|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
South Africa: Supreme Court of Appeal |
[Database Search] [Name Search] [Recent Decisions] [Noteup] [Help]
Reportable
CASE NO: 516/02
In the matter between :
ERIC M PHILLIPS Appellant
and
FIELDSTONE AFRICA (PTY) LTD First Respondent
FIELDSTONE PRIVATE CAPITAL GROUP Second Respondent
_____________________________________________________________________________
Before: MPATI DP, STREICHER, FARLAM, HEHER JJA & MOTATA AJA
Heard: 21 NOVEMBER 2003
Delivered: 28 NOVEMBER 2003
_________________________________________________________________________
J U D G M E N T
_________________________________________________________________________
STREICHER JA
STREICHER JA:
[1] I agree with Heher JA that the appeal should be dismissed with costs.
[2] Before the commencement of the trial in the court a quo it ordered in terms of rule 33(4) that:
‘1 The issues that arise from paragraphs 1 to 12 and paragraph 14.1 of the plaintiffs’ particulars of claim (and the defendant’s plea thereto) be decided separately from those arising from paragraphs 13 and 14.2 and that such former paragraphs be determined at the hearing of this trial.
2 Paragraphs 13 and 14.2 and prayers (a) and (b) of plaintiff’s particulars of claim stand over for determination.’
Paragraphs 13 and 14.2 dealt with the quantum of the appellant’s claim.
[3] The respondents alleged in their particulars of claim, inter alia:
On or about 12 April 1997 the second plaintiff and the defendant entered into a written employment agreement.
. . .
the defendant impliedly, alternatively tacitly, undertook a duty of loyalty to the second plaintiff.
. . .
During and pursuant to the defendant’s assignment to the Safika contract as aforesaid, and in or about September 1997, the defendant became aware that Safika required an urgent raising of capital, and that it was prepared to place shares for the purposes of raising such capital.
In or about September 1997 Safika offered a ten percent shareholding in Safika in exchange for such capital.
The offer of shares pleaded in paragraph 10.2:
represented a material financial benefit to the offeree;
became available to the defendant in his capacity as agent and representative of the first plaintiff, alternatively of the second plaintiff;
was an opportunity which properly belonged to the first plaintiff, alternatively to the second plaintiff;
was an opportunity which the first plaintiff, alternatively the second plaintiff, was able to take up;
was one which the defendant was obliged to have secured for the benefit of the first plaintiff, alternatively of the second plaintiff.
In breach of his obligations to the first plaintiff, alternatively to the second plaintiff, unlawfully and intentionally;
and on a date unknown to the plaintiffs the defendant acquired the offer of Safika shares for himself, and failed to acquire such shares for the first plaintiff, alternatively for the second plaintiff;
the defendant has failed and/or refused to account to the first plaintiff or the second plaintiff in respect of the benefit derived by him as a consequence of the aforegoing.
. . .
14 In the premises the defendant:
is obliged to account to the first plaintiff, alternatively to the second plaintiff, in respect of the shares taken up by him;
14.2 . . .’
[4] The issue which the court a quo had to decide was, therefore, whether the appellant was obliged to account to the first respondent alternatively the second respondent in respect of the Safika shares taken up by him.
[5] The court a quo found that no practical distinction could be drawn between the two respondents and that whatever duties and obligations the appellant might have owed to the second respondent (the American company) he at least impliedly owed to the first respondent (the South African company). This finding was, correctly so, not attacked on appeal. I will therefore refer to the respondents as one entity. The court a quo found, furthermore, in favour of the respondents, that the appellant was, by virtue of a fiduciary duty owed by him to the respondents, obliged to account to the respondents. The appeal is against this decision.
[6] The appellant was an employee of the respondents and represented them in their dealings with Safika. In these circumstances he owed the respondents a fiduciary duty in his dealings with Safika. This duty entailed, inter alia, that he was obliged not to work against the respondents’ interests; not to place himself in a position where his interests conflicted with those of the respondents; and not to acquire, in the course or by means of his agency, an interest or benefit without the consent of the respondents. (See Transvaal Cold Storage Co Ltd v Palmer 1904 TS 4 at 20-21 and 33-34; Jones v East Rand Extension Gold Mining Co Ltd 1903 TH 325 at 335; Robinson v Randfontein Estates Gold Mining Co Ltd 1921 AD 168 at 177; Premier Medical & Industrial Equipment (Pty)Ltd v Winkler and Another 1971 (3) SA 866 (W) at 867H-877A; and Uni-Erections v Continental Engineering Co Ltd 1981 (1) SA 240 (W) at 252D-253F.)
[7] In the present case an opportunity arose to acquire shares in Safika. Counsel for the appellant submitted that the opportunity was not available to the respondents. However, I agree with Heher JA that the contention is not borne out by the evidence. It was an opportunity which arose within the course of the appellant’s dealings with Safika in his capacity as agent of the respondents and it was of a kind which the respondents frequently acquired in the course of their business dealings with clients such as Safika. Capitman testified:
‘The cream in our business is the equity participations because just as we make money for our clients out of their opportunities, the biggest gains sometimes come from the equity but it often takes years to collect, to harvest that investment.’
[8] In the event the equity investment proved to be particularly profitable. When Capitman learnt of the opportunity he told the appellant to go for it. That is exactly what the appellant did but not in order to secure it for the respondents but to secure it for himself.
[9] The appellant, by negotiating the acquisition of the shares for himself, worked against the respondents’ interests, placed himself in a position where his interests conflicted with that of the respondents and secured a benefit for himself at the expense of the respondents.
[10] In Transvaal Cold Storage Co Ltd v Palmer, supra at 20 Innes CJ said:
‘I should here like to quote two passages – one from the Encyclopaedia of the Law of England (vol. 10, p.355): “Whenever an agent in the course or by means of the agency acquires any profit or benefit without the consent of the principal, such profit or benefit is deemed to be received for the principal’s use, and the amount must be accounted for and paid over to the principal.” The other from Story’s Equity Jurisprudence (sec. 329 (a)): “Where one sustains any such fiduciary obligation to another, that such other is fairly entitled to his advice and services, either for the joint benefit of the two, or the exclusive benefit of himself; and the party sustaining such relation, in violation of his obligations and duty, enters into any subsidiary contract, with a view to his own advantage, all profits thus resulting belong to the party for whose benefit he ought to have acted.” These passages seem to me to contain an accurate statement of the law applicable to the present dispute.’
These statements still contain an accurate statement of the law. (See also the judgment of Mason J at 33 and Jones v East Rand Extension Gold Mining Co Ltd, supra).
[11] In the circumstances the appellant is deemed to have acquired the shares on behalf of the respondents and is obliged to account to the respondents in respect thereof.
[12] Counsel for the appellant also submitted that the respondents claimed an account in respect of the shares taken up by the appellant on the basis of a contractual undertaking to account and not on the basis that the appellant was obliged to account by virtue of a fiduciary duty. They submitted in particular that the respondents did not allege in their particulars of claim that the appellant owed them a fiduciary duty. In my view there is no merit in this submission. The respondents alleged that, in terms of the appellant’s employment contract, he impliedly alternatively tacitly undertook a duty of loyalty to the second respondent. I do not think that a duty of loyalty was intended or understood to mean anything other than a fiduciary duty.
[13] The particulars of claim, therefore, covered a claim based upon a breach by the appellant of a fiduciary duty arising from his employment contract with the respondents.
________________
STREICHER JA
SAFLII:
|
Terms of Use
|
Feedback
URL: http://www.saflii.org/za/cases/ZASCA/2003/137.html
.RTF of original document