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REPUBLIC OF SOUTH AFRICATHE LABOUR COURT OF SOUTH
AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case no: JS 69/09
JS 737/08
In the matter between:
JOHAN STOOP
FirstApplicant
JOHANNES BUCKLE
Second Applicant
and
RAND WATER
Heard:
Respondent
29 and 30 April and 1-10 May 2013
Judgment: 17 September 2013
Summary:
Two senior employees are held jointly and severally liable for
fraud perpetrated against their employer. Dismissal of a senior employee
on the basis of fraud is substantively and procedurally fair.
JUDGMENT
AC BASSON, J
Introduction
[1]
This was a lengthy trial comprising of approximately 46 volumes of
documents
containing
numerous
documents;
invoices
and
a
2
comprehensive forensic audit report. The parties have also submitted
comprehensive heads1 of arguments which greatly assisted the Court in
summarizing a very voluminous court record.2
The parties
[2]
The two applicants in this matter are Mr Johan Stoop (“Stoop”) and Mr
Johannes Buckle (“Buckle”). Stoop withdrew his unfair dismissal case at
the commencement of the trail and also elected not to oppose the
counterclaim instituted by the respondent against both applicants.
Consequently in respect of Stoop the sole issue before this Court was
whether he is guilty of breach of contract and if so, the quantum of
damages for which he is liable.
[3]
The respondent is Rand Water (“the respondent”) - a Schedule 3(B)
National Government Business Enterprise governed by the Public
Finance Management Act.3 The Water Cycle Management (WCM”)
section of the respondent does recoverable and capital projects in Water
Demand Management (WDM) for municipalities and for the Department
of Water Affairs (“DWAF”) in and outside of the respondent’s area of
supply. To enable the WCM section to execute the projects which they
are responsible for, it issued three tenders over the past six years for
specialist contracting work assistance on an as-and-when required basis.
Each tender was for a three year period and was awarded to SWR
Projects CC(“SWR”).The task to oversee and manage the tender
awarded to SWR fell under WCM.
The unfair dismissal claim and the counterclaim
[4]
Both Stoop and Buckle were charged with and found guilty of misconduct
by an independent chairperson of an internal disciplinary hearing and
dismissed on 11 June 2008 after the chairperson of the disciplinary
hearing found that Buckle’s and Stoop’s misconduct “… caused R7.8
1
The heads of arguments submitted on behalf of the respondent alone comprised of some 196
pages.
2 Because the facts were largely not in dispute, I have taken the liberty of relying extensively on
the respondent’s heads of arguments in summarising the facts.
3 Act No 1 of 1999.
3
million losses to Rand Water [the employer].”The applicants both referred
an unfair dismissal claim to the Commission for Conciliation, Mediation
and Arbitration (“the CCMA”) claiming that their dismissal constituted a
substantively and procedurally unfair dismissal. The Director of the
CCMA transferred the two referrals to the Labour Court.4 Subsequent to
the referral by Stoop of the unfair dismissal claim in terms of the LRA, the
respondent instituted a counter-claim for damages against Stoop in
terms of the Basic Conditions of Employment Act (“BCEA”)5. Before
Buckle could refer his unfair dismissal dispute to the Labour Court, the
respondent likewise instituted a similar claim for damages against him.
Buckle then instituted a counter-claim for unfair dismissal in terms of the
LRA. The two unfair dismissal claims and the counter-claims were
consolidated. Stoop and Buckle both claim unfair dismissal and seek
reinstatement.
[5]
Only Buckle’s unfair dismissal claim therefore remained before this
Court. The counter-claim against both Buckle and Stoop, however, also
remained before this Court although Stoop has abandoned his opposition
to the counter-claim at the commencement of the trail.
[6]
In the counter-claim the respondent claims damages against Stoop and
Buckle on the basis that the fraud committed by them resulted in
damages suffered by the respondent. The respondent submitted that the
damages suffered by it are as a result of the failure of Stoop and Buckle
to honestly and faithfully serve the respondent and their failure to
exercise due and reasonable diligence as is required by their contracts of
service.
The jurisdiction of the Labour Court to hear the counter-claim
[7]
At the commencement of the trail before Bhoola J, a point in limine was
raised on behalf of the applicants disputing that the Labour Court has the
requisite jurisdiction to determine the respondent’s counter-claim against
them. Bhoola J, upheld the point in limine.On appeal, the Labour Appeal
4
5
In terms of s191 (7) of the Labour Relations Act no.66 of 1995 (hereafter “the LRA”).
Act 75 of 1997,
4
Court ("LAC") in Rand Water v Stoop and Others6upheld the appeal
brought by the respondent and decided, with reference to section 77(3)
of the BCEA, that this Court has “concurrent jurisdiction with the Civil
Courts to hear and determine any matter concerning a contract of
employment, irrespective of whether any basic condition of employment
constitutes a term of that contract.” The LAC further confirmed that any
order made by the Labour Court may include an order for specific
performance, an award of damages or an award for compensation.7 The
LAC also pointed out that, although the allegation made by the
respondent that the applicants committed fraud undoubtedly is a delict,
this did not prevent the respondent from claiming damages arising from
the fraud on the basis of the contract of employment that existed
between the two applicants and the respondent:
‘The respondents [Buckle and Stoop] also averred that, the appellant’s
claim is a delictual one and therefore cannot be entertained in terms of
s77(3) of the BCEA. Once again the respondents are wrong. There is no
doubt that fraud is a delict but the fraud alleged in the pleadings is
connected to the contract of employment between the appellant and the
respondents. This was not a fraud committed against the appellant
[Rand Water] by persons unconnected to it. The allegation is that the
respondents abused their positions as servants of the appellant. The
committed fraud against their employer by abusing the positions they
held as employees.’8
[8]
Pursuant to the LAC judgment, the matter (the unfair dismissal claims
and the counter-claim for damages) was set down for trial on the merits.
Positions held by Buckle and Stoop
[9]
It is clear from the evidence that at the relevant time Buckle was
employed as the Water Cycle Management Strategist: Rand Water.
Stoop was employed as the Water Demand Manager of the Water Cycle
Management section. Stoop reported to Buckle. Buckle was therefore at
the relevant time Stoop's superior.
6
[2013] 2 BLLR 162 (LAC).
at para 22.
8Ibidat para 35.
7Ibid
5
[10]
Although Buckle denied during his evidence that he was the section
head, I am satisfied on the evidence that he was employed in this
capacity. I am also of the view that his denial that he was the section
head during his evidence in chief lacks credibility in light of the fact that
he admitted to being the section head during his interview with Mr
Levenstein
(the
forensic
auditor
appointed
by
the
respondent
(“Levenstein”) and Mr Herman De Lange (“De Lange”). This interview
took place during the preliminary investigations into alleged tender fraud
leading up to the decision by the respondent to charge Stoop and Buckle
with misconduct. The conclusion that Buckle was the section head is
further supported by the contents of his performance contract. It is also
clear from this document and Buckle’s Key Performance Indicators
(“KPI’s”) that it was expressly required of him to control the budget,
control expenditure and record assets in the Asset Register. The 2004
performance contract that applied up until his dismissal therefore
expressly states that Buckle was responsible for the financial control of
the section. The performance contract further record that Stoop was
Buckle’ssubordinate.
Appointment of SWR
[11]
It was common cause that a company with the name of SWR Projects
CC9 (“SWR”) wasappointed by the respondent following a tender process
to fulfil various projects for and on behalf of the respondent. Three
tenders were awarded over the past six years for specialist contracting
work assistance on an as-and-when required basis.10
[12]
The Managing Director of SWR at the relevant time was Mr Edward
Stonehouse ("Stonehouse"). Mr Wally Thomas (“Thomas”) was the
Project Manager of SWR for the period July 2002 to October 2007 and
Ms Charlene Bergh ("Bergh") was an employee of SWR.
[13]
The tenders awarded to SWR were controlled and overseen by the
section headed up by Buckle. In fact, the evidence confirms that Buckle’s
9CK
10
No. 2000/070283/23.
In 2002, 2003 and 2004.
6
section only had the one contractor (SWR) to oversee.
[14]
It was common cause that Stoop was appointed as the Project Manager
of the SWR tenders and that on each occasion when the tenders were
awarded,Buckle and Stoop appeared before the Tender Committee to
motivate for the appointment of SWR and that they represented to the
committee that SWR offered the cheapest services.
[15]
The tender documents (for the three tenders) that served before Court
clearly and in no uncertain terms set out the basis upon which SWR were
to charge the respondent for work done. The tender documents provide
for specific rates that may be charged in respect of the labour of a
technician and for a labourer respectively and for a specific rate in
respect of travel. As will be pointed out in more detail herein below, the
evidence overwhelmingly show that over the years the invoices
submitted by SWR and approved by Stoop and/or Buckle (in
approximately 44% of the invoices) grossly inflated the prescribed tender
rates andactual hours worked. The number of technicians that were
allegedly used on projects was also grossly exaggerated11as well as the
tariffs and distances allegedly travelled. Not only was the prescribed
travel rates grossly inflated, SWR also claimed for excessive travelling on
various projects. SWR also charged the respondent for excessive hours
worked and in some instances submitted duplicate invoices. This
resulted in the respondent making double payments to SWR.These
overcharges were so blatant (as will be shown herein below) that it could
not have been missed by Buckle. Furthermore, as will be shown herein
below, Stoop actively participated in the drafting of the fraudulent
invoices that were submitted for payment. It is, inter alia, these
overcharges that led to the dismissal of Stoop and Buckle.
[16]
The evidence further shows a consistent pattern whereby the tender
rates utilised by SWR were blatantly inflated by SWR on numerous
invoices contrary to the rates/tariffs expressly set out in the tender
documents. Stoop signed off on all the invoices and Buckle signed off on
11
It was clear from the evidence that SWR throughout its dealings with the respondent
employed no more than 6 technicians in 2006 and 9 technicians in 2007.
7
a significant portion of these invoices containing the inflated rates despite
the fact that he (Buckle) was part of the Tender Committee when the
tenders were awarded to SWR (and therefore he was aware of the
prescribed rates). It was not disputed that the tender documents reflect
the rate of payment for the different components of the tender. 12Both
Buckle and Stoop knew what the tender rates were but nonetheless
allowed for the payment of these fraudulent invoices.
[17]
The
respondent
appointed
Gobodo
Forensic
and
Investigative
Accounting (Pty) Ltd (“Gobodo”) on 19 November 2007 (Phase 1) to
conduct a forensic investigation into allegations of corruption and
manipulation of funds by Buckle and Stoop as well as conducting an
analysis of costs pertaining to the work performed by SWR (see further
herein below). It is concluded in the Gobodo-report that the project
analysis and invoice analysis reveal that SWR overcharged the
respondent in respect of labour (labourers and technicians) and travel
rates contrary to the tender. The report also concludes that charges were
levied for work not performed; excessive hours were billed; hours were
duplicated; miscellaneous charges were levied by SWR contrary to the
tender document and that losses were suffered by the respondent due to
the
non-recovery
of
amounts
payable
to
the
respondent
by
municipalities. The Gobodo-report meticulously records that tender rates
were suddenly increased significantly and far exceeded the rates allowed
for in terms of the tenderdocument. For example, the travel charge rate
that should have been R 2.55 suddenly increased to R3.20. Labour rates
were also significantly increased with no correlation whatsoever to the
rates set out in the tender documents. These increased rates were
charged on all invoices that Buckle and/or Stoop signed and approved
for payment in 2007. As already pointed out, the number of technicians
12
For example, in 2002 the rate for technicianswas R145.00, in 2003 R120.00; in February
2004 R120.00 and in 2007 R149.08. The rates for rates for labour were R25.00 in February
2002; R30.00 in February 2003; R30.00 in 2004; R32.25 in March 2005 to February 2006;
R34.67 in March 2006 to February 2007; and R37.27 in 2007. The travelcharge per kilometre
was R1.90 in February 2003; R2.05 in the 2004 revised tender; R2.20 from March 2005 to
February 2006; R2.37 in March 2006 to February 2007; and R2.55 in 2007. In certain instances
SWR combined the rate for technician and labourer when it was not allowed. The combined rate
charged for technicians and labourers on 11 January 2007 was R182.05 and R3.00 per
kilometre. There was a rate increase by SWR for the combined figure for technicians and
labourers on 20 January 2007 to R220.00 (it should have been R186.35).
8
billed exceeded the number of technicians actually employed by SWR.
Excessive kilometres for travel were charged at inflated and incorrect
rates. Invoices were submitted for work done whereas it was common
cause that no work had been done at all (for example in Soweto).
Ultrasonic metres were purchased and paid for and never installed. Four
ultrasonic meters were paid for by the respondent and never even
supplied to the respondent. There are but a few of the irregularities found
on the invoices submitted to the respondent for payment by SWR and
signed off by Stoop and/or Buckle.
[18]
The respondent submitted with reference to the Gobodo-report that the
rate and frequency in which the respondent were overcharged
demonstrates a clear pattern of fraud. I will return to these allegations
herein below.
Evidence of overcharges and overpayment
[19]
At the outset it must be pointed out that Buckle did not dispute the fact
that there were overcharges and also did not dispute the quantum of
overcharges arrived at in the Gobodo-report. In light of this concession, I
do not intend to summarise the findings of the Gobodo-report in detail. I
will, however, in order to show Buckle’s complicity in the submission of
the numerous fraudulent invoices, refer to some of the findings made in
the Gobodo-report. The Gobodo-report is the culmination of months of
investigations by a forensic auditor (Levenstein) of the numerousinvoices
submitted by SWR to the respondent, the actual work done by SWR, the
number of technicians employed by the respondent, the assets that were
purchased by SWR and the assets that were actually installed by SWR.
[20]
13
SWR was involved in numerous projects over the years.13 The Gobodo-
(1) The Mogale Project 1981 for the installation of metres at Muldersdrift; (2) The Soweto
Project 2166 for the supplying and fitment of 8 zonal metres in Soweto; (3) The ODI Project
2018 for pipe reinforcement at Klipgat, Mabopane and Winterveld Phase 1 and water supply informal areas Mabopane and Winterveld Phase 2; (4) The Rustenburg Project 2120 for the
supply and fitment of 5 ultrasonic clamp-on flow recorders complete with manholes and a metre
audit in Rustenburg; (5) The WCM Project 1731 for the appointment by the Department of
Water Affairs ("DWAF") as implementing agent for the Gauteng WCM Project; (6) Project 1564
for installations at Munisville; (7) The Mogale Project 1797 for the appointment by Mogale to
provide a bureau service; and (8) The Mogale Project 420 for the implementation of a WCM
9
report shows that between the period 2002 and 2007, the total amount
invoiced by SWR to therespondent amounted to R50 039 227.53. On
each project which SWR charged the respondent, the bills for labour
were levied on an hourly basis. SWR also submitted travel claims to
recover the expense of travelling to and from the project sites as well as
materials. It was these labour claim and travelling claims that were
grossly and blatantly inflated on the invoices.
[21]
It was common cause between the respondent and Buckle that the
evidence establishes unequivocally that SWR over claimed payments in
the amount of R8 091 013.16 from the respondent. The majority of the
overcharges occur within the period August 2006 to August 2007.
[22]
The quantification of the amount is set out in the Gobodo-report (and
which is not in dispute) as follows:
22.1
Labour rates charges not in terms of tender amounts to an
overcharge of R787 805.95. Stoop admitted to liability of an
overcharge in the sum of R 528 784.58.
22.2
Overcharges resulting from the number of technicians billed in
excess of technicians employed amounts to R1 103 585-62.
22.3
Travel rates per kilometre not in terms of tender amounts to an
overcharge of R143 416.48.
22.4
Excessive kilometres charged for travel amounts to an overcharge
of R294 382.48,
22.5
A handling fee charged by SWR in excess of 10 % resulted in an
overcharge of R116 036-09(less credit to allow a 10% mark-up
R36 834).
22.6
Hours on invoice 3636 wereduplicated on invoice 3689 and
resulted inan overcharge of R289 999.20.
22.7
No work was done in Soweto yet an invoice was delivered to the
Project for Mogale.
10
respondent for work done. This resulted in an overcharge in the
amount of R816 024.97.
22.8
SWR overcharged the respondent in respect of the Rustenburg
project in an amount of R630 167.42.
22.9
SWR submitted double charges on the so-called ODI invoice
numbers 4265, 4266, 4267 and 4268 which resulted in an
overcharge of R 451 919.02.
22.10 The
Gobodo-report
identified
overcharges
and/or
wasteful
expenditure on the ODI project in the amount of R404 800.49.
22.11 The Godobo-report identifies a double claim on invoice 4206
resulting in an overcharge in the amount of R131 222-00.
22.12 The Gobodo-report found that fixed assets to the value of
R792 652.00 are missing. The missing assets could not be
recovered.
22.13 In respect of the Mangaung (Bloemfontein)Municipality SWR was
paid an amount of R1 902 707.15 despite the fact that there was
no contract in place to justify the claim. The Mangaung
Municipality further disputed any liability for payment of this
amount when the respondent claimed this amount from the
municipality. No supporting documents were presented to this
Court to justify this claim paid over to SWR. Because this payment
to SWR cannot be reclaimed it resulted in a loss to the
respondent.
22.14 Less credits passed - R60 594.00.
[23]
The last tender expired in February 2007. In April 2007, Buckle and
Stoop appeared before the Tender Committee to motivate for
condonation for payments in the sum of R2 000 000 (two million rand) for
recoverable projects to be paid to SWR. Despite the fact that they
appeared before the Tender Committee to ask for a condonation in
respect of certain payments, they kept completely silent in respect of the
11
fact that the tender rates used in the invoices significantly increased in
2007 when no tender was in place as the tender had already expired in
February 2007. Buckle and Stoop also kept quiet about the fact that the
tender had expired in February 2007 but allowed SWR to continue to
invoice the respondent. In fact, a significant portion of the claim against
the applicant arose in 2007.The entire amount claimed for the so-called
ODI and WCM projects occurred in 2007 and a significant portion of the
Rustenburg overcharge occurred in 2007. In respect of the latter project
the evidence shows for example that between 29 January 2007 and 26
April 2007 there was an overcharge for labour in the amount of R
454 339.47. What makes matters worse for Buckle and Stoop is the fact
that the increased rate charged for the WCM Project, the Rustenburg
Project, the ODI Project and the Hartebeespoort Dam Project was not
authorised by the Tender Committee nor were these increased rates
approved by Thompson or any other official.
[24]
It should also be pointed out that it came to light in May 2007 that SWR
may be guilty of fronting. The Forensic Department of the respondent
investigated the allegations. De Lange confirmed the findings that SWR
was guilty of fronting. It was also established that Mr Thomas Modubedi
("Modubedi") who was represented as a majority owner of SWR was in
fact not the owner but merely a plumber. It was further found that
Stonehouse did not have a BEE partner and that he made a
misrepresentation on the tender submissions to the respondent. The
report further also questioned Stoop's objectivity in the technical
evaluation in light of the fact that Stoop had worked closely with
Stonehouse. As a result SWR was blacklisted and all work to SWR was
stopped.
Appointment of Gobodo and the Gobodo Investigation
[25]
Allegations of corruption and manipulation of funds were received and
investigated by the respondent’s Forensic Audit Unit (“FAU”). This
resulted in the suspension of Buckle and Stoop.
[26]
I have already referred to the fact that the respondent had appointed
12
Gobodo Forensic and Investigative Accounting (Pty) Ltd to conduct a
forensic investigation. The initial mandate was extended on 18 March
2008 (Phase 2) to include all projects performed by WCM, including
projects on the Walker System and the projects not previously covered
on the SAP System. The scope was also extended to analyse invoices
which were not previously provided to Gobodo.
[27]
During the course of the investigation Levenstein and De Lange
interviewed Buckle and Stoop. Buckle was interviewed on 28 January
2008. The transcripts of the interviews were placed before the Court and
the correctness thereof was confirmed by Levenstein. It was during this
interview that Stoop admitted to various overcharges.
[28]
Buckle, likewise, made certain important admissions during his interview
although he tried his utmost to distance himself from these concessions
in his evidence in this Court. He, inter alia, admitted that he was
responsible for the overall costs and income on the SWR projects and if
there was a discrepancy he was responsible for it. He admitted that he
relied on the manager (Stoop) without doing any sort of verification when
he was presented with the invoices (and which he signed). He admitted
that he put no verification procedures in place for the vetting of invoices
and that he did not check if the respondent was being overcharged for
technicians and labour. He admitted that he signed and motivated for the
payment of R1.7 million for the ODI Project. He also admitted that he did
not verify whether the R1.7 million in respect of the ODI project was in
fact owed and due to SWR despite the fact that he signed and motivated
for this payment.Buckle importantly admitted that he was aware of the
tender price as contained in the tender document and admitted that he
could not explain the sudden increase in the tender rates charged on the
invoices. He admitted signing invoice 4153 and could not explain the rate
of R220 for technicians. He admitted that he did not know the number of
technicians employed by SWR. He admitted that the travel rate charged
was not in accordance with the tender documents. He admitted that he
did not know why invoices 4076 and 4077, which relate to
Hartebeespoort Dam, were charged to Soweto. He admitted that he did
13
not know how many technicians from SWR worked on the Soweto
Project and also that he did not know what SWR did on the Soweto
Project in terms of labour. He admitted that he could not say if the
Ultrasonics on the SWR invoice were in fact supplied to the respondent
although he signed the invoice. He also could not explain why SWR gave
an all-inclusive quote and then still charged for the man-hole and labour
costsseparately on invoices 4148, 4162, 4223. He also admitted that the
invoices do not tie up with the quote.He admitted that he simply
rubberstamped what Stoop asked him to sign. He admitted that SWR
should not have been charged invoice 4224 – 4195. He admitted that he
did not know why money in the amount of R634 324.62 was owed on the
Mogale Project, and further that he did not know why the money was not
collected. He admitted that he was aware that R1 902 707 was
outstanding on the Bloemfontein Project. He admitted that Stonehouse
assisted his wife to obtain a second hand car and that SWR employees
did building work at his home.
Gobodo Report: Main conclusions
[29]
The final Gobodo-report was furnished on 31 August 2008 for phase 1
and phase 2. The Gobodo-report concluded14 that the project analysis
and invoice analysis revealed that SWR had overcharged the respondent
for the period 2002 to 2007. It further concluded that the respondent had
incurred losses in the amount of R12 363 633.65. The losses relate to
charges being levied in respect of work not performed (Soweto and
Rustenburg Projects), the charging of labour and travel rates in excess of
the amount stipulated in the tender document, charging for excessive
hours, duplications of hours charged, charging for assets which were not
installed in the relevant projects and the charging on non-recovery of
amounts due by Municipalities. It was further found that Buckle and
Stoop was not able to substantiate an amount of R1 902 707.15 due by
the Bloemfontein Municipality resulting in a loss of the said amount to the
respondent. It was also found that the asset register of the WCM
Department was inaccurate. The report also concluded that in several
14
I have quoted liberally from the conclusions reached on page 66 – 67 of the report.
14
instances costs specifically pertaining to the Soweto and Gauteng WDM
projects were incorrectly allocated ostensibly to conceal budget overruns.
An amount of R1 238 147.00 relating to the Bloemfontein City
Municipality project was concealed in project 562, thus misrepresenting
the costs on the Bloemfontein City Municipality project. It was concluded
that Buckle and/or Stoop had approved all the payments to SWR and
that they - as managers of the project - are responsible for the
overcharges levied by SWR. It was lastly concluded that it is evident that
the invoices from SWR were not queried by Buckle and Stoop as to the
number of hours charged, the rates charged, the services and assets
provided and the increased allocation of expenses to incorrect projects.
[30]
The Gobodo-report recommended that the joint claim against Buckle and
Stoop should reflect a total amount of R 8 091 607.16. The report further
recommended
that
charges
of
fraud,
corruption
and
possible
contraventions of the Public Finance Management Act should be laid
against Stoop and Buckle.
[31]
Levenstein was not cross-examined on the conclusions reached in this
report. Instead Buckle's representative had attempted to indicate to the
Court, when Buckle was being cross-examined, that the report had not
been lead in evidence. This proposition had to be withdrawn when it was
pointed out that Levenstein in his evidence in chief was extensively led
on the report and that there was a failure on the part of the applicant’s
representative to challenge such evidence.
[32]
It was common cause that Stoop had signed all invoices which reflect the
overpayments. Buckle testified that he had signed 44% of the invoices
which represent overcharges to the value of R3 934 179.94. The
respondent, however, claims the entire amount of the overcharges also
from Buckle. Buckle also signed, and in fact actively motivated the last
payment to SWR in 2007 for an amount of R1 725 618.15 in respect of
the ODI Project and an amount of R393 494.21 in respect of the DWAF
Water Cycle Management Project. The memorandum represented that a
total of R 2 393 795.51 was due and payable to SWR for three projects.
In the memorandum to the Legal Department Buckle confirmed that the
15
work was indeed done and that the amounts were indeed payable. On
the strength of this memorandum (the so-called Buckle memorandum)
the monies were thereafter paid to SWR. Buckle therefore expressly
approved these payments when he stated: "The above project were
finalised to the satisfaction of WCM. It is recommended that the
outstanding money to the total value of R2 393 795.51 be paid to SWR
Projects CC".Despite protestations from Buckle, it can hardly be
concluded that he did not actively promote that payment in this amount
must be made to SWR. In fact, he actively misrepresented that the work
was done and that payment was due.
Disciplinary proceedings
[33]
Buckle and Stoop were charged on 14 March 2008. The following
allegations are contained in the charge sheets:
33.1
That both Buckle and Stoop jointly and/or individually caused
payments to be made to SWR in the amount of approximately
R7 122 936.19 (seven million one hundred and twenty two
thousand nine hundred and thirty six rand and nineteen cents)
and/or approved invoices to this value submitted by SWR in
respect of various projects when they knew or ought to have
known that SWR were not entitled to such payments;
33.2
In approving such payments and/or invoices, both Buckle and
Stoop acted contrary to each one of their duties;
33.3
Alternatively, both Buckle and Stoop conspired with SWR to
defraud Rand Water;
33.4
Both Buckle and Stoop approved invoices when they knew or
ought to have known that Rand Water was being overcharged
and/or charged the incorrect rate and/or charged for work not
done and/or charged for work duplicated and/or charged contrary
to the tender documents and/or without proper supporting
documentation.Buckle and Stoop failed to disclose that SWR
conducted building activities at their home which they did not pay
16
for;
33.5
Buckle and Stoop's non-disclosure was a breach of Rand Water's
Code of Ethics and their contracts of employment.
33.6
As a result of the conduct of Buckle and Stoop acting in breach of
their obligations, Mangaung Municipality refuses to pay to Rand
Water an amount of approximately R1 900 000.00 (one million
and nine hundred thousand rand). Consequently Rand Water had
suffered a further loss in this amount.
[34]
A copy of the first Gobodo-report was attached to their respective charge
sheets.
[35]
Lengthy requests for further particulars in respect of 139 categories of
document were sent to the respondent prior to the disciplinary hearing. A
total of 1 937 documents were subsequently delivered by the respondent
to the applicant. None of the documents save for one document was
referred to by Buckle in his defence during the trial before this Court. I
will return to this fact herein below where the issue of costs is
considered.
Disciplinary Enquiry
[36]
Advocate Nazir Cassim SC ("the Chairperson") of the Johannesburg Bar
was appointed to chair the disciplinary hearing. The hearing commenced
on 1 April 2008 with the evidence of Levenstein. At the instance of
Buckle and Stoop the proceedings were postponed to 21 April 2008.
Initially, Buckle and Stoop were both represented by Advocate Van der
Westhuizen.
[37]
On 21 April 2008, Mr Van der Westhuizen informed the Chairperson that
he would no longer represent Stoop and that Mr Christo Van der Walt
would be representing Stoop. Mr Van der Walt requested a
postponement on Stoop's behalf in order to brief counsel.
[38]
The postponement was refused and the Chairperson instead ruled that
the respondent (represented by Mr Boda) should lead the evidence in
17
chief of all its witnesses and that the cross-examination would stand
down for a later date. This ruling enabled Buckle and Stoop to hear the
case against them without being prejudiced.
[39]
Mr Van der Westhuizen thereafter applied for the Chairperson's recusal
on behalf of Buckle. He then proceeded to accuse the Chairperson of
having a close relationship with the respondent and having a close
relationship with counsel for the respondent (Mr Boda). The Chairperson
explained that his relationship with Mr Boda was professional and that
they are friends but that at least 15 members of the Bar are his friends.
Mr Van der Westhuizen also accused the Chairperson of being more
accommodating and courteous of Mr Boda than to him and that his
relationship to the attorneys firm Cliffe Dekker Hofmeyr seemed to be a
significant and on-going source of income. The Chairperson also made it
clear to Mr Van der Westhuizen that he had no relationship with the
respondent but that he may have acted for them on occasion, instructed
by Deneys Reitz.
[40]
Mr Van der Westhuizen also accused the Chairperson of making rulings
without hearing his submissions. He also alleged that Buckle did not
know what the case against him was, even after hearing Levenstein's
evidence. The Chairperson dismissed these allegations.
[41]
It was further alleged by Mr Van der Westhuizen that the charge sheet
was unclear and that he had not been provided sufficient time to prepare.
Mr Van der Westhuizen also alleged that the Chairperson had had a
private discussion with the respondent’s legal representative, where the
Chairperson allegedly stated that this was an "open and shut case". The
Chairperson recorded that this was a lie and that Buckle was merely
creating a reason for his recusal. He invited Buckle to take the stand in
order to be cross-examined about this accusation. Buckle did not accept
this invitation (nor did he testify to this effect in Court).
[42]
Stoop's representative then indicated that they supported the application
for the Chairperson's recusal. The respondent opposed the application
on the basis that the Chairperson had been appointed externally with the
18
express purpose of ensuring a fair outcome.The Chairperson refused the
application for recusal and stated that his reasons would be provided at a
later stage.The proceedings then continued and the respondent led the
evidence of Bergh, Thomas and Van der Hulst. Levenstein was also
recalled. The cross-examination of the respondent’s witnesses stood
over to 9 and 10 June 2008.
[43]
The proceedings commenced on 9 June 2008. On this occasion,
Advocate Ackerman, representing Stoop, applied for the recusal of Mr
Van der Westhuizen (who acted for Buckle). It was alleged that Mr Van
der Westhuizen could no longer act in the matter due to a conflict of
interest between Buckle and Stoop and that if Mr Van der Westhuizen
continued to act this would result in an irregularity and an unfair hearing.
Mr Van der Westhuizen also requested a separation of the hearing. Mr
Boda responded to the allegations and submitted that the application
amounted to treating the hearing as a criminal trial, that it was not bona
fide and that it was designed to frustrate the hearing.
[44]
The Chairperson made the following ruling:
‘The ruling I make is that legal representatives are excluded.
I will
conduct this hearing in an interrogatory fashion and I will proceed
immediately after the lawyers have left this room.’
[45]
All the legal representatives were then excused. The hearing resumed
and the Chairperson proceeded to interrogate Levenstein, Buckle and
Stoop based on the contents of the Gobodo-report. The Chairperson
went through each complaint and requested the applicants to respond to
the allegations levelled against them. During the disciplinary hearing,
Buckle declined to comment on the overcharges and replied that he
could not answer the questions as he had not had access to the
information or prepared himself despite the fact that Buckle had been in
possession of the Gobodo-report for approximately two months prior to
the hearing.
[46]
To a question whether SWR did any work at his home, Buckle replied
that work was done for his wife. He indicated that he had proof of
19
payment for materials but not labour.Buckle admitted to signing the
invoice of R1.7 million for the ODI project. He testified that he did not
discuss the invoice because he trusted Stoop. Buckle also admitted that
no work was done in Soweto and that meters were not installed in
Soweto.
[47]
Buckle’s evidence about his role in signing invoices was that when Stoop
brought him the invoices, Stoop indicated to him that he had done the
necessary checking. He thenmerely signed the invoices. Nothing was
said during the disciplinary hearingthat he merely “noted” the invoices-a
version Buckle persisted with in this Court.
[48]
In respect of the Bloemfontein project (where a substantial amount was
paid to SWR whilstno contract was in place), Buckle indicated that he
would bring the whole file to the hearing. Up until the last day of the
Court hearing, no documentation was submitted by Buckle to prove that
a contract was in place.
[49]
The Chairperson delivered his findings on 11 June 2008. In his findings,
he addressed the procedural complaints raised by Stoop and Buckle and
the reasons for refusing to recuse himself. He also indicated that, while
he appreciated that his style in conducting the hearing was robust, he
also appreciated that his function was to do justice expeditiously,
efficiently and fairly. He indicated that he was following the approach
endorsed in the Avril Elizabeth Homesfor the Mentally Handicapped v
CCMA and Otherscase.15 The Chairperson also motivated the decision
for recusing the legal representatives. He indicated that Mr Van der
Westhuizen had continued to act in the matter conscious of a potential
for irregularities and that he was deliberately intending to delay the
proceedings. He indicated that he had excluded the lawyers in the
interest of justice and fairness and in accordance with the observations
made in the Avril Elizabeth Homes decision.
[50]
In respect of the allegations against Buckle and Stoop, the Chairperson
concluded that they were both guilty of causing the overcharges, that
15
[2006] 9 BLLR 833 (LAC).
20
they both had made false representations and that both were guilty of
dereliction of duty. With reference to the comprehensive evidence
presented by the Gobodo Report and in particular the fact that incorrect
rates were used and the magnitude of the fraud perpetrated by SWR on
the respondent, the Chairperson remarked that it "is reminiscent of a
thief's picnic".
[51]
Both Stoop and Buckle were found guilty of gross insubordination. It was
also found that both applicants had failed to cooperate with the
respondent to enable it to be placed in possession of sufficient
documentation to recover the amount of R1.9 million from the Mangaung
Municipality.
[52]
The Chairperson concluded that both employees were guilty of
corruption because they had taken kickbacks in the form of SWR making
improvements to their respective homes. The summary dismissal of both
employees was recommended.
Criminal Case
[53]
Subsequent to their dismissal, a criminal charge was laid against Buckle
and Stoop. Both Buckle and Stoop were required by the Public
Prosecutor to make representations on a draft charge sheet. They
provided the Public Prosecutor with their submissions in August 2012.
[54]
Advocate Kriel on behalf of Buckle denied the allegation of fraud but
made the following significant admissions: (1) Buckle was responsible for
planning and managing the budget for the projects (Soweto and ODI); (2)
When signing invoices, Buckle would ensure that the project had funds
before authorising payment from that project; (3) Buckle, on the
presentation of the invoices, merely authorised them on the basis of the
information provided; (4) There was no prejudice to WCM as Stonehouse
was paid for actual work done even though he was paid from a different
project; (5) The fact that Buckle signed the invoices provided by Stoop
could at most be negligentand not constitute the crime of fraud.
[55]
Levenstein responded to the submissions of Buckle and Stoop on behalf
21
of the respondent and pointed out that Buckle's version conflicted with
his version during the (transcribed) interview with Levenstein and De
Lange and that he did not explain why supporting documentation was
concealed from the respondent. Most importantly, it was pointed out that
there was no evidence that Buckle had applied his mind when
authorising payments.
[56]
What is, however, clear from Buckle’s submissions to the Public
Prosecutor is the fact that he admitted that he was, at the very least,
negligent when he signed the invoices.
Brief summary of the evidence presented in Court
[57]
The respondent called six witnesses. The witness statement of Mr Albie
Kriel was handed up by agreement. I intend to deal with some of the
salient parts of the evidence briefly.Ms Charlene Van der Bergh testified
that she is a relative of the Stonehouses. She had worked for SWR from
2004 – 2006 and was appointed mainly to answer phones. In 2006,she
started to prepare invoices and did so for approximately six months until
she resigned because she felt uncomfortable with what she saw
happening at SWR. She gave uncontested evidence that when she was
doing invoicing, she became aware that her aunt (Mrs Stonehouse),
Stonehouse and Stoop tampered with the invoices submitted by SWR to
the respondent for payment. She testified that Stoop would come to
SWR offices at the end of the month to fetch the invoices and that he and
Stonehouse would then manipulate the invoices that were drawn up by
Mr Wally Thomas (the Project Manager). After Thomas had submitted
the invoices, Stonehouse and Stoop would manipulate the hours,
labourers, technicians and kilometres by invoicing for more hours, more
technicians and more kilometres at grossly inflated rates that were far in
excess to what was stipulated in the tender document. She also
confirmed that although Klaud, Jonathon and Thomas were included in
the invoices, they did not even work for SWR but only worked on the
farm. She also explained how she was required to manipulate the
numbers on the invoices and add 50 or 100 on every invoice in order to
make it look as if the respondent was not the only client of SWR.
22
[58]
Mr Wally Thomas confirmed the evidence of Van den Berg concerning
the fraudulent alteration of invoices. He also confirmed that Mr Thomas
Modubedi was a plumber and that he was not an owner as was falsely
represented by SWR for BEE purposes. More importantly, he confirmed
that the schedule of labourers presented to Gobodo by Stoop was false.
He also confirmed his previous statement where he stated that SWR
employees performed work on Stoop’s house.16He also confirmed his
evidence at the disciplinary enquiry,namely, that Stonehouse complained
about the R 25 000.00 that he (Stonehouse) paid to Stoop on a monthly
basis.17 Thomas also testified that he had seen that work was also done
on Buckle's house and that he personally attended to dropping Thomas
and the tiler off at Buckle’s house. As will be pointed out herein below,
the respondent’s policies expressly prohibit employees from receiving
benefits from clients. At no stage did Buckle declare receiving a benefit
from SWR. Instead, he tried to downplay the extent of the benefit as
being negligible.
[59]
Van der Hulst’s evidence regarding the signing of invoices was clear. He
testified that Stoop, as the Project Manager, was required to verify that
work was done; that the invoices correspond to the quote and that labour
cost was correct. He was also required to verify who the people were
who were working on the project and to verify what the rates were. He
also explained that it was common practice for a contractor to submit
weekly schedules as they are required to report back on the jobs created
and the people who worked on the site. Van der Hulst further explained
that invoices cannot be signed for payment unless the goods have been
received along with a delivery note and that Stoop should have made
certain that the goods have in fact been delivered. He also stated that
Stoop ought to have known about the double charges.
His evidence during the Disciplinary hearing was as follows: ‘Gedurende die tyd wat ek vir
SWR gewerk het, was daar verskeie kere werk gedoen by Johan Stoop se huis. Richard
(Bouer) het ‘n lapa / afdak by Johan se swembad gebou en daar was ook ‘n braai ingesit (± 4-5
weke). Thomas Modibedi het ook ‘n toilet vervang en loodgieter werk gedoen toe Johan werk
laat doen het by sy kombuis. Ek dra kennis dat SWR mense teelwerk gedoen het by Hannes
Buckle se huis.’
17“He (Stonehouse) had a phone call and he walked away and he came back and was quite
aggravated, according to him, he had just spoke to Mr Stoop and they had an argument over
the phone and he mentioned to me; weet jy wat ek moet daardie bliksem elke maand R25
000.00 betaal”. I really got upset at this point in time because that was more than what I earned”
16
23
[60]
Van der Hulst explained in respect of Buckle that it was his (Buckle’s)
duty to check that the invoices were for the correct project to ensure that
there would be no misallocation of funds. He further stated that Buckle
had the duty to check the invoices against the orders and to do the
addition. Since SWR was the only contractor for these projects and since
Buckle’s division only had to deal with the one contractor (SWR), Buckle
ought to have known what the rates were and ought to have had a rough
idea of the number of people employed. In respect of the purchase of
assets, he testified that Buckle should have had the delivery note and
serial numbers in order to record the assets on the asset register. In
respect of the importance of serial numbers being reflected on the
invoices, he testified that those numbers are required for entry of the
assets onto the asset register. The asset or serial numbers were also
required in order to keep track of the assets once they have been
installed at a particular site. As will be pointed out herein below, Buckle
signed invoices where the serial number of assets purchased were
conspicuously absent. Van der Hulst further confirmed the various
findings made in the Gobodo report in so far as he was acquainted with
the findings. He also testified that he independently verified the
calculations done by Levenstein in the Gobodo-report.
[61]
Van der Hulst’s evidence in respect of the overcharges was clear. He
testified that in respect of the rates Stoop must have known what the
rates were and that Buckle also should have known the rates especially
in light of the fact that there was only one contractor used at that time
namely, SWR.
[62]
In respect of the Mangaung project, Van der Hulst testified that it was his
duty, when he took over, to ensure that outstanding money was
recovered. No documents were placed before the Court to show that the
project was extended for a further R 2 million rand. Despite the fact that
there were no supporting documents, Buckle wrote a memorandum
confirming that the project was completed and that payment was due and
payable. Van Der Hulst was critical of Buckle’s attempt to simply wash
his hands of this and testified that the manager of the section is
24
accountable and that he should have made sure that there were
procedures and checks and balances. With regard to the allocation of
monies to other projects, Van der Hulst stated that this is not an
acceptable accounting practice and that to allocate money to the
incorrect project is a misrepresentation.
[63]
In respect of the allegation that building works have been done to
Buckle’s house by SWR, Van der Hulst testified that that was not
acceptable particularly in light of the fact that he (Buckle) was part of the
process that resulted in the awarding of the tender to SWR. He testified
that he no longer trusted Buckle in light of the evidence contained in the
Gobodo-report.
[64]
I am in agreement with Mr Boda that Van Der Hulst was a credible
witness.Furthermore, it is clear from his evidence that, as a registered
Professional Engineering Technologist and someone who has been
involved in running projects as a Senior Project Manager in the Chief
Project Manager's department, he was in a position to comment on the
functions of Buckle and that of Stoop. He was also temporarily appointed
in the position Buckle had in the Water Demand Management Section.
[65]
Mr Roy Thompson (a consulting engineer) was Buckle’s superior. He
confirmed that it was discovered that SWR’sBEE status was suspect. He
then commissioned an audit which resulted in a finding that SWR was
guilty of BEE fronting. In respect of the overcharges he testified that it
was Stoop’s duty to check the work and that Buckle would then sign off
on the invoices. He testified that he expected that Buckle would have had
a basic idea of the scope of work that was done by SWR and of the
numberof employees that were required to perform the work. He also
confirmed with reference to Buckle’s declaration form that Buckle never
disclosed the building works done by SWR at his house. Thompson also
confirmed that Buckle had to record assets and that he had to look after
expenditure. He further confirmed that when he signed the so-called
Buckle memorandum (Mangaung Municipality), he testified that no
reservation was expressed by Buckle at the time (nor in the
memorandum) about the fact that SWR had to be paid for the work done
25
(as per the memorandum). Thompson testified that he was of the view
that there was a degree of misrepresentation by Buckle and Stoop and
that invoices were paid that should never have been paid. He also
testified that Buckle should have verified the travel rates and other
charges and that he should have checked for duplications. With regard to
Buckle signing invoices for meters purchased when there was no work
done, Thompson commented that this was misrepresentationand,
basically, fraud. He also testified that Buckle should have known what
the serial numbers of assets were and that he should have recorded it in
the Asset Register.
[66]
Mr Herman De Lange (Assistant Manager Forensic) confirmed that he is
a certified fraud examiner and that he has been doing forensic work for
more than 25 years. He confirmed that he became involved when it
transpired that SWR was not BEE compliant. In respect of the Soweto
project, De Lange confirmed that no work was done on the Soweto
Project (yet SWR invoiced the respondent for work done). He also
confirmed that he had learned about the tiling work done at Buckle’s
house. De Lange took a sworn statement from Thomas who confirmed
that Stonehouse had instructed Thomas to take the tiler to Buckle’s
house and do the tiling. The work was done during work hours. De Lange
also confirmed that Buckle did not disclose the tiling work.
The Gobodo Report and the evidence of Levenstein
[67]
I have already referred to the main conclusions reached in the Gobodo
report. Levenstein gave detailed evidence regarding the findings
contained in the Gobodo-report in which it was concluded that the
overcharges amounted to R 8091 013.16. I have already pointed out that
Buckle did not dispute the conclusions reached in the Gobodo-report in
respect of quantum. Moreover, as already pointed out, Buckle did not in
any meaningful way dispute the findings as set out in the Gobodo-report.
[68]
Before I turn to a brief summary of Levenstein’s evidence, I should point
out that Levenstein was an objective and credible witness. It is clear from
his evidence and the comprehensive report that Levenstein has
26
painstakingly analysed all the invoices that led to the finding of
overcharges as set out in theGobodo-report. Levenstein was furthermore
able to refer the Court to every single invoice and document which
substantiate the findings contained in the Gobodo-report.The invoices
referred to all contain glaring and obvious irregularities and were signed
by Stoop and/or Buckle. Apart from the fact that the Gobodo-report has
been accepted by Buckle in respect of the quantum,I am also satisfied
that the Gobodo-report has been established in evidence that it is
objective and based on the documents and invoices contained in the
bundles before Court.
[69]
I have, therefore, accepted the Gobodo-report in its entirety and the sole
question to be considered by this Court is whether Buckle and Stoop can
be held accountable on the basis of fraud which resulted in a breach of
contract for the loss suffered by the respondent as a result of the
fraudulent overcharges.
[70]
Levenstein confirmed that he is a chartered accountant by profession
and that he was appointed to investigate the conduct of Buckle and
Stoop. Levenstein meticulously took the Court through the Gobodoreport and confirmed his findings contained in the report. He also
confirmed that he had interviews with Stoop and Buckle and confirmed
that the correctness of the transcript of the interviews.
[71]
Levenstein’s evidence regarding the signing of invoices is instructive. He
testified that the invoices were signed and that it is normal practice for
the user department to sign invoices to confirm that the goods and
services were provided. He testified that even if Buckle never signed the
invoices he should have known whether the charges that were being
charged to his department’s projects were
reasonable.Levenstein
confirmed with reference to the KPI document which sets out Buckle’s
duty to manage and control budgets that Buckle was accountable. In this
case, the tariffsrecorded on the invoices were blatantly incorrect.
Levenstein further testified that his understanding of signing of an invoice
was that it could be relied on for purposes of payment. Furthermore, with
reference to the PFMA environment, he explained that when someone
27
signs for an invoice from the user department, it signifies that they are
acknowledging that the goods and services have been provided and that
there has been compliance with section 45 and 57 of PFMA. The
Finance Department of the respondent obviously relied on their
managers to submit correct invoices because the user department is
best positioned to confirm that the service was provided. The practice,
therefore, is that the user department should approve the payments. In
respect of assets (such as water meters) purchased by SWR and
invoiced for payment to the respondent,Levenstein confirmed that Buckle
should have ensured that there was a delivery note for the meters and in
terms of his KPI, he should have ensured that the meters were entered
into an asset register. This Buckle could only do if there were serial
numbers recorded in the invoices. The findings in the Gobodo-report
were that Buckle did not do this. In fact, on some of the invoices the
serial numbers of the assets purchases were not even recorded – an
omission that should have been patently clear to Buckle.
The evidence of Buckle
[72]
The evidence of Buckle stands in stark contrast with the evidence of the
witnesses on behalf of the respondent and particularly that of Levenstein
who is found to be a credible and objective witness. Buckle, on the other
hand,was an evasive witness and at times simply obstructive. Buckle
was in particularly evasive when answering questions about the Gobodoreport and his standard answer to even the simplest of questions simply
was that “we admitted to the overcharges but nothing else”. Buckle
clearly had no intention of taking this Court into his confidence but was
resolved at trying to distance himself from any liability by claiming that
because he merely “noted” invoices, he was innocent. I will, therefore,
proceed to evaluate Buckle in light of this finding.
[73]
Buckle testified in support of his case and did not call any other
witnesses.At the commencement of Buckle’s evidence, Mr Delport on
behalf of Buckle expressly stated in Court that according to them the
dispute centred around the position of Buckle versus Stoop. Mr Delport
also made it clear that he had advised his client to only admit to
28
overcharges and to nothing else. As already pointed out, this is exactly
what Buckle did. In fact, whenever cross-examination became difficult
Buckle’s standard answer was that ‘we admit to overcharges and nothing
else’.
[74]
I have already pointed out that this Court is of the view that Buckle was
not a credible witness.Buckle was confronted with the evidence that
building works were done at his house. AlthoughBuckle admitted that
SWR did tiling at his house, he persistently stated that no “building
works” were done and stated that “building” was not “tiling”. I have no
doubt that Buckle, by being over technical and tried his utmost best to
avoid the unavoidable conclusion, namely, that SWR granted him a
favour – a favour which he, by his own admission, decided not to
disclose to the respondent. He admitted that his failure to disclose this
fact to the respondent was dishonest but tried to justify accepting the
tiling work by comparing this to a situation where an employee was given
a cup of coffee by a subcontractor. Buckle also could not explain why the
evidence led by Thomson regarding the fact that work was done at his
house was not challenged. Buckle merely stated that it was not
challenged because it was only “an allegation”. Buckle was also evasive
about his evidence before the disciplinary hearing where the issue of
building to his house was raised.
[75]
Buckle further consistently evaded questions and refused to make
admissions on the Levenstein report even in circumstances where the
report sets out facts which are evident from the documents and replied
over and over again that he was only prepared to admit to overcharges
even when questions were directed at factual matters. Buckle’s
persistence to avoid even the simplest questions where documents
plainly support factual issues led this Court to the conclusion that Buckle
had something to hide and that he tried his utmost to persuade the Court
of his innocence even in the face of overwhelming factual and
uncontested evidence that he was a willing participant in a fraudulent
scheme that swindled the respondent out of millions of rands.
[76]
Buckle further contradicted himself on many other critical issues. During
29
the investigation interview he admitted that he was overall responsible for
the losses on projects. In Court, Buckle sought to avoid this critical
admission by contending that he was intimidated during the interview into
making the admission even though the transcript clearly shows that he
was told that he had no duty to answer questions and that he could
terminate the interview at any point. A further critical admission was
made by Buckle when he stated that he had a duty to apply his mind to
an invoice before signing it. When he realised the implications of this
concession, he changed his mind and said that he had no duty to apply
his mind.
[77]
I am further in agreement with Mr Boda that Buckle’s version about why
he signed invoices is downright dishonest. The Court also had the
impression thatBuckle tried to deliberately mislead this Court with a
fanciful story about what his signatures on other documents meant. For
example, Buckle first said that he signed Stoop’s KPI’s just to “note” its
contents but later said he signed it to” signify agreement” with its terms.
In respect of his own KPI’s, which he himself drafted,he first said that he
signed it to merely “note” its contents. However, when he realised how
absurd his statement was he changed his version to say he signed it to
“signify agreement” with its contents. In respect of the so-called Buckle
memorandum, he testified that he signed it to “note” the contents thereof.
When he realised how absurd this must sound, he, again, changed his
evidence.
[78]
Buckle’s evidence in respect of why he signed the invoices which was
merely to “note” the invoices shows in my view the great lengths at which
he would go to conceal his participation in the fraudulent scheme. I will
return to my conclusion regarding Buckle’s version that he merely “noted”
invoices and the absurdity of this defence herein below. If Buckle then
signed certain documents to signify agreements with its contents, on
what basis can he now submit that he merely signed invoices to ”note”
the contents thereof? Buckle admitted that he knew what the tender rates
were. Buckle admitted that he knew that SWR’s last tender had expired
in February 2007 yet he continued to “note” invoices even after the expiry
30
of the tender.
[79]
Buckle admitted that he knew that after signing the invoices,Stoop would
take the invoices to the Finance Departments. When he was confronted
with the argument that it made no commercial sense to merely “note”
invoices, Buckle had no comment. Buckle’s evidence regarding why he
signed the Buckle memorandum was equally absurd. He initially said that
the others who signed the memorandum approved the payment. When it
was pointed out to him that it was absurd, he conceded that he signed
memorandum to approve payment. I am in agreement with Mr Boda that
this is again a manifest contradiction in his evidence that exposes his
dishonesty. Buckle’s evasiveness concerning his duties in respect of the
signing of invoices and the fact that he refused to comment when difficult
questions were put to him is, in my view, highly significant in assessing
his state of mind at the time.
[80]
Buckle admitted that SWR was a significant contractor, yet he evaded
questions regarding his liability in checking the tender rates and that the
tender rates on the invoiceswere incorrect.I have already pointed out that
the Gobodo-report contains numerous examples of invoices in which the
tender rates were grossly and blatantly inflated. Buckle could also not
give any explanation as to why he did not ensure that serial numbers
were recorded on the invoices when it was one of his duties in his KPI’s
to record assets in the asset register. In fact, Buckle steadfastly avoided
any questions on the Gobodo-report. His standard answer was ‘we admit
to the overcharges and nothing else.’
[81]
I have considered the evidence of Buckle and, as will be pointed out in
more detail herein below, the evidence clearly establishes that Buckle,
Stoop and SWR conspired to defraud the respondent. Buckle knew that
the tender prices were inflated and he actively participated in this
scheme to defraud the respondent. At best for Buckle, he was reckless
although I am of the view that the overwhelming evidence proves that
heactively participated in the scheme of submitting fraudulent invoices to
the respondent.
31
Issue before the Court
[82]
In brief, the case against Buckle and Stoop was that they had breached
their contracts of employment and that the respondent had suffered
damages as a result of the breach. (I will return in more detail to this
submission.)
[83]
Before I turn to the merits, I must point out that the admission was made
on behalf of Buckle (and by Buckle himself during his evidence) that he
admitted to the overcharges which quantify the sum claimed in the
counterclaim. He, however, denied that he was in any way responsible
for the overcharges which had resulted in the defrauding of the
respondent. Buckle further also disputed that the respondent had
suffered any loss. Stoop placed no version before this Court.
Did Buckle and Stoop defraud the Respondent?
[84]
It was submitted that this Court should find that Buckle and Stoop
committed fraud against the respondent on the basis that,where an
employee makes a deliberate misrepresentation on financial records, he
commits fraud if the records (in this case the numerous invoices) contain
a deliberate misrepresentation.
[85]
Before turning to the facts, it is necessary to briefly set out the legal
requirements for fraudulent misrepresentation. They are as follows:
(i)
The representer must make a factual representation by omission or
commission:18
(ii)
Knowledge by the person making the representation that the
representation is false,19and
(iii)
The representation induced the representee to act in a certain
way.20
18Feinstein
v Nigli1981 (2) SA 684 (A) and S v Huijzers[1988] 2 All SA 92 (A).
Flour Mills (Pty) Ltd v Moriates [1988] 2 All SA 92 (A).
20Bill Harvey’s Investment Trust (Pty) Ltd v Oranjegezicht Citrus Estates (Pty) Ltd 1958 (1) SA
479 (A) at 483G.
19Roto
32
[86]
It is clear from the objective facts that all the invoices referred to in the
Gobodo-report that makes up the quantum of the overcharges in the
amount of R8 091 607.16, contain an express representation by the
signatories that the amount on the invoices was due and payable. (I will
deal with the question whether Buckle can be held accountable by virtue
of his position and/or by virtue of the fact that he signed a significant
amount
of
invoices
in
more
detail
hereinbelow.)
Buckle
has
repeatedlystated in his evidence that he admitted that there were
overcharges. However, his defence was that he is not responsible or
liable for the overcharges. On the facts before this Court, it can,
therefore, be concluded that each of the invoices on which the
respondent bases its claim, contain a fraudulent misrepresentation. The
unchallenged evidence of Levenstein, the Gobodo-report and the
invoices and other supporting documents overwhelmingly support the
conclusion that the invoices were fraudulent. Buckle also admitted in his
evidence that the representation on each of the invoices is false and also
admitted that there were overcharges. It is further common cause that all
of these invoices were presented to the Finance Department of the
respondent for payment and that payment has in fact made to SWR on
the strength of the representations made in the invoices.
[87]
The objective and admitted facts, therefore, support the conclusion that a
factual representation (which is common cause was false) has been
made on each of the invoices on which the respondent bases its claim
and that the misrepresentation had induced the respondent to act in a
certain way namely to pay SWR on the strength of the (false)
representation that certain services were rendered, that goods were
purchased, that the payment was due and that the amount invoiced and
claimed was correct.
[88]
The crucial question in this case is whether Stoop and Buckle had the
intention to defraud the respondent? Put differently, did Stoop and
Buckle know when they signed the invoices that they were falsifying the
invoices?It is accepted that the standard of proof required to prove fraud
33
in a civil case is that it must be proved on a balance of probabilities.21
[89]
Dolus directus, dolus indirectus or dolus eventualis is sufficient to
constitute the intent required for fraudulent misrepresentation. Where the
respresentor knows or foresees and reconciles him to the possibility that
the representation is false and intends the representee to act upon it, the
second requirement will have been satisfied. In determining whether
Stoop and Buckle had the intention to defraud, it is necessary to
investigate their state of mind at the time. In this regard Greenberg, JA
held as follows in R v Myers:22
‘In English Law the house of lords decision in Derry v Peek (14 ac 337)
is the locus classicus on the question of the state of mind of a person
who makes a false representation which justifies a finding that he has
been fraudulent in making such representation.
I think it can be summed up, for the purposes of the present case, by
saying that if the maker of the representation which is false has no
honest belief in the truth of his statement when he makes it, then he is
fraudulent. (There may be other factors, such as materiality or
inducement, but they are not relevant to the point I am discussing.)" 23
…
“Fraud is proved when it is shown that a false representation has been
made (1) knowingly or (2) without belief in its truth, or (3) recklessly,
careless whether it be true or false. Although I have treated the second
and third as distinct cases, I think the third is but an instance of the
second, for one who makes a statement under such circumstances can
have no real belief in its truth."’24
[90]
Only where a statement is made in the honest believe in the truth will the
statement not constitute fraud. The onus to prove that the belief was not
honest rests on the party making the claim that the belief was not honest.
21Gates
v Gates193915 and Ley v Ley's Executors1951 (3) SA 186 (A) at 192H.
[1948] 1 All SA 354 (A).
23 Ibid at 382–383.
24 Ibid at 374.
22
34
In this regard, the Court in Myers25stated as follows:
‘To prevent a false statement being fraudulent, there must, I think,
always be an honest belief in the truth. And this probably covers the
whole ground, for one who knowingly alleges that which is false, has
obviously no such honest belief.
The affirmative manner in which this statement is made does not mean
that the onus rests on the person charged with making a fraudulent
statement to prove his honest belief; the onus is on the party making the
charge to disprove it. The requirement that the belief should be honest is
referred to in Halsbury (2nd ed., vol. 23, sec. 59), where it is said that a
belief is not honest which, ‘though in fact entertained by the representor
may have been itself the outcome of a fraudulent diligence in ignorance
– that is, of a wilful abstention from all sources of information which
might lead to suspicion, and a sedulous avoidance of all possible
avenues to the truth, for the express purpose of not having any doubt
thrown on what he desires and is determined to, and afterwards does (in
a sense) believe.
It appears to me to follow that, in english law, proof of negligence in
25
The accused in this matter raised the defence that he did not make the representations
wilfully, i.e with knowledge of their falsity or with such recklessness as to lead the Court to
conclude wilfulness, His defence was that he relied on the information given to him by the other
accused. The Court a quo concluded as follows:'The point, which was mainly urged on behalf of
Myers, was that his representations, even if false, were not wilfully false - in other words, that he
did not know them to be false or that he did not make them recklessly, not caring whether they
were true or false. Myers repeatedly asserted that he had believed what he said to be true, that
he had acted on the faith of what Dyssell had told him and that he had believed the assurance
of Dyssell to be correct. The Crown must satisfy us beyond reasonable doubt that Myers'
representations were wilfully false. We are not satisfied that it has been proved that Myers knew
that what he stated was false. But the question whether he made these representations with
such recklessness as to lead the Court to conclude wilfulness is one of greater difficulty.
Recklessness is something more than mere negligence; a man may make a false statement
upon insufficient grounds, without taking due steps to verify the information on which he is
acting, and nevertheless his conduct may not amount to fraud. But there comes a stage when
the negligence is so great as to lead the Court to the conclusion that the speaker neither knew
nor cared whether his statement was true or false. In such an event the Court may be justified in
regarding his statement, if in fact false, as fraudulent. We have come to the conclusion that this
is such a case…. These representations were false, and he made them without taking the
slightest trouble to investigate whether they were true or not, when it would have been the
easiest thing in the world to have made some such investigations at the railway offices in Port
Elizabeth from some responsible official. Instead he chose to rely upon the totally unsupported
word of this obscure and minor official, Dyssell… He contented himself with the bare assertion
of Dyssell and did not take the elementary precautions, which ordinary business prudence
would have suggested, in justice to the creditors who were lending him money on the strength
of his representations to finance his enterprise. We feel that in the circumstances his
representations must be regarded as having been made so recklessly as to force the Court to
conclude that they were wilfully false.' (At 380 – 381.)
35
making enquiries as to the facts which are represented, even though it
be of so extreme a degree as to merit the epithet of ‘gross’, can never in
itself amount to proof of the absence of an honest belief, and the same
applies to an absence of reasonable grounds for the belief (see derry v
peek (supra, at pp 361, 363, 369 and 375) and cf. Basner v trigger(1946
ad 83 at p 106)). But, as is pointed out in both these cases, absence of
reasonable grounds for belief in the truth of what is stated may provide
cogent evidence that there was in fact no such belief.
….
But there comes a stage when the negligence is so great as to lead the
Court to the conclusion that the speaker neither knew nor cared whether
his statement was true or false. In such an event the Court may be
justified in regarding his statement, if in fact false, as fraudulent. We
have come to the conclusion that this is such a case. After the
successful conclusion of his venture in the purchase of valve-grinders
and electric batteries, Myers, we are convinced, saw or thought he saw
an opportunity of getting rich quickly by engaging in similar ventures in
the same field. He became embarrassed for lack of funds to pursue this
venture. To enlist financial support he made the representations
complained of. These representations were false, and he made them
without taking the slightest trouble to investigate whether they were true
or not, when it would have been the easiest thing in the world to have
made some such investigations at the railway offices in Port Elizabeth
from some responsible official.’
[91]
Where a person also remains deliberately silent with knowledge of the
facts that constitute fraud, his actions will constitute fraud. See in this
regard,Christiein The Law of Contract:
‘Assuming the existence of circumstances that give rise to a duty to
speak,
silence
resulting
from
negligent
or
grossly
negligent
unawareness or forgetfulness of the facts cannot be fraudulent, but
silence resulting from fraudulent diligence in ignorance or from
knowledge of the facts and a deliberate decision not to reveal them or to
remain
silent
after
taking
steps
to
conceal
them
must
be….Recklessness amounting to fraud may exist when a half-truth has
been told or when a person knows the facts but does not reveal them
36
because he has not bothered to direct his mind to their significance.’26
[92]
The Labour Appeal Court has also accepted that a calculated silence
constitutes fraud: See BMW (South Africa) (Pty) Ltd v Van der
Walt27where the LAC held as follows:
‘[7]
Where there is calculated silence in the face of a duty to speak,
one has to do with that species of fraudulent misrepresentation
known as fraudulent concealment or fraudulent non-disclosure.
In my view the respondent was guilty of a fraudulent
misrepresentation by non-disclosure. His explanation for having
requested the second invoice and for having concealed the true
position from Labuschagne is not plausible. It was, in my view,
correctly rejected by a second disciplinary enquiry held into the
respondent’s conduct.’
[93]
There is no doubt that SWR defrauded the respondent with the intention
of doing so. Invoices were dishonestly and deliberately and with
calculated frequency manipulated to represent to the respondent that
certain goods were delivered and that certain services were in fact
delivered.SWR also sold goods to the respondent for which it paid but
the goods (four ultrasonics) were never delivered. Travel claims were
grossly and blatantly contrary to the tender document inflated and the
number of labourers and technicians used to do tasks were
misrepresented. SWR charged for persons as technicians who were not
technicians and charged for more labour than actually worked. Claims
were also made contrary to quotations and to add insult to injury SWR
submitted a few double claims. The evidence also shows that SWR gave
bribes to Stoop and Buckle. All of these fraudulent claims were paid out
to SWR and resulted in a loss to the respondent in the amount of eight
million rand.
[94]
That Stoop had the intention to defraud the respondentis patently clear
from the evidence. Stoop actively participated in the drawing up and
manipulation of the invoices. In this regard, both Van der Bergh and
26
27
At 306.
[2000] 2 BLLR 121 (LAC).
37
Thomas gave direct and uncontested evidence that Stoop was involved
in fraudulently altering the invoices and that he actively colluded with
Stonehouse to manipulate the invoices. The uncontested evidence
further was that SWR did some building works at Stoop's residence for
which he did not pay nor did he disclose it to the respondent. The
uncontested evidence of Thomas during the disciplinary enquiry (and
confirmed by him in this Court)was that Stoop also received a kickback of
R25 000 per month. Since Stoop has withdrawn his defence to the
counterclaim, the Court is entitled to accept that he admitted that he
conspired to defraud the respondent. In so far as Stoop is concerned,
this Court is of the view that the respondent has proven that Stoop has
breached his contract of employment by defrauding the respondent and
causing the respondent to suffer loss in the amount of R 8 091 607.16.
[95]
Mr Boda persuasively submitted that in respect of Buckle, his conduct
was likewise intentional and dishonest and that fraud in Buckle’s case
has also been established in all of the three categories mentioned in Rex
v Myers.28 I am persuaded that there are both direct and indirect
evidence of fraud in that Buckle, when signing false invoices; when
failing to recover monies due to the respondent; when failing to monitor
and control finances in his department, when falling to record assets in
the Asset Register and when falling to recover the respondent’s assets,
intended to defraud the respondent and that he was aware of the fact
that the invoices were falsified. In short, Buckle knew what the tender
prices were and knew that the invoices grossly inflated the tender prices.
The objective evidence further confirms that Buckle could not have had
an honest belief in the truth of the information contained in the invoices
especially in light of the numerous glaring irregularities contained in the
invoices. The invoices either conspicuously lacked essential detail (such
as serial numbers)or contained glaring overcharges.I am, therefore,
persuaded that when Buckle signed the invoices for payment and when
he signed the Buckle memorandum, he did so without believing in the
truth of invoices that he approved for payment, alternatively, that he was
reckless because he did not bother to direct his mind to the facts so that
28Supra.
38
he could ultimately claim innocence by simulating his intention. I am,
further, persuaded that the evidence showsthat Buckle’ssilence when
signing the invoices many of which contained blatant overcharging and a
blatantly lack of particularity in respect of serial numbersand his silence
when he coerced the Legal Department and the Forensic Department to
sign the Buckle memorandum, was deliberate.
[96]
I am,therefore,in agreement with Mr Boda that, on a balance of
probabilities, Buckle’s conduct was intentional and that he intentionally
participated in a systematic scheme of submitting false invoices to the
respondent for payment. At the very least, Buckle was recklessly
careless. In my view the following objective facts overwhelmingly prove
that Buckle was involved in fraud and that he knowingly participated in
the fraudulent scheme:
96.1
Buckle received a kickback (in the form of tiling work at his house)
from SWR which he did not disclose to the respondent. This
dishonesty, in my view, shows unequivocally that Buckle was
involved in a conspiracy to defraud the respondent. Buckle tried
his best to downplay the extent of the work done on his house. He
tried to say that it was his wife who arranged everything and then
he tried to convince the Court that the amount involved was more
or less R 2000.00. The value of the work done is, in my view,
irrelevant. The amount involved is certainly not negligible. The fact
that Buckle never disclosed that he received a favour from the
only contractor under his control, is significant. This favour
becomes even more significant if regard is had to the fact that
both Buckle and Stoop appeared before the Tender Committee to
motivate for the appointment of SWR.
96.2 Buckle did not dispute that the tender documents contained the
rates (tariffs)that applied to all projects awarded to SWR. Buckle
also admitted that he knew what the rates were that are clearly set
out in the tender. However, when he was referred to a number of
invoices – which he had signed - reflecting inflated or incorrect
tender rates, he suddenly and conveniently refused to comment.
39
His refusal to comment is significant and I am in agreement with
Mr Boda that this refusal to comment on a pertinent question
directed at establishing his state of mind at the time of him signing
the invoices is damning. I am further in agreement that his refusal
to comment can only lead to one inference and that is that he
acted knowinglyand with theintent to defraud the respondent.
There is in light of this evidence, absolutely no basis upon which
Buckle can avoid the irresistible and obvious inference that he
deliberately signed numerous invoices knowing that they were
false. The rates for travel, labour and technicians are clearly set
out in the tender documents. These rates are straight forward and
do not require difficult calculations. Buckle canhardly argue that he
forgot what the rates were. He was part of the Tender Committee
which awarded the tenders to SWR. At the very least, he could
have (and it fact should have) checked what the rates were. There
was only one rate to remember for one significant contractor which
had to be adjusted for inflation. When Buckle was confronted in
Court with invoices showing a sudden and substantial increase in
the rate of technicians, he likewise declined to comment. Buckle’s
refusal to comment especially in light of the objective facts only
reinforces this Court’s conclusion that Buckle knew exactly what
was going on. I also have no doubt that Buckle was aware that the
rates were inflated in order to defraud the respondent and to
squeeze out as much money as possible out of the respondent. In
light of my finding that Buckle must have known at all material
times what the tender rates were, it therefore follows, in my view,
that when Buckle signed the invoices (which he admitted he read),
he knew that the invoices contained overcharges. There is, in my
view, no room for any other finding in the face of the blatantly
incorrect invoices that Buckle, who was aware of the tender rates,
knew that the invoices contained fraudulent overcharges. In this
regard, I am in full agreement with the Chairperson of the
Disciplinary Enquiry’s conclusion that "wrong rates were used and
in short the magnitude of the fraud perpetrated by SWR on Rand
40
Water by reference to objective documents before me is
reminiscent of a thief's picnic".
96.3
Despite the fact that the overcharges were blatant and would have
been evident to Buckle, he nonetheless continued to try and
distance himself from the blatant fraudulent invoices by testifying
that he simply “noted” the invoices. Even if it was so (which is not
accepted by this Court), in any event, as was pointed out by the
Court in R v Meyrs,29there comes a stage when the negligence is
so great as to lead the Court to the conclusion that the speaker
neither knew nor cared whether his statement was true or false. In
casu, Buckle admitted that he read the invoices before signing
them. Although his defence was that he merely “noted” the
invoices, he does not explain why in noting the invoices he never
picked up the blatant overcharges and blatant misrepresentations
contained therein but allowed them to proceed to the Finance
Department for payment.
96.4 The extent of the irregularities on each individual invoice and the
fact that these invoices blatantly misrepresented information and
the frequency in which these fraudulent invoices were submitted
for payment, demonstrate, in my view, a clear pattern of conduct
aimed at defrauding the respondent. The misrepresentationson
the invoices are so blatant that it would havebeen patently clear to
anyone who reads the invoices. It must, therefore, also have been
blatantly obvious to Buckle that the invoices were fraudulent.
96.5 I am further also persuaded that the fact that these irregularities
occurred with such frequency shows that Buckle was more than
negligent. Despite the fact that Buckle had admitted in his
submission to the Public Prosecutor in his criminal case that he
was negligent, he refused to admit in this Court that he was
negligent. The invoices since 2004 – 2007 show that SWR
submitted fraudulent invoices almost every single month. Even
29Supra.
41
from March 2007 to August 2007 when no tender was in place, it
appears that there was a sudden feverish rush to grab even more.
I am in agreement with Mr Boda that the fact that the irregularities
escalated after the tender had expired is a clear indication that
there was a conspiracy to defraud the respondent. Buckle knew
and admitted that he knew that the tender had expired.If he was
so innocent and ignorant as he tried this Court to believe, why did
he not make the respondent aware of the fact that the tender had
expired and why did he allow the invoices to simply carry on even
after the tender has expired? To make matters even worse, the
evidence shows that from March 2007 to August 2007 (during the
time the tender has already expired) there was significant
overbilling. The tender price for technicians suddenly increased
and therewas a significant overbilling for travel during 2007 and
the claims in respect of the actual kilometres travelled were
excessively inflated. I have, in light of this evidence, no doubt that
Buckle was fully aware of this scheme to defraud the respondent.
96.6
The conclusion that Buckle knowingly took part in the scheme to
defraudthe respondent is further reinforced by the fact that certain
invoices contain a glaring lack of detail to such an extent that
Buckle must have known that the invoices were fraudulent. In fact,
if the invoices are perused, it shows that the invoices were drafted
in a manner to conceal crucial information on the invoices. For
example, some of the invoices provided by SWR pertaining to
travel claims did not record the number of trips and the distance
per trip. The question arises why Buckle did not query the
deceptive lack of detail in respect of the number of kilometres
recorded on the invoice? No time sheets weresubmitted with the
invoices which would have enabled Stoop and Buckle to verify the
number of technicians and labourers that worked on a project as
well as the hours of work. According to the Gobodo-report, the
overcharges in respect of excessive hours resulted in an
overcharge of R1 103 585.62 which could have been detected if
Buckle and Stoop had done their work properly. The serial
42
numbers of the certain purchases (on the Rustenburg and Soweto
Projects) are also not reflected on the invoices. This again is a
blatant omission of crucial detail on an invoice. Why did Buckle
not query this?Some invoices blatantly duplicated previous
invoices. I am in agreement with Mr Boda that the quantum of
these fraudulent invoices expresses volumes about Buckle’s
intentions.
96.7
The Gobodo-report further shows a clear pattern of overcharging
in respect of technicians for the period January 2006 to August
2007 in the amount of R 1103 585.62. The evidence shows that a
maximum of six technicians were employed in 2006 and nine in
2007. Yet, if regard is had to the Gobodo-report SWR excessively
overcharged for technicians. For example in February 2007,
almost seventeen technicians were billed for yet no more than
eight technicians were employed at that stage. The rates per hour
are also inflated. There is also no explanation why separate
payments were made for labour when quotes were inclusive of
labour. This happened on more than one occasion. In January
2007 – April 2007, three invoices claiming for labour separately
were signed by Buckle. Not once did Buckle query the invoices.
96.8
Even after SWR was blacklisted Buckle tried to persuade De
Lange to relist SWR by attempting to persuade De Lange that
there was in fact no BEE fronting. His attempt to get SWR to be
relisted is, in my view, afurther clear indication that Bucklewas
involved in the scheme to defraud the respondent.
96.9
Buckle could also not explain why he did not ensure that there
were serial numbers on fixed assets and did not provide any
explanation as to why the respondent’s assets are missing or
were found at the premises of SWR even though they were
purportedly for capital projects.
96.10 In respect of the Soweto Project, it is patently clear that all the
Soweto invoices were a fraud from start to finish as no work was
43
done in Soweto. Buckle also admitted during cross examination
that the Soweto invoices were fraudulent and contained
misrepresentations. He also admitted that he signed the invoices
and that he knew that Stoop would present the invoices to the
Finance Department for payment. He, however, denied that at the
time he knew that it was fraudulent. Buckle and Stoop knew that
no work was done in Soweto, yet they falsely represented to the
respondent that goods and services were rendered in Soweto.
The costs of the Soweto project of R1 473 894.67 were, therefore,
misrepresented by Buckle and Stoop.
96.11 Buckle and/or Stoop approved the payment of R194 356.00 to
SWR in respect of four Ultrasonics. The serial numbers are not
recorded on the invoice and there is no evidence that these
Ultrasonics wereever received by the respondent. Buckle and/or
Stoop approved the payment of R485 894.70 to Peter Jones
Electronics Equipment for the purchase of 10 zonal meters,
specifically for the Soweto project. Although the cost was charged
to the Soweto project, these meters were never installed in
Soweto. Of the 10 meters purchased, two meters were installed
on the Rustenburg project and eight meters were subsequently
retrieved from the SWR store by Van der Hulst. The final nail in
the coffin is the fact that Buckle and/or Stoop approved the
payment of labour and travel in the amount of R559 460.00 and
R59 925.00 respectively on the Soweto project whereas no work
whatsoever was performed in Soweto. There is simply no basis
upon which Buckle can claim to avoid complicity in the falsification
of the invoices. Even on his own version that he merely “noted”
the invoices, he must have picked up the glaring irregularity and
lack of particularity on numerous invoices. This begs the question:
Why did he not bring this under the attention of his employer? The
only conclusion in my view to be drawn from this glaring
irregularity is either that Buckle was complicit in the fraudulent
scheme or at the very least that he was reckless in the execution
of his duties. I am in agreement that the sheer magnitude of
44
irregularities paints a clear picture of a conspiracy to defraud.
96.12 One of the most glaring examples of fraud is the invoice signed by
Buckle for travelling of 18 690 at R 3.20 per kilometre for the
month of May 2007 whereas the distance should have been 8 535
kilometres. This resulted in an overcharge of more than 10 000
kilometres. This blatant overcharge could not have innocently
been ignored.
[97]
It is,therefore,concluded on the overwhelming evidence presented to this
Court that there was a conspiracy to defraud the respondent. The Court
does not accept Buckle’s excuses that he simply “noted” invoices and
that he merely relied on Stoop. The clear pattern of submitting fraudulent
invoices and the sheer magnitude of glaring irregularities on the invoices
support the overwhelming probabilities that Buckle conspired with Stoop
to defraud the respondent.
Breach of contract
[98]
I am satisfied on the evidence that Buckle committed a serious breach of
contract not only in respect of his express duties but also in respect of
the implied duties which are inherent and fundamental to his contract of
employment and the employment relationship as between a senior
employee and his employer.
[99]
It is further accepted that both Stoop and Buckle not only had the
express duty to maintain the highest level of ethics and transparency but,
as senior employees, they had a fiduciary duty to ensure total honesty
and integrity when goods and services were procured.In this regard, the
Supreme Court of Appeals, in Volvo (Southern Africa) (Pty) Ltd v
Yssel,30held as follows:
30
[2010] 2 (BLLR) 128 (SCA). In this matter Volvo instituted action against Mr Yssel (employed
through a labour broker) from damages for breach of fiduciary duty owed by Yssel to Volvo to
act in Volvo’s interests and not his own. See also Phillip v Fieldstone Africa (Pty) Ltd 2004 (3)
SA 465 (SCA) referred to with approval in the Volvo-matter: ‘[30] The principles which govern
the actions of a person who occupies a position of trust towards another were adopted in South
Africa from the equitable remedy of English law. The Roman and Roman-Dutch law provided
equivalent relief. In Transvaal Cold Storage Co Ltd v Palmer 1904 TS 4 at 19–20 and 34–5 the
sources were considered and the conclusion was expressed that the extension and refinement
45
‘[13]
Over a century ago in Robinson v Randfontein Estates Gold
Mining Co LtdInnes CJ expressed in general terms the legal
principle that is applicable in a case of this kind as follows:
“Where one man stands to another in a position of
confidence involving a duty to protect the interests of that
other, he is not allowed to make a secret profit at the other's
expense or place himself in a position where his interests
conflict with his duty. The principle underlies an extensive
field of legal relationship. A guardian to his ward, a solicitor
to his client, an agent to his principal, afford examples of
persons occupying such a position. As was pointed out in
The Aberdeen Railway Company v Blaikie Bros. (1
Macqueen 474), the doctrine is to be found in the civil law
(Digest 18.1. 34.7), and must of necessity form part of every
E civilised system of jurisprudence.”
[14]
Monies that are earned secretly in breach of a duty of trust fall to
be disgorged by the fiduciary and there is little room for him or
her to avoid that consequence. Recently in Phillips v Fieldstone
Africa (Pty) Ltd and Another Heher JA summarised the position,
as it has been articulated in various decided cases, as follows:
of the Civil Law by English courts was a development of sound doctrine suited to “modern
conditions”. The fullestexposition in our law remains that of Innes CJ inRobinson v Randfontein
Estates Gold Mining Co Ltd (supra) at 177–180. It is, no doubt, a tribute to its adequacy and a
reflection of the importance of the principles which it sets out that it has stood unchallenged for
80 years and undergone so little refinement.
“Where one man stands to another in a position of confidence involving a duty to
protect the interests of that other, he is not allowed to make a secret profit at the
other’s expense or place himself in a position where his interests conflict with his duty.
The principle underlies an extensive field of legal relationship. A guardian to his ward,
a solicitor to his client, an agent to his principal afford examples of persons occupying
such a position. As was pointed out in The Aberdeen Railway Company v Blaikie
Bros. (1 Macqueen 474), the doctrine is to be found in the civil law (Digest 18.1.34.7),
and must of necessity form part of every civilized system of jurisprudence. It prevents
an agent from properly entering into any transaction which would cause his interests
and his duty to clash. If employed to buy, he cannot sell his own property; if employed
to sell, he cannot buy his own property; nor can he make any profit from his agency
save the agreed remuneration; all such profit belongs not to him, but to his principal.
There is only one way by which such transactions can be validated, and that is by the
free consent of the principal following upon a full disclosure by the agent... Whether a
fiduciary relationship is established will depend upon the circumstances of each
case... But, so far as I am aware, it is nowhere laid down that in these transactions
there can be no fiduciary relationship to let in the remedy without agency. And it
seems hardly possible on principle to confine the relationship to agency cases.”’
46
“The rule is a strict one which allows little room for
exceptions. It extends not only to actual conflicts of
interest but also to those which are a real sensible
possibility... The defences open to a fiduciary who
breaches his trust are very limited: only the free consent
of the principal G after full disclosure will suffice....
Because the fiduciary who acquires for himself is deemed
to have acquired for the trust... once proof of a breach of
a fiduciary duty is adduced it is of no relevance that (1)
the trust has suffered no loss or damage; (2) the trust
could not itself have made use of the information,
opportunity etc or probably would not have done so; (3)
the trust, although it could have used H the information,
opportunity etc has refused it or would do so... (4) there is
not privacy between the principal and the party with
whom the agent or servant is employed to contract
business and the money would not have gone into the
principal's hands in the first instance... (5) it was no part
of the fiduciary's duty to obtain the benefit for the trust...
or (6) the fiduciary acted honestly and reasonably...
(although English and Australian Courts make some
allowance for equity in calculating the scope of the
disgorgement in such cases).”’31
[100] In so far as it may have been argued that no such fiduciary duty existed
in respect of Buckle and Stoopvis à vis the respondent, it is clear from
the facts that Buckle and Stoop had such a fiduciary duty towards the
respondent by virtue of their positions and the vast discretions given to
them to manage the projects rendered by SWR. Furthermore, the fact
that invoices were paid out to SWR on the strength of the
representations made by Buckle and Stoop further underscores the trust
that was placed in them by their employer. A trust that they have abused
for their own
benefit. In this regard, the Supreme
Court in
Volvo32explained what type of relationship encompasses a fiduciary duty:
31
Ibid at paras 13-14.
at paras 16-17.
32Ibid
47
‘[16]
While certain relationships have come to be clearly recognised
as encompassing fiduciary duties there is no closed list of such
relationships. As pointed out in Randfontein Estates, and in
numerous other cases in this country and abroad, whether a
particular relationship should be regarded in law as being one of
trust will depend upon the facts of the particular case. Courts
have
nonetheless
often
sought
to
identify
features,
or
characteristics, that impart fiduciary qualities to a relationship. In
Hodgkinson v Simms, (footnote omitted) for example, La Forest
J, writing for a majority of the Supreme Court of Canada, said the
following of 'situations in which fiduciary obligations, though not
innate to a given relationship, arise as a matter of fact out of the
specific circumstances of that particular relationship':
“In these cases, the question to ask is whether, given all
the
surrounding
circumstances,
one
party
could
reasonably have expected that the other party would act
in the former's best interests with respect to the subjectmatter at issue. Discretion, influence, vulnerability and
trust were mentioned as non-exhaustive examples of
evidential factors to be considered in making this
determination.
Thus, outside the established categories, what is required
is evidence of a mutual understanding that one party has
relinquished its own self-interest and agreed to act solely
on behalf of the other party. This idea was well-stated in
the American case of Dolton v Capitol Federal Sav. and
Loan Ass'n, 642 p 2d 21 (Colo. App. 1982), at pp 23 - 24,
in the banker-customer context, to be a state of affairs.
"... which impels or induces one party 'to relax the care
and vigilance it would and should have ordinarily
exercised in G dealing with a stranger'... [and]... has been
found to exist where there is a repose of trust by the
customer along with an acceptance or invitation of such
trust on the part of the lending institution.”
48
[17]
Features of the kind that were mentioned in that extract - the
discretion that one party may have in relation to the affairs of
another, the influence that he or she is capable of asserting, the
vulnerability of one person to another, the trust and reliance that
is placed in the other - receive frequent mention in judgments on
the subject of whether a relationship was one of trust. But such
references do not seem to me to advance materially what was
stated in Randfontein Estates and do little more than to identify
factors that were considered to be relevant to the enquiry in the
particular case. And while the extract that I have referred to
might suggest that a 'mutual understanding' between the parties
concerned is a prerequisite for such a relationship to exist I think
that would be to approach the matter too restrictively. What is
called for is an assessment, upon a consideration of all the facts,
of whether reliance by one party upon the other was justified in
the circumstances….’
[101] Furthermore, certain express duties are recorded in Buckle’s KPIS. He
was responsible, inter alia, for managing and controlling the budget, for
project expenditure management and for ensuring that assets are
recorded in the asset register. Buckle’s performance contract further
expressly made him responsible for the financial control of the section
under his care. Stoop also had certain express duties as Project
Manager which included the duty to control project expenses and
reconcile expenses and make financial reports. He also had the duty to
control the budget, record assets in their asset register and to do project
management work. Both Stoop and Buckle breached the express duties
set out in the KPIS. In Buckle’s case, he, in addition, breached his
express duty to exercise financial control over the section under his
control.A duty he conceded was expressly recorded in the Performance
Contract.
[102] The fact that, on Buckle’s own version, he never checked any invoices
nor checked the invoices against the tender documents displayed a
reckless dereliction of his duties to ensure proper financial control and
discipline in the section under his control. There is also no doubt,in my
view,that the systematic defrauding of the respondent of submitting false
49
invoices and in almost half of the invoices “noted” by Buckle is
fundamental and goes to the root of the contract. In fact, it completely
destroyed, in my view, the trust relationship between the contracting
parties (see further hereinbelow). It is accepted that an employee(and
even more so in the case of a senior employee) has the express duty to
maintain the highest level of ethics, fairness and transparency in their
interaction with all stake holders and especially the contractors engaged
to render services to the respondent. This principle applied to both
Buckle and Stoop who were senior employees. Where the employee isas
senior as Buckle and Stoop were, an employer is therefore entitled to
rely on total honesty and integrity when goods and services are
procured. In the well-known case of Herholdt v Nedbank Limited,33 the
Labour Appeal Court also accepted that the failure of a Financial Advisor
to disclose a conflict of interest that the employee had with a client of the
employer constituted dishonest conduct which justified dismissal. In
casu, it is common cause that Buckle did not disclose the fact that SWR
had done tiling work at his house. Against the background that Buckle
adjudicated on the tenders of SRW, this on its own justifies, in my view,
dismissal.34
[103] It is, therefore, accepted that both Buckle and Stoop, clearly, had the
duty to act honestly when certifying payment of invoices. This duty to act
honestly entailed that they would not certify for the payments of invoices
in a manner which would be corrupt or involve any form of dishonesty.
These duties have also been recognised in the judgment of Rand Water
v Stoop and Others:35
‘[16]
The counterclaims are pleaded as arising out of and related to
the contract of employment that existed between the appellant
and the respondents. Whether the claims were one in delict I
shall deal with later, but the fact that the claims arose out of a
contractual relationship is what is pleaded. Furthermore, the
alternative claims as pleaded is based on the allegations that
33
2012 (33) ILJ 1789 (LAC). The finding on the facts was confirmed on appeal to the SCA in
Andre Herholdt v Nedbank (701/2012) [2013] ZASCA 97 (5 September 2013).
34See also Woolworths (Pty) Ltd v CCMA and Others 2011 10 BLLR 963 (LAC).
35 [2013] 2 BLLR 162 (LAC) at paras16-17.
50
even if the appellant fails to discharge its onus of proving that
the respondents committed fraud, the respondents would have
been found to have breached their contracts of employment by
not acting diligently or in good faith or in the appellant’s best
interest. These claims therefore, prima facie are claims that are
contractual. In Sappi Novoboard (Pty) Ltd v Bolleurs, it was said
that:
“It is an implied term of the contract of employment that
the employee will act with good faith towards his
employer and that he will serve his employer honestly
and faithfully: Pearce v Forster and others (1886) QB 356
at 359;Robb v Green (1895) 2 QB 1 at 10;Robb v Green
(1895) 2 QB (CA) at 317;Gerry Bouwer Motors (Pty) Ltd v
Preller1940 TPD 130 at 133;Premier Medical and
Industrial Equipment Ltd v Winkler and Others 1971 (3)
SA 866 (W) at 867H. The relationship between employer
and employee has been described as a confidential one
(Robb v Green at 319). The duty which an employee
owes his employer is a fiduciary one ‘which involves an
obligation
not
to
work
against
his
master’s
interests’(Premier Medical and Industrial Equipment Ltd v
Winkler at 867H; Jones v East Rand Extension Gold
Mining Co Ltd 1917 TH 325 at 334). If an employee does
“anything incompatible with the due or faithful discharge
of his duty to his master, the latter has a right to dismiss
him”:Pearce v Forsterat 359. In Gerry Bouwer Motors
(Pty) Ltd v Prellerit was said at 133: ‘I do not think it can
be contended that where a servant is guilty of conduct
inconsistent with good faith and fidelity and which
amounts to unfaithfulness and dishonesty towards his
employer the latter is not entitled to dismiss him.’ The
conduct of an employee in receiving a commission which
arises out of the employment relationship without the
knowledge of his employer constitutes a lack of faith:
Boston Deep Sea Fishing and Ice Co v Ansell (1888)
[787] 39 ChD 339 (CA) at 363-4;Levin v Levy 1917 TPD
51
702 at 705;Gerry Bouwer Motors (Pty) Ltd v Preller at
133.”
[17]
The contractual link to the claim is also secured by the fact that
in our common law every employee undertakes to exercise due
and reasonable diligence in the discharge of the duties he is
contracted to discharge. (footnote omitted)’36
[104] Lastly, because Buckle and Stoop had a fair measure of discretion in
their jobs it was expected that they had to perform their duties arbitrio
bono viri. See in this regard,NBS Boland Bank Ltd v One Berg River
Drive CC and OthersDeeb and Another v ABSA Bank Ltd; Friedman v
Standard Bank of SA Ltd:37
‘[25]
All this does not mean that an exercise of such a contractual
discretion is necessarily unassailable. It may be voidable at the
instance of the other party. It is, I think, a rule of our common law
that unless a contractual discretionary power was clearly
intended to be completely unfettered, an exercise of such a
discretion must be made arbitrio bono viri (cf Dharumpal
Transport (Pty) Ltd v Dharumpal 1956 (1) SA 700 (A) at 707A B; Moe Bros v White 1925 AD 71 at 77;Holmes v Goodall and
Williams Ltd 1936 CPD 35at 40; Bellville-Inry (Edms) Bpk v
Continental China (Pty) Ltd 1976 (3) SA 583 (C) at 591G - H;
and Remini vBasson 1993 (3) SA204 (N) at 210 I-J)....
[28]
So far I have confined myself to our common law and
comparable legal systems. An analogous conclusion may well be
reached if one applies the modern concept of the role of public
policy, bona fides and contractual equity to the question in issue
(see, for example, Eerste Nasionale Bank van Suidelike Afrika
Bpk v Saayman NO1997 (4) SA 302 (SCA) at 318-31, per Olivier
JA).’
[105] The Labour Appeal Court in Rand Water v Stoop and Others38also
accepted that any fraud committed against their employer as arising from
Court’s emphasis.
(4) SA 928 (SCA) at paras 25 and 28.
38 [2013] 2 BLLR 162 (LAC).
36
371999
52
the employment contract may give rise to an action for damages in terms
of section 77(3) of the BCEA:
‘[35]
The respondents also averred that, the appellants’ claim is a
delictual one and therefore cannot be entertained in terms of
section 77(3) of the BCEA. Once again the respondents are
wrong. There is no doubt that fraud is a delict but the fraud
alleged in the pleadings is connected to the contract of
employment between the appellant and the respondents. This
was not a fraud committed against the appellant by persons
unconnected to it. The allegation is that the respondents abused
their positions as servants of the appellant. They committed
fraud against their employer by abusing the positions they held
as employees.’
[106] In respect of the third requirement, the entire loss is attributable to them
on this basis.
Buckle’s defence
[107] Buckle’s whole case is based on the contention (defence) that he had no
duty to certify invoices for payments due and that he signed invoices
merely to “note” its contents. Consequently, according to Buckle, he had
no duty to whatsoever in respect of the invoices and that he was entitled
to simply rely on Stoop. Although Buckle admitted to the overcharges, his
evidence was that he had nothing to do with that.
[108] I have already on numerous occasions, in this judgment,indicated that I
reject this version. There is simply no basis factual or legal basis upon
which this Court can accept that Buckle simply “noted” invoices and
therefore he incurred no liability for the fraudulent misrepresentations
embodied in the invoices. This argument is simply nonsensical and
without any merit. Furthermore, in listening to the evidence, this Court
had the impression that Buckle’s defence was clearly crafted to distance
himself from the fraudulent conduct and in an attempt to mislead this
Court in respect of his own participation in this fraudulent scheme that
led to a loss of millions. Moreover, Buckle’s own admissions on record
53
and the fact that he adapted his evidence in respect of the weight his
signature had to suit him, clearly,confirms that Buckle tried to mislead the
Court in an effort to distance himself from the fraudulent invoices.
[109] Buckle also tried to convince the Court that he had no duty to sign
invoices on the basis that it is not required in terms of his KPI’s. I am in
agreement with Mr Boda that the fact that this duty to sign invoices is not
expressly stated in Buckle and Stoop’s contract of employment or KPI’s
or performance contract is of no consequence. The fact that they signed
the invoices is significant. If their signatures meant nothing, then why did
Buckle and/or Stoopsign the invoices? Furthermore, it was not in dispute
that the Finance Department paid the invoices on the strength of the
signed invoices. The signatures on the invoices, therefore, clearly
induced the Finance Department to make payments which is consistent
with Levenstein’s evidence. On the probabilities, therefore, I am
persuaded that they did so because their KPIs required both of them to
control the budget and operational expenditure. In the case of Buckle,
the signing of the invoices was implicit as a means of fulfilling his express
duty to control the finances under his performance contract.
[110] I am further of the view that the signing of the invoices certifying that the
work was done and that payment was due, flowed from the fiduciary duty
that both Stoop and Buckle had towards the respondent, namely, to
ensure that they fulfil their fiduciary duty towards their employer to
ensure that they protected the interest of the employer in respect of
spending.
[111] The duty to sign (certify) the invoices further flow from the requirement
for business efficacy. Both Buckle and Stoop signed (and therefore
certified) the invoices month after month and year after year. Why did
Buckle continue to do so if he was under no duty to do so? Buckle tried
to convince the Court that only Stoop had that duty and that he was
entitled to rely on what Stoop represented to him. This can hardly be an
excuse. As a manager, he was obliged to ensure that basic verification
processes were put in place so that he could test the credibility of what
was being claimed. He admitted that he put no verification procedures
54
whatsoever in place. He also admitted, for example, not checking if their
respondent was being over-charged for technicians and labour. He also
never insisted on time sheets or supporting documentation. Even more
damning is his admission made during the interview with Levenstein that:
‘Overall
I am responsible for the, I would say, I am responsible for the
overall cost and income of the project. What that means is that if the end
of the month or at the end of the financial year, if there is a discrepancy
there then I am responsible for that.’
In this regard, I am in agreement with the Chairperson of the disciplinary
enquiry in finding that:
‘Buckle committed a serious dereliction of duties as he had an obligation
to verify whether the claims were genuine, justified and fair. Buckle’s
insistence that he relied totally on Stoop is furthermore nonsensical in
light of the frequency in which Buckle signed invoices. At the very least it
is accepted that both had the tacit obligation to sign the notices and that
their signature represented that the work was done, the goods were in
fact purchased and the price invoiced was correct.’39
[112] It is also highly suspect that Buckle never once made this claim, namely,
that he merely “noted” invoices in his disciplinary hearing or during his
interviews. There, he claimed that he was rubber stamping. His version
of simply noting (which surfaced for the first time in Court) is also wholly
inconsistent with his admission at the interview (prior to the disciplinary
hearings) that if there was a discrepancy with respect to overall cost and
income he was, as Section Head, responsible for it. I am,therefore,in
agreement with Mr Boda that his attempt to get away from this admission
is simply dishonest. At the time Buckle made these admissions, he was
represented by a shop-steward and was expressly told about his right to
remain silent.
[113] Buckle’s version that he was simply noting also begs the question: What
was he noting? Was he also “noting” the glaring irregularities that are so
glaring that it is plain to see? Even if he was only “noting”, why did he not
39
See alsoAlfred McAlpine and Sons (Pty) Ltd v Transvaal Provincial Administration 1974 3 All
SA 497 (A) and Botha v Coopers and Lybrand 2002 (5) SA 347 (SCA) at 360.
55
once query an invoice?
[114] Lastly, Buckles version is inconsistent with general accounting principles,
practise in the PFMA environment and common sense. I also find
Levenstein’s version far more probable and credible than the version put
up by Buckle. It is normal practice for the user department to sign
invoices to confirm that the goods and services were provided. The fact
that the charges were so unashamedly incorrect also casts serious doubt
on Buckle’s version. At the very least, he should have said something
about the blatant irregularities yet month after month, year after year, he
allowed these irregular invoices to proceed to the Finance Department
for payment.It also makes no commercial sense to merely “note” an
invoice. Furthermore, when a person signs an invoice, he must
reasonably believe that others could rely on his signature or hold him
accountable. It is therefore simply improbable that Buckle signed
invoices merely to “note” the contents thereof.
[115] In light of the overwhelming evidence, it is concluded that Buckle and
Stoop certified the invoices for payment and that Buckle’s claim that he
merely “noted” invoices must be rejected. When Buckle and/or Stoop
signed the fraudulent invoices, they misrepresented to the respondent
that the fees charged were reasonable and that the invoices were in fact
due and payable. I am persuaded that in certifying these fraudulent
invoices for payment both Buckle and Stoop breached the express,
implied, statutory and fiduciary duties in term of their contract.
[116] The fact that Buckle did not sign all the invoices (although Stoop did)
also cannot be used as an excuse to avoid liability. The fact of the matter
is that Buckle signed a large percentage of these fraudulent invoices. I
am further in agreement that it is irrelevant to his accountability with
respect to invoices he did not sign all the invoices.
[117] Lastly, Buckle has admitted in his plea that he is an official under the
PFMA. Yet, if regard is had to the sheer volume of fraudulent invoices, it
is clear that none of the obligations under the PFMA were fulfilled by
56
Buckle and Stoop.40
Causation
[118] I am satisfied that the respondent has establish that Buckle and Stoop
had caused the losses. Had they not acted fraudulently, the respondent
would not have made the overpayments to SWR on the strength of the
fraudulent invoices. I am, therefore, satisfied that there is a causal link
between the breach and the damages suffered by the respondent. 41 I am
also satisfied that there exists both a factual and legal cause for the loss
suffered.
[119] In respect of the factual causation, I am satisfied that both Buckle and
Stoop caused the losses. In respect of legal causation, I am satisfied that
the loss was clearly foreseeable and that there are no public policy
considerations militating against holding Buckle and Stoop liable for the
full loss jointly and severally.42
[120] Throughout the proceedings in this Court, Buckle attempted to blame
40
The PFMA which gives expression to these principles provides that:
‘57.
Responsibilities of other officials.—An official in a public entity—
(a)
must ensure that the system of financial management and internal
control established for that public entity is carried out within the area of
responsibility of that official;
(b)
is responsible for the effective, efficient, economical and transparent
use of financial and other resources within that official’s area of
responsibility;
(c)
must take effective and appropriate steps to prevent, within that
official’s area of responsibility, any irregular expenditure and fruitless
and wasteful expenditure and any under collection of revenue due;
(d)
must comply with the provisions of this Act to the extent applicable to
that official, including any delegations and instructions in terms of
section 56; and
(e)
is responsible for the management, including the safe-guarding, of the
assets and the management of the liabilities within that official’s area of
responsibility.”
41 See Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd[1977] 4 All SA 94 (A) and
Vision Projects (Pty) Ltd v Cooper Conroy Bell and Richards Inc 1998 (4) SA 1182 (SCA).
42 The test for legal causation was explained as follows in Lee v Minister for Correctional
Services (Treatment Action Campaign and Others as Amici curiae 2013 (2) BCLR 129
(CC):
‘[68]
There must be a reasonable connection between the breach and the harm
done.[footnote omitted] This serves to limit liability because the consequences
of an act or omission might stretch into infinity. The respondent did not suggest
that the harm was too remote. It bears mentioning that the supreme court of
appeal correctly rejected the respondent’s contentions for resisting liability in
that “it would impose an inordinate burden on the state”, and will “expose it to
indeterminate liability” and that “there are means other than a claim for
damages that enable prisoners to vindicate their rights.’ [footnote omitted]
57
Stoop for the loss. Firstly, it was not pleaded and secondly, contributory
negligence cannot reduce the quantum of damages in a contractual
claim.43
Loss
[121] According to the Gobodo-report, the respondent suffered a loss in the
amount of R8 091 607.16. As already pointed out, there exists no reason
why this Court should not be able to rely on what is clearly a very
comprehensive report. It is clear from the evidence of Levenstein that a
comprehensive and diligent investigation was conducted over an
extensive period of time The sheer volume of documents and invoices
placed before this Court and referred to by Levenstein with military
precision, confirms that this is the loss that was suffered. I am, therefore,
satisfied that this is the loss that was proven by the respondent. I am
further satisfied that Buckle and Stoop are liable jointly and severally for
the loss. See in this regard HolmdeneBrickworks (Pty) Ltd v Roberts
Construction Co Ltd(supra).44
See Price Waterhouse Meyernel v The Thoroughbred Breeders’ Association of South Africa
[2002] 4 All SA 723 (SCA) at para 3. Thoroughbred Breeders' Association v Price Waterhouse
2001 (4) SA 551 (SCA) at para 74.
44In Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltdat 687B-H, the Court set out
the fundamental rule in regard to the award of damages for breach of contract as follows:
‘The fundamental rule in regard to the award of damages for breach of contract is that
the sufferer should be placed in the position he would have occupied had the contract
been properly performed, so far as this can be done by the payment of money and
without undue hardship to the defaulting party… To ensure that undue hardship is not
imposed onthe defaulting party the sufferer is obliged to take reasonable steps to
mitigate his loss or damage.. and, in addition, the defaulting party's liability is limited in
terms of broad principles of causation and remoteness, to (a) those damages that flow
naturally and generally from the kind of breach of contract in question and which the law
presumes the parties contemplated as a probable result of the breach, and (b) those
damages that, although caused by the breach of contract, are ordinarily regarded in law
as being too remote to be recoverable unless, in the special circumstances attending
the conclusion of the contract, the parties actually or presumptively contemplated that
they would probably result from its breach… The two limbs, (a) and (b), of the above
stated limitation upon the defaulting party's liability for damages correspond closely to
the well-known two rules in the English case of Hadley v Baxendale, 156 E.R. 145,
which read as follows (at p. 151):
“Where two parties have made a contract which one of them has broken, the
damages which the other party ought to receive in respect of such breach of
contract should be such as may fairly and reasonably be considered either
arising naturally, i.e., according to the usual course of things, from such breach
of contract itself, or such as may reasonably be supposed to have been in the
contemplation of both parties, at the time they made the contract, as the
probable result of the breach of it."’
43
58
[122] What is clear from the evidence is that Stoop had signed all the invoices
making up the claim and that Buckle had signed a significant portion of
the invoices. I am satisfied that Buckle is also liable for the invoices that
he did not sign on the basis that he exercised no financial control over
the invoices he did not sign, he did not control the budget or expenditure
and on the basis that he conspired to defraud the respondent.
Substantive fairness of the dismissal
[123] I am satisfied, in light of the overwhelming evidence, that Buckle’s (and
Stoop’s) misconduct has been proven by the respondent. The finding of
the chairperson of the disciplinary enquiry that Buckle (and Stoop) are
guilty of corruption, dishonesty and gross negligence is borne out by the
evidence that was led in this Court and the findings contained in a very
comprehensive forensic investigation into the conduct of Buckle and
Stoop. In the event, it is held that the dismissal of Buckle was
substantively fair.
[124] In respect of the question of the fairness of the sanction of dismissal, I
should point out that in cases of dishonesty (and especially in a case
fraud),mitigating factors will little, if any, impact on the sanction to be
imposed.45 In Kalik v Truworths (Gateway) and Others,46the court went
as far as to say that dishonesty destroys the employment relationship
irretrievably:
‘An employment relationship broken down as a result of an act of
dishonesty can never be restored by whatever amount of mitigation. The
underlying reason for this approach is that an employer cannot be
expected to keep dishonest workers in his/her employ. The other reason
for this is to send an unequivocal message to other employees that
dishonesty will not be tolerated.’
45See
Hulett Aluminium (Pty) Ltd v Bargaining Council for the Metal Industry and Others[2008] 3
BLLR 241 (LC) at para 42 where the Court held as follows:
‘[T]he presence of dishonesty tilts the scales to an extent that even the strongest
mitigating factors, like long service and a clean disciplinary record, are likely to have
minimal impact on the sanction to be imposed.’
46 [2008] 1 BLLR 45 (LC) at para 7.
59
[125] A similar approached was followed in Dolo v CCMA andOthers47 where
the Court held as follows:
‘[21]
In this instance, what the arbitrator rightly believed was relevant
was that the applicant’s integrity had been tarnished by her
involvement in the fraudulent transactions and consequently her
trustworthiness had been placed in doubt. It does not seem an
unreasonable conclusion to come to that an employee who is
prepared to assist a third party to defraud that other party’s own
employer of substantial sums over a period of more than two
years, is someone an employer would be justifiably reluctant to
employ in the first place, or to retain in a position requiring the
incumbent to be sufficiently trustworthy to handle money and
supervise others handling money.’
[126] The Court in Theewaterskloof Municipality v SALGBC (Western Cape
Division) andOthers,48 also confirmed that conduct incompatible with the
trust relationship entitles an employer to dismiss.49
[127] Also of significant importance is whether the employee owns up to his
actions. It is patently clear in this case that Buckle refused to admit to
any wrongdoing and in the stead tried to hide behind Stoop and the fact
that he only “noted” invoices. See in this regard Mutual Construction
Company Tvl (Pty) Ltd v Ntombela NO andOthers:50
‘The misconduct which the third respondent committed involved gross
dishonesty and fraud which was bound to cause harm and prejudice to
47(2011)
32 ILJ 905 (LC) at para 21.
[2010] 11 BLLR 1216 (LC).
49 Ibid at para 10, where the court held:
‘The general principle that conduct on the part of an employee which is incompatible
with the trust and confidence necessary for the continuation of an employee relationship
will entitle the employer to bring it to an end is a long-established one. See Council for
Scientific and Industrial Research v Fijen (1996) 17 ILJ 18 (AD) at 26E–G [also reported
at [1996] 6 BLLR 685 (AD) – Ed]:
“It is well established that the relationship between employer and employee is in
essence one of trust and confidence and that, at common law, conduct clearly
inconsistent therewith entitles the ‘innocent party’ to cancel the agreement... On
that basis it appears to me that our law has to be the same as that of English
law and also that a reciprocal duty as suggested by counsel rests upon the
employee. There are some judgments in the LAC to this effect... It does seem
to me that, in our law, it is not necessary to work with the concept of an implied
term. The duties referred to simply flow from naturalia contractus.”’
50 [2010] 5 BLLR 513 (LAC) at para 37.
48
60
the appellant’s business operation. It was also significant that the third
respondent elected not to own up to his misdemeanour. In other words,
he showed a complete lack of remorse or contrition for what he did.
Instead, he attempted to shift the blame to the site manager whom the
third respondent apparently induced to signing the falsified time sheet.
He had only 21/2 years of service with the appellant. Even if he had a
much longer service that would not (and should not) have spared him in
the circumstances of this case. In Toyota SA Motors (Pty) Ltd v Radebe
andOthers (2000) 21 ILJ 340 (LAC) [also reported at [1999] JOL 5876
(LAC) – Ed] the court stated:
“Although a long period of service of an employee will usually be
a mitigating factor where such employee is guilty of misconduct,
the point must be made that there are certain acts of misconduct
which are of such a serious nature that no length of service can
save an employee who is guilty of them from dismissal. To my
mind one such clear act of misconduct is gross dishonesty. It
appears to me that the Commissioner did not appreciate this
fundamental point.
I hold that the first respondent’s length of service in the
circumstances of this case was of no relevance and could not
provide, and should not have provided, any mitigation for
misconduct of such a serious nature as gross dishonesty. I am
not saying that there can be no sufficient mitigating factors in
cases of dishonesty nor am I saying dismissal is always an
appropriate sanction for misconduct involving dishonesty. In my
judgment the moment dishonesty is accepted in a particular case
as being of such a serious degree as to be described as gross,
then dismissal is an appropriate and fair sanction. (at 344C–F).”’
[128] I am satisfied with the fact that Buckle was involved in fraud and that
dismissal was an appropriate sanction. The evidence on behalf of the
respondent was also that Buckle can no longer be trusted.
Procedural fairness
[129] The parties have agreed that this Court may decide the issue of
procedural fairness on the transcript of the hearing. I have already
61
referred to the facts pertaining to the disciplinary hearing.
[130] Two issues arose in respect of procedural fairness. The first is that
employees who frustrate their rights to due process cannot be allowed to
be heard to complain about procedural unfairness. The second is that the
Code of Good Practice does not require an employer to hold a
disciplinary hearing that is modelled on a criminal or even civil trial.
Where an employer does a full investigation (as was done in this case)
and obtains a forensic report there is nothing unfair, in my view, if the
hearing takes the form of a neutral Chairperson interrogating the report
and the employees responses thereto in an interventionist manner and
by granting the parties a fair opportunity to question each other on
disputed issues. Unfortunately many disciplinary enquiries are allowed to
run for months while employees are on suspension with pay because of
the fear that employees may claim procedural unfairness if the enquiry
was not conducted in the manner as one would conduct a trial. I
am,accordingly,persuaded that the approach adopted by the Chairperson
adequately balanced the need for expedition with the need to do justice
between the parties. It is clear from the record that the Chairperson
allowed Buckle and Stoop time to prepare cross-examination by first
allowing each of the employer witnesses to give evidence in chief and
permitting the cross-examination to stand over to a later date. Moreover,
I am satisfied that the interventionist approach followed by the
Chairperson was warranted in the circumstances. The manner in which
the legal representatives of Buckle and Stoop tried to derail the process
by applications for recusals which had no basis and by requesting
numerous documents (that were not even referred to in these
proceedings) warranted the Chairperson from making a ruling excusing
all legal representatives from the proceedings. Mr. Boda who acted on
behalf of the respondent was likewise excused. It is further clear from the
record that Buckle had an adequate opportunity to state his case. In this
regard, the Court is also mindful of the comments made in Avril Elizabeth
Home for the Mentally Handicapped v CCMA and Others51where the
Labour Court made it clear that employers need not follow the “criminal
51
[2006] 27 ILJ 1644 (LC) at 839.
62
justice model”prior to dismissing an employee.52
[131] In arriving at a conclusion, the Court also had regard to the Code of
Good Practice. All that is required in terms of the Code of Good Practice
is that (1) the employee be afforded an opportunity to state his case; and
(2) the employer had to conduct some form of investigation which need
not be a formal enquiry.
[132] In conclusion, I am of the view that in employment matters onerous and
overly formal pre-dismissal procedural requirements defeat the purpose
of expeditious and fair labour dispute resolution. Employers are thus free
to follow an informal approach prior to dismissing employees bearing in
mind that the provisions of the Code of Good Practice should be
followed. In the event, I am satisfied that the dismissal was procedurally
fair.
Prescription
[133] Although a plea of prescription was raised on the papers it was not
seriously persisted with during the trail. Because the plea is before the
Court, the issue must, therefore, be considered.
[134] It is trite that a debt, whether contractual, delictual or arising otherwise, is
not deemed to be due until the creditor has knowledge of the identity of
the debtor and of the facts giving rise to the debt. A creditor who could
have acquired the knowledge by exercising reasonable care is deemed
to have had such knowledge.53 The respondent in this matter only
became aware of the fraudulent activities in March 2008. The evidence in
this regard is unchallenged.Accordingly, no portion of the claim has
prescribed.
Costs
52
See also Nitrophoska (Pty) Ltd v Commission for Conciliation Mediation and Arbitration and
Others[2011] 8 BLLR 765 (LC) at paras 17-18.
53 Prescription Act, 68 of 1969 section 12(3). See alsoAbrahamse v East London Municipality;
East London Municipality v Abrahamse[1997] 2 All SA 651 (A); 1997 (4) SA 613 (SCA) and
Nedcor Bank Bpk v Regering van die Republiek van Suid-Afrika[2001] 1 All SA 107 (A); 2001
(1) SA 987 (SCA).
63
[135] In respect of costs, I am of the view that costs should follow the result. In
the case of Stoop, he should only be held liable for the costs in respect of
the counter-claim. In deciding the issue of costs, the Court has also
taken into account that the applicants have requested volumes of
documents from the respondent only to end up not referring to it in
evidence.
[136] The Court has also considered the scale on which costs should be
ordered. It is accepted that an order for attorney-and- own client costs
will not be granted lightly. However, I have decided to grant attorney-own
client costs against the applicants in light of my finding that Stoop and
Buckle have been found to have committed acts of fraud. I am also of the
view that a special cost order is warranted in light of the applicant’s
conduct in Court. Buckle’s referral of his unfair dismissal claim is
vexatious and constitutes in my view, an abuse of the processes of this
Court. Buckle came to Court with dirty hands and attempted to exonerate
himself from any wrongdoing by concealing his participation in a
fraudulent scheme. I have also taken note of the fact that Buckle was a
particularly obstructive witness.
Order
[137] In the event, the following order is made:
137.1 The dismissal of
the second applicant, Mr Buckle
was
substantively and procedurally fair.
137.2 The unfair dismissal claimof the second applicant, Mr Buckle, is
dismissed with costs on an attorney and own client scale.
137.3 The counterclaim against both the first and second applicants is
upheld with costs on an attorney and own client scale.
137.4 The first and second applicants are held liable jointly and
severallyfor the amount of R8 091 607.16.
64
_______________________
AC Basson J
Judge of the Labour Court
65
APPEARANCES:
For the First Applicant:
Advocate J T Delport
Instructed by:
Gerald Delport Attoreneys
For Respondent:
Advocate F.Boda
Instructed by:
Cliffe Dekker Hofmeyr Incorporated