Ganes and Another v Telecom Namibia Ltd. (608/2002) [2003] ZASCA 123; [2004] 2 All SA 609 (SCA) (25 November 2003)

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[2003] ZASCA 123
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Ganes and Another v Telecom Namibia Ltd. (608/2002) [2003] ZASCA 123; [2004] 2 All SA 609 (SCA); 2004 (3) SA 615 (SCA); (2004) 25 ILJ 995 (SCA) (25 November 2003)

THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
CASE
NO
: 608/2002
In the matter between :
L I
GANES
First Appellant
L G
GANES
Second Appellant
- and -
TELECOM
NAMIBIA LIMITED
Respondent
______________________________________________________________________
Before: STREICHER,
BRAND & CLOETE JJA
Heard: 10
NOVEMBER 2003
Delivered:
25 NOVEMBER 2003
Summary:
Insolvency
– authority to institute proceedings – striking out of new matter
in replying affidavit.
_______________________________________________________________________
J U D G M E N T
_______________________________________________________________________
STREICHER
JA
STREICHER JA:
[1] This is an appeal against an order granted by Knoll J in the Cape
of Good Hope Provincial Division in terms of which the joint
estate
of the appellants, who are married in community of property, was
finally sequestrated.
[2] The first appellant was in the employ of the respondent as its
Manager: Procurement from 1995 until 2 July 2000 when he resigned.
In
terms of a contract between the respondent and Dresselhaus Scrap
Metal CC (‘Dresselhaus’) Dresselhaus was appointed as the
exclusive purchaser of all respondent’s scrap copper. The first
appellant was, by virtue of his position as Manager: Procurement,
responsible for the implementation and administration of the
contract.
[3] On 12 July 2001 the respondent brought an urgent
ex parte
application for a sequestration order against the appellants. The
founding affidavit was deposed to by one Gunther Hanke. He alleged
that the joint estate of the appellants was insolvent. The appellants
were, according to him, indebted to the respondent in at least
the
following amounts:
3.1 N$1 184 403,80 (it is common cause that N$1 equals R1) being
a claim by the respondent against the appellants in respect
of a loss
suffered by the respondent as a result of the first appellant having
deliberately under-invoiced Dresselhaus in respect
of copper sales.
3.2 N$416 295,08 being a claim by the respondent against the
appellants in respect of monies paid by the respondent to the
Receiver
of Revenue, Namibia.
3.3 N$37 748,20 being the balance due and owing by the first
appellant to the respondent in respect of a housing subsidy over-paid
in error by the respondent to the first appellant.
3.4 N$11 235,44 being the balance due and owing by the first
appellant to the respondent in respect of a car allowance received
by
the first appellant while he was not entitled to such allowance.
3.5 N$1 800 000,00 being an amount owing to the respondent
by the first appellant in respect of copper received by Dresselhaus
but not invoiced by the first appellant.
[4] According to Hanke the MCW Trust, a trust controlled by the
appellants, on 4 January 2001 purchased a Mercedes Benz CL 500 motor
vehicle for a purchase price of R972 000 for the appellants’
use. Hanke said that payments made by the first appellant in
respect
of the assets acquired by him must have come from a source other than
his salary of approximately N$16 000 per month.
He said,
furthermore, that a trustee would be in a position to conduct an
urgent investigation into the financial affairs of the
appellants as
it was evident that the first appellant ‘was involved in a variety
of unlawful and corrupt transactions giving rise
to extensive
unlawful “
commission
” payments to him’.
[5] The court
a quo
granted a provisional sequestration order
and issued a rule
nisi
calling upon the appellants to show
cause why a final sequestration order should not be granted. A
provisional trustee was appointed
and before delivery of the
appellants’ answering affidavit the appellants and their two
children were, in terms of s 152 of
the Insolvency Act 36 of
1936 (‘the Act’), interrogated before a magistrate.
[6] In their answering affidavits the appellants did not refer to the
interrogation in terms of s 152. The first appellant denied
most
of the instances of alleged under-invoicing and stated that to the
extent that Dresselhaus was under-invoiced such under-invoicing
was
not intentional and did not cause any loss to the respondent. He
denied, furthermore, that the respondent suffered any loss in
respect
of copper received by Dresselhaus and not invoiced by the first
appellant. According to the first appellant his liabilities
amounted
to approximately N$923 848,52 and the value of his assets to
R4 045 000 including R1 800 000 being
the value
of a 100% interest in Mintmark (Pty) Ltd. He, therefore, denied that
he was insolvent.
[7] In regard to the discrepancy between the salary earned by the
first appellant and the assets acquired by him the first appellant
stated that his salary was not his only source of income but that he
in addition thereto ‘received certain payments from certain
third
parties in return for certain advices and in the capacity as a
consultant’. He denied that he had received any unlawful
commissions.
[8] In the replying affidavit delivered by the respondent Hanke said
that in the course of further investigations and the interrogation
referred to it had emerged that the first appellant had substantial
further claims against the appellants. He alleged that the first
appellant, during the tenure and in the course of his employment with
the respondent, in breach of his fiduciary duty to the respondent,
‘received numerous secret and unauthorised payments in the nature
of bribes and/or “commissions” from the following
entities/persons
with whom (respondent) was contracting from time to
time in
at least
the following amounts’:-
Dresselhaus Scrap CC / its member Mr Weakley R 305 550,90
Global Telecom (Pty) Ltd / its director Mr Davies R 742 426,74
Energy Procurement Services (Pty) Ltd (‘EPS’),
Rousant International, Aquick International R1 253 185,00
Telephone Manufacturers of South Africa (Pty) Ltd
(‘Temsa’)
R 445 955,06
R2 747 117,70
[9] Documentary proof of these payments were annexed to the replying
affidavit. Hanke stated that the first appellant admitted at
the
interrogation that he received between R600 000 and R700 000
from Dresselhaus or Weakley, in excess of R1,5m from Global
Telecom
and approximately R1,7m from EPS, Rousant and Aquick (‘hereinafter
jointly referred to as “EPS”’); that certain of
the payments
were made to him in cash and were not deposited into any banking
account; and that the payments were made to him to
ensure his
continued support for these concerns in their business dealings with
the respondent. In regard to the appellants’ assets
the respondent
said that the first appellant was the beneficial owner of only 50% of
the shares in Mintmark (Pty) Ltd.
[10] The appellants thereupon delivered an application to strike out
certain paragraphs in and annexures to the respondent’s replying
affidavit, more particularly the paragraphs and annexures dealing
with the first appellant's admissions at the interrogation. The
appellants contended that these paragraphs and annexures should be
struck out on the ground that they constituted ‘new matter and/or
new causes of action’.
[11] On 23 October 2001 the matter came before Oosthuizen AJ. Two
preliminary matters were argued, namely, the question whether the
application for sequestration had been authorised by the respondent
and the striking out application. Oosthuizen AJ held that there
was
sufficient proof that the proceedings were duly authorised and also
dismissed the striking out application save in respect of
one
paragraph. In so far as the striking out application was dismissed he
held that the relevant paragraphs and annexures did not
constitute
new matter in that the respondent was replying to the first
appellant’s denials that he had accepted payment of unlawful
and
unauthorised commissions and that the acquisition of assets by him
indicated irregular conduct on his part. He held, furthermore,
that
the material complained of did not constitute a new cause of action.
He nevertheless proceeded to hold that, in any event, even
if it were
accepted that the material complained of constituted new matter he
had a discretion to permit new matter in the replying
papers. In the
light of the fact that the material complained of were not known to
the respondent when the founding papers were drawn
he exercised his
discretion in favour of the respondent and granted leave to the
appellants to deal with the matter which the appellants
wanted to
have struck out.
[12] In his supplementary answering affidavit the first appellant did
not deny that he gave the aforesaid evidence at the interrogation.
However, he stated that he received only the payments in respect of
which documentary proof was annexed to the replying affidavit.
He
gave no explanation for his evidence at the interrogation that some
of the payments received by him were made in cash and said
that the
amounts mentioned by him at the interrogation were merely estimates.
He stated that the payments received from Dresselhaus
and Weakley
were loans; that the payments received from Global Telecom were made
to him in consequence of advice given by him to
Global Telecom
relating to business opportunities and in particular to wireless
technology; and that the payments received from EPS
were made to him
‘in consideration for consultancy services (he) had rendered to
EPS, affording them advice concerning business
opportunities’.
[13] Temsa has at all material times been a supplier of payphones to
the respondent and the first appellant was responsible for the
administration of the relevant contracts. As regards the amount of
R445 955,06 received from Temsa it appears from a reading
of the
supplementary replying affidavit and the reply thereto that the first
appellant acquired a close corporation Lynco CC for
the purpose of
channelling money through this entity. A Mrs Helberg held the
member’s interest as the first appellant's nominee.
An agreement
was concluded between Temsa and Lynco in terms of which Lynco would
pay 5% of the value of goods supplied by Temsa to
any entity in any
African state other than the Republic of South Africa. The contract
for supply of goods by Temsa to respondent
fell within the ambit of
this agreement. The first appellant caused invoices in respect of the
5% commission payable to him by Temsa
to be raised in the name of
Lynco. A total amount of R445 955 was so received by Lynco in
respect of goods supplied by Temsa
to the respondent. After payment
of administration expenses the amounts received from Temsa were paid
to the first appellant except
in one instance when it was on the
instruction of the second appellant paid to a third party.
[14] According to the first appellant the agreement referred to was
concluded in consideration for consulting services rendered by
him to
Temsa and in particular for introducing Temsa to business
opportunities in inter alia the Democratic Republic of Congo. At
no
stage did he promote Temsa to the respondent.
[15] The first appellant denied that the respondent was entitled to
payment of the amounts received by him from Dresselhaus, Global
Telecom, EPS and Temsa. He did, however, concede that he held a 50%
and not a 100% interest in Mintmark (Pty) Ltd. It follows that
on the
appellants’ own version their assets amounted to R4 045 000
less R900 000 i.e. R3 145 000.
[16] The court
a quo
found that in accepting these payments
the first appellant acted in breach of a fiduciary duty owed by him
to the respondent which
rendered him liable to account to the
respondent for the gain which accrued to him as a result thereof. It
found, furthermore, that
the first appellant’s liability to the
respondent in respect of such payments together with the other
liabilities of the appellants
exceeded the value of their assets and
granted a final sequestration order against them.
[17] Upon application by the appellants the court
a quo
refused them leave to appeal against the finding by Oosthuizen AJ
that there was sufficient proof that the proceedings were duly
authorised; granted leave to the appellants to appeal to this court
against the dismissal by Oosthuizen AJ of the striking out
application;
and granted leave to the appellants to appeal against
the whole of its judgment. In regard to the court
a quo
's
judgment the appellants contended that the court
a quo
erred
in finding that their insolvency had been proved.
Authority to institute proceedings
[18] In their heads of argument the appellants asked that leave be
granted to them to appeal against the finding by Oosthuizen AJ
that
the proceedings were duly authorised and that their delay in applying
for such leave be condoned. They proffered no explanation
for their
delay in applying to this court for leave to appeal against that
finding. In this regard the appellants relied on
S v Safatsa and
Others
1988 (1) SA 868
(A) where Botha JA said at 877C-F:
‘If this Court is of the view that in a ground of
appeal not covered by the terms of the leave granted there is
sufficient merit
to warrant the consideration of it, it will allow
such a ground to be argued. This is well illustrated by the judgment
of Schreiner
ACJ in
R v Mpompotshe and Another
1958 (4) SA 471
(A) at 472H - 473F. In my view, however, it requires to be emphasised
that an appellant has no right to argue matters not covered
by the
terms of the leave granted. His only 'right' is to ask this Court to
allow him to do so. In
Mpompotshe
's case
supra
,
Schreiner ACJ referred to “matters which this Court should think
worthy of consideration”, and to the power of the Court “to
condone the delay and grant leave to appeal on wider grounds than
those allowed by the trial Judge”. A formal petition for leave
to
appeal on wider grounds is not an indispensable prerequisite, since
the matter is before the Court whose members would be conversant
with
the record, but the remarks I have quoted show that the Court will
certainly decline to hear argument on an additional ground
of appeal
if there is no reasonable prospect of success in respect of it.’
[19] There is no merit in the contention that Oosthuizen AJ erred in
finding that the proceedings were duly authorised. In the founding
affidavit filed on behalf of the respondent Hanke said that he was
duly authorised to depose to the affidavit. In his answering
affidavit
the first appellant stated that he had no knowledge as to
whether Hanke was duly authorised to depose to the founding affidavit
on
behalf of the respondent, that he did not admit that Hanke was so
authorised and that he put the respondent to the proof thereof.
In my
view it is irrelevant whether Hanke had been authorised to depose to
the founding affidavit. The deponent to an affidavit in
motion
proceedings need not be authorised by the party concerned to depose
to the affidavit. It is the institution of the proceedings
and the
prosecution thereof which must be authorised. In the present case the
proceedings were instituted and prosecuted by a firm
of attorneys
purporting to act on behalf of the respondent. In an affidavit filed
together with the notice of motion a Mr Kurz stated
that he was a
director in the firm of attorneys acting on behalf of the respondent
and that such firm of attorneys was duly appointed
to represent the
respondent. That statement has not been challenged by the appellants.
It must, therefore, be accepted that the institution
of the
proceedings were duly authorised. In any event, rule 7 provides a
procedure to be followed by a respondent who wishes to challenge
the
authority of an attorney who instituted motion proceedings on behalf
of an applicant. The appellants did not avail themselves
of the
procedure so provided. (See
Eskom v Soweto City Council
1992
(2) SA 703(W)
at 705C-J.)
The striking out application
[20] Save in respect of an amount of R22 747,66 the court
a
quo
did not find that the respondent’s claim for loss suffered
as a result of Dresselhaus having been under-invoiced or not having
been invoiced, had been proved. The respondent did not contend that
the court
a quo
erred in this regard. It contended that the
court
a quo
correctly found that the appellants were insolvent
as a result of the respondent’s entitlement, as against the
appellants, to payment
of the aforesaid amounts received by the first
appellant from Dresselhaus, Global Telecom, EPS and Temsa.
[21] To the extent that the respondent relies on the evidence
contained in the replying affidavit as constituting evidence of
additional
liabilities by the appellants, rendering their joint
estate insolvent, such evidence did constitute new matter as
contended by the
appellants. However, in terms of s 12(2) of the
Act a court may on the return day of a provisional sequestration
order, if not
satisfied that the debtor is insolvent, require further
proof of such insolvency. It follows logically that the court also
have a
discretion to allow such further proof in a replying
affidavit, subject, of course, to the debtor being granted an
opportunity to
deal with the new matter. Whether, in particular
circumstances, an application for sequestration should in terms of
the section be
dismissed or whether further proof of insolvency
should be allowed is a matter relating to the conduct of the business
of the court
hearing the application. In respect of such a matter
‘different judicial officers, acting reasonably, could legitimately
come to
different conclusions on the same facts’
1
.
In these circumstances there can be no doubt that the discretion
conferred on the court by s 12 is a discretion which has been
referred to as a discretion in the strict or narrow sense i.e. it is
for the court hearing the application to decide whether or not
to
allow further proof. A court of appeal can only interfere if the
court which heard the application exercised its discretion
capriciously
or upon a wrong principle, or has not brought its
unbiased judgment to bear on the question or has not acted for
substantial reasons.
2
[22] The appellants did not make out a case for interference with
Oosthuizen AJ's judgment on the aforesaid basis. Instead of doing
so
counsel for the appellants submitted that the material complained
about should have been struck out for a number of reasons of
which
Oosthuizen AJ was unaware. Oosthuizen AJ can obviously not be held to
have failed to exercise his discretion judicially on
the basis of
facts of which he was unaware. There is, therefore, no reason to deal
with the grounds upon which it was submitted that
Oosthuizen AJ
should have exercised his discretion in favour of the appellants.
Insolvency
[23] The first appellant did not deny that he testified at the
interrogation that he received payments from Dresselhaus, Global
Telecom
and EPS to ensure his continued support for them in their
business dealings with the respondent. He did not give an explanation
for
his evidence either. In the circumstances the reason given in his
supplementary affidavit for these payments cannot be taken seriously
and does not raise a genuine dispute of fact in this regard. The
court
a quo
, therefore, correctly found that the payments
admittedly received by the first appellant from Dresselhaus, Global
Telecom and EPS
were made to the first appellant to secure his
support in their business relationship with the respondent. The
appellants’ counsel
did not contend that the court
a quo
erred in this regard.
[24] On the appellants’ own version the amount admittedly received
via Lynco from Temsa was paid as a commission in respect of
goods
supplied by Temsa to the respondent.
[25] As an employee of the respondent and in the absence of an
agreement to the contrary the first appellant owed the respondent
a
duty of good faith. This duty entailed that he was obliged not to
work against the respondent’s interests; not to place himself
in a
position where his interests conflicted with that of the respondent;
not to make a secret profit at the expense of the respondent;
and not
to receive from a third party a bribe, secret profit or commission in
the course of or by means of his position as employee
of the
respondent.
3
[26] The employer may claim from an employee any bribe, secret profit
or commission received by him from a third party without the
consent
of the employer in the course of his employment or by means of his
position as employee.
4
The English law is to the same effect. In
Chitty on Contracts
28
th
ed vol 1 para 30-172 the English Law is stated thus:
‘Where an agent receives from a third party a bribe,
secret profit or commission in connection with his principal’s
affairs his
principal is entitled to claim it; the same principle
holds in regard to the relationship of employer and employee.’
[27] In the present case the first appellant breached his duty of
good faith to the respondent. He took money from Dresselhaus, Global
Telecom and EPS in return for looking after their interests in their
dealings with the respondent whereas in terms of his employment
contract with the respondent he was obliged to look after the
respondent’s interests. These payments clearly constituted bribes.
Although the first appellant denied that he promoted the interests of
Temsa in its business dealings with the respondent, the agreement
to
pay and the payment of commission to him in respect of payphones
supplied to the respondent was likely to serve as an incentive
to the
first respondent to promote Temsa’s interests in their dealings
with the respondent. These payments, therefore, similarly
constituted
bribes received by the first appellant.
[28] Counsel for the appellants did not contend that the payments
were not in the nature of bribes and that they were not received
by
the first appellant in breach of a duty of good faith to the
respondent. In their heads of argument they submitted that even if
it
is accepted that the duty owed by an employee to an employer is a
fiduciary one the employer may not claim payment from the employee
of
secret profits or commissions where these take the form of bribes.
There is no merit in this contention and it was not advanced
in oral
argument before us. What was argued before us was that the payments
received from Dresselhaus were in return for under-invoicing
Dresselhaus, that the respondent did not suffer a loss in respect of
such under-invoicing and that the amounts so received by the
first
appellant were, therefore, not recoverable.
[29] However, the appellants never contended in their affidavits that
the payments received from Dresselhaus were received in return
for
under-invoicing Dresselhaus. But, in any event, the respondent’s
claim is not a claim for damages. Bribes or secret commissions
received by an employee in the course of his employment or by means
of his employment in breach of his fiduciary duty to the employer
are
deemed to have been received for his employer.
5
[30] It follows that the respondent has a valid claim against the
first appellant for repayment of the amount of R2 747 117,70.
In addition to that liability the appellants admitted liabilities in
an amount of R1 057 131,18 which amount is made up
as
follows:
Fifty percent of respondent’s claim
referred to in para 3.2 N$208 147,54
Respondent’s claim referred to in para 3.3 N$  37 748,20
Respondent’s claim referred to in para 3.4 N$  11 235,44
Sundry loan creditors
N$800 000,00
These liabilities exceed the appellants’ assets by more than
R650 000. It follows that the appellants are insolvent.
Conclusion
[31] The appeal is dismissed with costs.
_______________
STREICHER JA
BRAND JA)
CLOETE JA) CONCUR
1
The words of Cloete J in
Bookworks (Pty) Ltd v Greater
Johannesburg Transitional Metropolitan Council and Another
1999
(4) SA 799
(W) at 806G.
2
R v Zackey
1945 AD 505
at 511;
Media Workers
Association of South Africa and Others v Press Corporation of South
Africa Ltd (‘Perskor’)
[1992] ZASCA 149
;
1992 (4) SA 791
(A) at 800C-G; and
Shepstone & Wylie and Others v Geyser NO
1998 (3) SA 1036
(SCA) at 1044J – 1045F).
3
Robinson v Randfontein Estates Gold Mining Co Ltd
1921 AD 168
at 177;
Premier Medical & IndustrialEquipment(Pty)Ltd v
Winkler and Another
1971 (3) SA 866
(W) at 867H-877A; and
Uni-Erections v Continental Engineering Co Ltd
1981 (1) SA
240
(W) at 252D-253F.
4
Transvaal Cold Storage Co Ltd v Palmer
1904 TS 4
at 20-21 and
33-34;
Jones v East rand Extension Gold Mining Co Ltd
1903 TH
325
at 335.
5
Transvaal Cold Storage Co Ltd v Palmer supra
at 20.