Tongaat Hulett Limited and others v Staude and anothers
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Koen J |
| Judgment Date | 23 January 2023 |
| Docket Number | 6075/2020P |
| Hearing Date | 21 October 2022 |
| Court | KwaZulu-Natal Division, Pietermaritzburg |
| Citation | 2023 JDR 0169 (KZP) |
Koen J:
Introduction:
This judgment deals with various exceptions taken by the second defendant to claims in the plaintiffs' particulars of claim.
The plaintiffs' claims are alleged to have arisen from events which occurred during the period from 2015 to 2019, when the second defendant was employed as the
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chief financial officer [1] of the first plaintiff, Tongaat Hulett Limited (Tongaat Hulett), chaired its audit committee and those of other entities within the Tongaat group, and at various times was a member of the board of directors of several entities within the group, being subsidiaries of Tongaat Hulett. The subsidiaries included inter alia the third plaintiff, Hippo Valley Estates Limited (Hippo Valley), the fourth plaintiff, Triangle Limited (Triangle), and the property development arm of the group, Tongaat Hulett Developments (Pty) Ltd (THD). It is alleged that in these capacities, the second defendant signed, consented to, or authorised the financial statements of the first plaintiff, and that these were inaccurate. The second plaintiff, Tongaat Hulett Sugar South Africa Limited (THS), was at all material times also a subsidiary of Tongaat Hulett, but the second defendant was not a director of THS.
The plaintiffs' particulars of claim
The plaintiffs' claims against the second defendant are contained in lengthy particulars of claim of just over 100 pages, excluding the annexures. In the interest of brevity, I shall endeavour to avoid quoting verbatim from the particulars of claim. The particulars of claim will be available to the parties and this judgment should be read with reference thereto.
A narrative form is often employed in the plaintiffs' particulars of claim and some paragraphs contain more than a single distinct averment, [2] contrary to what is required by rule 18(3). As exception is often taken on various grounds to the various allegations in a single paragraph it has made my task in formulating this judgment all the more difficult. But I shall endeavour to formulate my findings as clearly and with as little repetition as possible.
Briefly summarised, the claims against the second defendant are for:
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payment of amounts equivalent to the cost the first plaintiff incurred in restating certain of its financial statements (R44,68 million), and fines imposed by the Johannesburg Stock Exchange (R7,5 million) and by the Financial Sector Conduct Authority (R20 million) (the economic damages claim);
payment of monies the second defendant received while employed by Tongaat Hulett, comprising his base salary for the financial years 2015 to 2019 (R24 546 540), accumulated leave pay (R92 889), pension and medical aid contributions (R3 658 438.68), STI bonuses for the financial years 2015 to 2017 (R5 923 708) and LTI variable pay benefits for the financial years 2015 to 2019 (R10 170 115) (the remuneration damages claim);
payment of certain losses allegedly suffered by Hippo Valley (USD3 899 778.34);
payment of certain losses allegedly suffered by Triangle (USD4 875 358.02); and
a declarator that the second defendant is a delinquent director (the delinquency claim).
The aforesaid relief is claimed on the following basis: [3]
The economic damages claim, is formulated as a claim for damages arising from the second defendant's alleged breaches of his fiduciary duties to Tongaat Hulett.
(b) The remuneration damages claim, is formulated on three grounds, namely: as a claim based on unjustified enrichment (the enrichment), a claim for damages for breach of an implied term of the second defendant's employment contract (the breach of contract claim), and a claim for damages for fraudulently, alternatively negligently causing a misrepresentation to be made to Tongaat Hulett which induced the payment of those amounts (the misrepresentation).
The Hippo Valley and Triangle claims are formulated as claims for damages arising from the second defendant's alleged breaches of his fiduciary duties to Tongaat Hulett, Hippo Valley, and Triangle.
The delinquency claim is based on the second defendant's breaches of his fiduciary duties to Tongaat Hulett.
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The plaintiffs' causes of action therefore include an alleged breach of fiduciary duties, unjust enrichment, breach of (employment) contract, fraudulent or negligent misrepresentation, and, as regards delinquency, a contravention of provisions of the Companies Act 71 of 2008 ('the Companies Act). The second defendant has correctly identified these causes of action and the basis for each in the notice of exception and the heads of argument filed on his behalf.
The facta probanda, or facts required to be proved, to found a valid claim against the defendants in respect of each of the aforesaid causes of action, are trite. In brief and in so far as it concerns specifically the second defendant:
In respect of the breach of fiduciary duties, the plaintiffs need to prove that the second defendant was party to conduct which, if proved, would constitute a breach of fiduciary duties. What the conduct might entail is a factual issue that needs to be pleaded. Whether those facts, if proved would amount to a breach of fiduciary duties is a question of law.
As regards unjust enrichment, the plaintiffs need to alleged that a payment was made that was not due, and that it was made bona fide and in error, resulting in the second defendant being enriched and the plaintiffs being impoverished. That the payment was made, the factual basis why it is alleged that it was not due, that it was nevertheless paid bona fide, and the extent of the enrichment need to be pleaded.
As regards the breach of contract, the conclusion of the contract between the parties and when and where it was concluded, the material terms thereof, the breach of specific terms, and the consequence of such breach, must be alleged.
As regards fraudulent or negligent misrepresentation, the nature of the misrepresentation, the factual basis upon which it is contended that the misrepresentation was fraudulent or negligent, and the causative effect thereof need to be pleaded.
As regards the delinquency claim, the factual conduct which it will be contended would result in a legal conclusion that the second defendant had, as a director, been delinquent, needs to be pleaded.
The evidence (facta probantia) to prove the facta probanda need not be pleaded.
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Regarding the factual allegations required to be pleaded as the facta probanda in support of the aforesaid causes of action, the plaintiffs, rather than alleging specific facts separately in regard to each pleaded cause of action, collectively, and foundational to their causes of action, alleged and relied on four categories of what are alleged to be 'misconduct', giving rise to what has been labelled 'collective irregularities'. The plaintiffs allege that these had the effect, to the knowledge of the second defendant, of overstating the value of assets and revenue in the first plaintiff's financial statements as at 31 March 2018, in a sum exceeding R5 billion.
The four categories of misconduct are identified in the notice of exception. They will be set out in more detail below.
The second defendant's exceptions arise mainly in relation to the particularity with which these categories of misconduct and the collective irregularities are pleaded. The exceptions are extensive, the notice of exception running to 34 pages. The individual exceptions will need to be dealt with separately. It is often impractical to deal with them other than to repeat the material portions of the notice of exception, and to reference the text of this judgment to the numbered paragraphs in the notice of exception. That unfortunately has added to the length of this judgment, but hopefully will make a discussion of the individual exceptions more self-contained.
The notice of exception:
The material parts of the notice of exception relevant to this judgment read as follows:
'First Exception
The defendant is embarrassed to plead to the allegations that there were certain accounting irregularities within the plaintiffs and that he breached his fiduciary duties in either participating in them or not detecting them (which breaches underlie the Economic damages claim, the Misrepresentation claim, the Hippo/Triangle damages claim and the Delinquency claim) because the allegations in the amended particulars of claim set out nothing more than:
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vaguely formulated allegations of practices adopted within Tongaat Hulett and its subsidiaries over an extended period of time (referred to in the particulars of claim as the four categories of misconduct);
vaguely formulated allegations concerning the impact those practices had on the first plaintiffs financial statements;
a general absence of particularity as to the identities of the parties who carried out the four categories of misconduct, and how and when they did so;
conclusive statements that the second defendant encouraged those practices, knew of them, ought to have known of them and/or had constructive knowledge of them, without sufficient substantive factual allegations underpinning those conclusions;
Details of the deficiencies of the particulars of claim regarding the alleged misconduct, its commission and effect, and the second defendant's participation in and/or knowledge of it, are set out under the heading "Further Particulars of First Exception" below.
Second Exception
The Enrichment claim fails to disclose a cause of action, inasmuch as the payments the plaintiffs aver were...
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