Department of Agriculture, Forestry and Fisheries and Another v B Xulu & Partners Incorporated and Others (6189/2019) [2021] ZAWCHC 258; [2022] 1 All SA 434 (WCC) (5 August 2021)

Key Facts

Issues

• The second issue involves the joinder of Incovision (PTY) Ltd, Setlacorp (PTY) Ltd, and Nicole Lauren Pick to the proceedings. The applicants seek to hold Incovision and Setlacorp jointly and severally liable with BXI and BX for the repayment of the unlawfully obtained funds. Pick is specifically targeted for R1,690,584.34 paid to her, with arguments that she colluded in the misuse of funds. Investec is joined as a bondholder over the Sheffield property registered to Incovision.
• The third issue pertains to the relief against Nicole Lauren Pick, who is sought to be joined and held jointly liable with BXI and BX for repaying R1,690,584.34 from the unlawfully obtained funds. The applicants argue that Pick's acceptance of these funds, despite knowing the illegality, makes her complicit in the appropriation. Evidence includes her misrepresentation of invoices as 'Advocates Fees' and financial records showing funds were used for personal expenses, contradicting her claims of reimbursement for BXI business costs.
• The first issue concerns the joint liability of BX (Barnabas Xulu) with BXI (B Xulu and Partners Incorporated) to repay an amount of R20,242,472.90 to the Department of Environmental Affairs, Forestry and Fisheries (DEAFF) and the Department of Agriculture, Forestry and Fisheries (DAFF) from funds that were unlawfully obtained by BXI. The applicants argue that BX, as the controlling mind of BXI, abused the corporate veil and misappropriated funds for personal and related entities, warranting joint liability.

Holdings

• Frozen funds in Setlacorp's First National Bank account (No. 62712923615) are to be paid over to the second applicant as part of the repayment for the unlawfully obtained funds.
• If the respondents fail to repay the funds within seven days, the court declared the Sheffield property and BX's Porsche 911 Carrera GPX motor vehicle executable to satisfy the debt. These assets are to be used to discharge the liability.
• The court held BX (5th Respondent), Incovision (6th Respondent), and Setlacorp (7th Respondent) jointly and severally liable with BXI (1st Respondent) to repay R20 242 472,90 to the second applicant (DEAFF) for unlawfully obtained funds. This liability is subject to payment within seven days, with failure to pay triggering execution of preserved assets like the Sheffield property and BX's Porsche.
• Pick (8th Respondent) was held jointly and severally liable with the other respondents to repay R1 690 584,34 to the second applicant, with her liability limited to this amount. She must pay within fourteen days if the others fail to settle the full amount within seven days.
• The costs of the application, including two counsel, are to be paid by BXI, BX, Incovision, Setlacorp, and Pick jointly and severally. Pick's liability for costs is limited to ten percent.

Remedies

• Pick (8th respondent) was ordered to repay R1,690,584.34 to the second applicant within 14 days of the judgment, or as per a mutually agreed repayment arrangement.
• The first, fifth, sixth, seventh, and eighth respondents were ordered to pay the costs of the application, including two Counsel fees, jointly and severally. Pick's liability for costs was limited to 10%.
• Portion 667 of lot 61 (Sheffield property) was declared executable to secure payment of the R20,242,472.90 if the respondents fail to meet the seven-day repayment deadline.
• The sixth, seventh, eighth, and ninth respondents (Incovision, Setlacorp, Pick, and Investec) were formally joined as parties to the proceedings.
• If the first, fifth, sixth, and seventh respondents fail to repay the R20,242,472.90 within seven days, the court-ordered preserved funds and assets (including the Sheffield property and BX's Porsche) will be utilized for payment.
• The fifth (BX), sixth (Incovision), seventh (Setlacorp), and eighth (Pick) respondents were held jointly and severally liable with the first respondent (BXI) for repaying the unlawfully obtained funds amounting to R20,242,472.90 to the second applicant (DEAFF).
• Funds frozen in Setlacorp's First National Bank account (No. 62712923615) were directed to be paid over as part of the R20,242,472.90 repayment to the second applicant.

Monetary Damages

Legal Principles

• The court disregarded the formal legal structure of BXI, Incovision, and Setlacorp, focusing instead on their actual use as BX's tools to facilitate fund dissipation. The entities were treated as part of BX's personal affairs, not distinct legal persons.
• BX's unconscionable abuse of the corporate veil of BXI, Incovision, and Setlacorp was established. The court determined that BX conflated his personal affairs with these entities, treating them as instruments for his benefit without regard for their separate legal identities.
• The court applied the actio ad exhibendum (a delictual action) to hold BX liable for the wrongful disposal of funds. This action requires proof of BX's knowledge and intent to act unlawfully, which was established through his conduct post-notification of the illegality.
• The court found that BX, as an attorney and director of BXI, owed a fiduciary duty to ensure execution proceedings against the applicants were lawful and compliant with the State Liability Act. His conduct in misappropriating funds for personal and related entities breached this duty.

Precedent Name

• Provincial Government: North West Province and Another v Tsoga Developers CC and Others
• Matjhabeng Local Municipality v Eskom Holdings Ltd
• Country Cloud Trading CC v MEC, Department of Infrastructure Development
• Ebrahim and Another v Airport Cold Storage (Pty) Ltd
• Frankel Pollak Vinderine Inc v Stanton NO
• Le Roux v Dey
• Gering v Gering
• Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others
• Wallersteiner v Moir
• ZA v Smith
• Breetzke and Others NNO v Alexander and Others
• Tsung and Another v Industrial Development Corporation of South Africa Limited and Another
• City Capital SA Property Holdings Ltd v Chavonnes Badenhorst St Claire Cooper and Others

Cited Statute

• State Liability Act
• Companies Act 71 of 2008

Judge Name

• Binns Ward
• P Zilwa
• Z. Rogers

Passage Text

• BX's conduct... company. This justifies the lifting of the corporate veil to hold BX personally liable jointly and severally with BXI.
• It is difficult to avoid the conclusion, in relation to the amount of R17 657 098, that Mr Xulu caused BXI to part with the money despite knowing that the writ and attachment pursuant to which that money had been received were invalid. If he did not bother to look at the State Liability Act, he would seem to have acted in reckless disregard of the legality of BXI's actions, ie at least with dolus eventualis.
• BX has stated under oath that he was aware that there was no compliance with the law but nonetheless held the view that BXI was entitled to utilize the unlawfully obtained monies to discharge its liabilities and that even if his conduct was unlawful a court may nevertheless decline to order the repayment of such monies. As the controlling mind of BXI, BX elected to disburse the money and flout the law. I am of the view that in so doing he acted with the requisite dolus, at the very least dolus eventualis.