A Melomed Finance (Pty) Ltd (In Liquidation) v Harris Jeffrey (SGHC Case no: 2016/A5028) (Judgment handed down 23 June 2017)

The South Gauteng High Court, sitting as a court of appeal, recently handed down a judgment to the effect that a verbal acknowledgement of debt when made at an enquiry held into the affairs of a company, in terms of s417 and s418 of the Companies Act, No 61 of 1973 (s417 enquiry), can be used as evidence in subsequent civil litigation to recover the amount so acknowledged.

It is trite law that a witness subpoenaed to a s417 enquiry to testify before a commissioner, is obligated to take an oath and then answer any question that is put to him or her, even in the event that the answer may incriminate him or herself. The Act does, however, prevent such incriminating evidence, so obtained, from being used in criminal proceedings against that witness. 

In this case, the liquidators of the company, sought to recover a sum in excess of R8 million. The only evidence which the Appellant put before the court with regards to the proof thereof was the Respondent’s admissions, made under oath, at a s417 insolvency enquiry.

The Appeal court said that there is “no sound reason” not to rely on [an] oral acknowledgment of debt and that absence of corroborating documentation does not detract from the effect of the acknowledgment. The court concluded that no facts were adduced by the Respondent which contradicted his admissions made in the s417 enquiry and therefore the appeal must succeed and the Respondent was liable to pay.

The precedent set by the court is that a s417 enquiry transcript constitutes prima facie evidence in respect of admissions made at such enquiry. In this instance it constituted prima facie evidence of an acknowledgement of debt. A litigant faced with such evidence is therefore burdened with the onus to contradict the contents of the transcript of the s417 enquiry. This is a particularly onerous burden as any admissions made at a s417 enquiry are made under oath. 

This precedent is welcome as it is logical that evidence given under oath should be admissible in court as evidence which was not necessarily the case previously when such evidence had to be led afresh.