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[2009] ZAGPJHC 62
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Baird's Renaissance (Pty) Ltd v PKF (Johannesburg) Inc (09/2434) [2009] ZAGPJHC 62 (19 November 2009)
Links to summary
IN THE
SOUTH GAUTENG HIGH COURT
(JOHANNESBURG)
CASE NO:
09/2434
In the matter between:
BAIRD’S RENAISSANCE (PTY) LTD
Plaintiff/Respondent
and
PKF (JOHANNESBURG) INC
Defendant/Excipient
J U D G M
E N T
BLIEDEN, J
:
[1] The defendant excepts to the plaintiff’s particulars of
claim on the grounds that they are vague and embarrassing.
Simultaneously with the exception, the defendant has brought an
application in terms of Rule 30 seeking to set aside the particulars
of claim as an irregular proceeding.
[2] In its particulars of claim the plaintiff asserts that it was
the victim of systematic fraud or theft orchestrated by its
erstwhile
financial director, Vipul Mehta. It claims damages from the
defendant, who at all material times was its auditor, in
the amount
of R5 664 292,64.
[3] In broad terms, the plaintiff’s claim against the
defendant arises out of the defendant’s appointment as the
plaintiff’s statutory auditor, pursuant to the conclusion of a
written letter of engagement signed on 28 June 2004.
[4] The plaintiff alleges that the defendant breached its agreement
with it in respect of its audits for the financial years ending
February 2005, 2006 and 2007.
[5] It is the
plaintiff’s case that if the defendant had conducted its audits
in accordance with the agreement and what is
expected of a reasonable
auditor it would have identified and reported on the weaknesses of
the plaintiff’s internal controls;
detected by no later than
June 2005 evidence of the frauds/thefts; would not have reported
that the financial statements fairly
presented the plaintiff’s
financial position, and that as a result of the plaintiff having
become aware of weaknesses in
its system of internal control, it
would have taken steps to prevent further instances of theft/fraud in
the ensuing years.
[6] The first
exception addresses
the
contention that the plaintiff fails to make any assertions regarding
how the fraud/thefts took place, when they took place,
how many
frauds/thefts there were, and whether the same or a different
modus
operandi
was employed. It is the defendant’s complaint that as the
plaintiff has not pleaded the manner in which the alleged
frauds/thefts
were perpetrated, the conclusions as to breach and
causation do not identify how a properly conducted audit would have
assisted
in detecting the frauds alternatively thefts before they
occurred.
[7] The second exception is related to the first inasmuch as it
addresses the defendant’s inability to assess and deal with
the
damages and the quantum thereof.
The exception and Rule 30 application
[8] Rule 23(1)
provides that an exception may be taken against a pleading on the
grounds that it is “
vague
and embarrassing
”.
Such an exception strikes at the formulation of the cause of action
and not at its legal validity.
Trope
v South African Reserve Bank
[1993] ZASCA 54
;
1993 (3) SA 264
(A) at 269I.
[9]
This type of exception involves a twofold consideration. The
first is whether the pleading lacks particularity to the extent that
it is vague. The second is whether the vagueness causes prejudice.
This is the same approach as that which applies in an application
under Rule 30.
[10] A pleading
may be vague if it is “
either
meaningless or capable of more than one meaning
”,
leaves one guessing as to what it means, or if it fails to provide
the degree of detail necessary in the particular case
properly to
inform the other party of the case being advanced.
Parow
Lands (Pty) Ltd v Schneider
1952 (1) SA (SWA) at 152E-G;
Lockhat
v Minister of the Interior
1960 (3) SA 765
(D) at 777D;
Trope
v South African Reserve Bank
1992 (3) SA 208
(T) at 211D;
Nasionale
Aartappel Koöperasie Bpk v PriceWaterhouse Coopers
2001 (2) SA 790
(T) at 797J-798A;
Nel
& Others NNO v McArthur and Others
2003 (4) SA 142
(T) at 148F.
[11] The
typical prejudice which may justify an exception is if the
allegations in the particulars of claim are such that the defendant
is unable to plead properly.
Lockhat
v Minister of the Interior
(
supra
)
at 777E.
[12] The
question is whether “
the
embarrassment is, or is not, so serious as to cause prejudice to the
excipient if he is compelled to plead to the paragraph
in the form to
which he objects
”.
In order to answer this question, the court is “
obliged
to undertake a quantative analysis of such embarrassment as the
excipient can show is caused to him, in his efforts to plead
to the
offending paragraph, by the vagueness complained of
”.
Quinlan
v McGregor
1960 (4) SA 383
(D) at 393F-G.
[13] The
evaluation of prejudice is a factual inquiry, and is a question of
degree. The decision must necessarily be influenced,
inter
alia
,
by the nature of the allegations, their content, the nature of the
claim and the relationship between the parties.
Absa
Bank Ltd v Boksburg Transitional Local Council
1997 (2) SA 415
(W) at 422A.
[14] In
Jowell
v Bramwell-Jones and Others
1998 (1) SA 836
at 902J-903B Heher J referred to the following
general principles insofar as exceptions are concerned:
“
A.
Minor blemishes are irrelevant: pleadings must be read as a whole;
no paragraph can be read in isolation;
…
A
distinction must be drawn between the facta probanda or primary
factual allegations which every plaintiff must make, and the
facta
probantia, which are the secondary allegations upon which the
plaintiff will rely in support of his primary factual allegations.
Generally speaking, the latter are matters for particulars for trial
and even then are limited. For the rest, they are matters
for
evidence;
Only facts
need be pleaded; conclusions of law need not be pleaded; …
”
Rule 30
[15] An
exception that a cause of action is vague and embarrassing is
directed at the root of the cause of action as pleaded. If
the
complaint is that individual averments (as distinct from a claim or
cause of action) do not contain the particularity required
by Rule
18, then the remedy lies in Rule 30. In
Jowell
v Bramwell-Jones
(
supra
)
at 899D it was held that “
an
exception that a pleading is vague and embarrassing cannot be
directed at a particular paragraph within a cause of action
”.
Since the exception “
must
go to the whole cause of action
”.
An exception can however be taken to particular sections of a
pleading where they amount to a separate claim or defence
as the case
may be.
Barclays
National Bank Ltd v Thompson
1989 (1) SA 547
(A).
[16] It is
permissible for a defendant to proceed by way of Rule 23(1) and Rule
30 simultaneously.
Sasol
Industries (Pty) Ltd t/a Sasol 1 v Electrical Repair Engineering
(Pty) Ltd t/a L H Martinusen
1992
(4) SA 466
(W) at 469H;
Nasionale
Aartappel Koöperasie Bpk v PriceWaterhouseCoopers
(
supra
)
at 797J-798A.
The role and duties of a statutory auditor
[17] In order to appreciate the
nature of the defendant’s complaint regarding the plaintiff’s
particulars of claim
it is necessary to identify some of the legal
principles which apply as a matter of law and which affect the role
and duties of
an auditor such as the defendant in this case. These
can be summarised as follows:
The auditor is not part of the
management of the company, and his duties do not include the
conduct of its business. His obligation
is to report to the members
in general meeting on the directors’ financial statements,
and the account which they give
of their stewardship of the
company.
Companies Act
61 of 1973
, sections
282, 286, 300 and 301.
The auditor does not prepare the books and records of the company,
nor its financial statements, which are the responsibility
of the
directors of the company. Section 286 of the Companies Act.
Auditing, by its very nature,
does not involve the examination of each and every asset and
liability as at the year end, nor
each and every transaction that
has occurred during the year. Instead, it is a process which
involves designing and performing
tests, and collecting selected
audit evidence, so as to obtain reasonable assurance that the
financial statements fairly represent
the position of the company
(balance sheet) and the results of its operations (income
statement). The result of this exercise
is to express an opinion
on the financial statements. Section 300(i) of the Companies Act;
Tonkwane Sawmill Co Ltd
v Filmalter
1975 (2)
SA 453
(W).
For purposes of obtaining
reasonable assurance and expressing an opinion on the financial
statements, the auditor is obliged
to design and use such
procedures (audit tests) as he considers necessary and appropriate
for that purpose. These typically
include an examination of
controls and sample tests of different kinds. But they still are
only tests, and no auditor is expected
to examine every single
asset or to re-perform every single transaction. Cilliers &
Benade
, Corporate Law
(3
rd
ed) 413; Simpson (ed),
Professional
Negligence and Liability
pp 13-40; 13-53; Jackson & Powell
,
Professional Negligence
(6
th
ed) 17-056;
Pacific
Acceptances v Forsyth
(1970) 92 WN (NSW) 29 at 87-8.
In the design and application of those tests and procedures, the
auditor is guided by South African and International Auditing
Standards, though these standards afford him some latitude in
determining an approach appropriate to the particular
circumstances.
As alleged in paragraph 6 of the
plaintiff’s particulars of claim, an auditor is obliged to
exercise reasonable care in
the execution of his audits and to
perform his audits with the skill expected of a reasonable auditor.
The implications of
an auditor’s duty to exercise reasonable
care and skill, are expressed in two classic statements (emphasis
supplied):
“
An auditor … is
not bound to do more than exercise reasonable care and skill in
making enquiries and investigations.
He
is not an insurer; he does not guarantee that the books do correctly
show the true position of the company’s affairs;
he does not
even guarantee that his balance sheet is accurate according to the
books of the company. If he did, he would be responsible
for error
on his part, even if he were himself deceived without any want of
reasonable care on his part, say, by the fraudulent
concealment of a
book from him. His obligation is not so onerous as this
.
”
Re London and General Bank (2)
[1895] 2 Ch 673
(CA) 683 per Lindley LJ
“
It is the duty of an
auditor to bring to bear on the work he has to perform that skill,
care and caution which a reasonably competent,
careful and cautious
auditor would use.
What
is reasonable skill, care and caution, must depend on the particular
circumstances of each case. An auditor is not bound to
be a
detective, or, as was said, to approach his work with suspicion or
with a foregone conclusion that there is something wrong.
He is a
watchdog, but not a bloodhound … He is justified in believing
tried servants of the company in whom confidence
is placed by the
company
. He is
entitled to assume that they are honest and to rely upon their
presentations, provided that he takes reasonable care. If
there is
anything calculated to excite suspicion he should probe it to the
bottom; but in the absence of anything of that kind
he is only bound
to be reasonably cautious and careful.
”
Re Kingston Cotton Mill Co
[1896] 2 Ch 279
(CA) 288 to 289 per Lopes LJ
See also:
Jackson
and Powell on Professional Negligence
,
6
th
ed at 17-050 – 17-053.
17.7 In
Kingston
Cotton Mill
Lindley LJ
also expressed the following caution:
“
I protest against the
notion that an auditor is bound to be suspicious as distinguished
from reasonably careful. To substitute
the one expression for the
other may easily lead to serious error.
”
Re Kingston Cotton Mill Co
[1896] 2 Ch 279
(CA) 284
See also:
London Oil Storage Co v Seear,
Hasluck and Co,
quoted
in
Guardian Insurance Co
v Sharpe
[1941] 2 DLR
417
(SCC) 424 to 425;
Re City Equitable Fire Insurance
Co
[1925] 1 Ch 407
(CA)
509 to 510;
Pacific Acceptance Corporation v
Forsyth
(1970) 92 WN
(NSW) 29 at 62
17.8 These principles have been
adopted in the Generally Accepted Auditing Standards in South Africa.
The cases cited in the previous
subparagraphs have been recognised
by the Appeal Court and the Supreme Court of Appeal as authoritative
and have been referred
to by these courts without criticism. See
Lipschitz and Another NNO
v Wolpert and Abrahams
1977 (2) SA 732
(A) at 747;
Thoroughbred
Breeders Association v PriceWaterhouse
2001 (4) SA 551
(SCA) at 568.
17.9 The standard applicable to
“
the auditor’s
responsibility to consider fraud and error in an audit of financial
statements
” for
the year ending February 2005 audit was SAAS 240 (revised and issued
in July 2001). Subsequently, and for the years
ending 2006 and 2007,
IAS240 became applicable. Both of these documents to all intents and
purposes echo what has been stated
above.
[18] It follows from this that the
fact of loss caused by fraud or theft does not of itself
automatically demonstrate that the
auditor has failed in his duty.
[19] It is apparent from this
summary of the role and duties of an auditor that unless the auditor
knows the details of the fraud
alternatively theft or
“
misappropriation
”,
and what those defalcations entail, and how he could reasonably have
prevented them by applying reasonable auditing procedures,
he cannot
plead to the case. It is essential that these facts be pleaded.
The plaintiff’s particulars of claim
[20] The relevant particulars of
claim are contained in paragraphs 6 to 17 of the plaintiff’s
summons. These are reproduced
below:
“
6. It was an implied
term of the agreement between the plaintiff and the defendant that
the defendant would exercise reasonable
care in the execution of its
audits and would execute its audits with professional skill to the
standard expected of a reasonable
auditor, and would do its work
without negligence.
The defendant was accordingly obliged to conduct its audits in
compliance with relevant legislation and applicable published
auditing
and accounting standards in force from time to time and
this required the defendant to comply with the following
obligations:
the defendant was obliged to obtain from the plaintiff all the
information and explanations which, to the best of its knowledge
and belief, were necessary for the purpose of carrying out its
duties;
the defendant was obliged to satisfy itself that the company’s
annual financial statements were in agreement with its accounting
records and returns;
the defendant was obliged to examine such of the plaintiff’s
accounting records and carry out such tests in respect of such
records and such other auditing procedures as it might consider
necessary in order to satisfy itself that the annual financial
statements fairly present the financial position of the company and
the results of its operations in conformity with the requirements
of the Companies Act;
the defendant was obliged to
comply with any applicable requirements of the Auditing Profession
Act, Act 26 of 2005;
the defendant would not be entitled, without such qualifications
as might be appropriate in the circumstances, to express an opinion
to the effect that any financial statement or any supplementary
information attached thereto relating to the plaintiff fairly
presented in all material respects the financial position of the
plaintiff and the results of its operations and cashflow,
and were
properly prepared in all material aspects in accordance with the
basis of the accounting and financial reporting framework
as
disclosed in the relevant financial statements unless it was
satisfied:
7.5.1 that it had obtained all information, vouchers and other
documents which, in its opinion, were necessary for the proper
performance
of its duties; and
7.5.2 as far as reasonably practicable in regard to the nature
the plaintiff and the audit carried out as to the fairness or
correctness,
as the case may be, of the financial statements;
7.6 the defendant was obliged, in order to comply with the
requirements of applicable auditing standards to perform its audit in
accordance with the following standards of work:
7.6.1 the defendant was obliged
to determine an acceptable audit materiality level to detect
quantitatively material misstatements;
7.6.2 the defendant was obliged to consider the possibility of
misstatements of relatively small amounts that cumulatively could
have a material effect on the financial statements;
the defendant was obliged to
implement a reasonably practicable system designed to keep track
of the cumulative effect of
non-material errors or misstatements;
the defendant was obliged to consider audit matters of
governance interest that arose from the audit of the financial
statements,
including, for example, a material weakness in
internal control, and to communicate such concerns to those
charged with the
governance of the plaintiff;
the defendant was obliged to obtain an understanding of the
plaintiff and its environment, including its system of internal
control, sufficient to identify and assess the risks of material
misstatement of the financial statements whether due to fraud
or
error, and sufficient to design and perform further audit
procedures;
the defendant was obliged to obtain an understanding of the
internal control system relevant to the audit, and use its
understanding
of internal control to identify types of potential
misstatements, consider factors that affect the risks of material
misstatement
and design the nature, timing and extent of further
audit procedures;
7.7 the defendant was obliged
to obtain a sufficient understanding of control activities to assess
the risks of material misstatement
at the assertion level and to
design further audit procedures responsive to assessed risks;
7.8 the defendant was obliged to maintain an attitude of
professional scepticism during the conduct of its audit, recognising
the
possibility that a material misstatement due to fraud could
exist, notwithstanding the defendant’s past experience with the
plaintiff;
7.9 the defendant was obliged to perform procedures designed to
obtain information used to identify the risks and material
misstatement
due to fraud;
the defendant was obliged to
identify and assess the risks of material misstatement due to fraud
at the financial statement
level and the assertion level; and for
those assessed risks that could result in a material misstatement
due to fraud, evaluate
the design of the plaintiff’s related
controls, including relevant control activities, and to determine
whether they
had been implemented;
the defendant was obliged to design and perform audit procedures
to respond to the risk of management override of controls;
the defendant was obliged to consider whether any identified
misstatement might be indicative of fraud;
the defendant was obliged, when obtaining an understanding of
the plaintiff and its environment, including its internal control,
to consider whether the information obtained indicated that one or
more fraud risk factors was present, and in particular to
recognise
that an ineffective control environment might create an opportunity
to commit fraud.
8. In carrying out its audit of the plaintiff’s financial
statements for the financial years ended February 2005, 2006 and
2007
the defendant breached its agreement with the plaintiff in the
following respects:
8.1 it failed to identify, alternatively, failed to report to the
plaintiff, the fundamental weakness in the plaintiff’s system
of internal control in terms of which one Vipul Mehta was solely
responsible for checking supplier invoices, authorising them for
payment and effecting payment by electronic funds transfer; and/or
8.2 it failed to determine a materiality amount against which to
assess the significance of errors or misstatements discovered during
the audit, alternatively it failed to determine an appropriate
materiality amount having regard to the size of the plaintiff’s
business; and/or
8.3 it failed to put in place an effective system for monitoring
the cumulative effect of misstatements or errors failing below
the
determined materiality amount; and/or
8.4 it failed to consider whether non-material misstatements
detected by it might be indicative of management fraud alternatively
it failed to recognise and report to the plaintiff that non-material
mistakes detected by it were indicative of fraud; and/or
it failed to maintain an attitude of professional scepticism and
failed properly to assess the risk of misstatement at the assertion
level and to devise audit procedures designed to test the
correctness of management assertions in the light of the weakness
of the plaintiff’s system of internal control; and/or
it failed to detect, alternatively to recognise and report to
the plaintiff the significance of irregularities in payments to
SARS in connection, in particular, with cheques not yet presented
for payment at the end of financial periods; and/or
it failed to detect and report to the plaintiff misstatements
and errors in the plaintiff’s financial statements that were
either material in and of themselves, or the cumulative effect of
which was material, in circumstances where the number and
money
amount of such misstatements was such that a reasonable auditor
would have detected them even on a sample test basis.
9. Throughout the period 20
September 2002 until 27 July 2007 one Vipul Mehta (‘Mehta’)
was employed by the plaintiff
as its financial director.
During the financial years 2005, 2006, 2007 and 2008 up until his
resignation, the said Mehta systematically defrauded, alternatively,
stole from the plaintiff by misappropriating the plaintiff’s
money for his own personal benefit without valid cause.
The total amounts misappropriated were the following:
11.1 Financial year ending February 2006 R2 065 715,06
11.2 Financial year ending February 2007 R2 438 099,26
11.3 Financial year ending February 2008 R1 160 478,32
The plaintiff was not aware of Mehta’s unlawful activities
and accordingly did not take steps to put a stop to them.
The plaintiff is unable to recover any of the misappropriated
money from Mehta.
If the defendant had conducted its audits in accordance with the
parties’ agreement and if it had not breached the agreement
in
the manner set out above:
it would have reported in writing after each audit for the
financial years ending 2005, 2006 and 2007 that Mehta’s role
in and the extent of his control over the plaintiff’s
financial management represented a significant weakness in the
plaintiff’s internal controls that required management’s
attention;
it would have detected and reported to the plaintiff, no later
than June 2005, that there was evidence of acts of fraud/theft
committed by Mehta;
it would not have reported
that it was satisfied that the plaintiff’s financial
statements fairly presented the plaintiff’s
financial
position and the results of its operations and cash flow in respect
of the financial year ended 2005 or any subsequent
year;
the plaintiff would have
become aware of the weakness in its system of internal control that
allowed Mehta to get away with
his unlawful activities, and/or
would have become aware of Mehta’s unlawful activities no
later than June 2005, and would
have taken steps that would have
prevented the further instances of theft/fraudulent
misappropriation that occurred over the
following years.
Accordingly the defendant’s breach of the parties’
agreement caused the defendant to suffer these losses.
The occurrence of these losses
as a consequence of the defendant’s breach flows naturally and
generally from the breach,
alternatively, was contemplated by the
parties at the time of contracting.
In the premises, the defendant
is liable to pay the plaintiff damages in the amount of R5 664
292,64.
”
The first exception/complaint
[21] The defendant’s
complaint is that as the plaintiff has not pleaded the manner in
which the alleged thefts/frauds were
perpetrated. The conclusions as
to breach and causation described in paragraphs 8 and 9 of the
particulars do not identify how
a properly conducted audit would have
assisted in detecting the frauds alternatively thefts relied on by
the plaintiff.
[22] In particular when it comes
to dealing with the frauds/thefts, the plaintiff simply asserts in
paragraph 10:
“
During the financial
years 2005, 2006, 2007 and 2008 up until his resignation, the said
Mehta systematically defrauded, alternatively,
stole from the
plaintiff by misappropriating the plaintiff’s money for his own
personal benefit without valid cause
.”
Because the plaintiff has not
pleaded how the fraud/theft took place, how many there were, and
whether the same or different
modus
operandi
was employed,
the defendant is unable to identify in respect of which year it ought
to have detected the alleged frauds/thefts.
In my view this
criticism is justified.
[23] The complaint continues that
although the plaintiff has addressed in paragraph 8 the procedures it
suggests the defendant
ought to have undertaken but did not, and
which would have detected the frauds/thefts, in the absence of
disclosing what, when
and how the frauds/thefts took place, those
allegations of breach are simply made in a vacuum.
[24] I agree with counsel for the
defendant that on the pleadings as they presently stand, the
defendant is left guessing as to:
24.1 how but for which of the
breaches set out in paragraphs 8.1 to 8.7 of its particulars of claim
the frauds/thefts would have
been detected;
24.2 in which year (whether it be
2005, 2006 or 2007) the defendant ought to have detected the
thefts/frauds;
24.3 which breach in which
particular year would have resulted in the detection of the
fraud/thefts.
[25] There is substance in the
defendant’s objection that the plaintiff’s particulars of
claim fail to comply with
the basic tenet of pleading – it does
not clearly and concisely state the material facts upon which the
plaintiff relies
for its claim. To the contrary, without knowing how,
when and where the frauds/thefts were perpetrated the general
conclusions
of breach and causation result in it being not possible
to identify the manner in which a proper performance of the audit
would
have resulted in them being detected. This renders the
pleading vague, imprecise and makes it impossible to plead to, with
the
resulting prejudice and embarrassment to the defendant. These
pleadings also do not comply with the requirements of Rule 18(4),
which reads:
“
(4) Every pleading shall
contain a clear and concise statement of the material facts upon
which the pleader relies for his claim,
defence or answer to any
pleading, as the case may be, with sufficient particularity to enable
the opposite party to reply thereto.
”
[26] Inasmuch as it might be
suggested that the details as to how the thefts/frauds were
committed, when they were committed, how
they were committed and
whether the same or different
modus
operandi
was used
constitute the
facta
probantia
of the matter,
it is my view that in a case such as the present one, these details
indeed form part of the
facta
probanda
.
[27] In circumstances where the
criticism of the defendant is that it did not detect systematic
fraud/theft over a number of years,
and having regard to what the
role and functions of a statutory auditor are, the facts describing
how the frauds or thefts were
committed clearly constitute material
facts upon which the plaintiff relies and are as such
facta
probanda
. The material
facts – i.e.
facta
probanda
– must
necessarily include the facts demonstrating the manner in which the
frauds/thefts were perpetrated so as to enable
the defendant to
ascertain how the carrying out of a proper audit would have resulted
in them being discovered or prevented.
[28] It seems to me that the
defendant is correct when it complains that it is unable to
understand the basis of the case against
it unless and until the
plaintiff identifies the relevant and essential material facts
regarding the frauds/thefts. This principle
is clearly stated by the
Full Bench of the Transvaal Provincial Division in
Buchner
and Another v Johannesburg Consolidated Investment Co Ltd
1995 (1) SA 215
(T) at 216I-J. Referring to Rule 18(4), delivering
the judgment of the court, De Klerk J said:
“
The necessity to plead
material facts does not have its origin in this Rule. It is
fundamental to the judicial process that the
facts have to be
established. The Court, on the established facts, then applies the
rules of law and draws conclusions as regards
the rights and
obligations of the parties and gives judgment. A summons which
propounds the plaintiff’s own conclusions and
opinions instead
of the material facts is defective. Such a summons does not set out a
cause of action. It would be wrong if a
Court were to endorse a
plaintiff’s opinion by elevating it to a judgment without first
scrutinising the facts upon which
the opinion is based.
”
[29] In
Nasionale
Aartappel Koöperasie Bpk v PriceWaterhouseCoopers
(
supra
)
at page 805G-I/J of the report, Southwood J held:
“
Die verweerders sal
beslis in die voer van hulle saak benadeel word. Die geskilpunte sal
nie volgens die reëls neergelê
in die gewysdes in die
pleitstukke met presiesheid identifiseer en omlyn word nie. Die
verweerders sal die vae feitlike gevolgtrekkings
moet ontken omdat
hulle nie weet wat die werklike feite waarop die eis berus is nie.
Hierdie massiewe litigasie sal dan voortgaan
totdat verdere
besonderhede vir doeleindes van verhoor en/of deskundige
kennisgewings en opsommings afgelewer word. Op daardie
laat stadium
sal die verweerders dan hopelik weet wat die wesenlike feite is
waarop die eiser steun.
Intussen
sal geleenthede om relevante getuies en getuienis te identifiseer en
te bewaar verlore gaan. Die verweerder sal ook koste
moet aangaan om
die feite te ondersoek, welke ondersoeke uiteindelik totaal
irrelevant mag wees met ‘n gepaardgaande verspilling
van
fondse.
”
[30] The pleadings complained of
in that case were to a large measure similar to those in the present
case and also related to
the duties of auditors. In my view on the
pleadings as they presently stand the defendant suffers the same
prejudice as did the
excipients in that case. Here the defendant has
no option but to deny the conclusions of breach because the plaintiff
has not
pleaded the underlying factual substrata (i.e. the when, how
and how many of the alleged thefts/frauds) upon which its case is
based. The defendant is not in a position to assess whether it
should admit or deny or confess and avoid – all it can do
is
proffer a bare denial, this is not what is required in pleading.
[31] To sum up on the pleadings as
they presently exist it is not possible for a defendant such as the
present one to know what
case it faces without knowing on what facts
the plaintiff relies for the alleged defalcations committed by Mehta.
Not only must
it have these facts, but it must also know how it is
alleged that it could have prevented such defalcations had it acted
properly.
It is not enough to rely on the generalisations as they
appear in the present particulars of claim. Rule 18(4) must be
complied
with in order to enable the defendant to plead meaningfully
to the plaintiff’s case. This it cannot do on the particulars
of claim as they presently exist.
[32] In the circumstances I find
that the first exception has been well taken.
The second exception
[33] The defendant’s
complaint is that the plaintiff ought to have specified with some
particularity how the globular amounts
of R2 065 715,06 (year ending
February 2006); R2 438 099,26 (year ending February 2007) and R1 160
478,32 (year ending February
2008) are computed or made up. This
would show how many defalcations occurred in each year.
[34] Rule 18(10) of this Court’s
rules provides that a plaintiff suing for damages shall set them out
in a manner as will
enable the defendant reasonably to assess the
quantum thereof, in other words to enable the defendant to know why
the particular
amount being claimed as damages is in fact being
claimed (
Grindrod (Pty)
Ltd v Delport and Others
1997 (1) SA 342
(W) at 346J).
[35] The plaintiff in its
particulars of claim speaks of frauds/thefts occurring
“
systematically
”
over the financial years concerned up until the time of Mehta’s
resignation. The utilisation of the word “
systematic
”
tends to suggest that there were not “
once
off
” frauds or
thefts in the relevant years but rather that there were a number of
such frauds/thefts. In the circumstances
it is impossible for the
defendant to assess why and in what manner the amount claimed as
damages is in fact computed. This again
precludes it from
meaningfully dealing with this issue in its plea.
[36] In my view the second
exception has also been well taken.
Conclusion
[37] In the circumstances both
exceptions have been well taken. The following order is made:
The plaintiff’s particulars
of claim are set aside as being vague and embarrassing.
2. The plaintiff is given 30 days from the date of this judgment to
amend its particulars of claim.
3. The plaintiff is ordered to pay
the defendant’s costs of suit.
_________________________
P BLIEDEN
JUDGE OF THE HIGH COURT
COUNSEL FOR THE PLAINTIFF/
RESPONDENT ADV A J LAMPLOUGH
INSTRUCTED BY WEBBER WENTZEL
COUNSEL FOR THE DEFENDANT/
EXCIPIENT ADV T DALRYMPLE
INSTRUCTED BY DENEYS REITZ
DATE OF HEARING 3 NOVEMBER 2009
DATE OF JUDGMENT