Rex v Milne and Erleigh (7)

• Jurisdiction: South Africa
• Judge: Centlivres CJ, Greenberg JA, and Schreiner JA
• Judgment Date: 15 December 1950
• Citation: 1951 (1) SA 791 (A)
• Court: Appellate Division

G Centlivres CJ:

The indictment on which the appellants were tried in the WLD contains 63 counts Some of the counts contain charges only against the first appellant and a greater number only against the second appellant When I refer to either of the appellants individually I shall call them Milne and Erleigh respectively It is unnecessary at this stage to particularise these counts beyond saying about one-third are H charges of the common law offences of theft or fraud while the remaining counts allege the contravention of provisions of the Companies Act or of sec 15 (a) or (b) of Act 27 of 1914 as amended All the common law counts contain alternatives charging other common law offences than the one mainly charged or alleging contraventions of one or more of the statutory provisions above-mentioned or both of these classes of offence In many of the counts one of the appellants is charged with the offence

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the other being charged as his partner under sec. 384 (7) of the Criminal Procedure Act of 1917 as amended.

The Minister of Justice, acting under the powers conferred upon him by sec. 216 (5) of the Criminal Procedure Act as amended by sec. 4 of Act A 37 of 1948, had ordered that the appellants be tried without a jury and it may be observed that, apart from the fact that the case involved a consideration of innumerable entries in books of account, it was obviously not a case which could conveniently be tried by a jury, more especially as the indictment, which consisted of 370 pages, was probably the longest and most involved indictment ever placed before a South B African court. The trial took place before LUCAS, J., sitting with two assessors, one of whom was a member of the Johannesburg Bar, and the other an accountant of Cape Town. In the result, after a lengthy trial, the appellants were convicted on the main or an alternative charge in most of the counts on which they were indicted and were sentenced to C terms of imprisonment and fines. They were acquitted on counts 1, 3, 4, 41, 49, 62 and 63, and the Crown at the trial withdrew the charges on counts 13, 14, 20, 28, 30, 35 and 37. Both appellants elected not to give evidence themselves and on behalf of the defence only one witness D was called; his evidence does not conflict with any of the evidence adduced on behalf of the Crown. At the close of the trial, on the application of the appellants, leave was granted them to appeal and special entries were made. At this stage it is unnecessary to refer E either to the grounds of appeal which attack all the convictions or to the sentences passed or to the special entries.

Case Information

Argument on appeal lasted 30 days and we are much indebted to counsel for the assistance they rendered the Court in a case which presented many difficulties and novel points of law.

F I shall of course have to refer later in detail to the counts on which there were convictions, but before doing so it is necessary to give some account of the companies in connection with which the offences were found to have been committed and the appellants' relationship to these companies. The need for a consideration of the position of these G companies and of the appellants' relation to them applies particularly to the charges of theft on which either of the appellants has been convicted as these offences are alleged to have been committed by the dealing, on the part of the appellant concerned, with property belonging to one or other of these companies and the right of such appellant so to H deal with the property or his belief in the existence of the right, will have to be investigated. Similar considerations may also apply in regard to the charges of fraud.

The company whose activities figure most prominently in the events which gave rise to the charges against the appellants is the New Union Goldfields Ltd. For the sake of brevity I shall refer to

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it in the same way as was done in the proceedings in the Court a quo, viz. as N.U.G. It was formed in 1934 to work a small mine in the Northern Transvaal, but in that sphere it never prospered. In 1938 Erleigh acquired a controlling interest in it and became its chairman A until 1947, when he resigned, and shortly thereafter it was placed under judicial management, a position which still existed at the time of the trial. Erleigh, after he became connected with it, developed it as a company to acquire interests in other existing companies or to form new companies to be associated with it. As a result of his activities its B capital was increased and it soon became the 'head of an ever-expanding group of companies', to quote from the reasons given in the Court a quo. Its revenue grew from £49,212 in 1938 to £1,167,124 in 1946. By 1947 N.U.G. was the head of a group of over 160 associated companies and acted as secretary of the companies in the group. Its C profits were obtained almost entirely by speculation on the Stock Exchange, either in shares in companies in which a controlling interest had been acquired, or through dealings in shares in new companies, which Erleigh and Milne had floated. Other companies in the group also made D large profits through sharedealing, e.g. Rooderand Main Reef Mines Ltd. (known as 'Rooderand'), which in 1946 made a profit of over £1,000,000 largely from share-dealing.

Erleigh was sole managing director of N.U.G. from 1939 to the end of 1946, when Milne became joint managing director. Erleigh was given no E specific powers until 15th November, 1944, when the board passed the following resolution:

'It was resolved that authority be and is hereby conferred on Mr. N. S. Erleigh as managing director of the Company to buy and sell on behalf of the Company shares or options on shares in other companies at his sole discretion, and to grant options or calls on any of the Company's shareholdings in other companies to such persons and on such terms and F conditions as he in his discretion may deem fit.'

This was in terms of sec. 109 of N.U.G.'s Articles of Association. He was given similar powers about the same time in Lydenburg Gold Farms Ltd. and New Witwatersrand Gold Exploration Company Ltd. (New Wits.), G two companies in the group, but it is clear that both in these companies in which he was given specific powers and in all the other companies in the group, both before and after the granting of these specific powers, he, and later he and Milne, rightly or wrongly exercised unlimited authority in all transactions effected by these companies. In the reasons given in the trial Court it is said that: -

H 'The evidence shows that Erleigh, and later, from 23rd December, 1946, Milne and Erleigh together, dominated the board of N.U.G. The remaining members were, as I shall show later, dummies and creatures of Erleigh. They were all dependent on him for their positions and for favours to come and-none could or ever did exercise any independent judgment or criticism. Generally Erleigh appointed them and to several of them gave them their qualifying shares which could at any moment be transferred out of their names, in which event they would cease to be directors.

It was common cause that N.U.G. was a 'one man company', not in the

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sense in which that word is usually used in connection with a private company but in the sense that it was a company in which everything was in the hands of one man who did just what he pleased, when he pleased, and how he pleased. He was responsible for all transactions of the company other than its purely administrative works.'

And in another passage,

A 'Though he was not given similar powers' (i.e. the specific powers I have already mentioned) 'in the other companies in the group . . . he wielded the same complete power over them as he did over N.U.G.'

I have already referred to Milne, and it appears that on December 23rd, B 1946, he was appointed joint managing director with Erleigh. Until that date he had not been a director of N.U.G., but, although holding no office, he had taken considerable part in its activities for some years before his appointment. He was specially interested in the industrial side of the group and was largely instrumental in forming a number of C Orange Free State companies which were brought into the group. It will appear from my reference to the indictment that it is contended by the Crown - and the contention was upheld in the Court a quo - that he and Erleigh were partners in transactions on which a number of counts were based and that one or other of them was liable under sec. 384 (7).

D It will be convenient at this stage to quote from another passage in the reasons in regard to the relation of N.U.G. to the other companies in the group and of the appellants' position in these companies. It reads: -

E 'There is no conflict about the composition of the N.U.G. group. A number of companies, about 160 at the time of the crash, were regarded as forming a group. N.U.G. acted as secretary of those companies, carried on a joint administration of their affairs, and kept their records.

In the N.U.G. group there were two sets of companies, (a) the financial companies, that is, those whose business was dealing and speculating in shares of which there were some thirty or forty; and (b) a large number F of industrial companies. The link between them all was Erleigh as managing director. The entire control of the group was in his hands until the appointment of Milne as joint managing director and then it was in the hands of the two of them. Erleigh was the person who gave instructions about the business of the companies in the group. His G instructions were carried out by the N.U.G. administration without question.

N.U.G. was the pivot of the organisation. The other companies, referred to during the trial as...