Price Waterhouse Coopers Inc and Others v National Potato Co-Operative Ltd

• Jurisdiction: South Africa

Price Waterhouse Coopers Inc and Others v National Potato Co-Operative Ltd
2004 (6) SA 66 (SCA)

2004 (6) SA p66

Citation	2004 (6) SA 66 (SCA)
Case No	448/02
Court	Supreme Court of Appeal
Judge	Harms JA, Cameron JA, Conradie JA, Lewis JA and Southwood AJA
Heard	May 11, 2004
Judgment	June 1, 2004
Counsel	W H G van der Linde SC (with him F G Barrie) for the appellants.; C E Puckrin SC (with him G W Alberts and W C Maritz) for the respondent.

Flynote : Sleutelwoorde B

Champerty — Agreement in terms of which person provides litigant with funds to litigate in return for share of proceeds of litigation neither contrary to public policy nor C void — Even where such agreement illegal, illegality extraneous to dispute between parties and thus no defence in litigation — Though champertous agreement may constitute abuse of process, Courts empowered to prevent such abuse despite right of access to courts guaranteed by s 34 of Constitution.

Headnote : Kopnota

The fact that a litigant had entered into an unlawful agreement D with a third party to provide funds to finance his case is a matter extraneous to the dispute between the litigant and the other party and was therefore irrelevant to the issues arising in the dispute, whatever the cause of action. (Paragraph [48] at 80C - D.) An agreement in terms of which a person provides a litigant with funds to prosecute an E action in return for a share of the proceeds of the action was not contrary to public policy or void. The illegality of such an agreement or an attorney's contingency fee agreement would not be a defence in the action. Litigation pursuant to such an agreement may constitute an abuse of the process that the Court may prevent in appropriate circumstances notwithstanding the right of access to the courts guaranteed by s 34 of the Constitution of the Republic of South Africa F Act 108 of 1996. (Paragraph [52] at 81J - 82B.)

The decision in the Transvaal Provincial Division National Potato Co-operative Ltd v Price Waterhouse Coopers Inc confirmed on appeal, but for other reasons.

Cases Considered

Annotations G

Reported cases

Afrox Healthcare Bpk v Strydom 2002 (6) SA 21 (SCA): referred to

Beinash v Wixley 1997 (3) SA 721 (SCA): referred to

Beinash and Another v Ernst & Young and Others 1999 (2) SA 116 (CC) (1999 (2) BCLR 125): referred to H

Botha (now Griessel) and Another v Finanscredit (Pty) Ltd 1989 (3) SA 773 (A): referred to

Brisley v Drotsky 2002 (4) SA 1 (SCA): dictum in para [94] applied

Brummer v Gorfil Brothers Investments (Pty) Ltd en Andere 1999 (3) SA 389 (SCA): referred to

Campbell v Welverdiend Diamonds Ltd 1930 TPD 287: critisised and not followed I

Chief Lesapo v North West Agricultural Bank and Another 2000 (1) SA 409 (CC) (1999 (12) BCLR 1420): dictum in para [22] applied

Corderoy v Union Government (Minister of Finance) 1918 AD 512: referred to

C V J J Platteau v S P Grobler [1897] 4 OR 389: referred to

Eastwood v Shepstone 1902 TS 294: referred to J

2004 (6) SA p67

First National Bank of South Africa Ltd v Land A and Agricultural Bank of South Africa and Others; Sheard v Land and Agricultural Bank of South Africa and Another 2000 (3) SA 626 (CC) (2000 (8) BCLR 876): dictum in para [6] applied

Fouche v The Corporation of the London Assurance 1931 WLD 146: compared

Giles v Thompson and Related Appeals [1993] 3 All ER 321 (CA and HL): referred to

Goodgold Jewellery (Pty) Ltd v Brevadau CC 1992 (4) SA 474 (W): referred to B

Green v De Villiers, Dr Leyds NO and The Rand Exploring Syndicate [1895] 2 OR 289: criticised and not followed

Hudson v Hudson and Another 1927 AD 259: referred to

Lekeur v Santam Insurance Co Ltd 1969 (3) SA 1 (C): referred to C

Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A): referred to

Moise v Greater Germiston Transitional Local Council: Minister of Justice and Constitutional Development Intervening (Women's Legal Centre as Amicus Curiae) 2001 (4) SA 491 (CC) (2001 (8) BCLR 765): dictum in para [23] applied D

Patz v Salzburg 1907 TS 526: referred to

Ram Coomar Coondoo and Another v Chunder Canto Mookerjee [1886] 2 AC 186: dictum at 210 applied

Re Trepca Mines Ltd [1962] 3 All ER 351 (CA): referred to

Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A): referred to

Schweizer's Claimholders' Rights Syndicate Ltd v The Rand Exploring Syndicate Ltd [1896] 3 OR 140: E critisised and not followed

Thomas Hugo and Fred J Möller NO v The Transvaal Loan, Finance and Mortgage Company [1894] 1 OR 336: criticised and not followed

Trendtex Trading Corporation and Another v Crédit Suisse [1980] 3 All ER 721 (CA): referred to

Western Assurance Co v Caldwell's Trustee F 1918 AD 262: referred to.

Statutes Considered

Statutes

The Constitution of the Republic of South Africa Act 108 of 1996, s 34: see Juta's Statutes of South Africa 2003 vol 5 at 1-149.

Case Information

An appeal against a decision in the Transvaal Provincial G Division of the High Court (Hartzenberg J). The facts and issues appear from the judgment of Southwood AJA.

W H G van der Linde SC (with him F G Barrie) for the appellants.

C E Puckrin SC (with him G W Alberts and W C Maritz) for the respondent. H

In addition to the cases cited in the judgment of the Court, counsel for the parties referred to the following authorities:

Dreyer v Tuckers Land and Development Corp 1981 (1) SA 1219 (T) at 1228C I

Headleigh Private Hospital v Soller and Manning Attorneys 2001 (4) SA 360 (W)

Hippo Quarries (Tvl) (Pty) Ltd v Eardley 1992 (1) SA 867 (A) at 876I - 877F

Hollard v Zietsman 1885 NLR 93 at 96 - 7 J

2004 (6) SA p68

Johannesburg Waterworks Co Ltd v Hollard 1891 SAR 26 at 32 and further A

Johnson v Incorporated General Insurances Ltd 1983 (1) SA 318 (A) at 332B - H

Jonathan v General Accident Insurance Co of South Africa Ltd 1992 (4) SA 618 (C) at 623G

Kali v Incorporated General Insurances Ltd 1976 (2) SA 179 (D) at 182A B

Laurent v Sale & Co [1963] 2 All ER 63 (QB) at 65

Martell and Others v Consett Iron Co Ltd [1955] 1 All ER 481 (CA) at 488I - 489B, 507G - H

Mayne v James and the High Sheriff 1892 C (4) SAR 274 at 276 - 7

Nasionale Aartappel Koöperasie Bpk v Price Waterhouse Coopers Ing en Andere 2001 (2) SA 790 (T)

Nedcor Bank Ltd v Hyperlec Electrical and Mechanical Supplies CC 2000 (2) SA 880 (T) at 884C

Neville v London (Express) Newspapers Ltd D 1919 AC 368 at 382

Novic v Comair Holdings Ltd 1979 (2) SA 116 (W)

Peacock v Marley 1934 AD 1 at 3

Pietermaritzburg Corporation v South African Breweries Ltd 1911 AD 501

Pillay v Krishna and Another 1946 AD 946 at 952 E

Re Trepca Mines Ltd (Application of Radomir Nicola Pachitch (Pasic)) [1962] 1 All ER 755 (ChD) at 764C - 767F

The Weston Distributing Company v Carter Brothers Products (Edms) Bpk 1945 NPD 467 at 472 - 3

Trendtex Trading Corporation and Another v Crédit Suisse [1981] 3 All ER 520 (HL) at 524h - 525d

Walker v Matterson 1936 NPD 495 at 504 - 5 F

Beale Chitty on Contracts vol 1 General Principles (1999) para 17-049, 17-066

Hutchinson et al Wille's Principles of South African Law 8th ed at 432 - 3 G

Milner 73 (1956) SALJ 81 at 84

Roberts Wessels Law of Contract in South Africa 2nd ed vol 1 paras 510 - 22.

Cur adv vult.

Postea (June 1). H

Judgment

Southwood AJA:

[1] The question which arises in this appeal is whether an alleged champertous agreement between the respondent co-operative (the plaintiff in the Court below) and a third party to finance the I respondent's action against a firm of accountants, the appellants (the defendants in the Court below) may be relied upon by the appellants as a defence to the respondent's claim. In this judgment, I shall refer to the appellants, individually and collectively, as 'Price Waterhouse' and to the respondent as 'the Co-operative'. J

2004 (6) SA p69

Southwood AJA

[2] The salient facts as they emerged from the Co-operative's A evidence (Price Waterhouse did not tender any) are as follows: The Co-operative is a primary agricultural co-operative registered in terms of the Co-operatives Act 91 of 1981. During 1997 the Co-operative appointed Collett, Du Toit & Associates (Pty) Ltd (CDA) to investigate certain irregularities allegedly committed by the Co-operative's then general manager, Mr Boonzaaier. Mr David Collett, a chartered B accountant, was to conduct the investigation for CDA.

[3] Late in 1997, CDA submitted a draft preliminary report to the Co-operative's board of directors. In this report Collett listed the irregularities which he had found and expressed the view that Mr Boonzaaier was heavily involved in the commission of these C irregularities. The report also referred to other matters which, in Collett's opinion, should have been detected and reported by the auditor. In November 1997, and apparently because of this report, Price Waterhouse resigned as the Co-operative's auditor at the annual general meeting. D

[4] CDA continued to investigate the irregularities but by April 1998 the focus of the investigation had changed to the viability of a claim against Price Waterhouse. On 27 March 1998 Collett gave his findings to a senior advocate and requested him to furnish an opinion on the Co-operative's prospects of success if it were to institute an action against Price Waterhouse. E

[5] The cost of CDA's investigation put a strain on the Co-operative's financial position and the Co-operative's management advised the board not to proceed with the investigation. The board chose instead to investigate alternative means of financing the litigation. Its initial proposal was to find a third party to finance F the litigation in exchange for a share of the proceeds of a successful action. The proposal contemplated that the third party would contribute an amount of R1,5 million to the cost of...