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2012
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[2012] ZAKZDHC 14
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Dr W A A Gouws Management Services CC v Seevnarayan and Others (6998/99) [2012] ZAKZDHC 14 (14 March 2012)
IN THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC OF SOUTH AFRICA
Case Number : 6998/99
In the matter between:-
DR W A A GOUWS MANAGEMENT SERVICES CC
…..........................
Plaintiff
and
ESHU SEEVNARAYAN
….........................................................
First
Defendant
NAREN PATTUNDEEN
…..................................................
Second
Defendant
SELVASEELAN NAIDOO
….....................................................
Third
Defendant
KOGIELAN NAIDOO
….........................................................
Fourth
Defendant
___________________________________________________________________________
JUDGMENT
___________________________________________________________________________
VAN ZYL, J.:-
Plaintiff is a close corporation and the alter ego of Dr W A A
Gouws, a chartered accountant and its sole member. Dr Gouws had
been, at the time of giving evidence, in practice for some forty two
years and claims particular expertise in matters relating
to
taxation. In the course of this judgement I will, for convenience,
refer to them as plaintiff or Dr Gouws, as the context
requires.
There are four defendants, all individuals. Although the third and
fourth defendants, who are brothers, were cited when the proceedings
commenced and entered appearance to defend, it appears that
subsequent pleadings were not served upon them. In any event they
had not pleaded, were not represented at and took no part in
opposing the plaintiff’s claims in the trial of this matter.
However, the third defendant appeared as a witness for the plaintiff
at the trial. The first and second defendants both defended
the
matter, pleaded to the plaintiff’s amended declaration and
were represented by Mr Thatcher throughout the trial.
The issues in dispute between the parties (effectively the plaintiff
and the first and second defendants), which took a long
time to come
to trial, have their origin in difficulties experienced by a company
called Sebcom (Proprietary) Limited. For convenience
this concern
will simply be referred to as Sebcom. Sebcom was incorporated and
commenced conducting business as a service provider
for the MTN
Cellular Network (herein called MTN) in 1994 during the early days
of the cellular telephone industry in Southern
Africa. It marketed
to members of the public cellular telephones and accessories, as
well as access to the cellular telephone
network developed and
operated by MTN by way of what is commonly known as “air
time”. The third and fourth defendants
were its initial
directors and only shareholders.
Sebcom found itself in financial difficulties almost from the
outset. It is unnecessary to analyse and set out herein the full
reasons therefor. Broadly it appears that Sebcom experienced various
cash flow and administrative challenges and that it was
probably
under capitalised for a new concern at that time trying to establish
itself in the developing field of mobile communications.
In planning
its infrastructure and operations it also relied upon incorrect
assumptions relevant to its ultimate performance
and profitability,
all of which combined to add to its difficulties.
As a result Sebcom incurred significant losses during the 1995 and
1996 tax years and eventually it was unable to pay its creditors
in
the normal course of business. During March and April 1995 Cellular
Sales CC, one of its creditors, brought two successive
applications
for the winding up of Sebcom. Each of these applications were
settled, so that Sebcom was not provisionally liquidated.
However,
its financial and administrative difficulties persisted and during
1998 MTN, its major creditor, successfully moved
for the provisional
winding up of Sebcom. It was, in order to overcome this crisis, to
settle the dispute with MTN and to discharge
the rule nisi, urgently
necessary for the third and fourth defendants to raise sufficient
finance. That gave rise to the disposal
by them of a portion of
their shareholdings in Sebcom and set the stage for the disputes at
the heart of the present litigation.
First and second defendants are businessmen. The first defendant in
particular would appear to have been a highly successful
businessman
and investor. He heads a group of businesses, the primary business
being a company called Kiran Sales (Pty) Limited
trading as Lylax
Bedding and of which the first defendant is the sole shareholder and
the managing, if not the only director.
Lylax Bedding is a
manufacturer of beds and related products and is based in the Jacobs
industrial area of Durban. According
to the undisputed evidence of
the plaintiff’s second witness Mr Sunjeeth Sahadave, the
former group accountant employed
by the first defendant, the other
companies making up the group comprised mostly property owning
enterprises and the offices
of Lylax Bedding served as the group
headquarters and as its administrative centre. The first defendant
was the driving force
of the group with undisputed authority
regarding its affairs.
When the third and fourth defendants faced the crisis brought about
by the provisional winding up order obtained by MTN against
Sebcom,
it is clear that conventional sources of finance were no longer
available to them. Sebcom was in deep financial distress
and had
been suffering repeated and substantial annual losses over an
extended period. It had been trading in insolvent circumstances
and
although its business, with its expanding customer base, was a
potentially valuable asset in the longer term, Sebcom was
not in a
position to obtain further credit in the ordinary course at that
stage and faced imminent liquidation, unless a solution
were to be
found as a matter of urgency.
Thus the stage was set for what turned out to be a very unhappy
commercial marriage of convenience. This involved the first and
second defendants as investors on the one hand and the third and
fourth defendants who, out of necessity, were compelled to sacrifice
fifty percent of their equity in Sebcom, in exchange for a dowry in
the form of the financial bailout of Sebcom. The full terms
of what
might conveniently be called the bailout agreement are by no means
clear and comprehensive details thereof were not produced
during the
course of the trial. However, sufficient details of how the
agreement was structured and as relevant to the present
dispute,
emerged in the course of the evidence.
The investment vehicle used by the first and second defendants was a
company called Seev-Patt Properties (Pty) Limited (Seev-Patt),
which
then acquired a fifty percent shareholding in Sebcom. As a result
the first and second defendants joined the third and
fourth
defendants as directors on the board of Sebcom.
A sum of twenty million, five hundred thousand Rand was committed by
the investors as part of the bailout agreement in order
to assist
Sebcom in extricating itself from the financial quagmire in which it
had fallen. This sum was acknowledged by the third
and fourth
defendants in clause 1.1 of an agreement in which they subordinated
their loan accounts in Sebcom in favour of Seev-Pat.
The mechanism
of where exactly the money came from is also unclear. The evidence
suggests that Seev-Patt was one of the companies
falling into what
was described as the first defendant’s group of property
investment companies, but it was by no means
established that it was
the source of the investment funding.
The position of the second defendant is also ambivalent and was not
clarified or fully explored in the course of the evidence,
nor did
he himself give evidence during the trial. However, against the
background of the evidence it would appear that the second
defendant
was a pre-existing fellow investor with (colloquially a partner of)
the first defendant in Seev-Patt when it was agreed
to use the
latter as the vehicle for the acquisition of the shareholding in
Sebcom. Whilst the evidence is silent on how such
shareholding was
apportioned between the first and second defendants and who in
reality provided the investment capital made
available to Sebcom,
the irresistible suggestion is that the first defendant, through his
group of companies, was the major financier
and controlling force of
the transaction.
After the solemnisation of the commercial marriage, the investment
funds made available to Sebcom were applied to settling its
most
pressing debts, including MTN, so that the provisional winding up
order obtained by the latter was discharged. However,
its troubles
were by no means over. Both the third defendant and Sebcom had
fallen foul of the South African Revenue Services
(SARS) and the
position of the third defendant in particular was precarious. SARS
was in the process of investigating the financial
and taxation
affairs of the third defendant, with potentially significantly
adverse consequences to follow for the first and
second defendants,
as investors in Sebcom.
If not common cause, it was not seriously disputed that the position
after the bailout was that, whatever taxes and penalties
SARS
imposed upon the third defendant, would have to be settled by Sebcom
against the third defendant’s existing loan account
in it.
Sebcom itself was also exposed to the risk of arrear payments,
interest and penalties being levied against it by SARS
for unpaid
VAT and PAYE. Since Sebcom itself would be unable, out of its own
resources to pay SARS, the investors (primarily
the first
defendant), would then have to provide the additional bailout
funding.
Dr Gouws and Mr Sahadave knew each other from when the latter had
been employed in an accounting firm in which Gouws was at the
time a
partner. Sahadave left that employment in 1991 to join the first
defendant in the Lylax Bedding group. Subsequently and
through the
intervention of Sahadave, Gouws was approached and retained to
assist and represent the first defendant when the
latter, Lylax
Bedding and a number of his other companies became the subject of an
investigation by SARS, very similar in nature
to the investigation
against the third defendant in the present matter. Gouws explained
that the modus operandi usually followed
by SARS is to launch the
initial investigation against the individual who effectively
controls the corporate entity. If it can
be shown that such
individual misreported income derived from the corporation, it is
easier then to extend the investigation
also into the affairs of the
corporate entity as well.
In the present matter Gouws was likewise approached, through the
intervention of Sahadave and on the instructions of the first
defendant, to assist in respect of the difficulties with SARS and
involving the third defendant and Sebcom. At that stage Gouws
knew
the first defendant, but not any of the other defendants. The
initial meeting took place during May 1998 at the Lylax Bedding
offices, which also served as the administrative headquarters of the
group and where Gouws met with the first defendant, assisted
by
Sahadave.
Although the first defendant and Sahadave only had limited
information at that stage, two problem areas were identified, namely
alleged VAT arrears owing by Sebcom and an intended tax evasion
investigation to be launched by SARS against the third defendant
as
the person who effectively controlled the affairs of Sebcom from its
inception. As indicated above, the intended investigations
by SARS
held grave implications for the first defendant as the primary
investor in Sebcom because he might well have to find
and advance
considerable sums in excess of the R20,5 million already advanced to
Sebcom. At that stage they speculated that SARS
might demand an
additional R2 million and from the first defendant’s
perspective it was therefore imperative that clarity
regarding the
extent of the risk and the intentions of SARS be obtained.
Gouws was supplied with formal authority to represent the third
defendant and Sebcom and went forth to meet with SARS. The
investigating officer at SARS was a Mr Bender who advised that the
investigation was still in its preliminary stages, but that
it was
envisaged that the third defendant and Sebcom (in that order) would
be the subject of extensive investigations. By reason
of subsequent
tax irregularities attributed to the third defendant, the tax
amnesty previously granted to him would be withdrawn
and arrear
taxes, interest and penalties to the extent of the maximum
permissible 200% would be levied against the third defendant
and
amounting to an estimated R10 million. Bender further advised that
it was suspected that Sebcom had also failed to make all
the
payments required for VAT, as well as PAYE deductions from its
employees and which he estimated, together with interest and
penalties at a further R8 million. In total the estimated additional
tax liability thus came to an alarming R18 million which,
in the
circumstances already alluded to above, the first defendant would
have to finance in addition to the monies already advanced
to Sebcom
in the course of the bailout operation.
As a result Gouws called for a meeting with the interested parties.
Such a meeting took place at Gouws’ offices in Durban
and was
attended by the first, second and third defendants, as well as
Sahadave. What followed was what Gouws described as a
“very
hot” crisis meeting, where tempers flared to the extent that
by the end thereof it threatened to develop into
a physical
confrontation.
According to Gouws, during the course of the meeting, he explained
to those present the steps which needed to be taken to address
the
concerns of SARS and to resolve the tax disputes as speedily and
cheaply as possible. This would involve, inter alia, a painstaking
analysis of Sebcom’s and the third defendant’s financial
records extending over several tax years and demonstrating
to SARS
that items appearing to represent irregular transactions could in
fact be satisfactorily be accounted for. Where irregularities
in
fact occurred, the circumstances of each should be analysed,
explained, rectified and SARS prevailed upon to exercise leniency
in
its discretion. Insofar as arrear VAT payments were concerned, he
pointed out that SARS could often be prevailed upon to accept
payments of the arrears in instalments and to waive, or reduce,
penalties in deserving circumstances.
All of this would, however, be both time consuming and labour
intensive, which brought the discussion to the subject of the
remuneration to be charged by Gouws, through the medium of the
plaintiff, should they be instructed to deal with the problem.
According to Gouws he made it clear to those present that he (and
though him the plaintiff) would not prepared to embark upon
such an
extensive exercise, which he estimated was likely to occupy some 80%
of his productive time for the foreseeable future,
unless there was
clear understanding and agreement as to how payments would be made
for the services to be rendered. Gouws said
that in particular he
stressed that he was not prepared afterwards to run between four
shareholders (sic) and a bankrupt company
to try and recover the
plaintiff’s monies for services rendered.
According to Gouws he specifically addressed the first defendant and
reminded him of their past association and the manner in
which they
dealt with payment issues at that stage, namely that Gouws reported
to the first defendant, who undertook personal
responsibility for
payment of the obligations, irrespective of the entity who actually
acted as the instrument of payment thereafter.
He explained that
during their previous association the first defendant accepted
personal responsibility to ensure that Gouws
was paid for his
services and it mattered not which of the first defendant’s
companies or entities were thereafter debited
with any particular
payment in the course of the group’s administration. In any
event, according to Gouws, where he performed
a particular service
at the behest of one of the first defendant’s companies,
inevitably one or more of the others forming
part of the group were
also effected or benefitted, so that it became entirely impractical
to try an attribute a particular service
to a particular
beneficiary. Gouws said he accordingly made it clear at the meeting
that he required a similar arrangement and
undertaking from the
first defendant in regard to the instructions in the present matter,
to which the first defendant agreed.
Gouws said that he adopted this attitude in the interests of
certainty and also in the light of the fact that he knew the first
defendant as a man of financial substance, whilst the second and
third defendants were unknown to him. In fact, it was only at
the
meeting that he met them for the first time and the fourth defendant
was not even present, although he understood that the
third
defendant was authorised to represent him. Given the nature of the
financial demands SARS intended making against the third
defendant,
the latter would not at that stage have inspired much confidence in
his ability to pay the plaintiff’s accounts
at a later stage,
whether wholly or in part. According to Gouws, following this
meeting he did not have any further contact with
the second
defendant, to the extent that he failed to recognise him at the
commencement of the present trial.
Gouws gave evidence to the effect that the defendants agreed at the
meeting that the plaintiff (Gouws) be instructed to proceed.
Although the second and third defendants, the latter also
representing the fourth defendant, in addition agreed to be
personally
liable for the plaintiff’s fees and charges, Gouws
(and through him the plaintiff) accepted the instruction primarily
based
upon the first defendant’s undertaking of personal
responsibility for all payments. He said that the first defendant
directed
that all payments becoming due to the plaintiff would come
from his (group) office, via Sahadave, who would act as intermediary
and to whom accounts for services rendered should be delivered for
the attention of and approval by the first defendant. The
first
defendant would thereafter resolve the respective liabilities of the
four “partners” amongst themselves. Effectively
Gouws
was to report to and ultimately take his instructions from the first
defendant only, the latter representing the overriding
authority as
between the four “partners”.
Asked what his attitude would have been had he been told at the
meeting that Sebcom would be liable for the payment of the
plaintiff’s fees and charges, Gouws responded that in such an
eventuality the plaintiff would have required a deposit of
R500 000-00, without which it would not have rendered any
services at all. It was only due to the high regard which Gouws
had
for the financial strength of the first defendant and the fact that
the first defendant, in their past association, had not
only
accepted personal responsibility for the payments becoming due to
Gouws, but had also ensured that such responsibilities
were duly
discharged, that Gouws was prepared to agree that the plaintiff
would accept the instructions without requiring the
payment of any
deposit.
Following the meeting Gouws proceeded to execute the plaintiff’s
instructions. Upon the authority of the first defendant
both
Sahadave, as well as one Persadh, another accountant also in the
employ of the first defendant’s group, were made
available to
assist Gouws in the execution of the plaintiff’s mandate which
involved both the SARS investigation aimed
against the third
defendant, as well as the VAT and PAYE contraventions apparently
perpetrated by Sebcom. In the process the
third defendant’s
tax amnesty was reinstated after the formulation of an application
to the High Court where Gouws cooperated
with attorneys and counsel
retained for this purpose by the first defendant, additional tax
assessments against him were disallowed
and the affairs of Sebcom
were brought in order.
Two progress payments, respectively R85 000-00 on 31 May 1998
and R50 000-00 on 30 June 1998, were made to the plaintiff,
according to Gouws in compliance with the first defendant’s
undertaking and towards the end of October 1998 the end of
the
assignment was within sight, although some work remained to be done.
At that stage fees and charges already due to the plaintiff
amounted
to R484 570-00 exclusive of VAT, to which the cost of the
remaining work until the completion of the assignment
and estimated
at R73 150-00, exclusive of VAT, would still be added.
On 6 November 1998 a meeting took place between Gouws and the first
defendant relative to the outstanding balance already due,
as well
as the estimated future charges. In the result the plaintiff
compromised combined figure of R557 720-00, exclusive
of VAT
and it was agreed that the plaintiff would complete the assignment
for the sum of R500 000-00, exclusive of VAT and
payable in ten
equal instalments. In this regard the plaintiff was supplied with
ten post dated cheques for R57 000-00 each,
the drawer of which
was Sebcom and the first he first of which was payable on 6
Novemeber 1998. Gouws said that he remembered
the date because it
coincided with his birthday.
These cheques were presented and paid, save for the last four
totalling a face value of R228 000-00, which were unpaid by
reason of the fact that Sebcom had been liquidated. Subsequently the
plaintiff unsuccessfully tried to demand payment of these
from the
four “partners”, but they all resisted. Eventually the
present action was instituted and in the amended
declaration the
plaintiff claims payment of this claim, styled as “Claim 1”,
from the first defendant personally,
and in the alternative from all
four defendants.
During the course of the trial the defendants submitted a letter
dated 4 November 2010, together with a schedule thereto, from
PKF
Chartered Accountants, the liquidators of Sebcom. These documents
were received by consent as exhibit “F” and
it appears
there from that, following the liquidation of Sebcom on 31 March
1999, the plaintiff had in fact proved a claim against
the company
in liquidation and had received dividends totalling R98 349-23,
thus leaving a balance of its Claim 1 in the
sum of R129 650-77
only.
The question to be answered is whether such claim lies against the
first defendant only, alternatively against the four defendants
jointly and severally as contended by Mr Combrinck who appeared for
the plaintiff, or whether the claim lies only against the
defendants
jointly, if at all, as contended for by Mr Thatcher for the first
and second defendants.
Much criticism was levelled at Gouws for the somewhat inept wording
contained in subsequent correspondence by him, or by representatives
of the plaintiff acting on its behalf. I do not propose to embark
upon an exercise of trying to analyse each document, in order
to
judicially interpret its contents, because I do not consider this to
be either necessary or helpful. The May 1998 agreement
relied upon
by the plaintiff was concluded orally and it is necessary to
consider the proven facts as they emerge from the evidence
before me
in order to determine the terms of the agreement concluded at the
time.
Gouws was adamant that he contracted on behalf of the plaintiff on
the basis that the first defendant undertakes primary personal
responsibility for the settlement of the fees and charges becoming
due to the plaintiff. He motivated this approach in some detail,
as
already discussed above. In my judgment the probabilities weigh
heavily in favour of the version put forward by Gouws. Not
only had
he followed such a course in dealings with the first defendant in
similar circumstances before, but given the precarious
situation of
Sebcom at the time, it was not credit worthy. That much appears to
be conceded by counsel for the first and second
defendants, but
counsel then argued that the intention of the parties in contracting
was to render each of the “partners”
personally liable
on the basis of joint, but not several, liability.
I find Gouws’ explanations persuasive and in accordance with
the probabilities, namely that at the time he knew the first
defendant as a man of financial substance, whilst the others were
unknown to him. He knew nothing about the second defendant,
save
that he was a director of Seev-Patt. Since he was not privy to the
shareholders of that company, he could not even be certain
that the
second defendant held any such shares. Certainly the third defendant
would not have appeared credit worthy, given the
stated intention of
SARS to levy taxation claims and penalties amounting to an estimated
R10 million against him, as well as
the fact that both the third and
fourth defendants found themselves beholden to the first defendant
specifically because they
had been unable themselves to raise
finance in order to protect Sebcom from the claims made against it
by its creditors. Fourth
defendant, even if represented at the
meeting by the third defendant, remained unknown to Gouws in any
event.
I therefore consider it very improbable that Gouws would have been
prepared to embark upon a venture which would have required
of him
to devote some 80% of his productive time over an extended period,
when he was uncertain whether he would be paid in full
by all four
his debtors, or whether one or more of them might become unable or
unwilling to effect his share of the payments
due, thereby leaving
the plaintiff short and requiring it potentially to sue men of
straw. It is, in my view, much more probable
that in such an event
Gouws would have called for the suitable deposit to have been paid,
failing which he would not have accepted
the instruction offered to
the plaintiff.
In my judgement it is far more likely that Gouws, and thus the
plaintiff, required and obtained the undertaking of personal
liability as alleged from the first defendant in the course of that
meeting and that the plaintiff accepted the instruction on
that
basis. This conclusion is fortified by the subsequent conduct of the
parties whereby Gouws reported to the first defendant
and accepted
his ultimate authority as decisive of any conflicts between the
uneasy directors of Sebcom. The fact that the plaintiff’s
claims for services rendered and to be rendered were compromised by
the agreement of 6 November 1998, in my view takes the matter
no
further. The nature of this agreement, as initiated by the first
defendant, was merely to effect a saving on the total commitment
and
not to change the fundamental nature of the original transaction by
substituting a new debtor in the place of the old.
In any event, the version advanced by Gouws finds support in the
evidence of both Sahadave, as well as the third defendant who
gave
evidence as a witness for the plaintiff. Counsel for the first and
second defendants suggested that these witnesses were
prejudiced
against the first defendant and that each had reason to falsify
their evidence. It is so that both witnesses parted
with the first
defendant in circumstances of some disunity and unhappiness. But I
am not persuaded that either of these witnesses
perjured themselves
in order to assist the plaintiff. Both of them, as well as Gouws,
favourably impressed me as witnesses and
some allowance regarding
the quality of their evidence and their ability at recall needs to
be made in their favour, by reason
of the very long time which had
elapsed before they were called to the stand.
The first defendant, on the other hand, did not impress ne as
favourably. I came away with the distinct impression that his memory
veered to the demands of opportunism and that the thread of his
evidence clashed with the obvious probabilities emerging in this
case.
At the end of the day and having considered the evidence and
arguments before me, I have come to the conclusion that the
plaintiff
has established with the requisite degree of certainty the
primary personal undertaking by the first defendant to assume
personal
responsibility for the charges becoming due to the
plaintiff. The fact that the instruments of payment may have been
any one
or more of the entities controlled by the first defendant
makes no difference to his assumption of responsibility.
Since the Plaintiff’s claim 1 is framed in the alternative and
on the basis that any claim as against the first, second,
third
and/or fourth defendants jointly only come into play in the event of
the main claim against the first defendant failing,
the issue of
their joint liability falls away and requires no further
consideration. This includes the argument advanced by counsel
for
the first and second defendants to the effect that their alleged
joint liability in fact amounts to an invalid oral suretyship
in
contravention of the provisions of section 6 of the General Law
Amendment Act 50 of 1956.
The respective positions of the second defendant on the one hand and
the third and fourth defendants on the other however differ
from
each other. In the case of the second defendant he had joined the
unsuccessful first defendant in resisting the plaintiff’s
claims. But for the fact that the claim against him was framed in
the alternative, he may well have been found liable upon the
evidence that he independently also undertook personally to pay the
plaintiff’s charges. In the circumstances I take the
view that
an appropriate order in regard to the second defendant would be one
of absolution from the instance, with no order
as to costs.
In the case of the third and fourth defendants they nominally remain
in an adversarial position relevant to the plaintiff. They
entered
appearance to defend the claims made against them by plaintiff.
However, there is no indication on file that the plaintiff’s
amended declaration was ever served upon them, nor that they have
pleaded thereto. There is also no indication on record that
they
have been barred in terms of Rule 26 from pleading. Accordingly, as
against the third and fourth defendants, there has not
been
compliance with Rule 31(4) requiring at least five days’
notice to them, so that even if plaintiff were so inclined,
it could
not seek judgement against them at the present time. The most
appropriate order regarding the third and fourth defendants
would
therefore be simply to adjourn the matter as against them
sine
die
, with no order as to costs.
In contrast to Claim 1 the plaintiff’s Claim 2 stands on a
different footing. It is alleged in paragraph 16 of the declaration
that the nature of the instruction was for the plaintiff to
facilitate the unscrambling of the egg, by reversing the joint
venture effectively embarked upon when the first and second
defendants invested in Sebcom and through Seev-Patt, acquired a 50%
shareholding in Sebcom. That the relationship between the two camps
was unhappy from its inception is without doubt. The plaintiff’s
allegations are simply denied in the first and second defendants’
plea.
It should be remembered that the position regarding Sebcom had
changed between May 1998 and the beginning of November 1998. The
taxation onslaught by SARS against Sebcom and the third defendant
had by then largely been contained, Sebcom had apparently become
profitable because, according to Gouws, it had repaid all but R6
million of the original R20,5 million advanced to it and the
two
camps actively disliked each other. Whilst first defendant wanted
the R6 million balance of the loan to Sebcom repaid, as
well as
payment for the 50% shareholding in Sebcom which Seev-Patt had
acquired, the third defendant felt aggrieved at how much
money had
been spent in repaying Seev-Patt and considered the demand for
payment for the shares held by it to be unreasonable.
According to Gouws he was asked on 6 November 1998 by the first
respondent to try and arrange for the re-purchase of the shares
which Seev-Patt held in Sebcom, as well as for Seev-Patt’s
loan account in Sebcom to be repaid. Gouws’ evidence does
not
bear out the allegation, albeit made in the alternative, in the
amended declaration that an agreement was reached between
plaintiff
and all the defendants acting together, nor does the plaintiff’s
allegations in this regard find support in the
evidence of Sahadave
or the third defendant.
On behalf of the first and second defendants counsel emphasised the
contents of a letter written on behalf of the plaintiff to
Sebcom on
14 December 1998, but it is by no means clear that this letter
purports to deal at all with the position relating to
the
plaintiff’s Claim 2. At the time Gouws was still involved in
the ongoing taxation disputes relative to the third defendant,
as
well as Sebcom. He was also assisting Sebcom in regard to other
issues, such as releasing the attachment by SARS of monies
belonging
to Sebcom and further difficulties which the third defendant had
experienced with SARS, but which were not included
in the ten post
dated cheques agreed upon between Gouws and the first defendant on 6
November 1998. It is also not clear why,
if plaintiff was asked to
act as a facilitator for the re-purchase by the third and/or fourth
defendants of the portion of Sebcom’s
shares then held by
Seev-Patt, the plaintiff would then address a letter Sebcom in
regard thereto.
In the course of his evidence Gouws also devoted very little time to
fleshing out the details of how the instruction at the heart
of
Claim 2 came about. The nature and extent of the work allegedly
agreed upon remains uncertain, as does the basis upon which
plaintiff would be remunerated for such service. If one were to
accept that Gouws and the first defendant had a discussion regarding
possible assistance which the former could give to the latter, or
indeed to all four the “partners”, then it remains
unclear exactly what the terms of the agreement was.
In my view there remains too many unanswered questions around the
plaintiff’s Claim 2 and it cannot be said that the plaintiff,
upon whom the onus of proof rests, has satisfactorily discharged
that onus in regard to Claim 2. It follows that absolution from
the
instance in regard to this claim is called for as against the first
and second defendants.
By reason of the long delays in the progress of the litigation
herein, counsel for the first and second defendants also sought
to
invoke the
in duplum
rule in order to limit the interest
accruing upon such sums as the first and/or second defefdants may be
held liable for. In my
view there is no merit in this submission. In
Standard Bank of SA Ltd vs Oneanate Investments (in liquidation)
[1997] ZASCA 94
;
1998 (1) SA 811
(SCA) the Court of Appeal made it clear that after
the service of the summons, but before judgment, the
in duplum
rule does not apply.
Finally, counsel for the first and second defendants urged me not
the make a costs order adverse to the first and second defendants.
The initial argument presupposed a finding by this court that such
defendants are individually liable for only a joint share
of the
monetary award, that in the circumstances it cannot be said that the
plaintiff had achieved substantial success and accordingly,
so the
argument goes, “
..this should be reflected in any order for
costs.
”.
A further line of argument advanced on behalf of the first and
second defendants relates to the application to amend the
plaintiff’s
declaration which was set down for opposed hearing
on 13 December 2004, but was then adjourned whilst the wasted costs
occasioned
by the adjournment were reserved. They now contend that
the adjournment was solely attributable to fault on the part of the
plaintiff,
who should therefore be ordered to pay the wasted cost
involved. The reason for the adjournment was that the plaintiff
followed
the incorrect procedure in seeking to amend its
declaration.
The plaintiff had given notice of intention to amend its
declaration, the defendants filed a notice of objection thereto and
the plaintiff then served and enrolled for hearing on 13 December
2004 and application to amend, but omitted simultaneously therewith
also to deliver a founding affidavit. After the matter was adjourned
and the plaintiff granted leave to deliver its founding
affidavit by
31 January 2005, it duly did so. In response the defendants gave
notice withdrawing their opposition to the amendment,
which
thereafter proceeded uneventfully.
There is no indication that the defendants, upon receipt of the
defective application to amend, sought to draw to the attention
of
the plaintiff that the application was defective, or sought to
invoke the mechanism of irregular proceedings as provided for
in
Rule 30. It is also unclear upon what basis the original objection
to the proposed amendment was made or, once the founding
affidavit
was filed, why the objection was summarily withdrawn.
The rules of court are not there to be opportunistically employed in
tactical manoeuvres to disadvantage the opposition. I am
of the view
that the fault for the adjournment is not to be laid solely at the
door of the plaintiff and that criticism may justifiably
be directed
at both the plaintiff and defendants in this regard. The most
appropriate order would be that no order be made in
regard to the
costs of the application to amend.
It appears from the court file that in regard to the summary
judgement application the “
usual order
” was
granted, so that the costs thereof would also have been reserved.
Considering that the plaintiff, subsequent to the
application for
summary judgment, significantly amended its declaration, it leaves
itself open to criticism for having applied
for summary judgement on
the initial version. However, the defendants have not argued this
point and in the circumstances I am
of the view that fairness
dictates that no order be made as to the reserved costs of the
summary judgment application.
At the end of the day the order which I make is therefore as
follows:-
a. I grant judgement in favour of the plaintiff against the first
defendant, for payment in respect of the plaintiff’s Claim
1;
i. in the sum of R129 650-77;
ii. together with interest thereon at the legal rate of 15,5 % per
annum from 1 July 1999 to date of payment, both dates inclusive;
and
iii. costs of suit, save that such costs will exclude;
1. the costs occasioned by the application for summary judgment which
were reserved on 30 August 1999; and
2. the costs of the application for the amendment of the plaintiff’s
declaration, including the costs of the adjournment
thereof on 13
December 2004;
both of which were which were reserved, and in respect of which no
order as to costs is hereby made.
b. In respect of the second defendant I order in regard to the
plaintiff’s Claims 1 and 2 absolution from the instance, but
with no order as to costs.
c. In respect of the third and fourth defendants the matter is
adjourned
sine die
, with no order as to costs.
_____________________
VAN ZYL , J.
APPEARANCES:
For Plaintiff : Adv P J Combrinck
Instructed by Du Toit, Havemann & Lloyd of Durban
For First and Second
Defendants : Adv G R Thatcher
Instructed by the Garlicke & Bousfield of Durban.
Date written
argument submitted : 11 November 2010
Delivered : 14 MARCH 2012
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