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- November 11, 2023
- |Civil Law, Practice, And Procedure, Concise Law Reports (CLR)
After the close of the plaintiff’s case, the defendants launched an application for absolution from the instance. The test for absolution from the instance has been settled by the authorities. The principles and approaches have been followed in several cases. They were approved by the Supreme Court in Stier and Another v Henke 2012 (1) NR 370 (SC) where the Supreme Court stated:
‘[4] At 92F-G, Harms JA in Gordon Lloyd Page & Associates v Rivera and Another 2001 (1) SA 88 (SCA) referred to the formulation of the test to be applied by a trial court when absolution is applied at the end of an appellant’s (a plaintiff’s) case as appears in Claude Neon Lights (SA) Ltd v Daniel 1976 (4) SA 403 (A) at 409 G-H:
“. . . when absolution from the instance is sought at the close of the plaintiff’s case, the test to be applied is not whether the evidence led by the plaintiff establishes what would finally be required to be established, but whether there is evidence upon which a Court, applying its mind reasonably to such evidence, could or might (not should, or ought to) find for the plaintiff. (Gascoyne v Paul and Hunter 1917 TPD 170 at 173; Ruto Flour Mills (Pty) Ltd v Adelson (2) 1958 (4) SA 307 (T).)”
Additionally, in Dannecker v Leopard Tours Car & Camping Hire CC [2015] NAHCMD 30 (20 February 2015).
The following considerations (which I shall call ‘the Damaseb considerations’) are in my view relevant and find application in the case before me:
- Absolution at the end of the plaintiff’s case ought only to be granted in a very clear case where the plaintiff has not made out any case at all, in fact, and law.
- The plaintiff is not to be lightly shut out where the defence relied on by the defendant is peculiarly within the latter’s knowledge while the plaintiff had made out a case calling for an answer (or rebuttal) on oath.
- The trier of fact should be on the guard for a defendant who attempts to invoke the absolution procedure to avoid coming into the witness box to answer uncomfortable facts having a bearing on both credibility and the weight of probabilities in the case.
- Where the plaintiff’s evidence gives rise to more than one plausible inference, any one of which is in his or her favour in the sense of supporting his or her cause of action and destructive of the version of the defence, absolution is an inappropriate remedy.
Perhaps most importantly, in adjudicating an application of absolution at the end of the plaintiff’s case, the trier of fact is bound to accept as true the evidence led by and on behalf of the plaintiff, unless the plaintiff’s evidence is incurably and inherently so improbable and unsatisfactory as to be rejected out of hand.’
Another important principle that the court determining an absolution application should consider is this. The clause ‘applying its mind reasonably’, used by Harms JA in Neon Lights (SA) Ltd requires the court not to consider the evidence in vacuo but to consider the evidence in relation to the pleadings and in relation to the requirements of the law applicable to the case.
DISCUSSION
PARKER J:
‘[6] The charge is that the member defendants ‘carried on the business of the first defendant and in a manner that was grossly negligent and/or reckless’. Therefore, the plaintiff claims, that those defendants should be declared jointly and severally liable for a (the) judgment obtained against the first defendant.
[7] It need hardly saying that the plaintiff bears the burden of proving that which they have alleged, that is, that the member defendants carried out the business of the first defendant grossly negligently and recklessly or grossly negligently or recklessly. Thus, the plaintiff can succeed only if it discharged the onus cast on it. The question that arises for determination is therefore this: What proof has the plaintiff placed before the court in its attempt to prove the aforementioned allegation? Before I consider that question, I shall examine the interpretation and application of s 64(1) and s 65 of the CCA.
9] Section 64(1) of the CCA compares substantially with s 430(1) of the CA; except that the charge of ‘gross negligence’ is absent from s 430(1) of the CA. Both Acts provide the charge of recklessness.
[10] The three key elements under s 64(1) of the CCA relevant to the instant proceeding are:
a) knowingly a party to the carrying on of the business in the manner prohibited by s 64(1);
b) any business of the corporation being carried on recklessly;
c) with gross negligence.
[11] The onus is upon the party alleging recklessness or gross negligence to so prove, and being civil proceedings, to establish the necessary facts on a balance of probabilities. The crucial phrase in s 64(1) is: a person is knowingly a party to the carrying on of the business in the prohibited manner. The adverb ‘knowingly’ means having knowledge of the facts from which the conclusion is properly to be drawn that the business of the corporation was or has been carried on recklessly; it does not entail knowledge of the legal consequences of those facts. It follows that ‘knowingly’ does not necessarily mean consciousness. Thus, being a party to the conduct of the corporation’s business does not have to involve the taking of positive steps in the carrying on of the business; it may be enough to support or concur in the conduct of the business.
Be that as it may, it is important to signalize the crucial point that recklessness is not lightly to be found; but where facts are within the exclusive knowledge of one party, his or her failure to give an explanation for his or her conduct may weigh very heavily against him or her.
[13] It has been said that –
‘Ordinarily, if a company while carrying on its business incurs debts at a time when to the knowledge of its directors there is no reasonable prospect of the creditors’ ever receiving payment, there is a carrying on of its business with intent to defraud those creditors.’
[14] This principle does not apply in the instant matter because the plaintiff does not base its case on the charge of carrying on the business of the first defendant ‘with intent to defraud any person or for any fraudulent purpose’. That being the case, Mr Lochner’s submission that the member defendants ‘knew that they could not pay any invoice that would be presented to them in respect of the preparatory work was done’ turns on nothing. That may – I emphasise ‘may’ – prove fraudulent conduct, but not reckless or grossly negligent conduct without more, within the meaning of s 64(1) of the CCA.
[16] There should therefore be sufficient and satisfactory evidence, tending to establish that the conduct of the members of the corporation amounted to a gross abuse of the juristic personality of the corporation as a separate entity, within the meaning of s 65 of the CCA.
[18] …The evidence does not account for any charge under s 64(1) or s 65 of the CCA. The following facts, which I accept and have probative value, debunk any attempt to prove any prohibited conduct under s 64(1) or s 65 of the CCA and to resist absolution.
[19] When the first defendant entered into the service agreement with the plaintiff, the first defendant had an honest and justifiable belief that the project involved would be financed by the Small and Medium Enterprises Bank (‘the SME Bank’).
[20] To argue that the faith the first defendant had in the SME Bank was misplaced is, with respect, fallacious and self-serving. The SME Bank was established to give financial assistance to entities such as the first defendant. The faith the first defendant had in the SME Bank was their attitude and state of mind, and that cannot be disregarded. Their faith was justified and beyond reproach.
22] Furthermore, when the first defendant sold its only immovable property in a market overt, it used the proceeds thereof prudently and lawfully. It paid off its preferent debtors, i.e. Bank Windhoek, the mortgagee of the bond that was held over the property, and the Okahao local authority council in respect of municipality fees and charges. Part of the remaining amount went to the payment of lawyers’ fees respecting the matter with Bank Windhoek. A tiny amount of N$64.30 remained. It should be remembered, in a mixed economy as ours, referred to in article 98(1) of the Namibian Constitution, where market forces determine and control the price of goods and services, the member defendants cannot be faulted for the price they sold the property for in a market overt.
[23] Furthermore, there was not a solitary shred of evidence, tending to establish that the member defendants appropriated a part of the proceeds from the sale of the immovable property for their personal benefit. Indeed, in his cross-examination evidence, Mr Nashidengo, a plaintiff witness, conceded that the sale of the property did not amount to reckless or grossly negligent conduct. Accordingly, I also find that the acts of the member defendants cannot constitute a gross abuse of the juristic personality of the first defendant as a separate entity from the members.
As a result, absolution from the instance was granted with costs.