Maize Board v Hart (2726/1996) [2004] ZAFSHC 3; [2006] 3 All SA 556 (O); 2005 (5) SA 480 (O) (12 February 2004)

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[2004] ZAFSHC 3
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Maize Board v Hart (2726/1996) [2004] ZAFSHC 3; [2006] 3 All SA 556 (O); 2005 (5) SA 480 (O) (12 February 2004)

IN THE HIGH
COURT OF SOUTH AFRICA
(ORANGE FREE STATE PROVINCIAL DIVISION)
Case No.: 2726/1996
In
the matter between:
THE MAIZE BOARD
Plaintiff
and
TEMPLE ALBERT HART
Defendant
___________________________________________________________
CORAM:
HANCKE, J
___________________________________________________________
HEARD ON:
27, 28 & 30 JANUARY 2004
___________________________________________________________
DELIVERED ON:
12 FEBRUARY 2004
___________________________________________________________
The plaintiff is the Control Board referred to in
section 6 of the Maize Marketing Scheme published by proclamation
R.45 of 1979,
and established in terms of the Marketing Act, 1968
(Act No.59 of 1968).
It is common cause that the defendant concluded two
written agreements with Rainbow Chicken Farms (Pty) Ltd.,
(“Rainbow”), a breeder
and producer of broiler chickens, which
were entitled respectively as a “lease agreement”, and a
“management agreement”.
The terms of the lease agreement were to
the effect that the defendant let and Rainbow hired for the
particular season farmland
situated within the Magisterial District
of Harrismith and that Rainbow undertook to plant, grow and harvest,
inter alia,
yellow
maize, on the said land.
The terms of the management agreement were to the effect
that Rainbow appointed the defendant as its manager to manage the
farm operations
on the land leased by it in terms of the lease
agreement, and that the defendant undertook to supply the necessary
labour, machinery,
equipment, fuel, expertise and to prepare and
fertilize the land, plant seed, apply herbicide and insecticide,
cultivate, harvest
and produce the said crop and arrange the delivery
of the crop to a milling company or at such other place as Rainbow
may direct.
It is also common cause that thereafter the defendant
produced and delivered, according to Rainbow’s directions, a crop
of yellow
maize of 409,263 tons.
It is the plaintiff’s cause of action that each of the
lease and management agreements were simulated and were concluded in
their
terms with the intention of disguising that the defendant in
fact sold, and Rainbow in fact purchased, the yellow maize produced
on the land, and of evading the payment of the levies referred to in
paragraph 8 below, on the basis that Rainbow was the “producer”
of the crop for its own use and thereby exempt from the said levies,
whereas in truth and in fact the defendant was in respect of
each
such crop the “producer” of it, as defined in the said Maize
Marketing Scheme, and therefore the entity obliged to pay the
levies.
According to the plaintiff’s particulars of claim, the said levies
ought, according to law, to have been paid by the defendant
to the
plaintiff which defendant failed to do.
The issues between the parties therefore relate to the
question as to whether or not the management agreement and the lease
agreement
are simulated transactions.
Up until now the plaintiff has called three witnesses,
the last of which was Mr Rudman, the attorney for the plaintiff, who
testified
that he obtained certain documents of the Maize Board,
Rainbow Chickens and Verus Farms respectively. In view of the
objection made
by Mr Ploos van Amstel, counsel for the defendant, to
the admissibility of the documents handed in by Mr Rudman, Mr Gordon,
counsel
for the plaintiff, applied for the admission of these
documentary evidence contained in Bundle “X” as evidence in the
trial.
The said documents consists, firstly, of an agency
agreement concluded between Rainbow and Verus Farm Holdings (Pty)
Ltd., on 6 September
1994, and appendices to said agency agreement;
secondly, memoranda and correspondence, including Verus progress
reports, forward
buying contracts, Rainbow internal memoranda and
other documents of Verus Farms; and, thirdly, Rainbow internal
memoranda.
As far as Rainbow’s role in the present litigation is
concerned, it appears that clause 17.2 of the management agreement
provided
that the defendant:
“
irrevocably
waives any claims or actions which it may have at any time against
Rainbow in respect of any claims of actions, whether
at law or
administrative, which may be brought against the manager by any
government authority, statutory board or the like in respect
of the
land or the farming operations.”
Rainbow in the present action, and apparently in all the
other actions, has waived that clause and undertaken the defence of
each
and every action.
An application to set aside
subpoenas
duces tecum
issued at the instance of the
plaintiff was lodged three days before the commencement of the
present trial. In his affidavit herein
Mr Stephen Burridge Heath,
legal advisor and company secretary of Rainbow, stated that:
(Rainbow agrees):
“
in
principle to indemnify each of the individual farmer in respect of
the claims brought against them by the first respondent (the
Maize
Board).
Given the vast number of actions
brought individually against the various farmers, it was also
necessary to consolidate the legal
representation of the defendants.
All of the defendants are being represented through attorneys
MacCullums Inc of Cape Town appointed
at the instance of Rainbow
Chickens and at its expense ……
During 1995 Rainbow Chickens
appointed Verus Farming and Investments (Pty) Ltd (“Verus”), a
company based in Brighton Beach, Durban
to administer the maize
contracts.”
Subsequently Rainbow has either itself or through its
attorneys directed the defence of the actions, apparently
participated in all
the necessary discussions with the plaintiff’s
attorneys and paid the judgments, interests and costs in the broiler
cases which
have reached finality.
I agree with Mr Gordon’s submission that Rainbow has
conducted itself as a party to the action and although it is not the
defendant
de iure
, it
is the
de facto
defendant or the alter ego of the defendant.
The strategy of Rainbow puts itself in a crucial and
advantageous position for example, under the guise that the farmer
defendants
are independent of it, Rainbow directed the defendant to
require the plaintiff to prove its own documents, and those of its
agents.
The most common way to prove the authenticity of the
relevant documents would be to call the author or authors, to
identify the
documents.
The South African
Law of Evidence
(formerly Hoffmann &
Zeffertt) by Zeffertt, Paizes and Skeen (2003) p.694. Rainbow has
therefore placed the plaintiff at an
evidential disadvantage to prove
the documents to compel the plaintiff to call witnesses who will
manifestly be unhelpful, if not
hostile, to the plaintiff and give
itself the advantage of the ability to sympathetically cross-examine
any witness merely called
to identify a document.
As far as the common law in this regard is concerned,
Human, J stated the following in
HOWARD &
DECKER WITKOPPEN AGENCIES AND FOURWAYS ESTATES (PTY) LTD v DE SOUSA
1971 (3) SA 937
(T) on 940E-G:
“
The
law in relation to the proof of private documents is that the
document must be identified by a witness who is either (i) the writer
or signatory thereof, or (ii) the attesting witness, or (iii) the
person in whose lawful custody the document is, or (iv) the person
who found it in possession of the opposite party, or (v) a
handwriting expert unless the document is one which proves itself,
that
is to say unless it:
(1) is produced under a
discovery order, or
(2) may
be judicially noticed by the court, or
(3) is
one which may be handed in from the Bar, or
(4) is
produced under a subpoena
duces
tecum
, or
(5) is an affidavit in
interlocutory proceedings, or
(6) is admitted by the opposite
party.”
Bewysreg
by C.W.H. Schmidt & H. Rademeyer (4
th
edition) p.339 - 342
In
the case of
BOTES v VAN DEVENTER
1966 (3) SA 182
(A),
Williamson, JA stated
the following at
204E:
“
In
so far as our law of evidence is presently concerned it is clear that
it is a principle of the English law, recognised as applicable
here,
that a relevant extra-judicial statement by a person who has privity
or identity of interest with a party to a suit in relation
to the
matter in issue in the suit, is admissible in evidence against such
party.”
The phrase in English law is “in privity”. 17
Hallsbury Laws of England
:
para 68 p.53 (4
th
ed.) Both
Hallsbury
and Williamson, JA referred to the case of
In
Re: WHITELEY AND ROBERT’S ARBITRATION
(1891) 1 Ch 558
at 563:
“
One of them (i.e. exceptions
to the hearsay rule) is, when the party against whom the admission is
sought to be read has a joint interest
with the party making the
admission in the subject matter – and the thing to which the
admission relates.
IV Wigmore on Evidence section
1077 p.118 (3
rd
Ed.) writes:
“
So
far as one person is privy in obligation with another, i.e. is liable
to be effected in his obligation under the substantive law
by the
acts of the other, there is equal reason for receiving against him
such admissions of the other as furnish evidence of the
act which
charges them equally. Not only as a matter of principle does this
seem to follow, since the greater may here be said to
include the
less; but also as a matter of fairness, since the person who is
chargeable in his obligations by the acts of another
can hardly
object to the use of such evidence as the other may furnish.
Moreover, as a matter of probative value, the admissions
of a person
having virtually the same interests involved and the motive and means
for obtaining knowledge will in general be likely
to equally worthy
of consideration.”
Mr Gordon, therefore, submitted that sufficient privity
or commonality of interest existed so as to make the statements
contained
in the documents of Rainbow and Verus Farms admissible
against the defendant. In this regard he referred to the fact that
the defendant
claims to have an identity of interest with Rainbow to
endeavour to lawfully achieve the situation where Rainbow became as a
matter
of fact the producer of the maize to feed its own animals and
thereby avoid the levies. The parties also had a mutual and common
interest and a legal obligation to enter into a contract of purchase
and sale of the maize without payment of the lawful imposed
levies.
It is also appropriate to refer to the remarks of
Wigmore
section 1073
(
op.cit
. at p.90)
dealing with the admissibility of third party writing found in the
possession of a litigant:
“
The
party’s possession of a document made by a third person may well
be evidence of the party’s knowledge of its contents; but
is it
sufficient to justify an inference of assent to the statements
contained therein? It is easy to imagine instances in which
such an
inference would be fallacious. Yet, since the party may always
exculpate himself and disown the inference by proving the
true reason
for this retention of the document, the question remains whether the
mere fact of possession ought not to suffice at
the outset to make
the document receivable, subject to explanation that may later be
made.”
It is clear from the approach of McCall, J in
ZUNGU
NO v MINISTER OF SAFETY AND SECURITY
2003 (4) SA 87
(D)
that the common law
survives in tandem with the statutes.
Mr Gordon submitted that The Law of Evidence Amendment
Act, 1988 (Act 45 of 1988) is a statutory intervention authorising
the Court
to accept the documents in issue as evidence. According to
Navsa, JA in
MAKHATHINI v ROAD ACCIDENT
FUND
2002 (1) SA
511
(SCA)
the purpose of the Act is:
“
to
allow the admission of hearsay evidence in circumstances where
justice dictates its reception.”
(p.
521I-J
).
In this regard Van Schalkwyk, J stated the following in
METEDAD v NATIONAL EMPLOYERS’ GENERAL
INSURANCE CO. LTD
1992 (1) SA 494
(W)
at 498 I – 499 G:
“
It
seems to me that the purpose of the amendment was to permit hearsay
evidence in certain circumstances where the application of
rigid and
somewhat archaic principles might frustrate the interests of justice.
The exclusion of the hearsay statement of an otherwise
reliable
person whose testimony cannot be obtained might be a far greater
injustice than any uncertainty which may result from its
admission.
….. There is no principle to be extracted from the Act that it is
to be applied only sparingly. On the contrary, the
court is bound to
apply it when so required by the interests of justice.”
In the present case the issues between the parties
relate to the question as to whether or not the management agreement
and the lease
agreements are simulated transactions. It is therefore
necessary to consider,
inter alia
,
the interpretation of the clauses contained in the agreements, how
the agreements were in fact formed as well as the intention of
the
parties when concluding the agreements. In
ERF
3183/1 LADYSMITH (PTY) LIMITED AND ANOTHER v COMMISSIONER FOR INLAND
REVENUE
[1996] ZASCA 35
;
1996 (3) SA 942
(A)
,
Hefer, JA stated the following on
953C-D
:
“
That
the parties did indeed deliberately cast their arrangement in the
form mentioned, must of course be accepted; that, after all,
is what
they had been advised to do. The real question is, however, whether
they actually intended that each agreement would
inter
partes
have effect
according to its tenor. If not, effect must be given to what the
transaction really is.”
In
ZANDBERG v VAN ZYL
1910 AD 302
the following is stated at 309:
“
Not
frequently, however (either to secure some advantage which otherwise
the law would not give, or to escape some disability which
otherwise
the law would impose), the parties to a transaction endeavour to
conceal its real character. They call it by a name, or
give it a
shape, intended not to express but to disguise its true nature. And
when a Court is asked to decide any rights under such
an agreement,
it can only do so by giving effect to what the transaction really is;
not what in form it purports to be …. But the
words of the rule
indicate its limitations. The Court must be satisfied that there is
a
real intention,
definitely
ascertainable, which differs from the simulated intention. For if
the parties in fact mean that a contract shall have
effect in
accordance with its tenor, the circumstances, that the same object
might have been attained in another way will not necessarily
make the
arrangement other than it purports to be. The enquiry, therefore, is
in each case one of fact, for the right solution of
which no general
rule can be laid down.”
See also
P.W. MICHAU v THE
MAIZE BOARD
(unreported case No. 280/2002
(SCA) delivered on 12 September 2003).
The contention of the plaintiff in the present case is
that the intention of the parties was to conclude a contract of
purchase and
sale but clothed it in the wrappings of a lease and
management agreement.
Mr Gordon submitted that in view of the fact that all
contracts require consensus
ad idem,
it does not help the defendant in the present case were the Court to
find that it was the intention of Rainbow to buy his maize,
but his
intention was to manage his own farm and permit the transfer of
ownership to Rainbow in that crops upon separation of the
plants. If
the Court were so to conclude, there could have been no consensus
ad
idem
and accordingly no commonly agreed
management and lease agreements. Accordingly, the Court’s
investigation of the intention of
Rainbow is a crucial consideration
in achieving a just decision.
It also appears that all of the hearsay documents sought
to be admitted as evidence relate to the intention of Rainbow and/or
its
agents. It appears that Rainbow, which is the party behind the
defendant in this case, requires the proof of its own documents
extending
even to the agency agreement which its own deponent to an
affidavit in these proceedings, Mr Heath specifically referred to.
The
conduct of Mr Heath and Rainbow in this regard should be
considered as highly relevant to the determination of the
application.
The relevant section of the Act reads as follows:
“
3. Hearsay
evidence –
(1) subject to the provisions of
any other law, hearsay evidence shall not be admitted as evidence at
criminal or civil proceedings,
unless –
(a) each party against whom the
evidence is to be adduced agrees to the admission thereof as evidence
at such proceedings;
(b) the person upon whose
credibility the probative value of such evidence depends, himself
testifies at such proceedings; or
(c) the Court, having regard
to –
(i) the
nature of the proceedings;
(ii) the
nature of the evidence;
(iii) the purpose for which the
evidence is tendered;
(iv) the probative value of
the evidence;
(v) the reason why the evidence
is not given by the person upon whose credibility the probative value
of such evidence depends;
(vi) any
prejudice to a party to which the admission of such evidence might
entail; and
(vii) any
other factor which should in the opinion of the Court be taken into
account,
is of the opinion that such
evidence should be admitted in the interests of justice.”
The Act requires the Court in terms of section 3(1)(c)
of it to have regard to seven considerations or “factors”, as
they are
referred to, which should be regarded as inter-relating and
overlapping and judged cumulatively and as a whole.
MAKHATHINI’S
-case
op.cit
. p.
522C
.
It is therefore necessary to consider the factors as set
out in section 3(1)(c) in the light of the facts of the present case.
(i) THE NATURE OF THE PROCEEDINGS (Section
3(1)(c)(i))
In view of the decision in
MAKHATHINI
v ROAD ACCIDENT FUND
(
supra
)
at
522F
, this section
requires a consideration in the
widest sense of the nature of the proceedings, i.e. a
civil trial during which judicial consideration of a contract is
required.
The nature of the proceedings is for the recovery of money
payable to a statutory body in terms of lawfully imposed levies.
According
to the evidence at this stage of the proceedings, the other
party to the contract, namely Rainbow, appears to be the
de
facto
party to the proceedings. As was
pointed out in
MAKHATHINI’S
-case
(
supra
) at p.
522H,
both the defendant and Rainbow “can counter” the effect of the
admission of the hearsay evidence by other means.
It
is simple, if it is intended to aver that the documents are taken out
of context, that what appears to have been annexures were
not in fact
annexures and if there are innocent or exculpatory explanations for
what was written, then a witness from Rainbow or
Verus Farms can be
called by the defendant to ensure a complete consideration of the
documents and inferences to be drawn therefrom.
Accordingly,
on the first factor to be considered, the proper administration of
justice within the nature of these proceedings is
achievable and well
within the ability of the means of the farmer.
(ii) THE NATURE OF THE EVIDENCE (Section 3(1)(c)(ii))
What is required by the sub-section is a
characterisation of the evidence sought to be introduced.
MAKHATHINI’S
-case
op.cit.
p.
523A
.
The evidence is documentary evidence recording and generally
describing the policy, purpose and thinking behind the conclusion
of
the contracts.
(iii) THE PURPOSE OF THE EVIDENCE (Section
3(1)(c)((iii))
As has been stated above the documents fall within three
categories. The first document sought to be admitted is the Agency
Agreement.
As has been pointed out, this agreement has been relied
upon in proceedings before this Court by Mr Heath and was concluded
by Rainbow
and Verus Farms represented by Vermaak on 6 September
1994, almost two months before the agreements in the present matter
were signed.
I can see no reason why this document should not be
admitted.
The value of the document is its terms where Verus was
appointed the “manager of Rainbow’s maize growing” operations
and received
remuneration therefore. The Verus documents are
relevant as reflective of the true intention of both the manager
(Verus) and its
employer (Rainbow) to have entered into and to
continue to enter into agreements of purchase and sale. The
relevance of the Rainbow
documents is to prove that Rainbow at board
level considered the contracts to be or at the very least have
elements of a contract
of purchase and sale.
The purpose for which the evidence is tendered is to
establish the relationship between Rainbow and Verus Farms, the real
intention
of Rainbow in entering into the contracts as well as the
inferences which can be drawn therefrom.
(iv) THE
PROBATIVE VALUE OF THE EVIDENCE (Section 3(1)(c)(iv))
This section requires that the probative value of the
evidence be considered.
MAKHATHINI’S
-case
op.cit.
p.
523I
.
This gives rise to questions of relevance and reliability. In so
far as reliability is concerned there is no reason to doubt the
reliability of the evidence of a contract concluded by Rainbow and
relied upon by Mr Heath in the aforesaid proceedings. There is
also
no reason to doubt the reliability of the documentary evidence which,
ex facie
, is created
by Rainbow or its agent and which was obtained by Mr Rudman and adv.
Lingenfelder at inspections at the relevant premises.
In totality these documents reflect intentions,
understanding and descriptions which are relevant to the state of
mind of one of the
contracting parties. They are also relevant
because they apparently form a part of a very broad scheme or
arrangement which operated
in all the major maize growing areas of
the Republic and which had the effect, as Mr Du Plessis the one
witness in his unchallenged
evidence testified, to destabilize the
maize industry.
(v) WHY EVIDENCE IS NOT GIVEN BY THE AUTHORS OR
CREATORS OF THE DOCUMENTS (Section 3(1)(c)(v))
The most common way or method of proof of the documents
and their contents would require the plaintiff to call witnesses
manifestly
unhelpful to the plaintiff’s case to testify and create
the opportunity where even the identification of a document could
result
in a sympathetic cross-examination occurring within the ambit
of the plaintiff’s presentation of his case. The proper
administration
of justice within the context of our adversarial
system could be diminished by a Court giving in to stratagems such as
that adopted
in the present case and likely to be adopted in the
monolith of cases in waiting.
(vi) PREJUDICE TO THE DEFENDANT (Section 3(1)(c)(vi))
One of the perils of hearsay evidence which must be
faced whenever hearsay evidence is sought to be introduced is the
inability on
the part of a party to test by cross-examination the
accuracy of the hearsay evidence.
S v
RAMAVHALE
1996 (1) SACR 639A
on 649J;
MAKHATHINI’S
-case
(
supra
) at
524D-F
.
As already mentioned earlier in this judgment, the
defence in this case is managed and directed and paid for by Rainbow.
In the light
of Rainbow’s active participation in similar cases,
the suggestion that there is an independence and/or separation
between the
defendant and Rainbow within the context of the present
litigation appears to be absurd when in reality there is identity of
interest
and support.
(vii) OTHER FACTORS (Section 3(1)(c)(vii))
In this regard
“…
.
the Court is required to take into account any other factor, which
must reflect to any relevant factor not yet covered by any of
the
preceding categories.”
(
MAKHATHINI’S
-case
(
supra
) at
524G
).
Mr Gordon has not referred to any such factors.
Mr Ploos van Amstel, on behalf of the defendant, argued
that these documents have not been authenticated and that they are
therefore
inadmissible. In this regard he,
inter
alia
, referred to Rudman’s evidence that he
obtained some of the documents from the plaintiff.
The documents found in possession of Rainbow and/or
Verus Farm Holdings (Pty) Ltd., as well as the affidavit of Mr Heath,
with annexures
thereto, filed under Case No. 2726/96 appear to be
prima facie
authentic
documents. There is doubt regarding the authenticity of documents
obtained by Mr Rudman from the plaintiff, because the
source of these
documents is unclear. As long as this is the situation, these
documents are inadmissible as evidence.
Having regard to all the factors set out in section
3(1)((c)(i) to (vii), and the circumstances dealt with above, I
regard it in the
interest of justice that the first mentioned
documents be admitted as evidence. It also follows that upon the
application of common
law principles the statements of Rainbow and
Verus, and found in their possession, are admissible against the
defendant, subject
to what is stated above.
H
& D WITKOPPEN AGENCIES AND FOURWAYS ESTATES (PTY) LTD v DE SOUSA
(
supra
) at
940E-G
,
and authorities referred to above. As to the weight to be attached
to this evidence, a final decision can only be made at the conclusion
of the trial.
I accordingly rule that the documents mentioned above
and contained in Bundle “X” are admitted as evidence in the
present trial.
_________________
S.P.B.
HANCKE, J
On behalf of Plaintiff:
Adv.
D.A. Gordon SC
assisted by: Advv. S. Joubert & E.J.B. Lingenfelder
instructed by:
Bezuidenhout, Milton Earle Inc.
On behalf of Defendant:
Adv.
J.A. Ploos van Amstel SC
assisted
by: Adv. A. Stokes
instructed
by:
Webbers
/scd