NOT REPORTABLE

CASE NO.: I 1425/2009

IN THE HIGH COURT OF NAMIBIA

In the matter between:

CHINA JIANGSU INTERNATIONAL NAMIBIA LIMITED

PLANTIFF

and

J. SCHNEIDERS BUILDERS CC 1 ST DEFENDANT

JAKOBUS SCHNEIDERS 2 ND DEFENDANT

CORAM: HENNING, AJ

Heard on: 27 September 2010

Delivered on: 5 October 2010

JUDGMENT

HENNING, AJ:
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[1] These are exceptions in which the plaintiff seeks to have the

defendants’ defences set aside. In order to determine the

issues it is necessary to refer to the pleadings. The plaintiff

instituted action against the defendants for payment of

amounts resulting from an oral construction agreement

concluded during April 2005 for the erection of ten residential

dwellings at Opuwo. This is admitted. It is further common

cause

[1.1] that a dispute arose as a result of which the plaintiff

stopped the work in terms of the oral agreement,

[1.2] that the dispute was settled by way of a written

agreement dated 2 April 2006,

[1.3] that the oral agreement was concluded between the

plaintiff and the first defendant, represented by the

second defendant,

[1.4] that the written agreement was concluded between the

plaintiff and the first defendant, represented by the

second defendant “in his capacity as Director,”

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[1.5] that the written agreement embodied terms relating to

payment by the first defendant in various amounts over

a period,

[1.6] that the plaintiff complied with its obligations in terms

of the written agreement and that the houses were

handed over to the eventual purchasers,

[1.7] that the first defendant still owes the plaintiff an

amount of N$166 028.15 in respect of the contract

price.

[2] The plaintiff excepted to the first defendant’s plea as

disclosing no defence. It was conceded by counsel appearing

for the defendants that the exception had to succeed. It was,

however, submitted that leave should be granted to the first

defendant to amend its plea. This seems to be in accordance

with the “invariable practice” referred to in Group Five

Building Ltd v Government of the Republic of South Africa

(Minister of Public Works and Land Affairs) 1993 (2) SA 593

(AD), at 602 D.
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[3] In respect of the claim against the second defendant, it is not

disputed that the second defendant is the sole member of the

first defendant, that he is responsible for the management of

the business of the first defendant, and in particular

represented the first defendant in concluding the agreements

referred to above.

[4] The following additional averments are made:

“13. At the time when the plaintiff and the first defendant

entered into the aforesaid agreements, the second

defendant knew the first defendant was or would be

unable to pay the full contract price.

14. The second defendant therefore acted (and was carrying

on the business of the first defendant) in a reckless or

fraudulent manner with the intent to defraud the

plaintiff.

15. The plaintiff is therefore entitled to an order in terms of

which the second defendant is declared to be personally

liable for the debt of the first defendant to the plaintiff in

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terms of Section 64 the Close Corporations Act, Act 69 of

1984.”

These allegations are denied in paragraph 8 of the plea.

[5] The plaintiff noted an exception in respect of the second

defendant’s defence, based on the denials referred to in the

previous paragraph. The plaintiff relied upon section 64 of

the Close Corporations Act, 69 of 1984 (“section 64”)

“on the ground that the second defendant acted in a

reckless or fraudulent manner with the intent to defraud

the plaintiff when he entered into the aforesaid

agreement with the plaintiff knowing that the first

defendant was or would be unable to pay the full

contract price.”

The plaintiff further relied on the fact that the second

defendant is the sole member of the first defendant and

represented the first defendant when the aforesaid

agreements were entered into with the plaintiff. On this issue

the plaintiff concludes:

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“The aforesaid denial constitutes a bare denial especially

in light of the fact that the first defendant has admitted

that it has not paid the balance of the contract price and

that it is indebted to the plaintiff in the amount claimed

without advancing any reasons for such failure.”

[6] On behalf of the plaintiff reference was made to Nationwide

Detectives and Professional Practitioners CC v Standard Bank

of Namibia Ltd, 2008 (1) NR 290. At page 299 E-F the Court

with approval cited the following dictum from an earlier case.¹

“The organic or alter ego doctrine recognizes that in some

situations the acts, intentions and knowledge of certain

persons are the acts, intentions and knowledge of the

company. This is because the company is not a visible

person. It has no physical existence, no body parts or

passion, no mind or will of its own. It has ‘no body to

kick and no soul to damn and the only way of

ascertaining its intentions is to find out what its directors

acting as such intended’ (per Centilivres CJ in

Commissioner for Inland Revenue v Richmond Estates

(Pty) Ltd 1956 (1) SA 602 (A) at 606G). Such persons

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_______________________

¹Lees Export and Export (Pty) Ltd v Zimbabwe Banking Corporation Ltd 1999 (4)

SA 1119 (ZSC) at 1129 B-F

therefore are the directing mind and will of the company

and control what it does; the very ego and centre of its

personality; its embodiment. They do not act or think on

behalf of or for the company as its agents. Rather they

act and know and form intentions through the persona of

the company”.

The plaintiff argued that the second defendant is the sole

directing mind of the first defendant, that he was responsible

for the first defendant’s default and is, in terms of section 64

personally liable.

[7] The second defendant’s counsel contended that the debt was

incurred when the written agreement was concluded in April

2006, that section 64 has not been properly pleaded, and that

the plea denied the alleged liability of the second defendant.

[8] The starting point of the enquiry is section 64. It reads:

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“If it at any time appears that any business of a

corporation was or is being carried on recklessly, with

gross negligence or with intent to defraud any person or

for any fraudulent purpose, a Court may on the

application of the Master, or any creditor, member or

liquidator of the corporation, declare that any person who

was knowingly a party to the carrying on of the business

in any such manner, shall be personally liable for all or

any of such debts or other liabilities of the corporation as

the Court may direct, and the Court may give such

further orders as it considers proper for the purpose of

giving effect to the declaration and enforcing that

liability.”

[9] In Harri and Others NNO v On-line Management CC and

Others, 2001 (4) SA 1097 (T) at 1099 F it was stated that
section 64

“is aimed at discouraging fraudulent, dishonest and

reckless persons from abusing the protection which is

provided by a corporate entity.”

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The element of “gross negligence” could, with respect, have

been added.

[10] It is correct that the decisions and actions of the first

defendant were taken and performed by its alter ego the

second defendant. The second defendant caused the

construction work to be performed and caused the first

defendant not to meet all its financial obligations. The second

defendant caused the first defendant to admit liability on the

existing pleadings and caused the first exception to be

conceded. The second defendant, however, seeks to escape

liability in terms of section 64 by way of denials. In respect of

paragraphs 13 to 15 of the particulars of claim (referred to in

paragraph 4 above) the second defendant responded:

“The defendants deny each and every allegation

contained herein as if specifically considered, traversed

and denied”.

The question arises whether this form of pleading is in the

circumstances permissible.

[11] Rule 18 (4) reads:

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“Every pleading shall contain a clear and concise

statement of the material facts upon which the pleader

relies for his claim, defence of answer to any pleading,

as the case may be, with sufficient particularity to enable

the opposite party to reply thereto.”

Denials are specifically addressed by rule 18 (5) which

provides:

“When in any pleading a party denies an allegation of

fact in the previous pleading of the opposite party, he

shall not do so evasively but shall answer the point of

substance”.

Rule 22 (2) states:

“The defendant shall in his plea either admit or deny or

confess and avoid all the material facts alleged in the

combined summons or declaration or state which of the

said facts are admitted and to what extent, and shall

clearly and concisely state all material facts upon which

he relies”.
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[12] Herbstein and Van Winsen, The Civil Practice of the High

Courts in South Africa, 5th ed., Vol I, 566 formulates the

general rule as follows:

“A pleading must allege the facts that are required in

order to disclose a cause of action or defence. A pleading

that states conclusions and opinions instead of material

facts, or that draws a conclusion without alleging the

material facts, which, if proved, would warrant that

conclusion, is defective”.

In Neugebauer & Co. Ltd v Bodeker & Co. (SA), 1925 A D 316

it was held at 319 that

“the ground of defence must be stated with sufficient

precision and in sufficient detail to enable a plaintiff to

know what case he has to meet.”

On the pleadings in that case it was found at 320:

‘On this plea the plaintiff is entirely in the dark as to

what the defence is.”

[13] “In law context is everything,” Lord Steyn said in the House of

Lords². In view of the admissions by the second defendant

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referred to above and the plaintiff’s allegations in paragraphs

13 to 15 (see paragraph 4 above), the second defendant

should

_______________________

² R v. Secretary of State for Home Department, Ex parte Daly, [2001]

3 All ER 433 at 447, quoted in Seven Eleven Corporation of SA (Pty) Ltd v.

Cancun Trading Co 150 CC, 2005 (5) SA 186 (SCA) at 196 C

not deny evasively, but should answer the point of substance

– rule 18 (4), and he shall clearly and concisely state all

material facts upon which he relies. His denial of each and

every allegation in these paragraphs of the claim, does not

answer the point of substance, does not state any material

facts, and could be called a “negative pregnant,” which is

ambiguous - Britz v. Weideman 1946 OPD 144, at 150 and

157. To the list of instructive early cases can be added SA

Railways and Harbours v Landua & Co 1917 TPD 485 and

Dlamini v Jooste 1925 OPD 223.

[14] In the more recent case of Sterling Consumer Products (Pty)

Ltd v Cohen and other related cases [2000] 4 All SA 221 (W)
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reference was made (226 b – c) to Harms, Civil Procedure in

the Supreme Court, at 276 where the learned author states:

“The plea must clearly show which facts are admitted

and which are denied. The plea may deny each and

every allegation of fact contained in a particular

paragraph of a declaration or combined summons but

must not give rise to ambiguity as lack of clarity.”

The Court mentions (226 a) the definition of “evade” in the

Oxford English Dictionary as inter alia

“to avoid giving a direct answer to,”

or

“to avoid or shirk the discussion.”

The Court concluded (227 c):

“In the light of the aforegoing, I conclude that a defendant

may plead a bare denial of each and every allegation of

fact alleged in a plaintiff’s particulars of claim provided,

firstly, that such denial does not give rise to ambiguity or

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lack of clarity and provided, secondly, that such denial is

not evasive but answers the point of substance.

[15] In view of the above-mentioned principles, it seems necessary

to analyse the second defendant’s denials. Paragraph 13 of

the particulars of claim, referred to in paragraph 4 above,

consists of the following elements:

[15.1] when the first agreement was concluded the

second defendant knew that the first defendant

was unable to pay the full contract price,

[15.2] when the second agreement was concluded the

second defendant knew that the first defendant

was unable to pay the full contract price,

[15.3] when the first agreement was concluded the

second defendant knew that the first defendant

would be unable to pay the full contract price,

[15.4] when the second agreement was concluded the

second defendant knew that the first defendant

would be unable to pay the full contract price.

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[16] Paragraph 14 of the claim, similarly, embodies a number of

allegations, inter alia:

[16.1] the second defendant acted in a reckless manner,

[16.2] the second defendant acted in a fraudulent

manner,

[16.3] in acting in a reckless manner the second

defendant intended to defraud the plaintiff,

[16.4] in acting in a fraudulent manner the second

defendant intended to defraud the plaintiff,

[16.5] the second defendant was carrying on the

business of the first defendant in a reckless

manner,

[16.6] the second defendant was carrying on the

business of the first defendant in a fraudulent

manner,
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[16.7] the second defendant was carrying on the

business of the first defendant in a reckless

manner with intent to defraud the plaintiff,

[16.8] the second defendant was carrying on the

business of the first defendant in a fraudulent

manner with intent to defraud the plaintiff.

[17] The second defendant is the embodiment of the first

defendant, the very ego and centre of its personality. He is

not in a no knowledge situation. He confined his reply to the

above allegations to a denial. His denial is inconsistent with

the admission of paragraphs 8 to 10 of the claim. His denial

is ambiguous and fails to answer the point of substance. His

denial is evasive. For the plaintiff to go to trial on the existing

plea would demand speculation regarding the defence.

[18] In the result the following order is made:

[18.1] The exceptions succeed with costs and the

defendant’s plea is set aside.

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[18.2] Leave is granted to the defendants to, if so

advised, file an amended plea within 15 days from

date of delivery of this judgment.

___________________________

HENNING, AJ

ON BEHALF OF PLAINTIFF: Adv. N Bassingthwaighte

Instructed by
H D Bossau & Co

ON BEHALF OF DEFENDANTS: Mr. C. J Verwey

Theunissen, Louw &
Partners