S v De Jager and Another

• Jurisdiction: South Africa
• Judge: Beyers JA, Rumpff JA and Holmes JA
• Judgment Date: 09 March 1965
• Citation: 1965 (2) SA 616 (A)
• Court: Appellate Division

S v De Jager and Another
1965 (2) SA 616 (A)

1965 (2) SA p616

Citation	1965 (2) SA 616 (A)
Court	Appellate Division
Judge	Beyers JA, Rumpff JA and Holmes JA
Heard	February 15, 1965; February 16, 1965; February 17, 1965
Judgment	March 9, 1965

Flynote : Sleutelwoorde A

Criminal procedure — Sentence — Interference by Appellate Court — Company — Director — Theft by — Directors, the sole beneficial shareholders, paying out funds for their own purposes.

Headnote : Kopnota

B Appellate jurisdiction to interfere with punishment is not discretionary but, on the contrary, is very limited.

The appellants had been directors of several limited liability companies and they had been charged with, inter alia, theft. The trial Court had found that the first appellant, in conspiracy with S, a co-director, had caused payments totalling R22,665 to be paid out of the FGG Company's C funds, that such payments had been unauthorised and had been for the first appellant's own purposes and not for the FGG Company. The defence was that the first appellant had been entitled to a credit of R25,000 in his loan account, being his share of a sale of shares which the Court found had never taken place, and that this amount exceeded that which he had caused to be paid out. In an appeal,

Held, per HOLMES, J.A. (BEYERS, J.A., concurring), that the fact that the first appellant, with S, had been the sole beneficial shareholder of D FGG, did not enable him as a director to use any funds for his own purposes.

Case Information

Appeal from a conviction in the Witwatersrand Local Division (GALGUT, J.). Facts not material to this report have been omitted.

W. Oshry, Q.C. (with him B. Merber), for the first appellant.

J. F. Coaker, for the second appellant. E

G. G. Hoexter (with him F. H. Grosskopf), for the State: In the investigation of the rei gestae veritas, the test propounded by Lord HALSBURY, L.C., in Aaron's Reefs, Ltd v Twiss, 1896 A.C. (H.L.) at p. 281, is in harmony with our law; see Pothier Verhandeling van Contracten F (van der Linden's translation, eerste deel, s.v. 'van bedrog'). There is no reason in law why a director of a company, in his personal capacity, cannot be charged with making a false representation to the company, even though he makes it through a board of directors all of whom are aware that the representation is false; see R v Kritzinger, G 1953 P.H. H.109. The meaning of the phrase 'calculated to prejudice' is objective and not subjective; see R v Kruse, 1946 AD at pp. 532 - 3; R v Heyne and Others, 1956 (3) SA at pp. 622 - 5.

Oshry, Q.C., in reply.

Coaker, in reply.

Cur adv vult.

Postea (March 9th). H

Judgment

Rumpff, J.A.:

In the judgment of my Brother HOLMES there appear extracts of the finding of the trial Court setting out the facts which constitute the general background of this case. I agree with his conclusions as to the outcome of the appeals on counts 2 and 3. I propose to set out briefly what my view is as regards counts 1 and 6 and 7, and to deal with counts 10, 11 and 13.

1965 (2) SA p617

Rumpff JA

In count 1 the appellants were charged as directors of FGG (therefore as agents) with having paid out certain FGG monies for the benefit of the payees (themselves, Shaban and certain companies) and not for the benefit of FGG.

A It seems to me that if on count 1 the evidence discloses that all the shareholders - and therefore the company - approved of the payments with which the appellants are charged, it cannot be said that a theft has been committed - whatever other crimes or statutory contraventions may have been perpetrated - unless the evidence also discloses that the payments were made pursuant to transactions which, to B the knowledge of the directors concerned, were ultra vires the memorandum of the company. To that extent I agree with the views expressed by WILLIAMSON, J., in R v Jona, 1961 (2) SA 301 (W), referred to in the judgment of my Brother HOLMES. A short (and incomplete) definition of theft is the unlawful appropriation of somebody else's property. Such appropriation is lawful when the owner C consents thereto or when the appropriator bona fide thinks that the owner will consent.

Fraud may be committed on creditors or on shareholders or on the company by directors, or directors may steal from the company or the majority of shareholders may commit fraud on the minority but I am not aware of any D provision whereunder the shareholders of a company commit theft when the company (through a resolution of the shareholders) disposes of its assets in a manner which is not ultra vires the memorandum. There is also, in my view, no duty on the shareholders when they meet as shareholders to act in the interests of the company. They can decide what they like - within the objects of the memorandum - and when E they decide, the company has decided. Nor do the directors or the company itself owe a common law fiduciary duty to creditors to preserve the assets of the company. For purposes of this case the only question to be considered is one of consent. Fraud and other offences need not be discussed. The evidence discloses that the transactions with which the F appellants are charged were authorised by all the shareholders. The alleged victim has therefore consented to the payments of the moneys taken from it. The fact that the shareholders in this case happen to be the directors may of course give rise to a sense of indignation but it does not alter the legal position.

G The trial Court held that there was a duty on FGG because it was a public company and because it had been given leave to operate as a deposit receiving institution. The trial Court held that the company

'was required . . . to conduct its affairs in a manner appropriate to a public company and to apply its fund as would be expected from any normal deposit receiving institution'.

If the learned trial Judge by his opinion meant that the shareholders H owed a duty to the public, even if they acted within the objects of the memorandum, I cannot agree with him. The shareholders do not act as agents for anybody and in my opinion there is in law no such duty as envisaged by him. If the evidence on count 1 reveals that the confirmation by the shareholders is ultra vires the memorandum, to the knowledge of the appellants, it could be said that the appellants are guilty of theft because in that case the company cannot be said to have given its consent. The memorandum of FGG was not put before the trial Court

1965 (2) SA p618

Holmes JA

and we do not know what its provisions are. In the circumstances I am unable to decide that the consent of the shareholders of FGG was ultra vires the memorandum and in my view the appeal against the conviction on count 1 should succeed.

A [The learned Judge then dealt with other counts and concluded.]

To sum up: I would dismiss the appeals on counts 10, 11 and 13; I agree with the judgment of my Brother HOLMES in which he is of opinion that the appeals on counts 2 and 3 should be dismissed. I am also of opinion B that the appeals against the sentences imposed on these counts should be dismissed. As to counts 1, 6 and 7, I would uphold the appeals and alter the total of the sentences imposed accordingly.

Judgment

Holmes, J.A.:

The two appellants, after a trial lasting several weeks, were convicted by GALGUT, J., sitting in the Witwatersrand Local C Division, on several counts of fraud and theft relating to the affairs of various companies of which they were directors. There were acquittals on some counts.

By way of introduction, I set out the following passage from the judgment of the trial Court.

'For the sake of brevity I will set out the name of the company in full D only once. Thereafter I will use the abbreviation which appears in the bracket behind the name of the company when it is first fully set out.

The companies mainly concerned are Finance Guarantee and General Holdings Ltd. (FGG), Pinnacle Insurance Co. Ltd. (Pinnacle), African Horison Insurance Co. Ltd. (AHI), Johannesburg Insurance Co. Ltd. (JIC) and Borgstaan (Eiendoms) Beperk (Borgstaan). Of these five companies the first four named are public companies and the second, third and fourth were also registered insurance companies. These insurance companies had E assets which were easily realisable. The fifth company is a private company.

In each count it is alleged that at the time of the commission of the offence one or both accused occupied a position of trust in relation to the company concerned in that such accused was a director of the company, either because he had been appointed as such or by virtue of the provisions of sec. 229 of the Companies Act, 46 of 1926, and the provisions of sec. 381 (10) of the Criminal Procedure Act, 56 of 1955, and that it was the duty of the accused to conduct the affairs of the F principal in the interest of the principal and not for their own benefit. It is alleged that in each of the fourteen counts there was a flagrant breach of that duty . . ..'

Count 1 alleged a theft from FGG. Counts 2 and 3 alleged a fraud on Pinnacle. Counts 6 and 7 alleged thefts from AHI. Counts 10 (theft), 11 (fraud) and 13 (theft), relate to JIC. These are the only counts G relevant to this appeal.

The judgment continues:

'It is convenient to state briefly that in terms of the Insurance Act, 27 of 1943, as amended, every insurer (Pinnacle, JIC and AHI were insurers) is obliged to make detailed annual reports to the Registrar of Insurance, including full details of assets and liabilities at least once a year. The Registrar has a discretion to call for quarterly H reports. An insurer must also appoint auditors and actuaries who have specific responsibilities. There are also provisions as to the nature of the securities in which an insurer may invest. The Registrar is given...