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1991
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[1991] ZASCA 25
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Cassel and Benedick NNO and Another v Rheeder and Cohen NNO and Another (599/88) [1991] ZASCA 25; 1991 (2) SA 846 (AD); [1991] 4 All SA 517 (AD) (26 March 1991)
IN THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE DIVISION
)
In the appeal of:
ISOBELLE ANNE CASSEL and
FIRST APPELLANTS
JOAN BENEDICK
NNO
ISOBELLE ANNE CASSEL
SECOND APPELLANT
and
DAVID
HERMANUS RHEEDER and
FIRST RESPONDENTS
LESLIE COHEN NNO
ASSOCIATED BRUSH MANUFACTURERS
SECOND RESPONDENT
(PTY) LTD
Coram
: CORBETT CJ, E.M GROSSKOPF, SMALBERGER, STEYN JJA, PREISS
ÁJA
Date heard: Monday 4 March 1991
Date delivered: Tuesday 26 March 1991
2 JUDGMENT
PREISS AJA
:
Rand Broom and Brush (Pty) Ltd (the company) manufactured brooms and brushes
at its factory in Industria West, Johannesburg. Associated
Brush Manufacturers
(Pty) Ltd was its holding company. The late Dennis Joseph Cassel (Cassel) was a
director of the subsidiary company
from 3 November 1949 until his death on 3
March 1984. A fellow director was Mr A. B. Treisman (Treisman).
During December 1985, almost two years after Cassel's death, an action was
commenced in the Witwatersrand Local Division.
.../3
3
It consisted of a number of claims arising out of the alleged
conduct of Cassel during his administration of the company's affairs.
The first
plaintiff was the company itself and the holding company was the second. The
executors in Cassel's deceased estate were
cited as the first defendants and
Cassel's widow (who was, incidentally, one of the joint executors) was cited as
the second defendant.
During July / August 1986 the company was placed into liquidation; its two
liquidators, Messrs Rheeder and Cohen, were substituted
for the first plaintiff.
In what follows it is convenient to describe the four parties to the action as
the company, the second plaintiff,
the first defendants and the second
defendant, respectively, as they were in the court
a quo
.
.../4
4
The action was heard by Levy A.J. He was faced with a series of
claims. Some of them were at the suit of the company and some at the
suit of the
second plaintiff. Relief was claimed in some instances against the first
defendants, in some against the second defendant,
and in some against the first
defendants, alternatively, the second defendant. Fortunately, for the purposes
of this appeal it is
unnecessary to differentiate between them. Only one single
claim falls to be considered, namely, claim E. There are two reasons for
this
limitation. First, a number of claims were settled between the parties before
the trial commenced. Secondly, all the remaining
claims, save for claim E, were
dismissed. The first and second defendants sought, and obtained, leave to appeal
against claim E.
The second plaintiff has confined its cross-appeal to claim E
only, contending that a larger amount should have been awarded, although
both
plaintiffs initially obtained
.../5
5 leave to appeal in respect of all the claims with which
the trial court was concerned.
Claim E is a claim at the instance of the second plaintiff against the first
defendants in terms of which an order was sought, declaring
the first defendants
to be responsible for the debts of the company to its creditors as at 3 March
1984 (the date of Cassel's death)
pursuant to the provisions of s 424(1) of the
Companies Act 61 of 1973, which states:
"When it appears, whether it be in a winding-up, judicial management or
otherwise, that any business of the company was or is being
carried on
recklessly or with intent to defraud creditors of the company or creditors of
any other person or for any fraudulent
.../6
6 purpose, the Court may, on the application of the Master, the liquidator, the
judicial manager, any creditor or member or contributory
of the company, declare
that any person who was knowingly a party to the carrying on of the business in
the manner aforesaid, shall
be personally responsible, without any limitation of
liability, for all or any of the debts or other liabilities of the company as
the Court may direct."
In the summons the plaintiffs
alleged that during the period 1973 to 1984 the business of the company was
carried on fraudulently
and / or recklessly and that Cassel was knowingly a
party to the carrying on of business in this manner. Particulars of the alleged
fraudulent or reckless conduct were furnished. The trial court found that three
classes
.../7
7 of fraudulent conduct were proved. They are described in
the summons as follows:
(a) "During or about the period 1981 to 2 March 1984,
Cassel improperly
misappropriated monies in the sum of
R 59 684.64 belonging to the First Plaintiff, alternatively,
due to the First Plaintiff, in respect of the sale of
wire by the First Plaintiff to Pretoria Betonmuur Fabrikante
(Edms) Bpk." (para 29.10).
[This claim will be dealt with under the heading, "Sale
of Scrap Wire".]
(b) "During or about the period 1981 to 2 March 1984,
Cassel, alternatively,
Cassel and Treisman jointly,
improperly misappropriated monies in the sum
of
approximately R 40 000.00 belonging to, alternatively,
.../8
8 due to, the First Plaintiff in respect of the Saturday sales of brushware and
steel wool through the First Plaintiff's cash sales
store" (para 29.11). [This
claim will be dealt with under the heading "Cash Sales Store"].
(c) "During or about the period 1979 and 1980, Cassel improperly misappropriated
monies in the sum of approximately R 20 000.00 belonging
to, alternatively, due
to, the First Plaintiff in respect of the sale of reject products arising in the
course of the First Plaintiff's
manufacturing operations" (para 29.13). [This
claim will be dealt with under the heading "Reject Brushes"].
As
a result of the alleged misappropriations, the second plaintiff sought an order
in terms of s 424(1) declaring that
.../9
9 Cassel and, in consequence, the first defendants were
responsible for the debts of the first plaintiff to its creditors as at 3
March
1984, being the sum of not less than R 3,75 million.
The learned Judge heard evidence and argument extending over nine days. In
the result the second plaintiff succeeded on claim E. It
was held that
misappropriations had been duly proved under all three heads and that the
company's loss need not be confined to such
amounts as Cassel had retained for
himself but should, in terms of s 424(1), include additional amounts that
accrued to Treisman,
Cassel's fellow director, and to Mr R.F Pascoe, the then
general manager of the company. The award totalled R 99 551.50. It was made
up
of a loss to the company from the sale of scrap wire in the sum of R 48 551.50;
a loss from the cash sale store in the sum of
.../10
10 R 36 000.00; and a loss from the sale of reject brushes
in the sum of R 15 000.00.
Section 424(1) empowers a court to "declare that any person who was knowingly
a party to the carrying on of the business in the manner
aforesaid, shall be
personally responsible... for all or any of the debts or other liabilities of
the company...". The learned judge
did not limit his order to a mere
declaration; he went on to order the first defendants to pay the sum of R 99
551.50 to the first
plaintiff.
The form of the order was presumably in accordance with the provisions of s
424(2)(a) of the Companies Act, which states:
"Where the Court makes any such declaration, it may give such further directions
as it thinks proper for the purpose
.../11
11
of giving effect to the declaration..."
While they have no
bearing upon the issue in the present appeal, two features of the trial court's
order should be mentipned. The
first is that, although the relief in claim E was
specifically sought at the instance of the second plaintiff, the order of
payment
was made in favour of the company, i e the first plaintiff. The reason
probably lies in the fact that it was the company itself which
sustained the
loss. The second observation is that the plaintiffs were awarded the costs of a
six day hearing and had to pay the
costs of the remaining three days.
For a proper evaluation of the evidence tendered in the court
a quo
in support of claim E, it must be borne in mind that
many of the witnesses
had already testified in prior proceedings.
.../12
12
During June and July 1986 an enquiry was held before
inspectors appointed under s 258 of the Companies Act. After the winding-up of
the company, a further enquiry was held under s 417 of the Act. Transcripts of
the proceedings at both enquiries were made available.
One of the terms of the
pre-trial conference was that such transcripts constituted an accurate record of
the proceedings, and relevant
extracts were used during the cross-examination of
the plaintiffs' witnesses.
I proceed now tó an analysis of the evidence upon each of the three
categories of Cassel's alleged misappropriations.
(a)
SALE OF SCRAP WIRE
.
The plaintiffs alleged that Cassel had misappropriated cash which was earned
by the company from the sale of scrap steelwool
.../13
13 wire. Mr Labuschagne, an artisan in the employ of the
company, was in charge of the manufacture of steelwool. The manufacture resulted
in a by-product, scrap steelwool wire. Labuschagne nowhere involved Cassel in
the sale of this by-product. He said that it was Pascoe
who instructed him to
telephone prospective purchasers and to insist on payment in cash. It was Pascoe
who was given the cash or
blank cheques and it was Pascoe who completed the
blank cheques received from customers. Pascoe told him that he must not let the
company auditors know about the existence of certain Croxley books which
recorded these cash sales.
It is only Pascoe who says that the monies were handed to Cassel. I shall
have occasion to deal with Pascoe's deficiencies as a witness
in due course. It
suffices for the present to say that counsel for the defendants described him as
a self-
.../14
14
confessed liar and thief. The description is not unmerited. In
so far as this series of transactions is concerned there are a number
of
disquieting features in Pascoe's account. In his evidence-in-chief he told the
court that he used to take the cheques to Nedbank,
Industria, across the road
from the company's premises. Mrs Thompson, a teller at the bank, required him to
sign each cheque at the
back and to fill in the company's account number. It was
only in cross-examination that he disclosed that the account number was
not the
company's, but his own. It is strongly suggestive of a naive attempt to distance
himself from an irregular course of dealings
and to foist some degree of direct
participation upon Cassel.
There are a number of other features of his evidence which cause concern. He
said that Cassel on most occasions gave Treisman his
share of the cash proceeds.
Treisman (whose
.../15
15
reliability as a witness is discussed at a later stage) denied
that Cassel had ever handed him money; it had always been given to
him by
Pascoe.
The learned Judge in the court
a quo
found that Cassel had been
responsible for the alleged misappropriations solely on the ground that Pascoe's
evidence (which he was
unwilling to accept without corroboration) was
corroborated by Treisman's evidence that Cassel had suggested to him that cash
should
be set aside for building purposes, for staff bonuses and for "perks" for
himself and Treisman. Apart from Treisman's general deficiencies
as an
acceptable witness, the learned Judge in my view lost sight of the fact that
Treisman under cross-examination receded from
his original account. He admitted
that it was Pascoe who told him that the money was in the form of a "perk". He
said that he could
not even remember
.../16
16
whether the arrangement had been discussed with Cassel.
It follows that the so-called corroboration of Pascoe by Treisman is no
corroboration at all. It would involve a finding that Pascoe
is corroborated by
a conversation which Treisman cannot recall. I am of the view that the evidence
in regard to this transaction
falls far short of what is required, not only for
the reasons given, but because Pascoe and Treisman, as ï shall indicate,
were
unworthy of credence and because it is necessary to apply the cautionary
rule regarding evidence against a deceased person. The rule
is stated in
Borcherds v Estate Naidoo
1955 (3) SA 78
(A) at 79 A - B by Fagan JA in
the following terms:
"If the facts in issue are particularly within the knowledge of only one of the
parties to a suit, that is a circumstance
.../17
17 which the Court must take into consideration in weighing the probative effect
of the evidence adduced. Here the one party to the
alleged transaction of
repayment is dead. The Court must therefore scrutinise with caution the evidence
given by, and led on behalf
of, the surviving party."
Though
there is no rule which requires evidence against a deceased estate to be
corroborated, corroboration may assist in satisfying
the cautionary rule. On the
other hand, as Fagan JA went on to point out in the
Borcherds
case,
supra
(at 79 F):
"The mere fact that, as in the case before us, three witnesses corroborate each
other by giving similar evidence on the one side
cannot make the three or any
one of them
.../18
18 escape the cautious scrutiny which should be applied to evidence which the
other party to the suit is not in a position to answer."
See
also:
Da Mata v Otto NO
1972 (3) SA 858
(A) at 869 B - E.
Randaree and
Others NNO v W H Dixon and Associates and Another
1983 (2) SA 1
(A) at 6
A.
The learned judge in the court
a quo
referred to the
cautionary rule but failed in my view to appreciate that Pascoe's testimony was
insufficiently cogent to overcome
the caution, and that there was no
corroboration of such testimony.
.../19
19 (b)
CASH SALES STORE
.
The evidence of this alleged misappropriation and that of
the sale of scrap wire is similar in nature and quality.
The court
a
quo
found that Cassel misappropriated cash monies
derived from a cash
sales store which was operated on Saturdays
by Labuschagne. Labuschagne's
evidence, as in the case of
scrap wire sales, does not involve Cassel at all.
It was
Pascoe who instructed him to use Croxley books, as distinct
from
the company's regular books, for the Saturday sales.
It was Pascoe who
controlled the operation of the store and
told the company's employees what
to do. The cash was locked
up in the safe over weekends; on Monday mornings
the cash
and the Croxley books were handed to Pascoe. The only
evidence
linking Cassel with the Saturday store is Pascoe's. He told
the
court that he handed over the proceeds to Cassel and that
.../20
20 he had been present on occasions when Cassel had handed
a share of the money to Treisman. He stated that in the majority pf cases
Cassel
himself handed the money to Treisman and in the minority of cases he was asked
by Cassel to give Treisman the money. At the
s 258 enguiry he said it was the
other way round. This, in itself, is not a serious discrepancy. What is more
disquieting is Treisman's
denial that he had ever received money directly from
Cassel.
In relatlon to this transaction Pascoe displayed uncommendable zeal in
implicating Cassel. At the s 258 enquiry he retracted his former
evidence (which
in itself, raises a serious doubt about his veracity) and stated that the cash
proceeds from the Saturday store and
the scrap wire sales had been discussed
between Cassel and Karlin, the company's auditor. This discussion had taken
place at the
Houghton Club in 1982.
.../21
21
The inspectors then asked Pascoe the obvious question, namely,
whether he had himself been present at the discussion. He said that
he had not.
His information derived solely from what Cassel had told him.
At the s 417 proceedings Pascoe repeated this version. When the issue was
pursued before the commissioner he stated expressly that
he had no personal
knowledge of the discussion; his source of information was Cassel's disclosure
to him.
At the trial, however, Pascoe's evidence underwent a startling
transformation. He claimed for the first time that he had been present
at the
luncheon at the Houghton Club and this evidence was proferred almost immediately
after he had said the following:
.../22
22
"Mr Cassel told me that he had discussed the matter with Mr Karlin, who was the
senior auditor, and that they had agreed that they
could retain certain of the
cash sales".
Accordingly, his claim to have been present at the
luncheon ran completely counter to what he had asserted on several previous
occasions,
including the stage immediately prior to this change of front.
Pascoe's attempts to repair this damaging feature were clumsy and
disingenuous.
On this aspect alone Pascoe was shown to be completely unreliable . It should
further be noted that Karlin had also
died before the trial took place. The
cautionary rule, the complete unreliability of Pascoe's evidence and the failure
by Treisman
to provide any sort of corroboration lead in my opinion to one
conclusion only - that the evidence of this alleged misappropriation
.../23
23
falls far short of what is required.
(c)
REJECT BRUSHES
.
This alleged misappropriation reguires special scrutiny since it involves the
evidence, not only of Pascoe and Treisman, but also
of Mrs Pretorius, who worked
for the company over two separate periods totalling nearly 20 years. Her duties
varied from time to
time. She began as a wage clerk, and then worked as a
general office employee and later as head of the despatch section.
The essence of her evidence was that the sale by the company of the reject
brushes was a clandestine operation, devised by Cassel,
and of which only the
two of them were to know. She stressed that Cassel impressed upon her that it
was just
.../24
24
between the two of them. This element of secrecy was not borne
out by her subsequent testimony. She admitted that instructions to
sell rejects
had come from Pascoe and from Treisman as well as Cassel. She repeated that "the
directors" had asked her to arrange
the reject sales. She was then asked by her
own counsel which of the directors had given her instructions, whereupon she
reverted
to Cassel. In that context, her identification of Cassel is suspect.
The guestion as well as her answer do not flow convincingly
from her general
reference to "the directors". In further evidence she stated that the proceeds
were to be handed either to Cassel
or to Pascoe. Thereupon she added that she
had been told to hand the proceeds to Treisman if Pascoe was absent.
Her elaborate attempt to prove a confidential, and therefore suspect,
operation to which only she and Cassel were privy
.../25
25
collapsed upon further analysis. She described how, in order
to protect herself, she took away a number of Croxley books relating
to the
reject sales. Her idea was to have proof that it was Cassel who dealt with the
proceeds in case she should herself be accused
of misappropriation. Yet it was
not Cassel who asked her to return the incriminating books but Mrs Liebenberg,
the company's bookkeeper.
Mrs Pretorius alleged that Cassel "glo vir hulle daar
by die werk gesê [het] hy sal my wys, ek het geen bewys van daardie geld
nie". "Hulle" suggests that the scheme was by no means a secret one, confined to
Cassel and herself. At the s 258 enquiry she said
that this information was
given to her by a coloured employee of the company, named Baker. She was
confronted with her evidence at
the enquiry in the court
a quo
, whereupon
she named another employee, Koos Slafa, as having come to her with news that the
cash sales books had been destroyed.
(Incidentally, the
.../26
26
destruction of these books was never established).
Thus, on the evidence of Mrs Pretorius alone, this so-called private
arrangement was known not only to Cassel and herself, but also
to Pascoe,
Treisman, Mrs Liebenberg, Baker, Koos Slafa and "hulle daar by die werk". It
certainly suggests a deliberate initial attempt
to stigmatise the transaction as
part of a secret scheme devised by Cassel. This in itself makes her evidence and
her motive suspect.
This particular feature is not in my opinion as serious as her description of
the duration of the irregular sales. In her evidence-in-chief,
she told the
court
a quo
that reject sales had continued for "'n jaar, of twee of
drie". Then she specified the particular years, namely, 1978, 1979 and 1980.
This evidence stands in direct contrast with what she told
.../27
27
the s 258 inspectors. When she was asked how long she was
involved with the reject sales she said "Ek sal sê omtrent drie, vier,
miskien vyf maande, ek kan nie die presiese tydperk gee nie maar dit was h paar
maande voordat ek weg is." When one of the inspectors
at the enquiry, seizing
upon the longest period of her estimate, said, "Nou, u het met die reject
verkope vir ongeveer vyf maande
gewerk het u vir ons gesê", she replied,
"Ek sal sê plus / minus vier, vyf maande, ek kan nie vir u die regte
tydperk
gee nie". The inspector, still apparently engaged in extending the
period, put the following to her, "Met ander woorde, die vyf maande,
die vyf of
ses maande wat u betrokke was by die verkoop van die rejects was seker daar van
November / Desember se kant van die vorige
jaar?" Her reply was, "Ja, dit kan so
wees".
It is clear that at the enquiry, in a series of questions
.../28
28
directed to establish the duration of her involvement with
reject sales, she furnished replies which indicated a period of several
months.
One can make due allowance for her uncertainty as to the precise duration, but
the difference between several months to which
she testified at the enquiry, and
a period of years to which she adhered in the court a
quo
is so marked
upon so central an issue that she must be regarded as unreliable. I would
hesitate to describe her as dishonest, but
little faith can be placed upon her
uncorroborated account.
The criticism of Mrs Pretorius does not end there. She gave a confused
account about when she decided to report the irregularities
to the company's
auditor. Initially, she said that she made that decision before she left the
company's employ and that was why she
took a number of Croxley books
.../29
29
with her. Later in her ëvidence, she was equally
adamant
that it was after she had left. As for her reasons for leaving
the company, she was equally unsatisfactory. She told the
court
a quo
that it was because she had had an argument.with
an Indian woman in the company; to the s 258 inspectors she
spoke generally in the following terms, "Omdat ek nie gelukkig
was daar
nie, daar was dinge wat my gegrief het en dinge,
ek dink die 'pressure' op my
was ook te veel, die drukking
was te veel vir h vroumens alleen om die hele
'despatch' te
hanteer." When her conflicting reasons for leaving the
company
were put to her, she launched forth against Cassel for not
backing
her up in her quarrel with the Indian woman and stated
that she and Cassel
had been involved in a dispute over it.
True, these are not major
discrepancies but they point to
a state of confusion, which, largely for the
reasons which
are already recorded, makes it inadvisable to treat her
testimony
.../30
30
as sufficiently cogent to overcome the cautionary rule. The
learned judge in the court
a quo
considered that she was merely confused
and that her evidence could safely be accepted. In the light of the present
analysis I cannot
share that view.
Part of the evidence linking Cassel with the reject sales
is the evidence
of an alleged meeting between Cassel, Pascoe,
Treisman and the auditor, Mr
Prissman. Mrs Pretorius stated
that she took the Croxley books to Prissman
and disclosed
the irregular dealings to him. If Cassel was shown to
have
attended this meeting it would have provided some proof of
his
complicity, because it was alleged that Prissman had
confirmed that the money
would have to be returned to the
company and that Cassel had undertaken to do
so. Prissman
did not testify at all. Pascoe gave this evidence. For reasons
which I have already stated, Pascoe is unworthy of credence;
.../31
31 it will be recalled that upon another occasion he tried
to place himself at a meeting,_the luncheon at the Houghton Club, in order
to
implicate Cassel. It is significant that when he gave evidence before the s 258
inspectors all he said was that Prissman had brought
the matter to Treisman's
attention. Not a word was said about the alleged meeting. Treisman was himself
asked a leading question
by his counsel. It was, "Do you remember a meeting
after she had left, between you and Mr Cassel and the auditor, Mr Prissman, and
Mr Pascoe?" Treisman replied, "I have a recollection of that". Under
cross-examination it became clear that Treisman could not recall
it. He began by
saying, "I take it that Dennis and Pascoe were there too". Then the following
questions and answers are recorded:
"Yes, but you don't remember Mr Cassel being present?
.../32
32
— I can't say so.
No, he might or he might not? He might or he
might not. As I say, it was so many years
ago."
Apart from his inability to place Cassel at
that meeting, Treisman did not commend himself as a reliable or an objective
witness.
It was not established that Cassel was told by Prissman that the
proceeds of the reject sales would have to be refunded to the company.
That
being so, there was no cogent evidence linking Cassel to the reject sales and
the unlawful appropriation of cash monies. In
my view this complaint was also
unproved.
(d)
THE QUALITY OF THE EVIDENCE GENERALLY
.
From the above analysis it will be apparent that I do not subscribe to the
finding by the court
a quo
that three categories
.../33
33
of misappropriation were duly established. I have already
indicated that in my view Mrs Pretorius was not merely a confused witness
but
also an unreliable one. I have set out reasons for rejecting the evidence of
both Pascoe and Treisman. These reasons were based
upon what they stated in
regard to those three specific categories of misappropriation. It is necessary
to deal with other unsatisfactory
features in their evidence, features which
serve to fortify the conclusion that they cannot be believed.
Pascoe was at pains to protect Treisman. He first denied all knowledge of
irregular dealings when he testified before the s 258 enquiry.
He claimed that
the cash sale store was open on week-days only and that there had been Saturday
sales for no more than "a couple
of weeks" on a trial basis. The Saturday
takings were negligible, amounting to about R200
.../34
34 or R250 each time. The money was handed to him by
Labuschagne on Mondays and was then deposited in the company's account. Dealing
with the sale of scrap wire, Pascoe told the s 258 inspectors that the proceeds
were deposited in the company's account. When challenged
with this testimony
under cross-examination in the court
a quo
, Pascoe admitted that he had
lied. He said that he had written a letter to one of the commissioners,
admitting that he had not told
the truth. When taxed about the reason for his
duplicity he said that he had acted out of sympathy for Treisman and in an
effort
to shield him. He had given his word to Treisman that he would not
divulge anything about his thefts from the company. To put it
bluntly, he
breached his oath before the enguiry in order to honour his promise given to
Treisman. This issue must obviously reflect
adversely upon Pascoe's credibility,
but it also touches upon Treisman's and lends added emphasis
.../35
35
to the probability of Treisman's own misappropriations.
Both Pascoe and Treisman had strong reasons for giving evidence favourable to
the plaintiffs. Both of them admitted to thefts of money
from the company and
neither of them had been asked to repay it. Treisman had paid back no less than
R 50 000.00 to the company.
This refund only covered amounts disbursed for
private air tickets, petrol for private motoring and telephone expenses. It did
not
cover his misappropriations. As for Pascoe, there was the admitted receipt
of "bonuses" from the proceeds of cash transactions as
also an amount of R
9612.50 that he received from an arrangement between himself and Mr Bachan, an
agent in the employ of the company.
This arrangement is completely indefensible. Commission agents at the same
level as Mr Bachan were paid a 5% commission on
.../36
36 orders. Pascoe arranged with Bachan that he would be
paid 10%, on the understanding that 5% would be remitted to Pascoe personally.
There can be no excuse for such an arrangement; it amounts to what is popularly
known as a "kick-back".. It is clearly a theft from
thê company. Nobody in
the business was made aware of this arrangement. Pascoe's attempt to justify his
conduct is as pathetic
as it is disingenuous. The following passage in the
record of his cross-examination speaks for itself:
"You simply took that money which belonged to the
company, didn't you? I believe it belonged to
Mr Bachan.
But Mr Bachan, you said, was prepared to work
for
5%? He was prepared to set up a
marketing
organisation and, due to the insecurity of
Rand
.../37
37
Broom and Brush at that particular stage, he would
look around for other products, and other products would be amalgamated into his
business. Well, I don't see any connection with you. What service did you
provide for the half of the commission?
What service did I provide? After hours service.
Going through the
'Yellow Pages'. 'Phoning Mr Bachan.
Giving him leads with regard to
wholesalers that
we had not approached. Leads to hardware stores
that he
had not approached, and basically guiding
him along the right lines.
But
wasn't this part of your job as the managing
director - the general manager
of Rand Broom and
Brush? It was part of my job.
So why did you have to
be paid extra for that? --- Because at that particular stage the future of
.../38
38 the company was very very insecure, and after the twelve years that I had put
into the company I realised that it was a possibility
that maybe time was
running out, and the thing is I should set up a marketing organisation and
hopefully, have something to fall
back on. So you were trying to set this up for
yourself?
Trying to set it up, and at the same time, trying
to keep Rand Broom and Brush hopefully trading
profitably."
Treisman was an unimpressive witness,
apart from the fact that he had received cash monies which had not been
accounted for. Often,
when driven into a corner, he sought refuge in a lapse of
memory. I have already cited one typical instance. Counsel for the company,
Mr
Cohen, was driven to admit that
.../39
39
he was untruthful but attempted to salvage this witness by
contending that he had deliberately tailored his evidence to protect a
guilty
Cassel. In my opinion, this contention carries the seed of its own destruction.
When once it was conceded that this witness
was untruthful it would be idle and
even dangerous to speculate about his motives. In any event it is more probable
that Treisman's
departures from the truth were prompted by a desire to deflect
attention from his own peculation rather than by a desire to protect
Cassel,
with whom he had not been on speaking terms for years.
Having advanced a great number of separate claims in their action in the
court
a quo
, the plaintiff attempted to paint a picture of
misappropriations on a massive scale. It is not without significance that the
company,
the alleged victim of such misappropriations, remained solvent and
viable right
.../40
40 up until Cassel's death. It was only a series of
ill-advised foreign exchange transactions and business decisions after Cassel's
death that brought about the company's demise. In the founding affidavit in
support of an order of winding-up, Pascoe stated the
following under oath:
"9.1 since March 1984 the Applicant has
suffered
severe exchange rate and control losses. These losses at present exceed R 1 000
000. The cause of this is that, since March 1984,
the Applicant borrowed money
and purchased goods from overseas and, as a result of the exchange control curbs
which have occurred
and the value of the rand against foreign currencies, has
suffered the said losses;
.../41
41 9.2 during 1984, 1985 and 1986 the Applicant has
suffered severe trading losses. This, I believe, can be ascribed to two reasons,
firstly the need to finance what is set out in 9.1
above and, secondly, the
costs of expansion to the Applicant's factory and plant situated at 15
Maraisburg Road, Industria West."
In
view of the uncertainty created by this welter of evidence, the finding by the
learned judge in the court
a quo
that claim E had been established and a
misappropriation by Cassel totalling R 99 551.50 proved, was, with respect,
unfounded. It
follows that the appeal must succeed and the cross-appeal must
fail.
This conclusion renders it unnecessary to consider an interesting further
argument as to the nature and applicability of the
.../42
42 relief under s 424(1) of the Companies Act. The
question is whether an action for such relief is passively transmissible as
against
the executors in Cassel's deceased estate. I express no view upon this
issue.
(e)
COSTS
.
It goes without saying that the defendants, the successful appellants, are
entitled to the costs of the appeal and cross-appeal. An
argument was raised by
Mr Doctor, their counsel, in support of an award of such costs on the attorney
and client scale. His argument,
briefly summarised, was that the plaintiffs,
duly forewarned by the unacceptable evidence by key witnesses given before the
two enquiries,
nevertheless pursued an action based upon such evidence. The
argument is not without force; but despite the deficiencies of Pascoe
.../43
43
and Treisman especially, there was evidence from many
witnesses which pointed to a series of suspicious dealings. Mrs Pretorius does
not fall into the same category of disrepute as do Pascoe and Treisman. It is
fair to say that there was evidence that money was
being lost to the company by
a series of cash transactions; it is the link between these transactions and
Cassel himself which fell
short of proof at the trial. In these circumstances,
despite the uncommon zeal with which the plaintiffs brought a multiplicity of
claims against Cassel's successors, I am of the view that the action was not
shown to have been instituted frivolously or dishonestly,
and the claim for
attorney and ciient costs must be rejected.
One further issue on the question of costs must be considered. It concerns
the qualifying fees of Mrs Claire Herbst, an accountant,
who was consulted by
the defendants in their
.../44
44 preparation of the case. More particularly, she was
consulted for the purpose of cross-examining Mr Wood, an accountant in the
employ of Price Waterhouse, who had carried out an extensive investigation of
the company's books and records. At one stage the plaintiffs
invited her to
consult with Wood in order to prepare a statement of agreed facts. Discussions
were thereafter held. After Wood had
been cross-examined (and in the presence of
Mrs Herbst who was allowed to remain in court) it was no longer necessary to
call her.
Mr Doctor argued that in these circumstances the defendants were entitled to
ask for her qualifying fees as a witness even though
she was not called. Mr
Cohen, for the plaintiffs, neither disputed these facts nor raised any counter
argument.
This issue was discussed in the case of
Stauffer Chemical
.../45
45
Co. and Another v Safsan Marketing and Distribution Co.
(Pty) Ltd and Others
1987 (2) SA 331
(A) at 355 E - H, where Corbett JA
stated the following:
"The true position, it seems to me, is that the fact that the person concerned
was not called as a witness is merely a factor to
be considered, in the context
of all other relevant circumstances, in determining whether the payment of his
qualifying fees by the
party applying for the order was reasonably necessary. In
the absence of any explanation, the failure to call the person as a witness
would generally lead to the inference that the payment of the fees was not
reasonably necessary. Where, however, as in the present
case, it appears that
the party in question originally intended to call the
person
.../46
46
as a witness and that, in the light of the issues then subsisting the person's
evidence would have been relevant, but that subsequently
the issues were
narrowed down, or eliminated by reason of. the attitude adopted by the other
party to the case in such a way as to
render the calling of the person as a
witness unnecessary, then, in my view, the non-appearance by such person in the
witness stand
would not itself lead to such an inference. Indeed in such a case,
depending on all the circumstances, the Court might well come
to the conclusion
that the payment of the qualifying fees was reasonably
necessary."
Mrs Herbst was to be called as a witness
in the light of the issues then subsisting. Those issues were then
eliminated
.../47
47 or narrowed down in such a way as to render her calling
unnecessary. In these circumstances the payment of her qualifying fees
was
reasonably necessary, in the light of the test enunciated in the above
decision.
The following orders are made:
1. The appeal is allowed with costs, and the cross-appeal is dismissed with
costs. Such costs are to be paid by the respondents jointly
and severally, the
one paying the other to be absolved.
2. Paragraphs 4 and 5 of the order made by the court
a quo
, are set
aside, and paragraph 4 is replaced by the
following:
"On claim E, absolution from the
instance with costs;
.../48
48
such costs to include the qualifying fees of Mrs Claire Herbst. The costs are to
be paid by the plaintiffs jointly and severally,
the one paying the other to be
absolved."
H.J PREISS AJA
CORBETT CJ )
E.M GROSSKOPF JA )
SMALBERGER JA ) CONCUR
STEYN
JA )