IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
CASE NUMBER: 247/2021
In the matter between
ARIOSCAN (PTY) LTD t/a NICO’S ENGINEERING PLAINTIFF
and
ZUHAIR MARLIE DEFENDANT
JUDGMENT
Date of hearing: 12 November 2024
Date of judgment: 18 November 2024
BHOOPCHAND AJ:
1. The Plaintiff is a private company based in Kenilworth. The Defendant was the
director of the company’s overall financial affairs. Defendant raises an exception
to the Plaintiff’s summons, which was issued on 11 January 2021. The Plaintiff’s
amended particulars , dated 20 October 2023, follow a previous exception
resolved by agreement between the parties . The Defendant raises the exception
contending that both claims identifiable in the particulars have no cause of action.
Defendant traversed the Plaintiff’s pleaded case to convey why it was excipiable.
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2. The Plaintiff is an employer in the metal and engineering industry and contributes
to two pension funds for workers in those industries. In terms of section 13A(1) of
the Pensions Funds Act, 1956, the employer was required to deduct monies from
its employees' remuneration as pension fund contributions and then pay those
monies to the funds. The plaintiff then states that in addition to being liable to the
pension fund for these payments, a director in charge of financial affairs can also
be personally liable for the monies it owes to the pension funds. The plaintiff
accepts that it failed to make the necessary payments to the pension funds , and
ultimately, it agreed to a court order in February 2023 that both it and the director,
Mrs Duncan, were liable to pay the pension funds, which it explains it has arranged
to do.
3. The Defendant was a director of the Plaintiff between June 2014 to March 2016.
Defendant interprets Plaintiff’s pleaded case to mean that, as an employer, he was
obliged by law to deduct monies from employee salaries and pay these deducted
monies to pension funds. The first claim is that Plaintiff alleges that Defendant
breached his fiduciary duties by paying monies from Plaintiff to himself instead of
to the pension funds to whom Plaintiff was indebted ( “the primary claim ”).
Alternatively, Plaintiff alleges that Defendant failed to pay the pension funds when
he had a duty to do so, resulting in Plaintiff being liable to the pension funds when,
if there were no such breach, Plaintiff would not have been so indebted (“the
alternative claim”)
4. Defendant asserts that the alternative claim discloses no cause of action.
Defendant asks how Defendant’s actions in failing to execute payment of monies
owed by Plaintiff to the pension funds for a two-year period starting ten years ago
in any way affect whether or not Plaintiff was liable to the pension funds. The
plaintiff explains that it was under a statutory duty to make these payments to the
pension funds on behalf of its employees, which it did not do and further explains
that it has now, by agreement and as confirmed by court order, arranged, together
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with its director Mrs Duncan to pay these amounts. Defendant asserts that on the
pleadings as they stand, there is no possible way Defendant could be liable under
the alternative claim as his purported failure to make payments could not have
affected Plaintiff’s legal obligations under the Act or its liability to the pension
funds.
5. The Defendant then contends that the primary claim is not based on a cognisable
cause of action. The defendant asserts that no claim is recognised in law for
recovery of stolen or misappropriated monies due to a breach of fiduciary duty by
a director. The law has provided the Plaintiff (and any aggrieved person in South
Africa) with an action for stolen goods and funds , namely the condictio furtiva .
There is no general or generic claim for stolen funds or a claim in terms of breach
of director duties.
6. The Plaintiff’s only allegations made in support of its primary claim are set out in
paragraph 23.3 of the particulars , where it says that the Defendant ‘was party to
an act or omission despite knowing that the act or omission was calculated to
defraud a creditor , employee, or shareholder of the company, or had another
fraudulent purpose by rather paying the pension fund contributions to the
Defendant instead of paying the amounts to the Funds.
7. Defendant asks if it is assumed that Plaintiff will prove this paragraph, then what
does it mean? The Defendant was party (with whom?) to an act or omission (so he
or someone else either did something or did not do something) calculated to
defraud creditors, employees or shareholders (none of whom are party to these
proceedings) by paying the monies to himself rather than to the pension funds.
The defendant contends that the paragraph makes no sense. Plaintiff appears to
allege that Defendant was party to fraud on non-parties to this action (employees,
shareholders and creditors rather than Plaintiff), which would be grounds for a
misjoinder or non-joinder (Plaintiff cannot sue on their behalf.
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8. Defendant states that if he applied a generous interpretation to the allegation “by
rather paying the pension fund contributions to the Defendant” , perhaps the case,
as pleaded, is that Defendant stole or misappropriated the employees' funds,
which the Plaintiff was obliged to pay on to the pension Funds (noting that these
would never have been the Plaintiff’s funds). Defendant submits that in this case,
it would surely have been the employees who were out of pocket (as their monies,
as alleged by Plaintiff , were not paid to the pension funds and not to Plaintiff.
Unless it is the Plaintiff’s case that it paid these monies to the pension funds
(which, in its pleaded case, it has not yet done, despite acknowledging liability) on
behalf of the employees despite these monies being stolen by the Defendant .
However, this is not what Plaintiff pleaded. Defendant states that it does not know
from the particulars why Plaintiff claims the monies from Defendant nor whether
or not its employees are out of pocket.
9. Defendant suggests that perhaps Plaintiff is simply claiming funds stolen from it
by Defendant (although this is not pleaded) . If so, it has a material issue that
cannot be overcome because , as set out above, the condictio furtiva is the only
recognised claim for monies stolen . The particulars do not include the required
allegations for such a claim, which are twofold. The plaintiff must always have had
a legal interest in the thing (e.g., as owner or as the person who bore the risk of
loss), and the Defend ant must have stolen the thing or received it mala fide ,
knowing that it had been stolen.
10. Defendant states there are no allegations that this was Plaintiff’s money stolen or
misappropriated. Instead, it is alleged in paragraph 23.3 that the Defendant is part
of some fraud on the shareholders, employees, or creditors, which is not a party
to these proceedings. Without pleading the requirements of the actio furtiva,
Plaintiff cannot sue for allegedly stolen funds , and the exception against the
primary claim must also be upheld. Even with a generous interpretation of the
particulars, the primary claim has no legal basis.
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11. When determining an exception, the Court must consider each allegation made in
the particulars as being true and correct and then , on that basis, determine
whether or not, on every reasonable interpretation of the particulars, there is a
cognisable legal claim made by the Plaintiff .1 An excipient who alleges that a
summons does not disclose a cause of action must establish that, upon any
construction of the particulars of claim, no cause of action is disclosed. Pleadings
should be considered as a whole, and exceptions provide a useful mechanism for
weeding out cases without legal merit.2 A cause of action comprises the material
facts necessary to prove to support a right to judgment of the court.3 An exception
that there is no cause of action is designed to obtain a decision on a point of law
which disposes of a case in whole or in part and, in the latter instance, avoids the
leading of unne cessary evidence at trial. 4 Exceptions of this sort enable the
determination of disputes expeditiously and cost-effectively.5
12. The Plaintiff contended that its cause of action is founded upon the provisions of
the Companies Act 71 of 2008. The Plaintiff pleaded that the Defendant was the
sole managing director of the Plaintiff from January 2012 to 20 February 2016.
While performing t he functions of a director , Defendant was under a duty to not
breach his fiduciary duties as contemplated in sections 75, 76(2) or 76(3) (a) or (b)
of the 2008 Companies Act. Instead of complying with his duties regarding the Act,
he took the Plaintiff’s money and paid it to himself. They committed theft, or fraud,
and stole Plaintiff’s money.
13. The Plaintiff contends that its claim is clearly set out. It relies on the statutory
provisions of the Companies Act to hold the Defendant liable for making payment
of the pension fund contributions to himself rather than the Funds.
1 Natal Fresh Produce Growers Association and Others v Agroserv (Pty) Ltd and Others 1990 (4) SA
749 (N) at 754J-755B
2 Telematrix (Pty) Ltd v Advertising Standards Authority SA 2006 (1) SA 461 (SCA)
3 Mc Kenzie v Farmer’s Co-operative Meat Industries Limited 1922 AD 16 ta 23
4 Alphina Investments Ltd v Blacher 2008 (5) SA 479 (C) at 483B
5 Colonial Industries Ltd v Provincial Insurance Co Ltd 1920 CPD 627 at 629, Kahn v Stuart 1942 CPD
386 at 391, Barclays National Bank Ltd v Thomson 1989 (1) SA 547 (A) at 553 F-I
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14. When a Defendant takes an exception to a Plaintiff’s particulars of claim on the
grounds that it does not disclose a cause of action, it is not about what the
Defendant thinks the Plaintiff’s cause of action should be, but rather whether on
any construction of the Plaintiff’s particulars of claim , no cause of action is
disclosed.
15. The claim is not based on the common law act of theft but rather on infringements
of the Companies Act. Although Plaintiff alleges that its case is that Defendant
stole Plaintiff’s money, that is not how the Court reads the particulars. The
particulars are not clear, as Plaintiff’s Counsel volunteered. What is discernible
from the particulars as a whole is that Plaintiff relies on a statutory claim founded
in the provisions of the Companies Act against Defendant. The Plaintiff recites the
background to the claim. The actual cause of action is that Plaintiff had a duty not
to act legally and not to act negligently as a director in his exercising his powers
and functions. Notwithstanding the duties assigned to him, he infringed them in
various ways contrary to the Companies Act's provisions . As a result of The
Plaintiff’s negligence or contravention of the provisions of the Companies Act, the
Plaintiff has suffered loss or damages.
16. The particulars cover sections 75, 76(2), and 76(3)9a) or (b), which is the conduct
that specifically creates liability, which creates a liability to the company under
the principles of the common law relating to the breach of fiduciary duty under
section 77(2)(a) of the Companies Act. The Defendant has unnecessarily
overinterpreted the particulars and applied an incorrect test . It is not what the
Defendant could plead or what the particulars amount to, i.e., theft of funds. If the
Defendant cannot plead to a set of particulars, then those particulars are vague
and embarrassing. That is not the Defendant’s basis for the exception.
17. The Court accepts the Plaintiff’s contentions that the cause of action is a statutory
claim in favour of a company against its former director, imposing liability on the
latter for any loss , damages or costs incurred by the company in certain
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circumstances.6 Whether the circumstances identified in those sections of the
Compan ies Act apply to the claim in this case is not an issue that the Court has to
decide. The Defendant can clarify those aspects of the particulars that remain
unclear with a request for particulars and is entitled to raise them at the trial. It
follows from the order that the De fendant mus t submit its plea to the particulars.
ORDER
18. The exception is dismissed with costs
19. Co unsel's fees are to be taxed or agreed upon on scale B.
Ajay Bhoopchand
Acting Judge of the High Court
Wes tern Cape Division
Cape Town
Judgment was handed down and delivered to the parties by e-mail on
Plaintiff's Counsel: A Mon tzinger
Instructed by Elton Shortles Attorneys
De fendant's Counsel: C Fehr
Instructed by Erleigh & Associates Inc
6 Gihwala v Graney Property Ltd (20760/2014) [2016] ZASCA 35 (24 March 2016) relating to s77(3)
of the Companies Act.