have not been supplied, and the second
defendant is thus unable to
plead to the conclusions in paragraph 116.3;
53.2   The
basis on which the external auditors referred to in paragraph 117
drew the conclusions pleaded in paragraphs
117.1 and 117.2 have not
been supplied, and the second defendant is embarrassed to plead to
the conclusions in paragraph 117.
[86]
The particulars have been pleaded with sufficient particularity to
render them not excipiable.
The exceptions in paragraphs 53 and 54
accordingly fall to be dismissed.
The
knowledge of the second defendant
[87]
In paragraph 118.1 of the particulars of claim the second defendant
is alleged to have
known of the practices outlined in the second
category of misconduct. The second defendant’s alleged role in
the second category
of misconduct is also pleaded in paragraphs
118.2-118.3 and 120, which repeat paragraphs 89.2-89.3 and 91
respectively.
[88]
The second defendant in paragraph 55 of the notice of exception
excepts to these allegations
as being impermissibly vague, for the
reasons set out in paragraph. Paragraphs 36 and 37 of the notice of
exception have been dealt
with in paragraphs 56 and 58 above.
[89]
The same response as to paragraphs 36 and 37 of the notice of
exception shall apply. The
exception in paragraph 55 of the second
defendant’s notice of exception is accordingly upheld to the
extent that the plaintiffs
are required to plead the factual basis
for the inference that the second defendant failed to measure up to a
standard of reasonableness
or had constructive knowledge of the
improper valuation practices, including when and how these would or
should have come to the
second defendant’s knowledge or
attention, the nature of the investigations which the second
defendant should have conducted
and which would have revealed that
the improper valuation practices were taking place, and which he
failed to do.
The
third category of misconduct (paragraphs 121-137 of the amended
particulars)
[90]
The third category of misconduct is dealt with in paragraphs 56 to 67
of the notice of
exception and ‘concerns the alleged
inappropriate capitalisation of operating expenses and maintenance
and repair costs within
“
Tongaat Hulett
”
(paragraph 121)’. The plaintiffs rely on five instances of
alleged inappropriate capitalisation.
The
first instance of inappropriate capitalisation
[91]
The first instance of inappropriate capitalisation is dealt with in
paragraphs 58 and 59
of the notice of exception and ‘concerns
the capitalisation of costs in respect of projects that allegedly did
not meet the
capitalisation requirements of IAS16 and 38 and, in some
instances, were not approved by the Board of Tongaat Hulett or THS
(paragraphs
123.1-123.5)’.
[92]
The second defendant excepts to these allegations as being
‘
impermissibly
vague, as the plaintiffs have failed to adequately particularise:
59.1   the
nature of the projects identified as items 1-10 on the table
appearing at paragraph 123.1, and the second defendant
is accordingly
unable to plead to the conclusion that those projects did not meet
the capitalisation requirements of IAS16 and
38;
59.2   which
costs were allegedly not approved by the boards of Tongaat Hulett or
THS (see paragraph 123.2) and the relevant
members of those boards,
leaving the second defendant embarrassed to plead to the allegation
that they did not approve the costs
in question.’
[93]
As regards the first instance of inappropriate capitalisation, the
allegations are vague.
The plaintiffs should have alleged the nature
of the projects identified as items 1-10 on the table appearing at
paragraph 123.1,
to enable the second defendant to plead to the
conclusion that those projects did not meet the capitalisation
requirements of IAS16
and 38. The plaintiffs should also have alleged
the costs not approved by the boards of Tongaat Hulett or THS (see
paragraph 123.2)
for the second defendant to be able to plead
pertinently to the allegation that these costs were not approved. The
exception is
accordingly upheld to the extent indicated above.
The
second instance of inappropriate capitalisation
[94]
The second instance of inappropriate capitalisation is dealt with in
paragraphs 60 and
61 of the notice of exception and
‘
concerns the
alleged failure to impair the asset value of the WSM project when it
was abandoned “
in around 2009/2010
” (the costs in
respect of that project having been properly capitalised), with the
result that the capitalised costs remained
reflected at full value in
the financial statements of Tongaat Hulett in the financial years
2010 to 2017 (paragraph 123.5).’
[95]
The second defendant excepts to these allegations as being
‘
impermissibly
vague, as the plaintiffs have failed to adequately particularise the
factual basis on which the conclusion is pleaded,
in paragraph
123.5.3, that the WSM project was abandoned in around 2009/2010, the
identities of the parties who made that decisions
who made that
decision, and/or how or when the second defendant was aware of those
facts, as alleged in paragraph 123.6, and the
second defendant is
accordingly embarrassed to plead to those conclusions.’
[96]
These exceptions raise matters of evidence on which further
particulars might have to be
requested for trial, but the allegations
made in the particulars of claim constitute statements of fact to
which the second defendant
can plead. The exception raised in
paragraph 61 of the notice of exception falls to be dismissed.
The
third instance of inappropriate capitalisation
[97]
The third instance of inappropriate capitalisation is dealt with in
paragraphs 62 and 63
of the notice of exception. It
‘
concerns the
alleged capitalisation of costs in respect of two projects, GNU and
Xinavane Refinery. The plaintiffs aver that costs
capitalised in
respect of those two projects were not budgeted for nor approved and
“
in some instances did not meet the requirements for
capitalisation per IAS 16 and 38
” (paragraph 124).’
[98]
The second defendant excepts to these allegations as being
‘
impermissibly
vague, as the plaintiffs have failed to adequately particularise:
63.1   the
nature of the GNU and Xinavane Refinery projects, the costs
capitalised in respect of those projects (the table
in annexure
POC15A being inadequate) and which of those costs the plaintiffs
contend “
did not meet the requirements for capitalisation
per IAS 16 and 38
”, leaving the second defendant
embarrassed to plead to the conclusion that those projects did not
meet the capitalisation
requirements of IAS16 and 38;
63.2   the
names of the project managers, referred to in paragraph 125, who are
alleged not to have approved the costs
in question, leaving the
second defendant embarrassed to plead to the allegation that they did
not do so.’
[99]
In regard to the second defendant’s complaints in paragraph 63
of the exception,
the plaintiffs were required to allege what these
costs were (the table in annexure POC15A being inadequate) and in
what respects
they did not meet the requirements for capitalisation
per IAS16 and 38. But the plaintiffs were not required to allege the
names
of the project managers who did not approve the costs in
question, as those are matters for evidence. To that extent the
exceptions
raised in paragraph 63 of the notice of exception
succeeds.
The
fourth instance of inappropriate capitalisation
[100]
The fourth instance of inappropriate capitalisation is dealt with in
paragraphs 64 and 65 of the notice
of exception and
‘
concerns the
alleged capitalisation of “
expenses
” to “
capital
works in progress
” and “
completed capital
projects
” from the income statements of “
operational
entities or divisions
” and that “
appear to have
related to the day-to-day running costs of the business
”
(paragraph 125). Those expenses included employee costs totalling
R295 million capitalised to capital projects “
across South
Africa and Mozambique between the 2012 and 2018 financial years
”
(paragraphs 126-127). Those capitalisations are alleged to have been
effected “
purely on the instructions of Munro [the second
defendant]
” (paragraph 128).’
[101]
The allegations are excepted to on the basis that they are
‘
impermissibly
vague, as the plaintiffs have failed to adequately particularise:
65.1   the
“
expenses
”, the “
capital works in
progress
”, the “
completed capital projects
”
and the “
operational entities or divisions
”
referred to in paragraph 125, and the defendant is accordingly
embarrassed to plead to those allegations, and to the allegations

that the expenses were inappropriately capitalised and that such
capitalisation was done “
purely on his instructions
”;
65.2   the
factual basis upon which the conclusion is based that the expenses
referred to in paragraph 125 “
appear to have related to the
day-to-day running costs of the business
”, and the second
defendant is thus embarrassed to plead to the conclusion in paragraph
128 that there was “
no sound commercial or accounting basis
”
for those costs (whatever they may entail) to be capitalised;
65.3   the
“
employee costs
” and the capital projects “
across
South Africa and Mozambique between the 2012 and 2018 financial
years
” referred to in paragraphs 126-127, and the defendant
is accordingly embarrassed to plead to those allegations, and to the

allegations that the expenses were inappropriately capitalised and
that such capitalisation was done “
purely on his
instructions
”;
65.4   when,
where, how and to whom the second defendant is alleged to have issued
the instructions to capitalise those
expenses.’
[102]
The plaintiffs did in paragraphs 122.1 and 129 of the particulars of
claim set out the basis of their categorisation
of the capitalisation
of repair and maintenance costs as improper. In para 129 it is
pleaded that ‘[r]epair and maintenance
costs, unlike
replacement costs, do not meet the criteria for capitalisation set by
IAS 16:7-13’. The final column of the
schedules in question at
specifically paragraphs 131 to 133 specifically identifies each
expense as having related to either ‘maintenance’,

‘repair’ or ‘replacement’. But the plaintiffs
were required to allege in respect of each, which ‘certain

costs’ constituted repair and maintenance costs, as opposed to
replacement costs, with sufficient detail as to their nature
to
enable the second defendant to assess the conclusion that they were
improperly capitalised. If that is done then the second
defendant’s
objection as to the allegations of approximate percentages of those
costs, and that they seemingly represent
merely an ‘example’
of such costs and that there are others on which reliance might or
might not be placed, should
fall away. The plaintiffs would not be
required to allege the identities of the parties who decided to
capitalise the costs in
question.
[103]
The plaintiffs were also required to allege the ‘employee
costs’ and the capital projects ‘across
South Africa and
Mozambique between the 2012 and 2018 financial years’ referred
to in paragraphs 126-127, and why it is alleged
that these were
inappropriately capitalised. The plaintiffs were also required to
allege when, where, how and to whom the second
defendant is alleged
to have issued the instructions to capitalise those expenses.
[104]
The exception in paragraph 65 of the notice of exception accordingly
succeeds to the extent set forth in
the preceding two paragraphs.
The
fifth instance of inappropriate capitalisation
[105]
The fifth instance of inappropriate capitalisation is dealt with in
paragraphs 66 and 67 of the notice of
exception and
‘
concerns the
alleged capitalisation of certain maintenance and repair work in
respect of four mills (Amatikulu, Darnall, Felixton
and Maidstone)
(paragraph 130). The plaintiff alleges, “
by way of example
”
in respect of each mill, that:
66.1
approximately 98% of certain costs incurred in respect of Amatikulu
between 1 April 2014 and 31 March 2018 constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 131);
66.2
approximately 81% of certain costs incurred in respect of Darnall
between 1 August 2014 and 27 February 2018 constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 132);
66.3
approximately 74% of certain costs incurred in respect of Felixton
between 1 April 2014 and 1 Apr 2017 constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 133);
66.4
approximately 79% of certain costs incurred in respect of Maidstone
during the 2015 2018 financial years constituted
repair and
maintenance costs, as opposed to replacement costs (paragraph 134).’
[106]
The second defendant excepts to these allegations as
‘
impermissibly
vague, as the plaintiffs have failed to particularise:
67.1   the
costs capitalised in respect of each mill with sufficient detail to
enable the second defendant to assess the
conclusion that they were
improperly capitalised;
67.2   the
basis and calculations underlying the plaintiffs’ conclusions
regarding the percentage of costs that
were allegedly legitimately
capitalised, and those that were not;
67.3   the
costs capitalised and the basis underlying the plaintiffs’
conclusions regarding the percentage costs
that were allegedly
legitimately capitalised, and those that were not, other than those
provided “
by way of example”
;
67.4   the
identities of the parties who decided to capitalise the costs in
question, and when they decided to do so.’
[107]
The plaintiffs were required to allege the expenses inappropriately
capitalised on the instructions of the
second defendant, and why it
is alleged that they were inappropriately capitalised. But details of
the ‘capital works in
progress’, the ‘completed
capital projects’ and the ‘operational entities or
divisions’ referred
to in paragraph 125, and to which they
relate would seem unnecessary, as these would probably appear from
the details of the expenses
themselves. Nor would it be necessary to
allege the factual basis upon which these expenses ‘appear to
have related to the
day-to-day running costs of the business’.
[108]
The exception raised in paragraph 67 accordingly succeed to the
extent indicated above.
The
role of the second defendant in the inappropriate capitalisation
[109]
The second defendant’s alleged role in the third category of
misconduct is pleaded in paragraphs 136
and 137 of the particulars of
claim, which is a repetition of paragraphs 89.1-89.3 and 91
respectively. The second defendant in
paragraph 68 of the notice of
exception excepts to these allegations as impermissibly vague for the
reasons set out in paragraphs
36 and 37 of the notice of exception.
My conclusion in regard to this exception is the same as that
previously set out in paragraphs
56 and 58 of this judgment.
[110]
The exception in paragraph 68 of the notice of exception thus
succeeds to the extent that the plaintiffs
are required to plead the
factual basis for the inference that the second defendant failed to
measure up to a standard of reasonableness
or had constructive
knowledge of the third category of misconduct, including when and how
it occurring would or should have come
to the second defendant’s
knowledge or attention, the nature of the investigations which the
second defendant should have
conducted and which would have revealed
that the third category of misconduct was taking place, and which he
failed to do.
The
fourth category of misconduct (paragraphs 138-150 of the amended
particulars)
[111]
Paragraphs 69 to 72 of the notice of exception
‘
concerns the
alleged conclusion of fictitious sugar sales between the third and
fourth plaintiffs (“
Hippo Valley
” and “
Triangle
”)
as sellers and special purpose vehicles (“SPVs”) as
purchasers, which sales are alleged:
69.1   to have
occurred between 2015 and 2018 (paragraph 147.1).
69.2   to have
been financing transactions (paragraph 138).
69.3   to have
been concluded with a view to generating cashflow, reducing debt and
reflecting sales before they had occurred
(paragraph 143).’
[112]
The second defendant contends that these allegations are
‘
are impermissibly
vague, as the plaintiffs have failed to adequately particularise the
fictitious sales relied on (save for the
one example tendered in
paragraph 140), leaving the second defendant embarrassed to plead to
the allegations regarding those transactions
and the conclusions the
plaintiffs draw from them, including the conclusions expressed in the
table at paragraph 145.8 and in paragraph
147.’
[113]
As regards the exception in paragraph 70 of the notice of exception,
the plaintiffs were required to particularise
the fictitious sales,
beyond the example identified in paragraph 140, which they intend to
rely upon. The exception accordingly
succeeds to that limited extent.
The
second defendant’s knowledge of the fourth category of
misconduct
[114]
In paragraph 148.1 of the particulars of claim, it is alleged that
the second defendant knew or ought to
have known of the practices
outlined in the fourth category of misconduct. The second defendant’s
alleged role in the fourth
category of misconduct is also pleaded in
paragraphs 148.2 and 150 of the particulars of claim, which is a
repetition of paragraphs
89.2-89.3 and 91 respectively. The second
defendant in paragraph 71 of the notice of exception excepts to the
allegations that
he had known of the practices in the ‘second
category of misconduct’ (presumably meaning the fourth category
of misconduct)
as being impermissibly vague for the reasons set out
in paragraph 36 of the notice of exception,
mutatis mutandis
.
The response to that paragraph has been set out earlier and will
equally apply in this regard. Similarly, the second defendant
in
paragraph 72 of the notice of exception takes exception to the
allegations regarding the role he allegedly played in the fourth

category of misconduct. The same comments as in relation to
paragraphs 36 and 37 of the notice of exception, contained in
paragraphs
56 and 58 of this judgment shall apply.
[115]
The exceptions in paragraphs 71 and 72 of the notice of exception
thus succeed to the extent that the plaintiffs
are required to plead
the factual basis for the inference that the second defendant failed
to measure up to a standard of reasonableness
or had constructive
knowledge of the fourth category of misconduct, including when and
how it occurring would or should have come
to the second defendant’s
knowledge or attention, the nature of the investigations which the
second defendant should have
conducted and which would have revealed
that the fourth category of misconduct was taking place, and which he
failed to do.
The
fifth exception
[116]
Paragraphs 20 and 21 of the notice of exception record that in
paragraph 154.2 of the amended particulars
of claim that
‘
the first
plaintiff had to pay to have its financial statements restated “
at
a cost of approximately R44,680,000”,
which amount is
alleged to represent:
“…
the
difference between the costs based on past invoicing for external
audits and the sums charged for the external audits for the
financial
years affected by the need for restatements, which amount was fair
and reasonable in the circumstances
.”’
[117]
The second defendant alleges that this allegation is so vague as to
embarrass him to plead thereto, and
fails to satisfactorily
substantiate the quantum of R44 680 000 Tongaat Hulett claims in the
prayer to the particulars of claim.
The prayer to the plaintiffs’
particulars of claim is for precisely R44 680 000, not approximately
R44 680 000.
[118]
Regardless
of what ‘approximate’ may be interpreted to mean in a
public law context,
[24]
in a
damages claim, the amount is either for exactly R44 680 000, or it
should be alleged, perhaps, to be for not less than R44
680 000. I
accept that paragraph 154.2 of the particulars of claim read with the
prayer is ambiguous, and hence vague. It raises
the question whether
the difference between the costs of invoices for external audits in
the past and the costs for external audits
relating to the financial
years affected by the need for restatement, amount to less, or more
or exactly R44 680 000?
[119]
Criticism was also expressed by the second defendant that if
additional costs were incurred for external
audits relating to the
financial years affected by the need for restatement, then the
external auditors would ‘surely’
have invoiced the
plaintiffs for the additional work required to be performed as a
result of the need for restatement of the financials,
and the amount
claimed should be as per the invoice for such work. That might be so,
and might mean that the basis of this claim
is not a correct measure
of the plaintiffs’ damages in law, but that does not render the
allegations excipiable. It might
present a defence in law which can
be met by a denial, thus leaving the correct measure of any such
claim, and whether it arises
from or was caused by the misconduct in
dispute, as matters for evidence, with the plaintiffs to discharge
the onus in respect
thereof. Details, based on the measure adopted by
the plaintiffs, of the amount of the costs of invoices for external
audits in
the past and the costs for external audits relating to the
financial years affected by the need for restatement, how these are
calculated, and what they are comprised of, are matters for discovery
and evidence, and possibly an appropriate request for further

particulars for trial.
[120]
The exception in paragraph 21 of the notice of exception accordingly
succeeds to the extent indicated above.
The second exception
(the enrichment claim)
[121]
Both the second and third exceptions are in respect of the
plaintiffs’ claims for the repayment of
various forms of
remuneration paid to the second defendant. These claims are based on
a variety of bases, pleaded in the alternative
to one another, the
unjust enrichment and breach of contract claims being but two of
these alternatives, but the only causes of
action sought to be
impugned.
[122]
The remuneration paid to the second defendant is also sought to be
recovered as damages by virtue of
sections 76
,
77
, and
218
(2) of the
Companies Act; and
on the grounds of misrepresentations which are
alleged to have induced Tongaat Hulett to make the payments. The
second defendant
does not except to the claims to recover these
amounts as pleaded on the basis of the
Companies Act or
misrepresentation. The claim for repayment therefore, in principle,
remains good in law, on those grounds, the only dispute raised
by the
second and third exception being whether two of these several
alternative bases are legally sound.
[123]
The second issue of significance is the different bases upon which
the enrichment and breach of contract
claims rest. The plaintiffs
point out that the enrichment claim is predicated on the tacit term
pleaded in paragraph 58 of the
particulars of claim not being proved,
with the consequence that there is no contractual basis to reclaim
payment. The tacit term
is to the effect that fixed remuneration was
paid in exchange for, and was dependent upon, the proper discharge of
the respective
defendants’ fiduciary duties and their
obligations as employees, and that variable pay and discretionary
retirement gratuities
were dependent, both on the proper discharge of
the respective defendants’ fiduciary duties, and the sound and
successful
financial performance of Tongaat Hulett. The only basis
upon which the second defendant would then be entitled to payment of
bonuses
and other discretionary remuneration is the exercise of a
discretion by Remco and the board of Tongaat Hulett taking into
account
the factors set out in paragraph 49.2 of the particulars of
claim. These included financial performance targets, the extent to
which the defendants personally had impacted on the business of
Tongaat Hulett and the financial performance of Tongaat Hulett,

including its subsidiaries. The plaintiffs plead that it was ‘based
on the application of the criteria referred to in paragraph
49’,
that the bonuses and other discretionary benefits were paid. The
alternative cause of action is based on a breach of
the implied term,
if proved. The alternative claims plainly would have different
foundations. The further corollary, which is also
pleaded, is that
‘the approval of salary increases, bonuses and gratuities would
not be sought in the absence of sound and
successful performance by
Tongaat Hulett’.
[124]
Paragraphs 9 to 13 of the notice of exception provides in regard to
the second exception that
‘
9.
The
Enrichment claim
fails to disclose a cause of action,
inasmuch as the payments the plaintiffs aver were mistaken or
sine
causa
were, on the allegations made in the particulars of claim,
due owing and payable in terms of extant obligations between the
first
plaintiff and the second defendant.
10.
In terms of the employment agreement that had been concluded between
the first plaintiff and the
second defendant on 19 May 2003, annexure
POC3 to the amended particulars of claim, the second defendant was,
as an employee of
Tongaat Hulett, entitled to receive,
inter alia,
a basic salary, pension and medical aid benefits.
11.
The plaintiffs have also averred that certain other amounts were
awarded and paid to the second
defendant by Tongaat Hulett in
accordance with the Share Appreciation Rights Scheme and the Deferred
Bonus Plan.
12.
In paragraph 155.1 of the particulars of claim, Tongaat Hulett
alleges that certain remuneration
paid to the second defendant was
paid “
in error”
, but such allegation is
inconsistent and irreconcilable with the terms of the employment
agreement, annexure POC3 and the allegations
that the second
defendant received payments pursuant to the Share Appreciation Rights
Scheme and the Deferred Bonus Plan.
13.
The amended particulars of claim fail to establish an essential
averment relating to the
Enrichment claim
, namely, that the
payments sought to be recovered were
indebiti.’
[125]
The essence of the second exception therefore is that as Remco had
resolved to pay the amounts, they were
not paid
sine causa,
and
they were not made
indebiti
. The mere fact that a resolution
was passed does not provide a legal
causa
for a payment when
that resolution was made as a result of what was at the time a bona
fide but mistaken belief that a certain
factual position prevailed
which entitled the second defendant to a bonus, when in truth and in
fact it did not.
[126]
The allegations in the particulars of claim clearly carry the
imputation, as pleaded in paragraph 158, that
had the first and
second plaintiffs been aware of the collective irregularities, there
would have been no such resolution. The
facts informing the valid
resolution by Remco, when it applied the relevant criteria which
should inform the resolution, were obscured,
as the plaintiffs
correctly put it, by the collective irregularities of which it was
then unaware, that the facts were not true.
The plaintiffs’
case is that on the true facts, there was no legal obligation to pay
bonuses and other discretionary amounts,
and Remco would not had done
so had its board known the truth. Hence, that it exercised its
discretion in the bona fide but mistaken
belief that the financial
performance of Tongaat Hulett was as reflected in its financial
statements and other accounting records,
when it was not. Such a
claim furthermore does not require that the resolution first be
rescinded.
[127]
I agree
with the argument advanced by the plaintiffs, with reliance on the
work by Prof Sonnekus, that the position is akin to a
situation where
the basis of the patrimonial transfer has fallen away since it was
made, ‘[a]t least from the moment that
the basis for the
performance was extinguished because of the later change in
circumstances, a legal ground for the patrimonial
transfer was
lacking’ (footnotes omitted).
[25]
[128]
The second exception is accordingly without merit and falls to be
dismissed.
The
third exception (breach of contract)
[129]
The plaintiffs’ claim based on breach of contract is pleaded on
the basis that the tacit term relating
to the defendants’
fiduciary duties, as set out in paragraph 58 of the particulars of
claim, is established. The pleaded
claim is that the collective
irregularities amounted to breaches of that implied term, and that
the amounts paid by way of fixed
remuneration, variable pay and
miscellaneous payments represent damages suffered in consequence of
such breach.
[130]
Paragraph 14 of the notice of exception provides that
‘
The
Breach of
contract claim
fails to disclose a cause of action, inasmuch as:
14.1   the
implied term alleged at paragraph 58 of the particulars of claim (and
in terms of which it is in essence alleged
that payment of
remuneration to the second defendant was conditional on the proper
discharge of his fiduciary duties) is not a
term implied by law; and,
in any event,
14.2   the
plaintiffs have failed to plead allegations to establish:
14.2.1
that the second defendant breached that term, it being a legal
impossibility to
breach a condition; or
14.2.2
that Tongaat Hulett suffered any damages as a result of any such
breach of that
term.’
[131]
The second defendant thus contends that such pleading does not
disclose a valid cause of action on two grounds,
which I deal with in
turn.
[132]
The first ground is that the plaintiffs have failed to plead a basis
to establish that they have suffered
a loss equal to the remuneration
they paid. This criticism is unfounded. The pleaded allegation
provides for a quantification of
the damages on a basis of a negative
interesse,
that is a claim for damages to place the plaintiffs
in the position they would have been in had they not contracted with
the second
defendant, and the second defendant would not have been
paid the three categories of remuneration, but that he must now repay
those
amounts he had received, as damages. That measure of damages is
legally competent.
[133]
The second ground of objection is that the plaintiffs’ claim is
one to enforce the tacit term, that
is that payment of the
remuneration was conditional upon compliance with the second
defendant’s contractual duties, hence
that it is not a damages
claim, but one to enforce a condition. This argument also lacks
substance. Properly construed, the plaintiffs
are not seeking to
enforce a condition. It is a claim that the criteria, which if
satisfied would trigger a contractual entitlement
to payment of fixed
pay bonuses and gratuity, had not been met. The allegation is that in
the absence of sound and successful performance
by Tongaat Hulett, a
breach of the contractual term pleaded in paragraph 58.2 meant that
the second defendant was not entitled
to payment of these amounts and
it was that breach which gave rise to the payments being made when
they should never have been
made, thus causing damage equivalent to
the payments made.
[134]
The third exception is accordingly also without merit and falls to be
dismissed.
The
fourth exception
[135]
Paragraphs 15 to 19 of the notice of exception deal with the fourth
exception.
[136]
The second defendant is alleged in the particulars of claim to have
knowingly caused harm to the second
plaintiff, THS, within the ambit
of
section 76(2)
(a)
of the
Companies Act. Section
76 provides
as follows:
‘
76.
Standards of directors conduct.
—
(1)
In this section, “director” includes an alternate
director, and—
(
a
)
a prescribed officer; or
(
b
)
a person who is a member of a committee of a board
of a company, or of the audit committee of a company,
irrespective
of whether or not the person is also a member of the company’s
board.
(2)
A director of a company must—
(
a
)
not use the position of director, or any
information obtained while acting in the capacity of a director—
(i)
to gain an advantage for the director, or
for another person other than the company or a wholly-owned

subsidiary of the company; or
(ii)
to knowingly cause harm to the company or a
subsidiary of the company; and
(
b
)
communicate to the board at the earliest
practicable opportunity any information that comes to the director’s

attention, unless the director—
(i)
reasonably believes that the information is—
(
aa
)
immaterial to the company; or
(
bb
)
generally available to the public, or known to the other directors;
or
(ii)
is bound not to disclose that information by a legal or ethical
obligation of confidentiality.
(3)
Subject to subsections (4) and (5), a director of a
company, when acting in that capacity, must exercise the
powers and
perform the functions of director—
(
a
)
in good faith and for a proper purpose;
(
b
)
in the best interests of the company; and
(
c
)
with the degree of care, skill and diligence that
may reasonably be expected of a person—
(i)
carrying out the same functions in relation to the company as those
carried out by that director; and
(ii)
having the general knowledge, skill and experience of that director.
(4)
In respect of any particular matter arising in the exercise of the
powers or the performance of the functions of director, a
particular
director of a company—
(
a
)
will have satisfied the obligations of subsection
(3) (
b
) and (
c
) if—
(i)
the director has taken reasonably diligent steps to become informed
about the matter;
(ii)
either—
(
aa
)
the director had no material personal financial interest in the
subject matter of the decision, and had no reasonable basis to
know
that any related person had a personal financial interest in the
matter; or
(
bb
)
the director complied with the requirements of
section 75
with
respect to any interest contemplated in subparagraph (
aa
); and
(iii)
the director made a decision, or supported the decision of a
committee or the board, with regard to that matter, and the director

had a rational basis for believing, and did believe, that the
decision was in the best interests of the company; and
(
b
)
is entitled to rely on—
(i)
the performance by any of the persons—
(
aa
)
referred to in subsection (5); or
(
bb
)
to whom the board may reasonably have delegated, formally or
informally by course of conduct, the authority or duty to perform
one
or more of the board’s functions that are delegable under
applicable law; and
(ii)
any information, opinions, recommendations, reports or statements,
including financial statements and other financial data,
prepared or
presented by any of the persons specified in subsection (5).
(5)
To the extent contemplated in subsection (4) (
b
), a
director is entitled to rely on—
(
a
)
one or more employees of the company whom the
director reasonably believes to be reliable and competent in
the
functions performed or the information, opinions, reports or
statements provided;
(
b
)
legal counsel, accountants, or other professional
persons retained by the company, the board or a committee
as to
matters involving skills or expertise that the director reasonably
believes are matters—
(i)
within the particular person’s professional or expert
competence; or
(ii)
as to which the particular person merits confidence; or
(
c
)
a committee of the board of which the director is
not a member, unless the director has reason to believe that
the
actions of the committee do not merit confidence.’
[137]
The
provision includes a person who occupied a position where he
reasonably ought to have knowledge or reasonably ought to have
made
investigations to an extent that would have provided him with actual
knowledge or resulted in him reasonably taking measures
which, if
taken, would reasonably be expected to have provided him with actual
knowledge.
[26]
[138]
Paragraphs 15-17 of the exception provide that
‘
15.   In
paragraphs 59.3 and 60.3 of the amended particulars of claim, the
plaintiffs aver that the second defendant owed
certain duties to some
of the subsidiaries of the first plaintiff by virtue of his
directorship of such subsidiaries.
16.
In paragraph 59.4 of the amended particulars of claim, the plaintiffs
aver that since THS was
in substance a division of the first
plaintiff, alternatively an agent of the latter for the business it
conducted, the second
defendant owed the said fiduciary duties to
THS; however, the second defendant is not alleged to have been a
director of THS.
17.
In paragraph 153 of the particulars of claim the plaintiffs allege
that the “
collective irregularities
” constituted a
breach of the second defendant’s aforesaid duties.’
[139]
In the fourth exception the second defendant contends that the
allegations in paragraph 59.4 of the amended
particulars of claim,
‘
do not constitute
a legal basis upon which the second defendant owed the duties pleaded
in paragraph 60.3 of the amended particulars
of claim to any of the
subsidiaries of the first plaintiff of which he was not a director,
including THS, and thus, the conduct
constituting the alleged
“
collective irregularities
”, insofar as they
pertained to subsidiaries of the first plaintiff of which the second
defendant was not a director, is not
actionable . . . bad in law, and
do not sustain a cause of action against him.’
[140]
The second
defendant’s argument however disregards the pleaded case that
THS was used as an agent, in which event the legal
position suggests
that the fiduciary duties owed by the second defendant are
extended.
[27]
[141]
In his
heads of argument, the second defendant accepted that
section
76(2)
(a)
(ii)
of the
Companies Act, upon
which the plaintiffs rely, does entail a
duty on the part of the second defendant in relation to subsidiaries
of which he is not
a director, in that it precludes him from
knowingly causing harm to them.
[28]
The second defendant also now seemingly accepts that the practical
effect of this is that if the second defendant can be shown
to have
been aware of any ‘misconduct’ committed at THS, he could
be held responsible for the losses that that misconduct
caused.
[142]
Even construed, the second defendant’s complaint is not aimed
at a discrete cause of action which
could competently be separately
attacked by way of an exception. But, in any event, the plaintiffs’
pleaded case in relation
to the misconduct which occurred within THS
is that the second defendant was aware thereof and did knowingly
cause harm to the
subsidiaries.
[143]
The fourth exception further, and in any event, appears misconceived
as correctly argued by the plaintiffs.
The second defendant contends
that ‘[t]he second plaintiff’s claims against the second
defendant … are …
bad in law, and do not sustain a
cause of action against him …’, but the second plaintiff
has not, itself, advanced
any action against the second defendant.
THS has only sought to advance a cause of action against the third
defendant (not the
second defendant) in respect of the payment of
remuneration to him, in the events contemplated in paragraphs 2.9 and
172 of the
particulars of claim.
[144]
The fourth exception accordingly falls to be dismissed.
Costs
[145]
The second defendant has been partially successful in respect of the
first and fifth exceptions, but unsuccessful
in regard to the second,
third and fourth exceptions. Having regard to the time and effort
spent on the various exceptions, it
will be appropriate that reach
party pay their own costs of the exception.
Order
[146]
The following orders are granted:
(a)
The exceptions in the following numbered paragraphs of the notice of
exception are upheld
to the extent indicated, and qualified in the
text of this judgment:
(i)  Paragraph 28,
insofar as the plaintiffs are required in their particulars of claim
to identify the terms of the accounting
policy which applied and
which they allege should be complied with, to identify each of the
backdated agreements involved, with
reference to the names of the
parties thereto and the alleged date when each agreement was actually
concluded; the date the plaintiffs
will contend the proceeds/revenue
produced by each contract should have been reflected in the
financials according to what the
plaintiffs contend was the existing
accounting policy of the plaintiffs; the dates to which each of these
agreements were allegedly
backdated; and in which financials the
proceeds/revenue were wrongly reflected.
(ii) Paragraph 30,
insofar as the plaintiffs are required to allege details of each of
the sale agreements which were structured
in a way to enable THD to
conceal material suspensive conditions and to recognise revenue
earlier than it ought to have been; to
identify the agreements in
question, that is when they were concluded, and who the parties to
these agreements were; and in what
way each agreement was structured
to enable THD to conceal material suspensive conditions and to
recognise revenue earlier than
it ought to have been, and what
revenue was recognized in respect of each contract, when such revenue
in respect of each contract
was allegedly impermissibly recognized as
a result of the way the agreements were structured, to achieve the
result alleged in
paragraph 78, and when it is alleged such revenue
should have been recognized.
(iii) Paragraphs 32 and
33, insofar as the plaintiffs are required to identify the agreements
not timeously cancelled with sufficient
particularity to identify the
parties to each agreement, the date of conclusion thereof, when it
will be contended each purchaser
became unable to perform its
obligations under the agreements in question, and by when it is
alleged each agreement should have
been cancelled. Further, also what
impact, if any, the alleged failure to timeously cancel each
agreement had on stating the financial
position of THD and/or the
plaintiffs, specifically where cancellation was allegedly not
timeously done, or by a certain date,
but cancellation nevertheless
followed within the same financial year or accounting period.
(iv) Paragraph 36,
insofar as the plaintiffs are required to plead the factual basis for
the inference that the second defendant
had failed to measure up to a
standard of reasonableness or had constructive knowledge of the three
forms of manipulation, including
when and how the three forms of
manipulation occurring within THD would or should have come to the
second defendant’s knowledge
or attention, the nature of the
investigations which the second defendant should have conducted and
which would have revealed that
the three forms of manipulation were
taking place, and which he failed to do.
(v) Paragraph 40, insofar
as the plaintiffs are required to plead the costs alleged to have
been impermissibly capitalised, when
such capitalisation occurred,
and the quantum of those costs – that is the amount of the
standard cost and actual cost per
hectare, and how these are
calculated.
(vi) Paragraph 50,
insofar as the plaintiffs are required to adequately particularise
the calculation of what the RV price should
have been, and what the
overstated RV price was.
(vii) Paragraph 55,
insofar as the plaintiffs are required to plead the factual basis for
the inference that the second defendant
failed to measure up to a
standard of reasonableness or had constructive knowledge of the
improper valuation practices, including
when and how these would or
should have come to the second defendant’s knowledge or
attention, the nature of the investigations
which the second
defendant should have conducted and which would have revealed that
the improper valuation practices were taking
place, and which he
failed to do.
(viii) Paragraph 59,
insofar as the plaintiffs should have alleged the nature of the
projects identified as items 1-10 on the table
appearing at paragraph
123.1 of the particulars of claim, to enable the second defendant to
plead to the conclusion that those
projects did not meet the
capitalisation requirements of IAS16 and 38. The plaintiffs should
also have alleged the costs not approved
by the boards of Tongaat
Hulett or THS (see paragraph 123.2) for the second defendant to be
able to plead pertinently to the allegation
that these costs were not
approved.
(ix) Paragraph 63,
insofar as the plaintiffs are required to allege what these costs
were (the table in annexure POC15A being inadequate)
and in what
respects they did not meet the requirements for capitalisation per
IAS16 and 38.
(x) Paragraph 65, insofar
as the plaintiffs are required to allege the expenses inappropriately
capitalised on the instructions
of the second defendant, and why it
is alleged that they were inappropriately capitalised, whether that
entails that there was
‘no sound commercial or accounting
basis’ for those costs to be capitalised, or some other reason.
The plaintiffs are
also required to allege the ‘employee costs’
and the capital projects ‘across South Africa and Mozambique
between
the 2012 and 2018 financial years’ referred to in
paragraphs 126-127, and the reasons why it is alleged that these were
inappropriately
capitalised. The plaintiffs are also required to
allege when, where, how and to whom the second defendant is alleged
to have issued
the instructions to capitalise those expenses.
(xi) Paragraph 67,
insofar as the plaintiffs are required to allege the expenses
inappropriately capitalised on the instructions
of the second
defendant, and why it is alleged that they were inappropriately
capitalised.
(xii) Paragraph 68,
insofar as the plaintiffs are required to plead the factual basis for
the inference that the second defendant
failed to measure up to a
standard of reasonableness or had constructive knowledge of the third
category of misconduct, including
when and how it occurring would or
should have come to the second defendant’s knowledge or
attention, the nature of the investigations
which the second
defendant should have conducted and which would have revealed that
the third category of misconduct was taking
place, and which he
failed to do.
(xiii) Paragraph 70,
insofar as the plaintiffs are required to particularise the
fictitious sales, beyond the example identified
in paragraph 140,
which they intend to rely upon.
(xiv) Paragraphs 71 and
72, insofar as the plaintiffs are required to plead the factual basis
for the inference that the second
defendant failed to measure up to a
standard of reasonableness or had constructive knowledge of the
fourth category of misconduct,
including when and how it occurring
would or should have come to the second defendant’s knowledge
or attention, the nature
of the investigations which the second
defendant should have conducted and which would have revealed that
the fourth category of
misconduct was taking place, and which he
failed to do.
(xv) Paragraph 21, the
plaintiffs must plead clearly whether the amount claimed in respect
of external audits relating to the financial
years affected by the
need for restatement amount to less, or more or exactly R44 680 000.
(b)
The exceptions in paragraphs 34, 37, 43, 44, 46, 48, 52, 53, 54, 55,
and 61 of the notice
of exception relating to the first and fifth
exceptions, and any portions of exceptions raised but not expressly
allowed in terms
of paragraph (a) above, and the second, third and
fourth exceptions are dismissed.
(c)
The parties are directed to each pay their own costs of the
exception.
(d)
The plaintiffs are afforded the opportunity to amend their
particulars of claim within 20
days from the date of the grant of
this order.
KOEN
J
APPEARANCES
For
the excipient/second defendant:
Mr
CM Eloff SC assisted by Mr A Morrissey
Instructed
by:
Allen
and Overy
c/o
Stowell and Co
Pietermaritzburg
(Ref:
S Norgot)
For
the plaintiffs
Ms
A Annandale SC assisted by Mr M Swain
Instructed
by:
Edward
Nathan Sonnenbergs Inc
c/o
Venns Attorneys
Pietermaritzburg
(Ref:
N Jooste)
[1]
The
first defendant was the Tongaat Group’s chief executive
officer and the third defendant was a finance executive of the
first
plaintiff involved in its sugar interests.
[2]
Rule
18(3)
requires that ‘Every pleading shall be divided into
paragraphs (including subparagraphs) which shall be consecutively
numbered
and shall, as nearly as possible, each contain a distinct
averment’.
[3]
I
follow the categorization identified by the second defendant in the
notice of exception.
[4]
Stols v
Garlicke & Bousfield Inc
2012
(4) SA 415
(KZP) para 10.
Lockhat
and others v Minister of the Interior
1960 (3) SA 765
(N) at 777C-D held that:
‘
The
object of all pleadings is that a succinct statement of the grounds
upon which a claim is made or resisted shall be set forth
shortly
and concisely; and where such statement is vague, it is either
meaningless or capable of more than one meaning. It is
embarrassing
in that it cannot be gathered from it what ground is relied on by
the pleader.’
[5]
Nel and
others NNO v McArthur and others
2003 (4) SA 142
(T) at 149F-G.
[6]
Children’s
Resource Centre Trust and others v Pioneer Food (Pty) Ltd and others
[2012] ZASCA 182
;
2013 (2) SA 213
(SCA) para 36, cited with approval
in
H v
Fetal Assessment Centre
[2014] ZACC 34
;
2015 (2) SA 193
(CC) para 10.
[7]
Nasionale
Aartappel Koöperasie Bpk v Price Waterhouse Coopers Ing en
andere
2001
(2) SA 790
(T) at 797J-798A: ‘Dit is ook vaag en verwarrend
indien dit 'n bepaalbare betekenis het maar die bewering of
bewerings
geen wesenlike inhoud het nie.’
[8]
Lockhat
and others v Minister of the Interior
1960
(3) SA 765
(N) at 777A-E.
[9]
Parow
Lands (Pty) Ltd v Schneider
1952 (1) SA 150
(SWA) at 152F-G.
[10]
1992
(3) SA 208
(T) at 211A-D.
[11]
Nel and
others NNO v McArthur and others
2003 (4) SA 142
(T) at 147-8.
[12]
Jowell
v Bramwell-Jones and others
1998 (1) SA 836
(W) at 913F-914G.
[13]
Jowell
v Bramwell-Jones and others
1998 (1) SA 836
(W) at 9o2G-H.
[14]
Barloworld
Logistics Africa (Pty) Ltd and another v Ford and others
2019
(5) SA 133
(GJ) para 39.
[15]
JSS
Industrial Coatings CC v Inyatsi Construction (South Africa) (Pty)
Ltd
[2013] ZAGPJHC 209 paras 6-7.
[16]
Jowell
v Bramwell-Jones and others
1998
(1) SA 836
(W) at 901F-G.
[17]
Ibid at 901G-H.
[18]
Venter
and others NNO v Barritt Venter and others NNO v Wolfsberg Arch
Investments 2 (Pty) Ltd
2008 (4) SA 639
(C) para 14.
[19]
Jowell
v Bramwell-Jones and others
1998
(1) SA 836
(W) at 902F-G.
[20]
Ibid at 899H-I, referring to
Carelsen
v Fairbridge, Arderne and Lawton
1918
TPD 306
at 309.
[21]
Ibid at 902C-D.
[22]
It is accepted that conceptually there exists an ‘essential
distinction between the substance of the cause of action (which
is
dealt with under
Rule 23)
and the particularity of a pleading (which
is regulated by
Rule 18(4))
’ (
Bramwell-Jones
1998
(1) SA 836
(W)
at
900B-C). Proceedings under
rule 30
, based on a complaint that the
bare minimum requirements of
Rule 18
have not been complied with,
focus on whether ‘individual averments do not contain
sufficient particularity’ (
Bramwell-Jones
at
902G).
Rule 23
is not focused on whether individual averments
contain sufficient particularity in the sense required by
rule 18
,
but whether there is vagueness and embarrassment which strikes at
the root of the cause of action pleaded (
Bramwell-Jones
at
902E). The fundamental principle is that ‘An exception that a
cause of action is vague and embarrassing is an entirely
different
proceeding from one based on
rule 30.
It does not allow a Court to
treat the matter as if there was non-compliance with
Rule 18
, which
deals with matters to be contained in pleadings.’
(
Bramwell-Jones
at
899B-C).
[23]
Bramwell-Jones
at
902H.
[24]
KwaZulu-Natal
Joint Liaison Committee v MEC for Education, KwaZulu-Natal and
others
[2013]
ZACC 10; 2013 (4) SA 262 (CC).
[25]
JC
Sonnekus
Unjustified
enrichment in South African Law
2 ed (2017) para 3.3.1.3.
[26]
See P Delport
Henochsberg
on the Companies Act 71 of 2008
(May 2022 – SI 28) at 298-298(1).
[27]
See
Henochsberg
supra
at 298(1). See also
Scottish
Co-operative Wholesale Society Ltd v Meyer
1959 AC 324 (HL).
[28]
Paragraphs 99-100 of the second defendant’s heads of argument
at 38-39. This position is supported by
Henochsberg
at 298.