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[2017] ZASCA 171
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Omega Risk Solutions (Pty) Ltd v De Witt (149/2017) [2017] ZASCA 171 (1 December 2017)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 149/2017
In
the matter between:
OMEGA
RISK SOLUTIONS (PTY)
LTD
APPELLANT
and
JOSIAS
ALEXANDER dE
WITT
RESPONDENT
Neutral
citation
:
Omega
Risk Solutions (Pty) Ltd v De Witt
(149/2017)
[2017] ZASCA 171
(1
December 2017)
Coram
:
Navsa ADP and Majiedt, Willis and Swain JJA and Lamont AJA
Heard
:
20 November 2017
Delivered:
1
December 2017
Summary:
Prescription Act 68 of
1969
–
s 12(3)
–
identity
of debtor and facts from which debt arose – objective standard
of reasonable care – statutory attribution of
knowledge to
creditor – claims prescribed.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria
(
Fabricius
J
,
sitting as court of first instance):
‘
The
appeal is dismissed with costs, including the costs consequent upon
the employment of two counsel.’
JUDGMENT
Swain JA (Navsa ADP,
Majiedt and Willis JJA and Lamont AJA concurring):
[1]
The issue
in this appeal is whether several claims advanced by the appellant,
Omega Risk Solutions (Pty) Ltd, against the respondent,
Mr Josias
Alexander De Witt, have in terms of ss 12(1) and 12(3) of the
Prescription Act 68 of 1969 (the Act) become prescribed.
It was
accepted by the parties, whether knowledge of these claims held by Mr
Philippus Smit, an employee of the appellant, should
be attributed to
the appellant, determines the outcome of the appeal.
[2]
The claims
were advanced by the appellant against the respondent, in the Gauteng
Division of the High Court (Fabricius J), based
upon a series of
payments made by the appellant during the period March 2007 to August
2010, at a time when the respondent was
the Chief Executive Officer
of the Omega Group. Certain of the claims alleged that the
respondent, in breach of his fiduciary duty
to the appellant,
authorised payment to named individuals, when to the knowledge of the
respondent the appellant was not liable
to make payment. Other claims
alleged that the respondent authorised payment to named individuals,
but then fraudulently and in
breach of his fiduciary duty to the
appellant, misappropriated these payments for personal purposes. A
further claim alleged that
the respondent authorised payment of an
amount to a company to discharge a personal liability and thereby
committed theft from,
and a breach of his fiduciary duty to, the
appellant.
[3]
In response
to these claims, save and except for three payments, the respondent
raised a special plea of prescription which was
upheld with costs by
the court a quo. By agreement, it was dealt with as a preliminary
issue in terms of rule 33(4) of the Uniform
Rules of Court. The
appeal is with the leave of the court a quo.
[4]
A resolution of the appeal requires the application of the provisions
of ss 12 (1) and (3) of the Act, to the facts. I
did not
understand counsel for either party to contend otherwise. These
sections provide as follows:
‘
12.
When
prescription begins to run
.
– (1) Subject to the provisions of subsections (2), (3), and
(4), prescription shall commence to run as soon as the debt
is due.
(2)
. . .
(3)
A debt shall not be deemed to be due until the creditor has knowledge
of the identity of the debtor and of the facts from which
the debt
arises: Provided that a creditor shall be deemed to have such
knowledge if he could have acquired it by exercising reasonable
care.’
[5]
It was common cause that the respondent bore the onus of proof in
respect of the special plea of prescription. The respondent
therefore
had to satisfy the requirements of the Act by proving in respect of
each claim:
(a)
The date of inception of the period of prescription; and
(b)
The date on which the appellant, as the creditor, acquired actual
knowledge of the identity of the respondent as the debtor,
as well as
actual knowledge of the facts from which the debt arose,
alternatively, the date on which the appellant could, with
the
exercise of reasonable care, have acquired knowledge of the material
facts.
[6]
On appeal the appellant accepted:
(a)
That the payments made by the appellant as alleged in its claims were
common cause and the respondent therefore established
the date of
inception of the period of prescription in each case;
(b)
That Mr Smit, the Group Finance Manager of the Omega group, had
gained knowledge of the minimum facts required to institute
action
(ie the facts from which the debt, claimed by the appellant in each
instance, arose) within a period exceeding three years
before summons
was issued against the respondent.
(c)
That the respondent had succeeded in proving the requisite knowledge
(of the minimum facts from which the appellant's
claims arose) on the
part of Mr Smit.
[7]
The appellant did not, however, accept that the actual knowledge of
Mr Smit could, on the facts of this case, be attributed
to the
appellant.
[8]
In
Northview Shopping Centre (Pty) Ltd v Revelas Properties
Johannesburg CC & another
2010 (3) SA 630
(SCA) para 20, the
judgment of Lord Hoffmann in
Meridian Global Funds Management Asia
Limited v Securities Commission
[1995] 2 AC 500
(PC) at 506B-D,
in which the following statement appears, was quoted with approval:
‘
Any
proposition about a company necessarily involves a reference to a set
of rules. A company exists because there is a rule (usually
in a
statute) which says that a persona ficta shall be deemed to exist and
to have certain of the powers, rights and duties of
a natural person.
But there would be little sense in deeming such a persona ficta to
exist unless there were also rules to tell
one what acts were to
count as acts of the company. It is therefore a necessary part of
corporate personality that there should
be rules by which acts are
attributed to the company. These may be called "the rules of
attribution.”’
[9]
Section 12(3) of the Act defines the circumstances in which
constructive knowledge of the identity of the debtor and the facts
from which the debt arose, may be attributed to the creditor. The
creditor is deemed to have acquired this knowledge if the creditor
could have acquired it by exercising reasonable care. This involves
the statutory attribution of knowledge to a creditor, based
on the
objective criterion of reasonable care, distinct from an enquiry in
terms of the rules of attribution. As stated in
PriceWaterhouseCoopers & others v National Potato Co-operative
& another
[2015] 2 All SA 403
(SCA) para 149:
‘
.
. . When prescription is raised against a corporate entity
the
ordinary rule of attribution of knowledge to the company of the
knowledge of natural persons of the facts giving rise to the
claim,
is satisfied
if the members of the board of directors have that knowledge,
or
could acquire it if they took reasonable care.
It is unnecessary for the purposes of this case to consider whether
the knowledge of other persons within the entity would also
be
attributed to it for the purposes of prescription.’
(Emphasis
added).
[10]
In
Macleod v Kweyiya
2013 (6) SA 1
(SCA) para 9, the
circumstances in which knowledge could be attributed to a creditor,
in terms of s 12(3) the Act, were described
in the following
terms:
‘
Constructive
knowledge is established if the creditor could reasonably have
acquired knowledge of the identity of the debtor and
the facts on
which the debt arises by exercising reasonable care. The test is what
a reasonable person in his position would have
done, meaning that
there is an expectation to act reasonably and with the diligence of a
reasonable person.’
[11]
In
Minister of Finance & another v Gore NO
2007 (1)
SA 111
(SCA) para 16, the policy underlying the Act was described in
the following terms:
‘
The
statutory prescription periods are meant to protect defendants from
undue delay by litigants who are laggard in enforcing their
rights.’
[12]
The evidence which was relevant to a determination of whether the
board of directors of the appellant, acting reasonably and
with the
diligence of reasonable persons, could have acquired knowledge of the
material facts upon which the claims were based,
was as follows:
(a)
The appellant formed part of a group of corporate entities described
as the ‘Omega International Associates’,
of which the
respondent was the Chief Executive Officer. Mr Smit was the Group
Finance Manager, which designation was later changed
to Group
Executive Finance in 2010, and was responsible for financial
strategy, policy and procedures. He was known as the person
who
managed and had the responsibility of supervising the Group’s
finances. The respondent and Mr Smit were members of and
reported to
the Executive Committee of the Omega Group.
(b)
Mr Smit supervised the delivery of budgets, had a great deal of input
into their formulation and had the important
function of ensuring
that all audits were done within the group. In addition, he ensured
that internal audits were undertaken with
regard to each individual
entity, as well as cross audits between entities, within the group.
(c)
Mr Smit had the responsibility of ensuring, on a monthly basis, that
all of the financial statements were consolidated
and that management
statements were made available to the board of directors of the
group. Every company had to have its own financial
statements on a
monthly basis.
(d)
Mr Smit was responsible for overseeing the effective management of
the cash flow situation within the group. This
included the
compilation of weekly and monthly cash flow statements. He was also
in charge of ensuring that the expenditure of
the group, which
included statutory expenditure, was properly accounted for as well as
timeously and correctly done.
(e)
The appellant was so to speak, the treasury for the entire group and
this function was located in the financial division,
which Mr Smit
controlled.
(f)
Mr Smit had oversight over, and was aware of, the payments made to
the respondent, which formed the subject matter
of the claims as they
were made by personnel within the Group’s office.
[13]
Claims 2 and 4 have to be considered in the context that the
appellant conducted operations in the form of risk management
by
providing security solutions primarily for clients located in parts
of Africa and the Middle East. In Gabon, for example, the
appellant
concluded a macro city centre surveillance contract in terms of which
they installed and maintained the surveillance
equipment. It
installed a control centre which it managed and maintained in support
of the government of Gabon and the city of
Libreville.
[14]
Claim 2 was in respect of the amount of R430 000.00 paid to Mr
MJ Khasu, the South African ambassador to Gabon, for assistance
he
allegedly rendered in respect of this contract which Mr Smit paid at
the request of the respondent. According to the respondent,
Mr Smit
was aware of the reasons for these payments, the work Mr Khasu had
supplied and the role he had played in ensuring that
the government
of Gabon made the payments to the Industrial Development Corporation
(IDC) timeously. The government of Gabon
did not have funds
immediately available to pay for the project and finance was
subsequently arranged through the IDC. Mr Smit
was fully aware of
what the contract entailed as well as the arrangement with Mr Khasu.
[15]
As regards claim 4, the respondent admitted these payments were made
to Mr Motayo and his consortium as advances in respect
of work that
he did on various phases of this contract. According to the
respondent, everybody was aware of the contract with Mr
Motayo and
that he was entitled to commission, including Mr Smit. He disputed
that Mr Smit was not aware of the reasons for these
payments.
[16]
Counsel for the appellant conceded that this contract was vital to
the economic survival of the appellant, as held by the court
a quo.
Consequently, when regard is had to the importance of this contract,
if the board of directors of the appellant had acted
reasonably and
with the diligence of reasonable persons, they could have acquired
knowledge of claims 2 and 4.
[17]
It must be borne in mind that the payments in respect of the claims
extended over several auditing periods. These payments
must have been
included in the annual financial statements for each successive year
and would have required the approval of the
board of directors. The
payments involved large amounts that could not escape attention. The
facts are such that it is compellingly
arguable that the board of
directors in fact knew and authorised the payments. In addition, when
regard is had to the functions
Mr Smit performed in the financial
management of the appellant, it becomes unnecessary to carry out a
detailed examination of these
claims. He was the Group Finance
Manager, managed the cash flow of the Group, had to ensure that the
expenditure of the group was
properly accounted for and was a member
of and reported to the Executive Committee of the Group. He had to
ensure that all financial
statements were consolidated on a monthly
basis and that management statements were made available to the board
of directors of
the Group. I agree with the conclusion of the court a
quo that Mr Smit was sufficiently close to the Chief Executive
Officer of
the Group that on the probabilities, the directors
possessed knowledge of these claims, or could have acquired it, by
the exercise
of reasonable care.
[18]
I do not agree with the criticism directed by the appellant at this
conclusion of the court a quo, describing it as a ‘novel
proximity test’ with the consequence that it thereby avoided
the process of attribution of knowledge, at least partially,
which as
a matter of law it should have applied in order to adjudicate the
question of prescription. Although the court a quo referred
to the
rules of attribution, it is clear that in concluding that ‘. .
. on the probabilities the directors of Plaintiffs
had knowledge of
the claims relevant in these proceedings, or could have acquired them
if they took reasonable care at the time
when they ought to have done
so’, it applied the provisions of s 12(3) of the Act and not
the rules of attribution, which
it was entitled to do.
[19]
In the result the following order is granted:
‘
The
appeal is dismissed with costs, including the costs consequent upon
the employment of two counsel.’
K G B Swain
Judge of Appeal
Appearances:
For
the Appellant:
G W Alberts SC (with F J Labuschagne)
Instructed by:
Booysen, Dreyer &
Nolte Inc., Pretoria
Honey Attorneys,
Bloemfontein
For the Respondent:
M v R Potgieter SC
Instructed by:
Senekal Simmonds Inc.,
Bedfordview
Phatshoane Henney
Attorneys, Bloemfontein