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[2016] ZAGPPHC 1192
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Omega International Associates Limited Partnership and Another v De Witt (45371/2013) [2016] ZAGPPHC 1192 (25 November 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Case
Number: 453 71/ 2013
25/11/2016
REPORTABLE
OF
INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
OMEGA
INTERNATIONAL ASSOCIATES
LIMITED
PARTNERSHIP
1
st
PLAINTIFF
OMEGA
RISK SOLUTIONS (PTY) LTD
2
nd
PLAINTIFF
And
JOSIAS
ALEXANDER DE WITT
DEFENDANT
JUDGMENT
Fabricius
1.
Plaintiffs
instituted action against the Defendant essentially based on breaches
of his fiduciary duties towards the Plaintiffs.
In addition, there
were allegations that in three instances he had misappropriated
monies.
2.
During
the course of the trial, First Plaintiff's claims were withdrawn and
the costs of the action were tendered. This judgment
is therefore
only concerned with Second Plaintiff's claims.
3.
First Plaintiff was OMEGA
INTERNATIONAL ASSOCIATES LIMITED PARTNERSHIP, a legal entity with
limited liability duly registered and
incorporated in however the
same as that of the Second Plaintiff, which is OMEGA RISK SOLUTIONS (
Pty) Ltd. It was initially pleaded
that Defendant was a director of
the First Plaintiff, but this was deleted by way of an amendment. The
relevant allegation therefore
was that Defendant had been employed by
the First Plaintiff as its Chief Executive Officer. It was also
pleaded that First Plaintiff
was a shareholder in the Second
Plaintiff and 13 other companies registered in various African
countries as well as in Kosovo.
These companies were known for
present purposes as "the OMEGA Group". The Group was
financially structured in such a
fashion that the Second Plaintiff
"acted and was conducted as the treasury for the Group", as
it was pleaded. In Plaintiffs'
Further Particulars it was pleaded
that Defendant had been employed from 2003 until 14 July 2012. The
"13 other companies",
referred to in Plaintiffs'
Particulars of Claim, were identified in the Further Particulars. The
Second Plaintiff's name also appears
on this list.
4.
Second Plaintiff’s
Claims:
The
first claim relates to an occurrence on 2 6 January 2009, where
allegedly authorized a payment to M. Kraft (Toerien). The second
claim relates to the period March
2007
to December 2008, and
refers to six payments made in that period to a certain M. J. Khasu,
who at the time was the South African
Ambassador to Gabon (some R430
000). The third claim refers to the period September
2007
to
January 2008, and relates to 12 payments made by the Defendant to W.
van der Berg (R 712 000). The fourth claim relates to payments
made
to Silvestre Motayo, during the period of February 2009 to July 2011.
It was alleged in this context that these payments,
some of which are
substantial, were made to Motayo ostensibly as advances on "Phase
2 of the Gabon Project". The fifth
claim relates to a payment in
favour of OMEGA FINANCIAL SOLUTIONS, ostensibly as a loan to the said
Mr Motayo on 20 February 2009,
which amount Defendant however
misappropriated for personal purposes. The sixth claim relates to
payments made to a Mr van Zyl
of basis that they would be advanced in
favour of S. Motayo. The relevant date here is 29 May 2009. The
seventh claim relates to
the period January to August 2010. It
appears that Defendant had been sued by Securicor Grey Security
Services in the North Gauteng
High Court, that the matter had become
settled, and that a certain sum had been paid to that firm by Second
Plaintiff, although
Defendant had been sued in his personal capacity.
5.
In
my view, certain paragraphs of the Particulars of Claim were
excipiable for a number of reasons, but no exception was taken.
Defendant filed a Special Plea of Prescription, and also pleaded
over. The Plea discloses no identifiable defence in my opinion,
but
that is not the subject matter of the present litigation. By
agreement between the parties, the Special Plea was adjudicated
first, and evidence was led thereon. The Second Plaintiff's Summons
was served on Defendant on
7
August 2013, which was more than
three years after the date on which most of the particular claims
arose, and the claims had therefore
prescribed in terms of
Section 11
of the
Prescription Act 68 of 1969
.
In respect of
Second Plaintiff's fourth claim, only the amounts claimed in respect
of paragraphs 21.
7
to paragraph 21. 9 were excluded from the
Plea of Prescription. In respect of the seventh claim and the period
January to August
2010, it was pleaded that on each of the dates of
each monthly instalment pleaded, the Second Plaintiff's seventh claim
fell due.
There was no replication to this Special Plea.
6.
Defendant
gave evidence on aspects relating to the Special Plea and gave
details about Second Plaintiff's activities mainly in Africa.
In
Gabon, a city surveillance contract, and a management contract
relating to it, had been entered into and had been worth a
substantial
amount. The services of the said Mr Khasu had been used
to "facilitate payment" by the Gabon Government to Second
Plaintiff.
This had been known to everyone, because of the precarious
financial position of Second Plaintiff at the time. A Mr du Tait had
been one of the members of Second Plaintiff's deal with his evidence.
Amongst others, Smit had to submit monthly financial statements
to
the Executive Committee and also had to control the cash flow of the
Group. The financial department was on the same floor of
the building
as the Executive Members. Most persons from the management side were
aware of the Gabon contract. As far as the amounts
paid to Van der
Berg were concerned, he had been interested in purchasing shares in
the OMEGA Group and for reasons related to
this intent. The
particular payments had been made to him. Again, the Executive
Committee was fully aware of this transaction.
Mr Motayo's role was
also concerned with the mentioned contract with the Gabon Government,
and he had been entitled to commission
in respect of his services
rendered in connection therewith. Phase 1 of this contract had
apparently been worth 10 million US Dollars,
Phase 2, 19 million
Euros and Phase 3, 15 million Euros. This contract therefore had been
of particular importance to Second Plaintiff,
and everyone had been
aware of a necessity to receive payment from the Gabon Government as
speedily as possible and, apparently
by whatever means as possible.
The Group Financial the First Plaintiff and the Management Committee
of the Second Plaintiff. As
far as the Securicor transaction was
concerned, the Executive Committee had similarly been aware of all
relevant details. Mr de
Witt also testified that the Chief Financial
Manager, Mr Smit, had been quite aware of the role of the said Khasu,
and the importance
of the Gabon Project for the firm. Similarly he
had been quite aware of the payments to Van der Berg. Motayo's role
was similarly
well-known to the Financial Management personnel again
in the context of the Gabon Project, which had been of crucial
importance
to Second Plaintiff.
7.
If
one considered the payments made to Motayo over the period of time,
it would be strange if Smit were be heard to say that he
had no
knowledge of the details or the role of Motayo. Smit had also been
aware of the litigation against him in the context of
the Securicor
case, and the settlement in that case had also come to the knowledge
of the Executive Committee.
8.
Mr
C. Smit testified on behalf of Second Plaintiff and a document
entitled "Job Description" was handed in as an exhibit.
His
job title was "Group Financial Manager" and he was
responsible to the Chief Executive Officer of OMEGA INTERNATIONAL
ASSOCIATES LIMITED PARTNERSHIP, First Plaintiff. He was also a member
of EXCO and according to this exhibit he contributed to the
strategic
decisions affecting all operations of the Company. The functions of
his role were set out in the same document, and amongst
others he had
to supply the Chief Executive Officer with weekly cash flow
statements. He also had to prepare and consolidate monthly
accounts
and on a monthly basis provide the Chief Executive Officer with an
income statement, balance sheet and cash flow statement.
He also had
to supply the CEO on a monthly basis debtor and creditor, as well as
variants reports, and inform him of any financial
matter which could
have a serious impact on the Company. His Service Agreement with
"OMEGA BUSINESS TRUST", was handed
in as an exhibit, and it
is clear that the Board of Trustees appointed him as OMEGA Group of
companies which is outsourced to the
Trust in terms of the outsourced
agreement between the Trust and OMEGA Group. It also appears from
various documents contained
in the agreed upon bundle of documents
(Court bundle) , that Smit had been aware of relevant transactions,
including the Gabon
Project and also signed a number of cheques. It
is also clear that Mr van Zyl, the Managing Director of OMEGA
FINANCIAL SOLUTIONS,
was aware of the dealings with Motayo if regard
is had to a number of emails which were not disputed.
9.
During
his evidence, Mr Smit clearly attempted on a number of occasions to
disassociate himself from the intimate knowledge of the
transactions
which gave rise to Second Plaintiff's claims. Having regard to the
objective evidence as per the documents contained
in the Court
bundle, the evidence of Defendant, his job description, and the
activities that such contained, it is in my view certain
that he was
quite aware of the nature of the transactions and especially the
importance of aware of the transactions relating to
Van der Berg. An
email was addressed to him in this context and having regard to his
duties, it is in my view extremely unlikely
that he would not have
been aware of all the relevant details concerning Second Plaintiff's
claim. As I have said, my distinct
impression in Court was that he
intentionally attempted to underplay his role and his knowledge of
these claims. None of the objective
facts in this context were
challenged by, or on behalf of Plaintiff, and it is abundantly clear
therefrom that Smit knew of the
Gabon Project and Motayo's role
therein. He himself gave evidence to the effect that the cash flow
situation of the Company was
critical and that it had been of the
utmost importance to control expenditure and to ensure that any
monies due to the Company
were speedily collected. There is no doubt
that the entire senior Executive body of both Plaintiffs knew about
the Gabon Project
and its importance thereof to their survival. Smit
and Van Zyl in fact signed cheque requisition forms which referred to
the Gabon
Project, Phase 2, and the 15 % commission due to Motayo.
10.
On
behalf of Defendant Mr M. v R. Potgieter SC, placed the most relevant
cases relating to prescription before me. It is settled
law that it
is for a party invoking prescription to allege and prove the date of
the inception of the period of prescription. On
the pleadings there
is no dispute or discrepancy about the applicable dates for purposes
of considering a plea of prescription.
11.
Section
12
(1) and
12
(
3
) of the
Prescription Act 68 of 1969
are
of importance. These provide as follows: "12 ( 1 ) Subject to
the provisions of sub-section ( 2 ) and ( 3 ) , prescription
shall
commence to run as soon as the debt is due. ( 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 a debt arises: provided that a
creditor shall be deemed to have such knowledge
if he could have
acquired it by "Debt" does not mean cause of action. It
means claim in a general sense. In
Drennan Maude and Partners v
Pennington Town Board
[1998] ZASCA 29
;
1998 (3) SA 200
SCA at
212 F to J,
the
following was said: "In short, the word "debt" does
not refer to the "cause of action", but more generally
to
the "claim" ... In deciding whether a "debt" has
become prescribed, one has to identify the "debt",
or, put
differently, what the "claim" was in the broad sense of the
meaning of that word". See in this context also
Barnett and
Others v Minister of Land Affairs and Others
2007 (6) SA 313
(SCA)
par. 19
and
Claassen v Bester
2012 (2) SA 404
(SCA) par. 12
to 13.
A debt is due when the creditor acquires the right to
institute legal proceedings and the debtor is under obligation to
perform.
It is also clear that a creditor is not able by his own
conduct to postpone the commencement of prescription. See:
Uitenhage
Municipality v Molloy
[1997] ZASCA 112
;
1998 (2) SA 735
(SCA) at 742 A to D.
12.
As
far as the provisions of
Section 12
(
3
) of the
Act
are
concerned, either actual or shown that the creditor actually knew the
facts and the identity of the debtor. 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 arose
by exercising reasonable care. The test is what a reasonable person
in that position would have done, which means that
there is an
expectation to act reasonably and with the diligence of a reasonable
person. A creditor can therefore not simply sit
back and by inaction
arbitrarily and at will postpone the commencement of prescription.
What is required is merely the knowledge
of the minimum facts that
are necessary to institute action and not all the evidence that would
ensure the ability of the creditor
to prove its case comfortably.
See:
Macleod v Kweyiya
2013 (6) SA 1
SCA at par. 9,
and
Gunase
v Anirudh
2012 (2) SA 398
(SCA) at par. 15.
It is also
clear that knowledge of legal conclusions is not required before
prescription begins to run. See:
Claassen v Bester
2012 (2) SA 404
(SCA) par. 14 to 15.
13.
Where
a loan is made without a specific time for performance, the
commencement date for prescription in such a case is the date
that
the advance was made. See: Mahomed v Nagdee
1952 (1) SA 410
(AD) at
page 418 G, and Fluxman v
Britain
1941 AD 273
page 294.
14.
Plaintiffs'
claims all relate to financial transactions, being credits and debits
raised and passed on loan account in respect of
the First Plaintiff
on the one hand, or payments made by or on behalf of the Second
Plaintiff of the other. It is also significant
that Annexure A to the
Particulars of Claim was prepared by the said Chris Smit, the Group
Executive Finance Manager of Plaintiffs.
In respect of the claims
made by the Second Plaintiff, the relevant records were kept and it
is abundantly clear that Smit knew
of these transactions at all
relevant times. It is clear that Second Plaintiff' s claims are for
damages based on Defendant' s
alleged breach of fiduciary duties.
These debts became due on the dates that the breaches of factual
ingredients of cause of action,
but are legal conclusions to be drawn
on the particular facts. See: Truter v Deyssel
2004 (6) SA 168
SCA at
par. 11. Mr Potgieter therefore argued that it was abundantly
clear from the objective evidence and in fact
Mr Smit' s own evidence
and that of Defendant, that there was ample information available to
the Second Plaintiff about the payments
that were made and the time
they were made. Second Plaintiff also knew of the circumstances
relating to these payments and in any
event, it could have acquired
all relevant knowledge by exercising reasonable care. Mr Smit had
testified that Mr du Tait, a director,
had requested him to
investigate the circumstances of all relevant payments that formed
the subject matter of the claim against
Defendant. He did so, but
under cross-examination admitted that nothing new had be discovered.
15.
In
argument, Mr G. Alberts SC on behalf of Second Plaintiff had no
qualms with the confined his argument to one principal submission
only, with reference to the decision of
Price Waterhouse Coopers
Inc and Others v National Potato Co-
operative ltd and Another
[2015] 2 ALLSA 403
(SCA).
The First Respondent in that case, the
National Potato Co-operative Ltd, was an agricultural co-operative
and in the context of
the plea of prescription, the question was
asked whether it had knowledge of the identity of the debtor and of
the facts or whether
it could have acquired such by the exercise of
reasonable care. The Court referred to the
Pennington Town
Board decision supra
and re-emphasized that "this Court has
consistently held that all that is required is knowledge of the
minimum facts required
to institute action. It is unnecessary for the
claimant to be aware of the legal consequences of those facts. Where
the Plaintiff
does not have actual knowledge of those facts, but
could by the exercise of reasonable care have acquired that
knowledge, that
was equivalent to actual knowledge". The issue
in that case related to the identity of the persons whose knowledge
was relevant
to the commencement of prescription. The point before
the Court on that particular topic and the point that knowledge of a
corporate
entity, it is necessary to identify the natural persons
whose knowledge is to be taken to be the knowledge of the corporate
entity.
With reference to the decision of
Meridian Global Funds
Management Asia Ltd v Securities
Commission
[1995] 2 AC 500
(PC) at 507 f,
cited with approval in
North View
Shopping
Centre (Pty) Ltd v Revelas Properties JHB CC and Another
2010 (3)
SA 630
(SCA) par. 20,
it was said that this is a search
referred to as the Rules of Attribution by which Courts determine
"whose act (or knowledge,
or state of mind) was for this purpose
intended to count as an act etc. of the Company ?" When
prescription is raised by a
corporate entity, the ordinary rule of
attribution of knowledge to the Company of the knowledge of natural
persons of facts given
rise to the claim, is satisfied the members of
the Board of Directors have that knowledge, could have acquired if
they took reasonable
care. In the
National Potato decision
supra,
the Court left open the question whether the knowledge
of other persons within the entity would also be attributed to it for
the
purposes of prescription. I would venture to suggest that one
would have to enquire for the purposes of this persons within the
entity would be sufficiently close to the activities, interests and
duties of the Board of Directors, so that it could reasonably
be
expected that the relevant facts had come to its knowledge. Having
regard to the evidence, the importance of the Gabon Project
and the
role played by Smit, Khasu and Motayo, and the facts that were known
to Smit at the time when the relevant transactions
all took place, I
hold 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 is clear from Mr Smit'
s own job
description and his duties, that he was in any event sufficiently
close to the Chief Executive Officer of the Group,
so that one can be
satisfied with a reasonable degree of certainty, but in any event on
the probabilities, that the particular
directors had the relevant
knowledge or could have acquired it. Mr Smit was a member of the
Executive Committee and according to
his job description, he
contributed to the strategic decisions affecting all operations of
the Company. It is clear that it was
well-known that there were
problems related to bad debts and the which were critical to its
survival. This has never been in dispute,
nor the role that the
various persons played in connection therewith.
16.
The
result is that Defendant's Special Plea of Prescription in respect of
all of Second Plaintiff s claims is upheld with costs
including costs
of two Counsel, with the exception of the claims pleaded in
paragraphs 21.7, 21.8 and 21.9 of Second Plaintiff
s fourth claim.
________________________
JUDGE
H.J FABRICIUS
JUDGE
OF THE HIGH COURT GAUTENG DIVISION, PRETORIA
Case
number: 453 71/ 2013
Counsel
for the Plaintiffs:
Adv
G. W. Alberts SC
Adv
F. J. Labuscagne
Instructed
by: Booysen Dreyer & Nolte Inc
Counsel
for the Defendant:
Adv
M. v R. Potgieter SC
Adv
S. J. van Niekerk
Instructed
by: Senekal Simmonds Inc
Date
of Hearing: 14 to 17 November 2016
Date
of judgment: 25 November 2016 at 10:00