S v Harper and Another

• Jurisdiction: South Africa
• Judge: Milne J
• Judgment Date: 28 November 1980
• Citation: 1981 (2) SA 638 (D)
• Court: Durban and Coast Local Division

S v Harper and Another
1981 (2) SA 638 (D)

1981 (2) SA p638

Citation	1981 (2) SA 638 (D)
Court	Durban and Coast Local Division
Judge	Milne J
Heard	August 4, 1980; August 5, 1980; August 6, 1980; August 7, 1980; August 8, 1980; August 9, 1980; August 10, 1980; August 11, 1980; August 12, 1980; August 13, 1980; August 14, 1980; August 15, 1980; August 16, 1980; August 17, 1980; August 18, 1980; August 19, 1980; August 20, 1980; August 21, 1980; August 22, 1980; August 23, 1980; August 24, 1980; August 25, 1980; August 26, 1980; August 27, 1980; August 28, 1980; August 29, 1980; September 2, 1980; September 3, 1980; September 4, 1980; September 5, 1980; September 6, 1980; September 7, 1980; September 8, 1980; September 9, 1980; September 10, 1980; September 12, 1980; September 13, 1980; September 14, 1980; September 15, 1980; September 16, 1980; September 17, 1980; September 18, 1980; September 19, 1980; September 20, 1980; September 21, 1980; September 22, 1980; September 23, 1980; September 24, 1980; September 25, 1980; September 26, 1980; September 27, 1980; September 28, 1980; September 29, 1980; September 30, 1980; October 14, 1980; October 15, 1980; October 16, 1980; October 17, 1980; October 18, 1980; October 19, 1980; October 20, 1980; October 21, 1980; October 22, 1980; October 23, 1980; October 24, 1980; October 30, 1980; October 31, 1980; November 3, 1980; November 4, 1980; November 5, 1980; November 6, 1980; November 7, 1980
Judgment	November 28, 1980

Flynote : Sleutelwoorde

H Criminal law — Fraud — Proof of — When presumption in s 245 of Act 51 of 1977 can be applied — Nature of enquiry where representation is made in regard to some future time.

Criminal law — Fraud — Representation honest when made but later shown to be untrue or circumstances altering so that statement no longer true — Accused not enlightening complainant thereanent — Harm resulting — Fraud committed.

Criminal law — Fraud — Fraudulent non-disclosure — Requisites

1981 (2) SA p639

of restated — Duty of disclosure — When such arises — Seller of shares knowing that shares might not be transferred to purchaser upon performance A by latter of his obligations because of circumstances known to seller but not to purchaser — Duty of seller to disclose such circumstances to purchaser.

Criminal law — Theft — Theft of incorporeals — When conviction for permissible in our law — Whether physical handling necessary to constitute theft.

B Criminal law — Theft — What amounts to — Agent knowingly altering share register of company to reflect himself as owner of shares — Such amounting to theft.

Criminal law — Theft — Of trust money — What State must prove — Must be proved that accused knew that the taking of the money was unauthorised.

C Company — Shares — Transfer of — Agent of shareholder altering register to reflect himself as owner of shares — Such amounting to theft.

Company — Management — Offences — Carrying on business of company recklessly — Contravention of s 424 (3) of Act 61 of 1973 — What State D must prove — "Recklessly" in section — What amounts to — "Carrying on" of business as intended by section — What amounts to — Company embarking on a series of different transactions, each of which is reckless — Conduct as a whole then amounts to the reckless carrying on of business of that company.

Headnote : Kopnota

E If the misrepresentation on which a charge of fraud is founded is an objective fact and it is proved to be false, the presumption in s 245 of Act 51 of 1977 applies. Where a representation is made in regard to some future time, the true enquiry is whether the accused has honestly, impliedly expressed his present state of mind in regard to the matter represented.

F Where A makes an honest representation (as to his intention regarding the security of a loan) to B in order to induce B to lend him money for a year and B does, but A then discovers that his statement was untrue or circumstances have altered so that what was then true is no longer so and A knows that B still believes it to be true and A allows a year to pass without enlightening B and at the end of the year A goes insolvent and cannot repay B, then A commits fraud: the statement had lulled B into a false sense of security and involved the risk of harm.

G Despite what is said in S v Kotze 1965 (1) SA 118 (A) at 125D - E, the Appellate Division has, in effect, decided that (a conviction of) theft of an incorporeal is, in the case of a credit balance, permissible in our law. Once the Courts have moved away from the requirement of a physical handling, then the reason for saying that there can be no theft of an incorporeal in any circumstances would seem to have fallen away.

Neither on the grounds of principle nor on the grounds of practical H considerations does there seem to be any reason for distinguishing between the act of an agent who knowingly, unlawfully reduces the credit of his principal's banking account and the act of an agent who knowingly, unlawfully alters the share register (of a company) reflecting his principal as a shareholder so as to reflect himself or his own company as the shareholder. Such person is guilty of theft.

In the theft of trust money, as in other cases of theft, it is still incumbent upon the State to prove, in addition to other requisites, that the accused knew that the taking of the money was unauthorised (and could not have believed that the principal, if approached, would have consented to the taking of the money) and that he intended to terminate the owner's enjoyment

1981 (2) SA p640

of his rights or to deprive him of the whole benefit of his ownership. The requisites of fraud, committed by fraudulent non-disclosure, restated.

Once the seller of shares in a company knows that, despite due A performance by the purchaser of his obligations, there is a real risk that the shares will not be transferred to the purchaser because of circumstances which are known to the seller, but not to the potential purchaser, then it is the duty of the seller to disclose them (ie the aforementioned circumstances) to the potential purchaser.

In order to obtain the conviction of a director of a company on a charge B of contravening s 424 (3) of the Companies Act 61 of 1973, the State must establish (a) that the business of the company was carried on (i) recklessly or (ii) with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose; (b) that the accused was knowingly a party to the carrying on of the business in the manner aforesaid. In deciding whether the business had been carried on "recklessly", the test to be applied is an objective one and proof of C gross negligence is sufficient. If the company continues to carry on business and incurs debts when there is, to the knowledge of the directors, no reasonable prospect of the creditors ever receiving payment of those debts, it is, in general, a proper inference that the company is carrying on business with intent to defraud: a fortiori, where the income of the company is appropriated as loans to employees or directors of the company. If, in the particular circumstances, it is for some reason not permissible to infer an intent to defraud, such conduct would almost invariably be reckless.

D There is support for the proposition that the "carrying on" of any business of a company, within the meaning of s 424 (3) of Act 61 of 1973, would not ordinarily be constituted by a single wholly isolated transaction. It is, however, clear that, if a company embarks upon a series of different transactions, each of which is reckless, then its conduct as a whole amounts to the reckless carrying on of business of that company. E

Case Information

Criminal trial on charges of fraud, theft and other charges. Facts not material to this report have been omitted.

H G Klem SC (with him R Stuart and V O'Connell) for the State.

L V Broster for accused No 1 at the request of the Court.

S Shepstone for accused No 2.

Cur adv vult. F

Postea (November 28). G

Judgment

Milne, J.:

The two accused in this case were originally charged on 74 different charges (excluding alternative charges). Of these, 50 were charges of fraud, 19 were charges of theft and the remaining five were H charges of contravening various sections of the Companies Act 61 of 1973, namely s 226 (4) (count 35) and s 424 (3) (counts 70 - 74). Certain further particulars were asked and furnished with regard to counts 112 and counts 33 - 74 (wrongly described in both the request and the reply as 13 - 74).

Both the accused pleaded not guilty to all the charges. Accused No 1 was represented by Mr Broster, who appeared pro deo, and accused No 2 was represented by Mr Shepstone.

Notice of objection to the indictment was given on behalf of accused No 2. This raised the question as to whether there was an improper splitting of charges on the ground that the conduct which was the subject

1981 (2) SA p641

Milne J

of counts 19 - 32 was already embraced in count 13. This objection was, however, withdrawn at the commencement of the trial, accused No 2 reserving the right to argue that there had been such a splitting at the A appropriate stage. Mr Shepstone, in the course of his argument at the conclusion of the trial, submitted that counts 13, 16, 19 - 32 inclusive and 69 should be consolidated into one count. He submitted that it was necessary to do so because the State had been unable to establish a B separate contrectatio in respect of each of these counts. Counsel for the State agreed with this submission, and applied for all these counts to be consolidated into one count of theft creating a general deficiency of R847 211, 10, this being the total of the amounts involved in counts 13, 16, 19 - 32 and 69. This excludes counts 20 and 26 on which both the accused C were...