Howard v Herrigel NO and Another (130/89) [1991] ZASCA 7; 1991 (2) SA 660 (AD); [1991] 2 All SA 113 (A) (8 March 1991)

Howard v Herrigel NO and Another (130/89) [1991] ZASCA 7; 1991 (2) SA 660 (AD); [1991] 2 All SA 113 (A) (8 March 1991)

The Supreme Court of Appeal held that, in application proceedings, the court must accept the respondent's version of disputed facts unless the applicant elects to refer the matter for oral evidence or trial. On Howard's version, he did not have knowledge of the fraudulent conduct or the absence of security for investments, and he relied on the assurances of Smith and Gelb. While Howard may have been negligent in not taking more active steps to verify the company's affairs, negligence does not suffice for liability under section 424(1), which requires recklessness or knowing participation. The court found no evidence that Howard was knowingly a party to the reckless or fraudulent conduct...

Citation
[1991] ZASCA 7
Parties
Appellant: Robin Francis Howard; Respondent: Otto Friedrich Christian Herrigel, N.O.; Respondent: Barend Gert Steyn de Wet, N.O.
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
8 March 1991
Case Number
130/89
Procedural Posture
Civil Appeal / Appeal From the Witwatersrand Local Division; Cross Appeal on Liability Period and Costs
Outcome
Appeal upheld with costs; order against Howard set aside; application against Howard dismissed with costs; cross-appeal dismissed with costs.
Judges
Joubert, Smalberger, Nestadt, Kumleben, Goldstone
Legal Topics
Reckless Trading, Director Liability, Section 424 Companies Act, Application Vs Action Proceedings, Fiduciary Duties, Proof of Knowledge
Commercial and Corporate Civil Procedure Reckless Trading Director Liability Section 424 Companies Act Application Vs Action Proceedings Fiduciary Duties Proof of Knowledge

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 5 Authorities cited 14 Party arguments 2 Amounts and remedies 1
Sign in to unlock

Parties

Robin Francis Howard

Appellant

Otto Friedrich Christian Herrigel, N.O.

Respondent

Barend Gert Steyn de Wet, N.O.

Respondent

Procedural Posture

Civil Appeal / Appeal From the Witwatersrand Local Division; Cross Appeal on Liability Period and Costs

Legal Issues

  1. 1 Whether the respondents were entitled to proceed by application rather than action under section 424(1) of the Companies Act.
  2. 2 Whether Howard was knowingly a party to Loredo's business being carried on recklessly or with intent to defraud creditors.
  3. 3 If Howard was knowingly a party, the extent of his liability under section 424 of the Companies Act.

Ratio Decidendi

The Supreme Court of Appeal held that, in application proceedings, the court must accept the respondent's version of disputed facts unless the applicant elects to refer the matter for oral evidence or trial. On Howard's version, he did not have knowledge of the fraudulent conduct or the absence of security for investments, and he relied on the assurances of Smith and Gelb. While Howard may have been negligent in not taking more active steps to verify the company's affairs, negligence does not suffice for liability under section 424(1), which requires recklessness or knowing participation. The court found no evidence that Howard was knowingly a party to the reckless or fraudulent conduct...

Court Disposition

Appeal upheld with costs; order against Howard set aside; application against Howard dismissed with costs; cross-appeal dismissed with costs.

Orders

  • The appeal is upheld with costs.
  • The order made against the appellant in the court a quo is set aside and substituted with: 'The application against the first respondent is dismissed with costs.'