THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No:   668/2011
In the matter between:

DHAYALAN CHOCKANATHAN CHETTY
APPELLANT

and

ITALTILE CERAMICS LTD
RESPONDENT

Neutral citation:
CHETTY v ITALTILE (668/2011) [2012] ZASCA 170
(28 November 2012)
Coram:
Brand, Malan, Pillay JJA and Southwood and Erasmus AJJA
Heard:
16 November 2012
Delivered:
28 November 2012

Summary:
Delictual liability for furtum usus – whether defendant used
missing stock when stock rolled over – whether defendant used
stock when selling it in breach of contract – causation.

__________________________________________________________________
ORDER

On appeal from: the North Gauteng High Court, Pretoria (T M Makgoka J sitting as
court of first instance):

1 The appeal is upheld with costs.

2 The order of the court below is set aside and replaced by the following:
‘The plaintiff’s claim is dismissed with costs.’
__________________________________________________________________
JUDGMENT

Malan JA (Brand and Pillay JJA and Southwood and Erasmus AJJA concurring):

[1] This is an appeal against the judgment and order of Makgoka J in the North
Gauteng High Court, Pretoria that the appellant (Mr D C Chetty) pay the amount of
R1 168 340,26 as damages together with interest and costs to the respondent
(Italtile Ceramics Ltd). The remedy relied upon was the condictio furtiva. The appeal
is with leave of the court below.

[2] Italtile is a retailer in ceramics. It has numerous branches and franchises and
conducts business under the names of both Italtile and CTM. During 2004 Mr Chetty
was a trainee manager at Italtile’s CTM branch in Gezina, Pretoria. On 8 June 2006
he personally and through his close corporation (the second defendant in the court
below), entered into a joint venture and franchise agreement with Italtile which
commenced on 11 February 2006. He became the manager of both the combined
warehouse and the CTM retail store in Gezina. The CTM brand is directed at the
middle range of the tile and sanitaryware market. It operates (with a minor exception)
on a strictly cash and carry basis. Italtile remained owner of all the goods in the
Gezina store. Its policy was that none of the goods in the store could be taken

without payment first having been made. Mr Chetty was aware of this policy, and that
it was required of him to manage the store in accordance with Italtile’s procedures
and targets.

[3] Mr Chetty, as a joint venture partner, was entitled to share with the
respondent in the profits made at the store. If, however, the profits declined his
remuneration would have been correspondingly less. By 2008 the Gezina store was
not meeting the performance targets set by Italtile. The executive chairman of Italtile,
Mr G A M Ravazzotti, then instructed Ms T Govender, a head office official
responsible for monitoring joint venture and franchise stores, to investigate the
situation at the Gezina store. She performed a mini audit of the store on 18 and 19
September 2008. She had stock sheets printed, did some stock counting and
checked whether certain stock was correctly stored in the areas demarcated. She
also discussed the management of the store with Mr Chetty.

[4] Her mini audit indicated that management of the store was poor and a cause
for concern. Moreover, she ascertained that there were large variances between
stock which was recorded on Italtile’s SAP computerised stock and accounting
system as being present at the store and what was in fact there. Furthermore, during
her mini audit, Mr Chetty admitted to her that he was running a manual delivery book
system (which involved the granting of credit) which he had not disclosed to Italtile,
the details of which were kept outside the SAP stock and accounting system. Mr
Chetty knew that Mr Ravazzotti was unaware of the delivery book system and also
that he would not be happy to hear that stock had left the store without payment
pursuant to the delivery book system. He preferred to tell the latter about the system
himself and not leave it to Ms Govender to do so.

[5] Mr Chetty’s evidence was that the delivery book system was designed to
allow his favoured customers to purchase merchandise on credit. This, he knew,
contravened company policy. Mr Chetty had longstanding relationships with these
customers and the arrangement was that they would buy large quatities of stock,
obtain delivery and settle their accounts at month’s end. He did this without the
knowledge or consent of Italtile which remained owner of the stock held by the store.

[6] Ms Govender’s mini audit led to a full stock count to be done to determine the
extent of the stock losses. In 2008 the Gezina store would carry stock of about R5
million on the premises.  Stock losses should have been in the region of no more
than 0,5 per cent of the stock delivered to the store. A report by Mr Mark Prior which
was given to Ms Govender showed stock variances of R1 million for a three month
period. It was during this stock count that Ms Govender ascertained that Mr Chetty
was rolling stock.  He had started doing this late in 2007. He would take the missing
stock off the system on the first day of a month (by posting it to eg breakages or
customer claims) and reverse it back onto the system on the last day of that month.
The management accounts which were automatically generated on the last day of
the month would therefore reflect that the missing stock was still held in the store. On
discovering Mr Chetty’s stock rolling, Italtile, on 17 October 2008, terminated the joint
venture and his management of the store.

[7] Italtile originally claimed an amount of R1 477 081 from Mr Chetty. This
amount was to a large extent based on the stock count performed by Mr Prior during
October 2008. Mr Prior did not give evidence but Ms Govender prepared a summary
of all stock movements showing the amount of missing stock. During her cross-
examination Italtile applied for an amendment reducing the claim to R568 374,30
which was made up as follows: R542 318,70 in respect of stock rolling and
R26 055,62 lost as a result of the book delivery system. These figures were not in
dispute. Italtile later applied for a further amendment to increase the amount claimed
to R1 168 340,26, being the retail value of the stock and not its cost. This was the
amount awarded by the court below.

[8] Italtile relied on the condictio furtiva. It alleged in its particulars of claim that
subsequent to the conclusion of the agreement it saw to it that the store was stocked
and that Mr Chetty, as the sole member of the second defendant, controlled the
warehousing and the stock in the store. It alleged that between February and
October 2008, Mr Chetty, with the intention to steal, directed or procured or caused
the unlawful removal of certain items of stock from the premises. The stock so
removed was not removed in the course of the management and operation of the
business nor in the ordinary course of the business. The plaintiff was at all times the

owner of the missing stock. Mr Chetty, the particulars of claim concluded, failed to
return the missing stock and was unable to do so.

[9] Makgoka J found for Italtile on all aspects. He held that Italtile had established
that it was the owner of the stock in the store; that large quantities of the stock went
missing during the time Mr Chetty was in charge; that he, contrary to company
policy, extended credit to selected customers; that he rolled stock by making false
entries on the SAP system and that the stock that was rolled could not be found.
Makgoba J found that Mr Chetty did not furnish a coherent, plausible reason why he
had rolled stock and that he misrepresented the true state of affairs to Italtile. The
inference he drew from these facts was that Mr Chetty’s conduct amounted to theft
as defined in the common law. He said that Mr Chetty’s delivery book system, false
write-off’s and reversals of missing stock resulted in Italtile’s suffering patrimonial
loss. But, with respect to the learned judge, this was not the issue. The question was
whether Mr Chetty could be held liable on account of furtum usus both in respect of
the manual delivery system and his stock rolling. This required an investigation into
whether the requirements of theft of this kind had been met.

[10] The condictio furtiva is a remedy the owner of, or someone with an interest
in,1 a thing has against a thief and his heirs for damages.2 It is generally
characterised as a delictual action.3 It is, of course, required that the object involved
be stolen before the condictio can find application. The law requires for the crime of
theft –
‘not only that the thing should have been taken without belief that the owner ... had
consented or would have consented to the taking, but also that the taker should have

1 Clifford v Farinha 1988 (4) SA 315 (W).
2 Kruger v Navratil 1952 (4) SA 405 (SWA) at 408;  John Bell & Co Ltd v Esselen 1954 (1) SA 147 (A)
at 151E-152B: Minister van Verdediging v Van Wyk & Andere 1976 (1) SA 397 (T) at 400C; Crots v
Pretorius 2010 (6) SA 512 (SCA) para 3.
3 Cf J Voet Commentarius ad Pandectas translated by P Gane The Selective Voet (1955) 13.1.2;
Minister van Verdediging v Van Wyk & Andere at 400C-D; Clifford v Farinha at 320H-322D; Crots v
Pretorius  para 3. On the nature of and need for the condictio furtiva, see John Blackie and Ian Farlam
‘Enrichment by act of the party enriched’ in Reinhard Zimmermann, Daniel Visser and Kenneth Reid
(eds) Mixed legal systems (2004)  469 at 488-9; P C Pauw ‘Historical notes on the nature of the
condictio furtiva’ (1976) 93 SALJ 395 at 399-400; J C Sonnekus Ongegronde verryking in die Suid-
Afrikaanse reg  (2007) at 149 ff; Daniel Visser Unjustified enrichment (2008) at 661 ff and Jacques du
Plessis The South African law of unjustified enrichment (2012) at 338-9.

intended to terminate the owner’s enjoyment of his rights or, in other words, to deprive him of
the whole benefit of his ownership.’4
However, at common law ‘theft’ has a wider meaning and includes furtum usus, or
the appropriation of the use of another’s thing.5 Theft of the use of another person’s
thing is no longer a crime.6 The condictio furtiva lies in all cases of theft: ‘whether the
theft wreaked was one of proprietorship or of use or possession ... makes no
difference to the possibility of the action being available.’7 In Clifford v Farinha it was
stated with regard to the condictio furtiva:8
‘[T]he “benemer” – to use the term of De Groot 3.37.3 – does something which he is not
permitted by law to do, namely, to arrogate to himself the power to deal with another’s
property. Thereby he incurs an obligation of the thief immediately to undo what he has done.
Whether the obligation of the thief immediately to restore what he has stolen is classified as
part of the mora doctrine ... or as simply arising from the delict ... the thief is ... regarded as
being in default ... and the obligation to restore – “is perpetuated ...”.’

The intention to appropriate the thing permanently, as in the case of criminal theft, is
not a requirement of the condictio where furtum usus is concerned. The condictio
furtiva will be available where, for example, the defendant withdraws the thing from
the possession of another, or ‘takes’ it, and uses it while intending to restore
possession after use.9 The condictio entitles the owner to the highest value of the
thing between the time it was stolen and litis contestatio.10 The rei vindicatio and the
condictio furtiva are alternative remedies.11 Where the thing stolen was lost or
destroyed the condictio is the owner’s only remedy.12

4 R v Sibiya 1955 (4) SA 247 (A) at 257B-D and see S v Van Coller 1970 (1) SA 417 (A) at 424G-F.
5 Visser at 661 ff; Du Plessis at 336-9; Minister van Verdediging v Van Wyk & Andere at 402G-403C;
Clifford v Farinha at 322E-323E.
6 R v Sibiya 1955 (4) SA 247 (A).
7 Voet 13.1.7.
8 Clifford v Farinha at 321F-H. Hugo de Groot The jurisprudence of  Holland  (1953) (translated by R
W Lee) at 3.37.3: ‘Door goed-beneming werden verbonden alle dieven, geweldigers, grondroovers,
oock die door valsche oorkonde ofte andere quade middelen iemand van ‘t sijne helpen, die eens
anders beest quetsen, ende diergelijcken.’ As was remarked in Smit v Saipem  1974 (4) SA 918 (A) at
929H-930C, at the time De Groot wrote his Introduction there was no  significant difference between
the actio furti and the actio legis Aquiliae. See also Pauw at 400.
9 Clifford v Farinha at 322C-D.
10 Pauw at 400; Visser at 661-5; Du Plessis at 338 but see M D Blecher ‘The owner’s actions against
persons who fraudulently ceased to possess his res (qui dolo desierunt possidere)’ (1978) 95 SALJ
341 at 358.
11 Conradie v Jones 1917 OPD 112 at 119; 8(1) Lawsa 2 ed para 34.
12 See 8(1) Lawsa 2 ed para 34 and 27 Lawsa para 387 for further particulars.

[11] I will first consider the claim of furtum usus based on stock rolling. Mr Rome,
who appeared for Italtile, submitted that the ‘inexorable’ inference to be drawn from
the facts was that Mr Chetty used the stock in an unauthorised manner and to
camouflage his misuse he concealed the missing stock by posting fraudulent entries
to accounts such as the breakages account. He then concealed the disappearance
of the stock at month end to mislead Italtile further. This, Mr Rome submitted,
constituted the use of another’s property without his consent. In support of his
contention, counsel referred to Mr Chetty’s reversal of the write-off’s at month end to
ensure that his take home pay would not be affected; his misuse of the breakages
account and, generally, his failure to provide a proper explanation for his conduct.

[12] I do not agree that the conduct complained of constituted the use of another’s
property.  What Mr Chetty did was to post false entries to the accounts to mislead
Italtile. This could well have amounted to fraud in as much as it would have caused
an increase in Mr Chetty’s profits, but it is not use of the stock. Most of the stock, in
any event, went missing prior to the false entries so that no use of it was possible.
The question is rather whether Mr Chetty’s conduct was calculated to conceal any
unlawful taking of the stock. There is no direct evidence of theft nor of Mr Chetty’s
participation in theft. Nor is such an inference the most plausible or the most likely
one to be drawn from the proven facts.

[13] Mr Chetty was not a good manager. This was found by Ms Govender as soon
as she commenced her mini audit. The 2006 financial year’s results were in line with
the targets set. The following year things deteriorated. The store underwent
extensive renovations and became, as Mr Chetty testified, a virtual construction site
with hundreds of people including contractors and builders walking in and out all the
time. All of this impacted negatively on the stock control systems. Mr Chetty was
concerned about stock going missing. He had suspicions about his staff members
and arranged for polygraph tests to be done during February 2008. He had informed
Mr Ravazzotti about these tests. He wanted to ascertain the reasons for the stock
losses. The write-off’s and subsequent reversals, so he said, would give him time to
investigate the reasons for the stock losses. Some losses resulted from the changed
packaging of the supplier, Pegasus. At best it can be said that Mr Chetty
implemented inappropriate mechanisms to protect his equity in the business pending

his investigations as to the stock losses, not that he intended to and did steal the
missing stock.

[14] Italtile’s claim relating to the book delivery system is also based on furtum
usus. The introduction and operation of the book delivery system was a
contravention of company policy and could well have exposed Mr Chetty or his close
corporation to claims for breach of contract. Whether it amounts to furtum usus is a
different matter. There was no ‘taking’ or withdrawal from Italtile of the goods sold on
credit: the stock was lawfully under Mr Chetty’s control. Its sale by Mr Chetty could
well have founded a complaint of another form of theft13 (which is not relied upon by
Italtile) but is difficult to fit it into the rubric of furtum usus. Mr Chetty never intended
to return the stock sold on credit to Italtile. He did not intend using it temporarily, as
in most cases of furtum usus, but sold it intending to benefit both his own corporation
and Italtile. However, it seems that his making the stock available for sale pursuant
to the book delivery system could be regarded as the use of the goods. The act of
selling the goods, necessarily, includes their use.

[15] The monthly turnover on the delivery book system was between R300 000
and R400 000. Sales were made to major customers with whom Mr Chetty had
formed commercial relationships. No bad debts were incurred by him except the
amount of R26 055 referred to below. All amounts received was credited to the store.
Despite this, it cannot be said that Mr Chetty’s use of the goods in this manner was
in good faith in the expectation that consent would be provided:14 he knew that he
was not entitled to sell on credit; he knew that if he had sought permission it would
have been refused; and he conceded that he would not have stopped the book
delivery system had he not been caught by Ms Govender.

[16] When Mr Chetty’s employment was terminated he left the premises with only
his diary and no information as to outstanding debts. All the reconciliations he had
done he gave to Ms Govender. He had little or no opportunity to collect the debts
outstanding after leaving his employment. Ms Govender collected all of them with

13 Cf R v Kinsella 1961 (1) SA 230 (C).
14 First National Bank of Southern Africa Ltd v East Coast Design CC & others 2000 (4) SA 137
(D&CLD) at 145E ff and see LAWSA 27 para 387 n 3 and C R Snyman Criminal law (2008) 5 ed at
493.

only a relatively small amount of R26 055 outstanding. For no specific reason she
decided not to pursue collecting the latter amount. Mr Chetty’s undisputed evidence
is that he would have been able to collect whatever was outstanding had he been
granted the opportunity to do so. Payment, he said, would have been forthcoming
immediately. He himself never had a bad debt on the manual delivery system. It is
difficult to conclude that he could have foreseen this specific loss. The loss arose,
not directly from the use of the goods, but from the failure of Italtile to collect the
outstanding debt. As between the parties Italtile was clearly better placed to recover
the outstanding amount. It was the only party able to do so. The debt was that of
Italtile, not that of the dismissed Mr Chetty. It could but did not request Mr Chetty’s
assistance. It is clear that Mr Chetty’s conduct is a factual cause of the loss suffered
by Italtile. However, in these circumstances it cannot be said that his conduct is
sufficiently closely or directly linked to the loss for legal liability to ensue.15  Italtile
caused its own loss.

[17] In the result the following order is made:

1 The appeal is upheld with costs.

2 The order of the court below is set aside and replaced by the following:
‘The plaintiff’s claim is dismissed with costs.’

__________
F R Malan
Judge of Appeal

15 International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 700E-I and see Fourway
Haulage (Pty) Ltd v SA National Roads Agency Ltd 2009 (2) SA 150 (SCA) paras 34 and 35.

APPEARANCES:
For  Appellant:

F du Toit SC

Instructed by:

Ron Lippi Attorneys

Pretoria

Lovius Block

Bloemfontein

For  Appellant:

G B Rome

Instructed by:

Edward Nathan Sonnenbergs

C/o Edelstein Bosman Inc

Pretoria

McIntyre & Van der Post

Bloemfontein

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From: The Registrar, Supreme Court of Appeal

Date:
28 November 2012

Status: Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.

CHETTY v ITALTILE
The Supreme Court of Appeal today upheld an appeal against the judgment and order of
Makgoka J sitting in the North Gauteng High Court, Pretoria upholding the claim by Italtile
against the former manager  and franchisee of its CTM Gezina, Pretoria branch. The claim
was based on the common law of furtum usus, or the theft of the use of another person’s
property. Although theft of the use of a thing is not a crime, delictual liability for damages
may nevertheless be based on it.  The Supreme Court of Appeal upheld the appeal for two
reasons. In respect of one claim it held that no use of the missing stock had been proved. In
respect of the claim relating to selling on credit in defiance of company policy, it held that
Italtile had failed to show, as a matter of law, that the manager had caused its loss.