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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO:  A5036/2016

Reportable

Of interest to other judges

Revised.12/6/2017

In the matter between:

ICM CLEARING AND FORWARDING (PTY) LTD                                          First Appellant

KURT ROBERT KNOOP NO                                                                     Second Appellant

and

CRONINET CHROME SA (PTY) LTD                                                                 Respondent

 

JUDGMENT

 

WEINER, J:

 

INTRODUCTION

[1] The appellants in their Particulars of Claim based their claim on contract.  The respondent filed its plea and denied the contract as pleaded by the appellants.

[2] In replication the appellants raised an estoppel based on evidence that was presented during an enquiry held in terms of section 418 of the Companies Act No 61 of 1973 (the insolvency enquiry). The respondents excepted to the replication on the basis that it was based upon inadmissible evidence.

[3] The exception was considered on 13 May 2016 and Ratshibvumo AJ upheld the exception and ordered that the appellants’ replication be struck out (judgment of the court a quo).

 

GROUNDS OF APPEAL

[4] The appellants are appealing against the whole of the judgment and order.

[5] The issue is whether or not the replication contained inadmissible evidence and was therefore excipiable.

 

LEGAL POSITION – RE EXCEPTIONS

[6] The duties of an excipient were clearly defined in Sun Packaging (Pty) Ltd v Vreulink [1996] ZASCA 73; 1996 (4) SA 176 (A) at 183E where it was held:

“An excipient has a duty to persuade the court that upon every interpretation which the pleadings in question, and in particular the document on which it is based, can reasonably be there no cause of action … is disclosed; failing this the exception ought not to be upheld.”

See also Vermeulen v Goose Vally Investments (Pty) Ltd 2001 (3) SA 976 (SCA) at 997B where Marais JA held:

[7] It is trite law that an exception that a cause of action is not disclosed by a pleading cannot succeed unless it be shown that ex facie the allegations made by a plaintiff and any document upon which his or her cause of action may be based, the claim is (not may be) bad in law. ….the excipient (respondent) had to show that ……there is no reason to suppose that any admissible evidence could conceivably exist which would enable that [the identification] to be done. In my view, the respondent failed to establish that such was the case ….. and the exception should have been dismissed on that ground alone.”

 

REPLICATION

[8] The appellants’ plea of estoppel in the replication is based on the following:

8.1 In the section 418 enquiry representations were made by one Etienne Smith (Smith).

8.2 At all material times Smith was acting within the course and scope of his employment as an employee and/or agent of the respondent in his capacity as the respondent’s exports/logistics manager.

8.3 During the enquiry, Smith represented to the liquidators that the respondent was indeed indebted to the first appellant on account of transactions which are the subject of the invoices referred to in paragraph 5 of the replication.

8.4 At the time when the representations were made Smith did so within the course and scope of his employment and as a servant and agent of the respondent.

8.5 The appellants relied upon such representations to their detriment and instituted the action against the respondent in reliance thereof.

8.6 The representations were material and were calculated to induce the appellants to rely upon them and in fact so induced the appellants.

8.7 Accordingly the respondent is estopped from denying liability on account of the aforesaid transactions which are the subject of the said invoices.

[9] In the exception filed by the respondent it is stated:

“7. In terms of section 418 read with section 417(2)(b) and 417(2)(c) of the Act any evidence deriving from the enquiry held in terms of the sections may only be used against a person who actually gave the evidence and can therefore not be used against another.

8. Consequently the alleged representations made by Smith may only be used against Smith and are inadmissible as evidence of the facts pleaded against the excipient. As a result the alleged representations cannot be used in support of the respondent’s reliance on estoppel.”

[10] In Engelbrecht NO and Others v Van Staden and Others 2011 ZAWCHC 447 (6 December 2011) Rogers AJ (as he then was) considered whether such evidence was admissible. He referred to Simmons NO v Gilbert Hamer & Co Ltd 1963 (1) SA 897 (N) where it was held that a person testifying at an liquidation enquiry in terms of s 155 of the Companies Act 46 of 1926 did so in his personal capacity and that his answers were not admissible evidence against his employer or principal. Rogers AJ also referred to O'Shea NO v Van Zyl NO & Others [2011] ZA (SCA) 156, where it was held that

[18]…“the Supreme Court of Appeal approved the statement of general principle laid down in Gilbert Hamer and applied it to the case where one of several trustees of a family trust testified at a s 417 enquiry….. …... In the O 'Shea case there was no evidence that Mr O'Shea (a co-trustee) had testified as an authorised representative of the trust rather than in his personal capacity. His evidence was thus held to be inadmissible to establish the liquidators' claim against the trust. ..

[20] Gilbert Hamer and O'Shea at least decide that evidence given in the circumstances dealt with in those matters and which would ordinarily be inadmissible hearsay when adduced against any person other than the witness himself is not rendered admissible by provisions such as s 65(5) of the Insolvency Act. What is less clear is whether they also decide that such statements may never be received into evidence against a third party, for example under the modern law regarding the admissibility of hearsay evidence as regulated by s 3 of the Law of Evidence Act 45 of 1988. The latter Act was not in force when Gilbert Hamer was decided. In O'Shea the possibility of receiving the evidence as hearsay in terms of Act 45 of 1988 appears not to have been raised. …. The references in Gilbert Hamer and O 'Shea (and in the authorities reviewed therein) to privity of interest and the circumstances in which admissions made by an agent are admissible against his principal suggest that the conclusion that the evidence was inadmissible rested on the fact the evidence was hearsay, which in modern law is not an absolute bar to receiving the evidence. ……. There is the further consideration that although s 65(5) of the Insolvency Act contains (as did s 155(2) of the 1926 Companies Act) an express provision regarding admissibility in later proceedings (including civil proceedings), the provisions of s 417 of the Companies Act 61 of 1973 (as they have read since their amendment in 2002) deal expressly only with later criminal proceedings. The admissibility or inadmissibility of such evidence in civil proceedings thus appears to rest on general principles of the law of evidence rather on than the terms of the Companies Act.[emphasis added]

[21] I am thus inclined to think that a court may in appropriate cases permit a litigant to rely on evidence given by X at a s 417 enquiry for purposes of making out a case against Y provided this would be in the interests of justice, having regard to the requirements laid down in s 3 of Act 45 of 1988.”

[11] To summarise the principles referred to by Rogers AJ:

11.1 The modern law relating to admissibility of hearsay evidence is regulated by section 3 of the Evidence Act.

11.2 The Act was not in force when Gilbert Hamer was decided and the possibility of receiving the evidence as hearsay in terms of the Evidence Act was not raised.

11.3 The references in Gilbert Hamer and O’Shea and the circumstances in which admissions made by an agent were held to be inadmissible against his principal suggests that the conclusion that the evidence was inadmissible rested on the fact that the evidence was hearsay which in modern law is not an absolute bar to receiving the evidence.

11.4 The admissibility or inadmissibility of such evidence in civil proceedings rests on the general principles of the Law of Evidence rather than on the terms of the Companies Act.

[12] In Van Zyl and Another NNO v Kaye NO and Another 2014 (4) SA 452 (WCC) Binns-Ward referred to Rogers AJ’s judgment and stated the position as follows:

[41] Section 417(2) in its current form was enacted to address the issues of constitutional incompatibility inherent in the abrogation of the right against self-incrimination. I do not think that the subsection has any bearing on civil proceedings.

[42] …. It is plain that the provisions for secrecy in s 417(7), and the resultant limitation on the use of the evidence, are to promote the achievement of the objects of the enquiry proceedings, and not for any  other policy purpose. Once that purpose has been served, ….he basis and the need for such secrecy fall away. ……

[43] I find nothing in the provisions, save as expressly provided in  s 417(2), that militates in principle against the use of the evidence adduced at such enquiries in other proceedings to the extent that the ordinary rules of evidence would allow. ……

[44] ….. the effect of allowing the use of the evidence at subsequent civil proceedings has thus far been that the evidence has been permitted to be used only against the  examinee as a party or a witness in such subsequent proceedings. I agree with the opinion expressed by Rogers AJ in Engelbrecht, that the exclusion of its wider use would appear to have been founded on the hearsay rule. For all these reasons I have concluded that the evidence adduced at the enquiry is amenable to being introduced in the current proceedings.”

[13] The respondent contends that the admissibility of Smith’s evidence was considered at the exception stage and the appellants advanced no reason why the admission of Smith’s evidence would be in the interests of justice in terms of the Evidence Act.

[14] The respondent also relies on the reasons given in Van Zyl’s case why the evidence was not admitted in terms of section 3 of the Evidence Act. The court held that the requirements of section 3 had to be satisfied before the evidence would be admissible.  It went on to hold that:

“It cannot be in the interests of justice to admit evidence that is prima facie inadmissible if its admission would not cure a fatal, evidential deficiency in the case of the party that seeks its admission (at [45]).

[15] The appellant seeks to distinguish the Gilbert Hamer and O’Shea judgments on various grounds some of which have already been stated  above. In addition, they contend that the persons whose evidence was held to be inadmissible ex facie their evidence did not have the authority to bind their principal (the trust or a company).

[16] The appellants contend that the trial the court will have to decide, on application, whether the hearsay evidence should be admitted in terms of section 3(1)(c) of the Evidence Amendment Act. It should be noted that in both the Gilbert Hamer and O’Shea judgments, extracts of the evidence were produced and were sought to be used as evidence before the court. In Gilbert Hamer there was no valid application in terms of the Evidence Act 14 of 1962 and in O’Shea there was no application in terms of section 3(1)(c) of the Evidence Act. In both cases it appeared that the persons whose evidence was held to be inadmissible did not have the authority to bind their principal. 

[17] This is an enquiry which, in my view, can only be held at the trial.  The application for the admission of hearsay evidence in terms of section 3(1)(c) of the Evidence Act, if successful, will render the evidence admissible.

[18] The learned judge a quo stated in his judgment at para [10] that:

“The respondents did not attempt to apply that the contested evidence to be ruled admissible in this application, not even provisionally. They suggest they will do so at a later stage before the trial court.”

[19] The appellants contend that the present matter was not decided on application where the affidavits would constitute both the pleadings and the evidence. The exception was decided on the pleadings as they stood and therefore the appellants contend that only at the trial stage can a judge consider the admissibility of the evidence to be introduced.

[20] In the present case it may be that, at the trial, evidence may be led either by Smith or someone else which would corroborate the hearsay evidence, confirm his authority, and render the evidence admissible as it would not be hearsay.  In my view, it is premature at the stage of exception to preclude the filing of the replication as evidence might be led on the pleadings which would disclose a cause of action. At exception stage, the pleading would only be excipiable on the basis that no possible evidence could be led in this regard.  See Vermeulen v Goose Valley Investments (Pty) Ltd (supra) at 997B.

[21] Accordingly I propose the following order:

1. The appeal succeeds;

2. The Order of the court a quo is set aside;

3. The defendants’ exception is dismissed with costs.

 

 

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S WEINER

JUDGE OF THE HIGH COURT

GAUTENG LOCAL DIVISION, JOHANNESBURG

 

 

I agree and it is so ordered:

 

 

 

________________________________________

D S S MOSHIDI

ACTING DEPUTY JUDGE PRESIDENT

GAUTENG LOCAL DIVISION, JOHANNESBURG

 

I agree:

 

 

________________________________________

T P   MUDAU

  JUDGE OF THE HIGH COURT

GAUTENG LOCAL DIVISION, JOHANNESBURG

 

 

Appearances:

For the Appellant: Adv L E Combrinck SC

Instructed by     : Venns Atoorneys

For the Respondent: Adv E Eksteen

Instructed by: Vassev Attorneys

Date of hearing: 24 May 2017

Date of Judgment: 12 June 2017

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