The State v Kruger and Another

• Jurisdiction: South Africa
• Judge: Ogilvie Thompson JA, Rumpff JA and Wessels AJA
• Judgment Date: 29 September 1961
• Citation: 1961 (4) SA 816 (A)
• Hearing Date: 01 September 1961
• Court: Appellate Division

Ogilvie Thompson, J.A.:

Appellants appeal, on leave granted, against a decision of the Orange Free State Provincial Division confirming their G conviction by a regional magistrate on two counts of fraud. At all times material to this case a company known as Continental Motors (Pty.) Ltd. conducted in Bloemfontein the business of a motor service station, including the selling of motor vehicles. The paid up capital of this company was £5,000, but the company - hereafter referred to as Motors H - enjoyed facilities at the Bank by way of overdraft guaranteed by its principal shareholder and director, the appellant Jessup, then an attorney in good standing practising in Bloemfontein. The company was managed by the appellant Kruger who was also a director and a small shareholder; but the dominant control lay throughout with Jessup. During 1956 Jessup and Kruger obtained a contract, which they expected to prove very profitable, for the cartage of materials in connection with the construction of the J. B. M. Hertzog airport at Bloemfontein. For the purpose of conducting this cartage business,

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Jessup and Kruger decided to form a private company in which they would be the sole shareholders. In June, 1956, such a company was registered with the name Continental Cartage Contractors (Pty.) Ltd. Initially the A word 'Contractors' appears to have been omitted from the company's name in certain documents signed by its directors, but in the present appeal nothing turns on this. The capital of this company - hereinafter referred to as Cartage - was, apparently, only £2. According to the evidence of Kruger at the trial, it was agreed that Cartage would be B financed by loans from Motors: Kruger was unable to point to any documentary corroboration in this regard. According to the Crown witnesses Shipway and Norval - whose evidence was accepted by the magistrate - they were told by Kruger, in the course of the negotiation of the matters forming the subject of the first count against appellants, that Cartage would be financed by loans from Jessup. It is, however, abundantly clear that, having regard to their financial C position, neither Motors nor Kruger were at any relevant time able to provide finance for Cartage. On the other hand, Jessup, who was then generally accepted as being a man of substantial means, would have been able, either directly or via Motors, to provide finance for Cartage at any rate in the first few months of Cartage's existence.

D To implement the airport contract, Cartage required a number of heavy duty vehicles and this necessitated a considerable capital outlay. To meet this situation, it was decided by Jessup and Kruger that Motors should first sell the necessary vehicles to Cartage on hire-purchase, and then discount the agreements with a finance house. By this means, it E was thought, Cartage would get its vehicles, Motors would not sustain any undue capital drain, and the finance house would in due course be paid off out of the anticipated substantial profits from the airport contract. It is in these discounting transactions that the present charges against the appellants have their origin. It must also be mentioned that none of the hire-purchase agreements concerned in this F appeal fell within the ambit of the Hire Purchase Act and that, consequently, the payment of an initial cash deposit in respect of those agreements was not legally compulsory.

In connection with that part of its business which consisted in selling G motor vehicles, Motors had at all relevant times an agreement, referred to in the evidence as the 'Master Agreement', with a finance house called National Industrial Credit Corporation Ltd., whereunder the latter - to whom I hereafter refer as the Credit Corporation - discounted hire-purchase contracts concluded between Motors and its customers. The head office of the Credit Corporation is in Johannesburg, but at all relevant times that Corporation also had a branch office in H Bloemfontein. It was to the Credit Corporation that appellants turned for finance in relation to the first vehicles acquired by Cartage; and, in the circumstances more fully detailed below, eight contracts were, between 23rd March, 1956, and 27th July, 1956, concluded with the Credit Corporation whereunder that Corporation discounted hire-purchase agreements between Motors, as the vendor, and Cartage, as the buyer, of the vehicles. All these eight contracts relate to the first count against appellants. The second count relates to a similar transaction concluded at

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Cape Town on 27th June, 1956, with Federale Trust Beperk (hereafter referred to as Federale Trust) whereunder that company discounted six hire-purchase agreements concluded between Motors and Cartage for vehicles supplied to the latter by the former. It is convenient to deal first with the second count.

A The gravamen of the charge laid against appellants in the second count is that, in relation to the six hire-purchase contracts discounted by Federale Trust, appellants represented to it

'that the required deposit in respect of each contract had been paid',

which said representation induced Federale Trust to its loss and B prejudice to discount these hire-purchase contracts, whereas in truth and in fact, when so representing, the appellants well knew that

'the required deposits had not been paid in respect of the said contracts'.

The initial enquiry, accordingly, is whether the Courts below were correct in holding, as they did, that the representation thus charged against the appellants was duly proved by the State.

C It is common cause that on 27th June, 1956, Kruger called upon Federale Trust at its Cape Town office and there interviewed Riedeman, the legal adviser of a group of companies of which Federale Trust is one, with the request that Federale Trust discount contracts relating to the supply of vehicles by Motors to Cartage. Some conflict exists between the accounts of this interview respectively deposed to by D Riedeman and Kruger. The magistrate found Kruger to be an unreliable witness and no attempt was made before us to assail that finding. In what follows I accordingly summarise the version given by Riedeman. According to Riedeman, after Kruger had made known what he wanted, a E committee of officials of Federale Trust who adjudicate upon such matters and which included Riedeman himself, considered Kruger's request and, inter alia, satisfied itself regarding the financial stability of Jessup. The decision of this committee was the same day verbally conveyed by Riedeman to Kruger substantially as follows, viz: Federale F Trust was prepared to discount provided the transactions between Motors and Cartage were reduced to writing in terms approved by Federale Trust and that, in each case, to cite Riedeman's own words in chief,

''n Kontant deposito van £650 betaal moes word op die kontrak aangegaan tussen Continental Cartage en Continental Motors.'

G Upon Kruger's immediate acceptance of those conditions, it was agreed that the necessary documents would be prepared forthwith in Federale Trust's office and that Kruger would return later the same morning to sign the contracts on behalf of Motors and Cartage. Pursuant to this arrangement, six separate documents were prepared, each relating to one vehicle, and were signed by Kruger later the same morning. Save for the H particulars regarding the vehicle, these six documents are identical. They consist of printed forms, ordinarily used by Federale Trust in this branch of its business, with spaces for the insertion of the relevant particulars of each transaction. The first part of the form comprises the terms of the hire-purchase contract between Motors and Cartage. The second part provides for notice of cession of his rights under the agreement, including the right of ownership in the vehicle, by the vendor and confirmation by the buyer of receipt of such notice. The third section

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of the document is a suretyship. The fourth section is an acknowledgment by the buyer of the receipt of the vehicle, while the fifth section relates to 'krediet informasie' concerning the buyer. In the present instance, the fourth section (dealing with suretyship) was left blank, A but all the other sections were signed by Kruger on behalf of Motors and Cartage respectively. In each of the six documents there appears, in the hire-purchase contract between Motors and Cartage, the following:

Totale kontantprys	£2,600 0 0
Plus finansiëringskoste	£155 8 0
Totale koopsom	£2,755 8 0
Min deposito: kontant	£650 0 0
Balans van die koopsom	£2,105 8 0

Provision then follows for the payment of the sum of £2,105 8s. in specified instalments on specified dates.

C It is important to bear in mind throughout the enquiry that Federale Trust had had no previous dealings, either with Kruger or his companies, prior to 27th June, 1956, and that the whole transaction was concluded during the course of a single morning in Cape Town several hundred miles D away from Bloemfontein. It would appear that, having once satisfied itself, through its own channels of information, regarding the financial stability of Jessup, Federale Trust was very happy to do business with Kruger. The terms of the hire-purchase agreements between Motors and Cartage, as reflected in the duly completed printed forms provided by E Federale Trust, were summarily accepted by Kruger (acting for both Motors and Cartage) and without prior reference to Bloemfontein. Indeed, since Jessup was at the time overseas, there was no occasion for Kruger to refer to Bloemfontein.

Manifestly Kruger would not, in his capacity as director of Cartage at Cape Town pay the £650 deposit (for each of six contracts) to himself in F his capacity as a director...