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[2017] ZAGPPHC 428
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Onsite Waste Management CC v Wasteserv Waste Management CC and Another (19322/2012) [2017] ZAGPPHC 428 (3 April 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO
:
19322/2012
DATE
:
2017-04-03
Reportable: NO
Of interest to
other judges: NO
Revised
In
the matter between:
ONSITE
WASTE MANAGEMENT CC
Plaintiff
and
WASTESERV
WASTE MANAGEMENT
CC
First
Defendant
NTUMELENI
PAULUS
MOYANA
Second
Defendant
JUDGMENT
BaqwaJ
Claim
for disgorgement of secret profits in terms of section 42
-
Close Corporations Act 59 of 1984
-
Breach of fiduciary duties
-
Conflict of interests
-
Duty to disclose undue benefits to other
members.
Summary
In 2009 Johan Lombard (Lombard) and
the second defendant had discussions regarding the possibility of
starting a company to perform
waste disposal in the Gauteng Province.
The idea culminated in the incorporation and registration of the
plaintiff, Onesitewaste
Management CC. To get the business off the
ground, the plaintiff purchased trucks and equipment with loans which
the plaintiff
obtained from RMB Bank. Lombard signed as personal
surety in favour of the plaintiff. The value of the assets acquired
was approximately
R10 million. The second defendant did not make any
financial contribution except for his contacts (potential clientele)
and skills
for which he was awarded 30% member's interest in the
plaintiff. The balance of the member's interest was held between
Lombard
and his wife Katrien. The business established an office in
Pomona, Kempton Park with Lombard as Chief Executive Officer. the
second
defendant as Manager, Sales and Marketing and Katrien as Chief
Financial Officer.
Unbeknown to Lombard and Katrien. the
second defendant had prior to the establishment of the plaintiff,
established another close
corporation. the first defendant, in which
the second defendant had 100% member's interest. In subsequent
business transactions
involving a company known as Halberg Guss, the
second defendant secured contracts ostensibly for the plaintiff but
involving the
first defendant as main contractor and the plaintiff as
sub-contractor. Lombard was under the impression that the first
defendant
was a subsidiary of Halberg Guss. The second defendant
secured contracts for waste removal in which both the plaintiff and
the
first defendant were competing without declaring the true facts
to the plaintiff. In the process, the second defendant secured secret
profits and benefits for himself without disclosing those to other
members of the plaintiff. When Lombard discovered the non-disclosure
of the 100% interest in the first defendant. he purchased the 30%
held by the second defendant in the plaintiff and instituted
action
against the second defendant.
Held,
that the second defendant had acted in
contravention of section 42 (a) and (b) of the Close Corporations Act
59 of 1984
("the
Acf')
and that it had to account for any secret profits and benefits to the
plaintiff in terms of section 42 (3) (a) of the Act.
Annotations:
Reported
cases
Transvaal
Cold Storage Co. Ltd v Palmer
1904 TS 45
West
Coast and Rand Native Labour Agency Ltd v Abernathy
1908 EDC 17
Robinson
v Randfontein Estates Gold Mining CO Ltd
1921 AD 188
Mallison
v Tanner
1947 (4) SA 681
(T)
Dorbyl
Ltd v Vorster
2011 (5) SA 575
(GSJ)
RP
v DP and Others
2014 (6) SA 243
ECP at 247
Statutes
Close
Corporations Act 59 of 1984
Companies
Act 71 of 2008
Introduction
[1]
This is a claim for payment of services rendered by the plaintiff to
the defendant subsequent to an oral agreement entered into
in
February 2010 in Pomona, Kempton Park Johannesburg.
The
Parties
[2]
The plaintiff is Onsitewaste Management CC, a close corporation
incorporated in terms of the Close Corporation Act 69 of 1984
whose
registered address is Pinzgauer Street, Industrial Park Mabopane.
[3]
The first defendant is Wasteserv Waste Management CC, a close
corporation of Suite 401, 4th floor, Hatfield Plaza, North Tower,
Hilda Street, Hatfield, Pretoria.
[4]
The second defendant is Ntumeleni Paulus Moyana, an adult male
businessman who is the sole member of the first defendant herein.
[5]
The second defendant was a director of the plaintiff at all times
relevant to this action and held a 30% member's interest in
the
plaintiff.
[6]
The second defendant held out to the
plaintiff that the first defendant was an independent juristic person
in which he only held
25% membership interest and that there was no
conflict of interest, potential or actual between his interests in
the plaintiff
and his interests in the first defendant.
[7]
The plaintiff subsequently discovered that the second defendant was
in fact the controlling mind behind the first defendant
at the times
relevant to the plaintiff's claim and that in reality the second
defendant held 100% membership interest in the first
defendant.
[8]
In this action the plaintiff instituted two claims against the first
defendant and the second defendant.
[9] At the commencement of the
proceedings the plaintiff withdrew its claim against the first
defendant and its first claim against
the second defendant. The
plaintiff however persists in its second claim against the second
defendant.
[10] The parties agreed that the
issues as pleaded by both parties with regard to the second claim
against the second defendant
be separated in terms of Rule 33
(4) of the Uniform Rules of Court and be tried in the present action
and a court order was
granted to that effect in terms of which this
court is called upon to decide two issues only, namely whether the
second defendant
acted in breach of his fiduciary duties to the
plaintiff and whether such breach occasioned an opportunity for a
secret profit.
The determination of quantum was postponed sine die.
The
Law
[11]
Section 42
of the
Close
Corporations Act 69 of 1984
governs the internal relations of a close
corporation and provides as follows:
"Fiduciary position of members
42.
(1)Each member of
a
corporation
shall stand in
a
fiduciary
relationship to the corporation.
(2) Without
prejudice to the generality of the expression 'fiduciary
relationship', the provisions of subsection (1) imply that
a
member-
(a) shall in relation to the
corporation act honestly and in good faith, and in particular-
(i) shall exercise such
powers as he may have to manage or represent the corporation in
the interest and for the benefit
of the corporation; and
(ii) shall not act without or
exceed the powers aforesaid; and
(b) shall avoid
any material conflict between his own interests and those of the
corporation, and in particular
-
(i) shall not derive any personal
economic benefit to which he is not entitled by reason of his
membership of or service to the
corporation, from the corporation or
from any other person in circumstances where that benefit is obtained
in conflict with the
interests of the corporation;
(ii) shall notify every other
member, at the earliest opportunity practicable in the circumstances,
of the nature and extent of
any direct or indirect material interest
which he may have in any contract of the corporation; and
(iiI) shall not compete in any way
with the corporation in its business activities."
[12]
With reference to the law of agency Salomon JA in Robinson v
Randfontein Estates Gold Mining CO Ltd
1921 AD 188
at 229 stated as
follows:
"....
It is no doubt well
settled that in equity an agent cannot without the consent of his
principal given with full knowledge of the
material facts and under
circumstances, which rebut any presumption of undue influence, retain
any profit acquired by him in transactions
within the scope of the
agency. The principal can always in such
a
case treat the
profit as acquired on his own behalf and insist on it being accounted
for to him."
[13] "The
duties of company directors arise from the common law and from the
Companies Act 71 of 2008
. In terms of the law, directors have
essentially two categories of general duties: fiduciary duties and
the duty to act with reasonable
care and skill. The nature and extent
of the fiduciary duty owed by
a
director to the company has been
discussed in
a
number
of cases. In this regard, the paramount duty of directors
individually and collectively is to exercise their powers in good
faith in the best interests of the company. Various categories of
fiduciary duties have been established over time. They include
the
duty
·
to act legally, honestly, and within their powers
and that of the company;
·
not
to allow personal interests to interfere with their duties to the
company and, therefore, to avoid any conflict of interest
with the
company and to disclose any such conflicts; and
·
not
to compete with the company or misuse confidential information.
These categories of fiduciary
duties are not exhaustive."
See
The Power of Governance: Enhancing the Performance of State
Owned
[14]
A number of duties are also provided for in the
Companies Act. Thus
section 234
of that Act provides as follows:
"234
Duty of Director or Officer to
Disclose Interest in Contracts
(1) A
director of
a
company
who is in any way, whether directly or indirectly, materially
interested in
a
contract
or proposed contract referred to in subsection (2), which has been or
is to be entered into by the company or who so becomes
interested in
any such contract after it has been entered into, shall declare full
interest and full particulars thereof as provided
in the Act."
[15] In discussing the subject of
conflict of interests, Khoza et al (supra) p 276 state as follows:
"In South Africa, the
fiduciary duties with regard to conflict include the duty to:
•
avoid
conflicts of interests;
•
avoid
competing with the company;
•
not make
secret profits;
•
declare
conflicts of interest;
•
recuse
oneself from discussions where there is
a
conflict unless otherwise permitted by
the board and allowed in terms of the articles of the company; and
•
t
able
contracts in which
a
director
has
a
direct
or indirect interest for the approval of the shareholder, unless
otherwise permitted by the articles.
Where
a
director has
a
fiduciary duty to
a
company, s/he can be held liable in the
absence of bad faith or dishonesty 'their liability in this respect
does not depend upon
breach of duty but upon the proposition that
a
director must not make
a
profit out of property acquired by
reason of his relationship to the company of which he is a director'
[Regal (Hastings) Ltd v
Gulliver and Others
[1942] 1 All ER 378].
"
[16] Even though we are dealing with a
close corporation in casu, the same principles with regard to
fiduciary responsibilities
of directors and conflict of interest
issues apply.
[17]
It is also of some relevance to consider the issue of
"corporate
personality"
which has been dealt
with extensively in our case law. Of particular relevance is the
dictum of Alkema J in the case of RP v DP
and Others
2014 (6) SA 243
ECP at 247 (Par 16 and 17) in which he comments as follows:
"[16]
It is trite that '(a) registered company is
a
legal
persona distinct from the members who compose it' (see Dadoo Ltd and
Others v Krugersdorp Municipal Council
1920 AD 530
at 550 which is
the leading South African case on the subject). It is equally trite
that
–
'a
court
would be justified in certain circumstances in disregarding
a
company's
separate personality in order to fix liability elsewhere for what are
ostensibly acts of the company. This is generally
referred to as
lifting or piecing the corporate veil.
...
The
focus then shifts from the company to the natural person behind it
(or in control of its activities) as if there were no dichotomy
between such person and the company.... In that way personal
liability is attributed to someone who misuses or abuses the
principle
of corporate personality.'
(See
Cape Pacific Ltd v Lubner Controlling Investments (Pfy) Ltd
[1995] ZASCA 53
;
1995
(4)
SA 790
(A) at 802 F
-
H;
Amlin (SA) Pty Ltd v Van Kooij
2008 (2) SA 558
(C) in para 12.)
[17]
Under the common law our courts have in certain exceptional
circumstances refused to recognise the separate legal existence
of
a
company.
This occurred, for instance, where it was held that the separate
legal personality of
a
company
was used as
a
device
by
a
director
to evade his or her fiduciary duty. One of the first leading cases is
Robinson v Randfontein Estates Gold Mining
Co
Ltd
1921 AD 168
where the Appellate Division refused to recognise the
separate legal personality of
a
subsidiary
where Robinson had attempted to use the subsidiary
as
a
device
to evade the fiduciary duties he owed to the holding company
as
a
director
of that company. Following
a
long
established line of cases, the new
Companies Act 71 of 2008
now for
the first time permits
a
court
under
s 20
(9) to disregard the separate legal personality of
a
company
if it finds that the use of the company or any act by it 'constitutes
an unconscionable abuse of the juristic personality
of the company as
a
separate
entity'
(s 20
(9))."
[18]
Whilst the dictum is some relevance in casu I am of the view that the
provisions of section 42 of the Act sufficiently cover
the factual
matrix presented by the evidence.
Common
Cause Issues
[19] It is common cause that:
19.1.
The
second defendant was a director of the plaintiff and held 30%
membership thereof.
19.2.
That
the second defendant represented to the plaintiff that the first
defendant was an independent juristic person in whom he only
held 25%
membership interest.
19.3.
The
plaintiff conducts business in the waste management industry, which
involves the collection, transport, recycling and disposal
of waste
at designated disposal and landfill sites.
19.4 That oral agreement was entered
into between the plaintiff represented by Johan Lombard and the first
defendant represented
by the second defendant.
19.5.
The
plaintiff would collect fly ash, core sand, furnace dust and other
related waste
("the waste")
at
Brits from Halberg Guss and other sites as directed by the first
defendant from time to time.
19.6.The plaintiff would transport and
dispose of the waste at the designated disposal and landfill sites.
19.7
he plaintiff would accomplish the aforesaid
collection, transport, recycling and disposal of waste by using its
large skip truck
and trailer with registration number YXX 223 GP
("the large skipper truck")
and Scania Horse with its 30 ton
hydraulic side tipper with registration number XHX 032 GP
("tipper
truck”)
19.8.
The
plaintiff would submit invoices to the first defendant for payment
within 30 days from date thereof by the first defendant.
19.9.
The
second defendant as a member and director of the plaintiff had a duty
to act with care, diligence and skill in managing the
business of the
plaintiff and had a duty to exercise good faith towards the
plaintiff.
19.10.As director and member of the
plaintiff, the second defendant was in a fiduciary relationship with
the plaintiff and owed
a fiduciary duty in this regard to the
plaintiff.
19.11.The 30% member's interest held
by the second defendant in the plaintiff from 9 August 2009 to 9
September 2011 was sold to
Mr Johan Lombard on 9 September 2011.
19.12.
he
first defendant represented by the second defendant gave the
plaintiff work to do collection, transportation and disposal as
a
subcontractor of the first defendant at certain designated sites.
The
Evidence
[20]
Mr Johan Lombard was the only witness to testify for the plaintiff
whilst the second defendant gave testimony for the defendants.
[21]
Lombard testified that he and his wife Katrien Lombard (Katrien),
have a business which deals in waste disposal in the Limpopo
province
under the name and style of Oil Separations.
[22]
During 2007 the second defendant engaged Lombard as an employee of a
company known as Phambili Wasteman. He offered the services
of
Phambili Wasteman to Oil Separations. The meeting led to a contract
in terms of which Phambili Wasteman did work for Oil Separations.
[23]
The work relationship led to regular interactions between Lombard and
the second defendant and during August 2008 the second
defendant
enquired whether Lombard would be interested in selling his company,
Oil Separations.
[24]
The company was not in the market but Lombard was willing to consider
an offer and advised the second defendant accordingly.
[25]
The second defendant set up a meeting between Lombard and certain
persons representing the first defendant, namely, Mr Ramaphosa
and Mr
Nonde.
[26]
Due to the then prevailing economic conditions the negotiations came
to nothing. Notably, the second defendant did not disclose
to Lombard
that he held any interest in the first defendant at that time.
[27]
It later transpired during the evidence that the second defendant did
not have any member's interest at the time because he
had transferred
his member's interest in the first defendant to his sister and wife
because Phambili Wasteman did not permit him
to hold same as long as
he was in their employ.
[28]
Towards the end of 2009 Lombard and the second defendant had further
discussions regarding the possibility of starting a company
to do
waste disposal in the Gauteng province. These discussions resulted in
the incorporation and registration of Onsite Waste
Management CC, the
plaintiff herein.
[29] In order to get the business
started the plaintiff purchased trucks and equipment utilising loans
which the plaintiff obtained
from RMB Bank and for which Lombard
signed personal suretyship in favour of the plaintiff. The assets
acquired to get the business
going were estimated at R10 million.
[30] It is common cause that the
second defendant made no financial contribution except for his
contacts (potential clientele) and
skills for which he was given a
30% member's interest in the plaintiff.
[31]
Lombard was the Chief Executive Officer responsible for the
operational requirements and it was agreed that he would execute
his
responsibilities mainly from the offices of Oil Separations in
Limpopo and that he would visit the plaintiff's Pomona office
in
Kempton Park from time to time.
[32]
Katrien would be responsible for the finance department of the
plaintiff and would issue invoices to clients also from Limpopo.[33]
The second defendant would be the sales and marketing manager
responsible for, inter alia, sourcing clients and negotiating
contracts
and prices, managing the Kempton Park office and generating
waste manifest documents which were known as the
"waste
stream".
He would endorse the
pricing on those documents once the work was performed.
[33]
The second defendant would be the sales and marketing manager
responsible for, inter alia, sourcing clients and negotiating
contracts and prices, managing the Kempton Park office and generating
waste manifest documents which were known as the
"waste
stream".
He would endorse the
pricing on those documents once the work was performed.
[34] The price endorsement preceded
the invoicing process and the documents were thereafter handed over
to Katrien and those assisting
her in order for them to issue the
invoices.
[35] During the end of February 2010
the second defendant advised Lombard that some of the work done at
Halberg Guss had to be channelled
through the first defendant.
[36] According to the second
defendant, the plaintiff would continue to charge Halberg Guss the
same rates it always charged and
the new arrangement would not
prejudice the plaintiff in any way.
[37]
Based on those assurances by the second defendant Lombard agreed that
the plaintiff would continue to collect fly ash, core
sand, furnace
dust and other related waste at Britz from Halberg Guss.
[38]
It was agreed further that the plaintiff would transport and dispose
of the waste at designated disposal and landfill sites
using its
large skip truck and it would charge the first defendant R6 600.00
for each trip of waste collected and disposed of.
The R6 600.00 was
calculated by multiplying the three bins carry load by R2 200.00
which was the rate agreed upon.
[39]
The plaintiff had positioned thirteen bins at the premises of Halberg
Guss which would be collected once they were full.
[40]
As work progressed it was agreed that the plaintiff would purchase a
further tipper truck which would also collect waste from
Halberg Guss
at the agreed rate of R220.00 per ton.
[41]
When the second defendant and Lombard had the discussions referred to
above, Lombard had no idea that the second defendant
held any
interest in the first defendant. He surmised that the first defendant
could be a subsidiary of Halberg Guss.
[42]
All seemed to be in order and Lombard observed that work was
proceeding as planned and money was coming into the plaintiff's
bank
account.
[43]
However, during or about July 2010 the second defendant approached
Lombard and informed him that all the invoices for work
done for
Halberg Guss by the plaintiff had to be channelled through the first
defendant. Lombard did not sense anything untoward
in the said
suggestion as he thought the first respondent was a subsidiary as
aforesaid.
[44]
It also transpired that the relationship between members of the
plaintiff had not been formalised at that stage in terms of
formal
agreements. The plaintiff then took steps to ensure the relevant
paper work was prepared including an Association Agreement
during or
about August 2010 for which he engaged the services of an attorney,
Mr Markgraaff of Gildenhuys Malatji Incorporated
Attorneys.
[45] The second defendant responded
regarding certain clauses in the Association Agreement by way of an
e-mail dated 16 August 2010
in which he advised that in respect of
clause 4.2.4 he held a 25% member's interest in the first defendant.
[46]
This revelation by the second defendant came as a total shock to the
Lombards as they had had no idea whatsoever about the
true
relationship between the first and second defendants.
[47] A meeting was subsequently held
at the attorneys' offices where the second defendant disclosed being
the holder of 25% member's
interest in the first defendant. He
further stated that the first defendant was merely a consulting firm
whose affairs were being
managed by his wife and sister. He contended
that in those circumstances there was no conflict of interests.
[48] Lombard accepted the second
defendant's explanation at that stage after weighing his options. He
was cognisant of the fact
that the plaintiff was mainly able to
operate because of the second defendant's skills and ability to
source clients.
[49] As matters turned out there was
an even greater surprise coming for Lombard, in August 2011 he
discovered that the true position
was that the second defendant had a
100% members' interest in the first defendant.
[50] As a result of the discovery, an
agreement was entered into in terms of which Lombard purchased the
second defendant's 30%
members' interest in the plaintiff.
[51]
The Lombard's were not aware at the time of purchase of his members'
interest that the second defendant had manipulated prices
to an
extent where he had benefited the first defendant and earned secret
profits They only became aware of this fact after the
second
defendant returned his laptop computer which he had formatted and
deleted the information thereon. The Lombards were only
able to
retrieve the information with expert assistance.
[52]
The discovery of the price manipulation and the making of secret
profit resulted in the present action.
[53]
The second defendant also testified about his personal background and
the fact that he obtained a business degree at the CIDA
campus after
which he joined the Phambili Wasteman group during June 2005 where he
garnered experience about the waste industry.
[54] He had registered the first
defendant after joining Phambili Wasteman. He registered it under the
name and style of Petshomi
Empowerment Technologies and later changed
its name to Wasteserv Waste Management.
[55]
Though he was hesitant to admit it under cross-examination he ended
up admitting that it was one of his conditions of employment
that he
would not hold any interest in a competing business such as that of
the first defendant. It was for that reason that he
had transferred
his members' interest to his wife and sister.
[56]
In August of 2008 the second defendant arranged a meeting regarding
the proposed purchase of Oil Separations between the Lombards,
Ramaphosa and Nonde.
[57]
The second defendant left Phambili Wasteman and joined the plaintiff
in December 2009 where he was paid a salary of R20 000.00
and given a
vehicle. The plaintiff also took over his cell phone and paid for his
cell phone account. The second defendant understood
that the
plaintiff did that to protect his intellectual property.
[58] The second defendant testified
that they did some work for Halberg Guss and that he was responsible
for the pricing for the
first defendant and for the plaintiff. He
admitted that he kept the pricing knowledge to himself and did not
share it with Lombard.
[59] The rates which the second
defendant negotiated for the plaintiff were less than what he
negotiated for the second defendant
for the Halberg Guss work.
[60] The second defendant further
conceded that he only disclosed that he held 25% members' interest
when he entered into a Close
Corporation agreement with the Lombards
whereas in truth and in fact he held 100% members' interest in the
first defendant.
[61] The second defendant testified
that he was indeed in control of pricing for the plaintiff which he
performed by endorsing same
on the back of the blue manifest document
after a job had been done and without which no invoices could be
issued by Katrien.
Application
of the Law to the Facts
[62] The common cause facts show that
the second defendant was employed by the plaintiff to inter alia
solicit business for the
plaintiff at prices most beneficial to the
plaintiff. The plaintiff was entitled to that benefit. Where an agent
acquires any benefit
for himself in the execution of that mandate,
such benefit is claimable by the principal even where the agent was
bona fide.
See
Robinson v Randfontein Estates Gold Mining CO Ltd (supra).
The
same principle applies in the case of a manager which the second
defendant was in casu.
See
Transvaal Cold Storage Co. Ltd v Palmer
1904 TS 45
; West Coast and
Rand
Native Labour Agency Ltd v Abernathy
1908 EDC 17
; Dorbyl Ltd v
Vorster
2011 (5) SA 575
(GSJ).
[63] Further, as a member of the
plaintiff close corporation, the second defendant stood in a
fiduciary relationship with the corporation.
In the circumstances he
had a duty to exercise such powers as he had to manage or represent
the plaintiff in its interests and
for its benefit.
See
section 42
(1) and
42
(2)(a)(i) of the
Close Corporations Act 69
of 1984
("the
Acf').
[64] The second defendant had a duty
to avoid any material conflict between his own interests and those of
the corporation and in
particular not to derive any personal economic
benefit by reason of his service to the corporation from any other
person where
such is obtained in conflict with the interests of the
corporation and to notify every member, at the earliest opportunity
practicable,
of the nature and extent of any direct or indirect
material interest he may have in any contract of the corporation and
not to
compete, in any way with the corporation in its business
activities.
See
section 42
(2)(b) and section 42 (b)(i) of the Act.
[65] Section 42 (3)(a)(i) of the Act
provides:
"(3)(a)
A member of
a
corporation
whose act or omission
has
breached
any duty arising from his or her fiduciary relationship shall be
liable to the corporation for:
(i)
any
loss
suffered
as
a
result
thereof by the corporation; or
(ii)
any economic benefit derived by the member by reason thereof."
[66]
In the case of Mallison v Tanner
1947 (4) SA 681
(T) ("Mallison")
an agent received a mandate to sell his principal's house for two
thousand pounds, and where he had
knowledge of an offer to purchase
at that sum by a prospective purchaser, and where the agent himself
had offered eighteen hundred
pounds and the offer was accepted and
where within one-and-a-half hours the agent resold the house to the
prospective purchaser
for two thousand pounds (plus fifty pounds
commission). The court held per Barry J. P.:
"That the
agent
was
liable
to account to his principal for the difference in the amount."
[67]
The second defendant had an absolute duty not only to disclose his
status vis a-vis the first defendant but also to make
a clean
breast of his pricing activities and profits to the plaintiff. In
Mallison (supra) Barry J. P. stated as follows (p 681):
"An agent
is
one who
acts on behalf of the principal and, unless otherwise understood, the
principal manifests consent that the agent shall act
only for his
benefit. Unless otherwise agreed, an agent
is
subject to
a
duty not to deal with his principal
as
an adverse party in
a
transaction connected with his agency.
Unless it
is
otherwise
provided in the agreement, however, an agent acting
as
an adverse party, even though with the
knowledge of the principal that he
is
doing
so,
is
subject to the duty to reveal to the
principal all the material facts which he knows or which he should
know, and to deal fairly
with the principal."
[68]
In casu, the second defendant simply did not deal fairly with his
principal. He kept his principal totally in the dark especially
in
regard to the secret profits which he was amassing behind his
principal's back.
[69]
In light of not only the common cause facts, the overall evidence and
the admissions made by the second defendant in his testimony,
I find
that while contracting with the first defendant on the plaintiff's
behalf the second defendant did not disclose to the other
members of
the plaintiff:
69.1The actual
prices he had negotiated for the first defendant with Halberg Guss
for skip services and/or bulk removal and disposal
work at Halberg
Guss in respect of the work set out in annexures
"A"
and
"B"
to the Particulars of Claim;
69.2.
The
second defendant's interest in the first defendant until 16 August
2010;
69.3.The full extent of the second
defendant's interests in the first defendant, namely 100%, after 16
August 2010;
69.4.That such
non-disclosure amounted to a breach of the second defendant's
fiduciary duties and fiduciary relationship towards
the plaintiff in
terms of section 42 of the Act.
[70]
Regarding the question of costs, as indicated (supra) the plaintiff
elected to withdraw its claim against the first defendant
and its
first claim against the second defendant. It therefore follows that
the plaintiff should be held liable for the costs incurred
by the
first and second defendant in regard to those claims.
[71]
In the result:
71.1.
The
second defendant is found liable towards the plaintiff to account for
the proven profits and economic benefits received by the
second
defendant directly or indirectly through the first defendant, from
the transactions listed in annexures
"A"
and
"B"
of the Particulars of Claim. The
determination of the value of such benefits with any other remaining
disputes in the action, are
postponed sine die.
71.2.
The
second defendant is ordered to pay the plaintiff's costs, including
the costs of two counsel for the trial from 27 February
2017 until 3
March 2017.
71.3.
The
plaintiff is ordered to pay the first defendant's costs including the
costs of two counsel.
71.4.The plaintiff
is ordered to pay the second defendant's costs regarding the first
claim against the second defendant including
the costs of two
counsel.
S.A.M. BAQWA
JUDGE OF THE HIGH COURT OF SOUTH
AFRICA
GAUTENG DIVISION, PRETORIA
Appearances
For
the Plaintiff: Advocate J. D. Maritz SC
Advocate
P. L. Uys
Instructed
by: Gildenhuys Malatji Inc.
For
the Defendant: Advocate F. W. Bates SC
Advocate
R. Deminey
Instructed
by: Fuchs Roux Attorneys
Heard
on: 27 & 28February 2017 and 1 & 3 March 2017
Delivered
on 3 April 2017