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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