About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2016
>>
[2016] ZAWCHC 95
|
|
Costa N.O and Others v Arvum Exports (Pty) Ltd and Others (A272/2014) [2016] ZAWCHC 95 (9 May 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: A272/2014
DATE:
9 MAY 2016
In
the matter between:
ZELDA
MARGARETHA COSTA
N.O
.........................................................................
First
Appellant
DANIEL
COETZEE
N.O
............................................................................................
Second
Appellant
JOHANNES
NICOLAAS JACOBUS VAN
DER
WESTHUIZEN
N.O
.............................................................................................
Third
Appellant
(In
their capacity as trustees for the time being of
the
Klein Botrivier Trust No. IT 852/2007)
ESTATE
OF THE LATE ALBERTO
COSTA
...........................................................
Fourth
Appellant
And
ARVUM
EXPORTS (PTY) LTD (formerly
Unlimited
Fruit (Pty)
Ltd)
...........................................................................................
First
Respondent
UNLIMITED
FRUIT (PTY) LTD (formerly
Arvum
Exports (Pty)
Ltd)
.......................................................................................
Second
Respondent
Arvum
Finance (Pty)
Ltd
...........................................................................................
Third
Respondent
JUDGMENT
DELIVERED 9 MAY 2016
SAVAGE J:
Introduction
[1]
This is an appeal against the judgment and
orders of the Court
a quo
which enforced the terms of a fruit Supply and Marketing Agreement
(‘SMA’) and a Production Loan Agreement (‘PLA’)
entered into between the late Mr Alberto Costa on behalf of the Klein
Botrivier Trust (‘KBT’) and the respondents,
Arvum
Exports (Pty) Ltd, Unlimited Fruit (Pty) Ltd and Arvum Finance (Pty)
Ltd, associated sister companies carrying on business
as fruit supply
chain managers, agents and exporters.
[2]
The KBT is a family trust founded in March
2007 by the late Mr Costa prior to his murder in February 2011. Mr
Costa, his wife Mrs
Zelda Costa (the first appellant) and Mr Daniel
Coetzee (the second appellant), an independent auditor, were
appointed trustees
of the KBT from its inception until Mr Costa’s
death. Following Mr Costa’s death Mr Johannes van der
Westhuizen (the
third appellant) replaced Mr Costa as a trustee of
the KBT. Included amongst the KBT’s income and capital
beneficiaries were
Mr Costa, his wife and children and their
descendants, another family trust known as the Alberto Costa Trust
(‘ACT’)
and farm managers Mr Christiaan Burger and Mr
Matthys Visagie.
[3]
In 2007 Portion 0 of the Farm 1022 Klein
Botrivier was acquired and registered in the KBT’s name as the
only asset of the
KBT. This land formed part of the farm Botterkloof
(which consisted of Portion 10 of the Farm 851 named ‘Boter
Kloof’
owned by the ACT, and that portion of the farm Klein
Botrivier owned by the KBT).
[4]
Mr Costa was a well-respected farmer who
had since 2004 been involved in a business relationship with the
respondents, by whom he
was known as a man of honesty and integrity,
in whom they had ‘
absolute
confidence
’ and who they knew to
be ‘
solely responsible for the
management and control of farming operations and consequently in
effective charge of the Trust’s
business affairs
’.
In 2007 Mr Costa approached Mr Nicolaas Steenkamp, a director of the
first respondent, Arvum Exports (Pty) Ltd, with the
request that the
respondents finance fresh plantings on Botterkloof, which the
respondents were made to understand had been acquired
or was being
acquired through a trust. This approach was made with a proposal that
the respondents be appointed supply and marketing
agents for the
fruit produced on the farm with the first respondent in January 2007
having been granted a South African Plant Breeders’
Licence to
propagate, exploit and distribute the Flavor Fall varietal
exclusively. Negotiations between Mr Costa and the respondents
continued over some time with a draft agreement prepared in February
2008 not being executed. Finally at a meeting on 11 May 2009
the
terms of the proposed PLA and SMA were agreed with the respondents
undertaking to plant the protected plum variety ‘Flavor
Fall’
on Botterkloof. At this meeting Mr Steenkamp asked Mr Costa to
produce a resolution of trustees confirming his authority
to act on
behalf of the KBT. On 18 May 2009 Mr Costa faxed a resolution dated 8
March 2007 to the respondents following which the
PLA and SMA were
executed on 12 July 2009. The resolution of 8 March 2007 was signed
by the three trustees of the KBT and read
as follows:
‘…
Alberto
Costa in his capacity as trustee of the Klein Botrivier Trust IT
852/2007 is hereby appointed and authorized to sign the
necessary
documentation
.’
[5]
Under the terms of the PLA the respondents
advanced approximately R730 000 to facilitate and enhance production
by funding the supply
of fruit trees of the Flavor Fall variety which
were planted on the KBT’s land. The debt was not reflected as a
liability
in the financial statements of the KBT, ACT or in Mr
Costa’s personal financial statements. The redemption of the
loan was
provided for in part by giving the respondents the right to
withhold and appropriate certain amounts each year which would fall
due on the sale of the fruit crop on Botterkloof which the first
respondent was appointed as agent to export, market and sell.
[6]
From 12 July 2009 until May 2012 the
provisions of the PLA and SMA were implemented in relation to the
fruit on Botterkloof. The
trees of the Flavor Fall varietal were
planted on the farm and approximately 65 000 cartons of fruit
produced were delivered to
the respondents and dealt with in terms of
the agreements. The respondents paid out approximately R2.5 million
under the SMA in
respect of fruit received, with more than half of
these deliveries and payments made after Mr Costa's death in the
2011/2012 season.
[7]
After the death of Mr Costa the respondents
took steps to obtain the signature by the trustees of the KBT of the
non-propagation
agreement in respect of the Flavor Fall varietal
planted on the farm, which agreement Mr Costa had, according to the
respondents,
intended to but ‘
never
got around to
’ signing. After Mrs
Costa in September 2011 indicated to the respondents that her
attorney had advised that signing the non-propagation
agreement would
put her in breach of the PLA, a meeting was convened on 20 September
2011 between the parties at the offices of
the appellants' attorneys.
At this meeting the appellants did not raise any issue regarding the
validity of the PLA and SMA but
sought that particular clauses in the
agreements be clarified. After the meeting the appellants' attorney,
Mr Johannes Spamer,
emailed the respondents recording that:
‘…
It
was important for Zelda to receive confirmation from you on behalf of
Fruits and Arvum of the spirit of the agreements concluded
between
the Trust and Fruits/Arvum and your willingness to amend the
agreements to reflect the spirit and to record the same in
clear
terms.
We
appreciate the investment that Fruits and Arvum made and Zelda
appreciate (sic) the relationship, however, explained and appreciated
by yourself, Alberto had a very different and personal style in his
relationships and understanding which Zelda does not share
and it is
important for her to make sure that the parties’ understanding
is correctly recorded - the responsibility of the
business now being
squarely on her shoulders…
We
appreciate your confirmation that Fruits is committed to obtaining
the price bands a set out in the Agency and Marketing agreement
and
that it is and was intended by Fruits that their commitment will
guarantee the price - it ensures peace of mind on Zelda’s
part
knowing that she can depend on your commitment and if you do not meet
that commitment to her business, that she would be entitled
to look
at Fruits with damages and cancellation. The performance on the part
of Fruits is as important to Zelda as her commitment
to you and your
investment in the Trust is. It is also reassuring to Zelda that the
penalty clause, clause 11, will not serve to
penalise her where they
are vis major or where poor farming practice and accidents preventing
her from meeting the estimated crop
forecast.
’
[8]
Mr G J “Riel” Malan of the
respondents replied the following day via email clarifying that he
‘
did not commit to change anything
in the contracts that are in place. As you know – we have no
reason to’
. He stated that the
respondents were nevertheless willing to consider the signature of an
addendum to the existing agreements
and reiterated that the
signature non-propagation agreement was required.
[9]
In March 2012 Mrs Costa informed the
respondents that Mr Costa’s farming business was now being
conducted by the trustees
of ACT. On 2 May 2012, in response to
rumours he had heard regarding the sale of the farm, Mr Malan emailed
Mrs Costa. No response
was received until 17 May 2012 when the
appellants’ attorneys wrote to the respondents indicating that
it was only in September
2011 that Mrs Costa had become aware of the
PLA and SMA. The letter continued:
‘…
Our
investigation into the validity of the agreements has revealed that
the other two trustees at the time were unaware of the transactions
contained in the agreements. Mr Costa did not inform his co-trustees
of the agreements and the Trust did not authorise Mr Costa
to enter
into the agreements or to sign documents for and on behalf of the
Trust. The resolution which you provided to Mrs Costa
last year with
the agreements as proof of the late Mr Costa's authority to enter
into the agreements, predates the agreements by
some two …
years and does not relate to these transaction.
In
these circumstances the agreements are void ab initio and the Trust
is not bound by the same
.’
[10]
On 28 June 2012 the respondents’
attorneys replied that the respondents had ‘
throughout
acted on the belief and understanding that valid agreements’
existed and had performed in terms of
these agreements over a three-year period.
[11]
After no amicable resolution of the matter
was reached, on 5 October 2012 the respondents approached the Court
seeking urgent interim
relief declaring the PLA and SMA to be binding
on the KBT; interdicting and restraining the KBT from transferring
possession of,
disposing of or commercially exploiting any of the
fruit, trees, bud stock, root stock or other vegetative matter of the
Flavor
Fall variety; and directing the KBT to deliver to the
respondents the certain fruit in respect of the 2012/2013 stone fruit
season
and subsequent years for the duration of the SMA. An interdict
was also sought to prevent the KBT from selling, delivering or
dealing
with any plum or nectarine stone fruits referred to in the
SMA in contravention of the plant breeders’ rights for the
Flavor
Fall varietal. In his founding affidavit Mr Steenkamp as
a director of the first respondent recorded that as part of the
process of executing the agreements Mr Costa had indicated that he
was authorised to represent the KBT and provided the respondents
with
a copy of the 8 March 2007 resolution.
[12]
In opposing the respondents’
application, Mrs Costa filed an answering affidavit together with
unsigned confirmatory affidavits
of Mr Coetzee and Mr Van der
Westhuizen. No trust resolution recording a decision of the KBT to
oppose the application was produced.
Mrs Costa denied that she had
been aware of the PLA and SMA prior to September 2011 in spite of her
role in attending to the administration
of the KBT and claimed that
Mr Steenkamp was ‘
lying
’
when he alleged differently in the founding papers. The KBT,
according to Mrs Costa, had been formed to acquire the farm
Klein
Botrivier. Its only asset was the land, its only business that of
renting the farm Klein Botrivier to Mr Costa and its only
source of
income the rental income paid to it by Mr Costa (and later the ACT)
who conducted his farming operation on the farm.
She stated that the
respondents did not supply trees to the KBT but to Mr Costa, who
undertook the farming operation in his own
name, and that Mr Costa
and the ACT had possession or control of fruit and not the KBT. The
respondents had conducted business
with Mr Costa in his personal
capacity when he farmed on the farm Botterkloof before the formation
of the KBT, had received invoices
from him and made payments into his
personal bank account. It was stated further that Mr Costa lacked
either actual or ostensible
authority to sign the PLA and SMA on
behalf of the KBT and the 8 March 2007 resolution provided to the
respondents had been ‘
passed to
authorise Alberto to sign bank documents when the KBT purchased the
farm Klein Botrivier
’. Mr Costa
was not able to make decisions for or on behalf of the KBT without
the authority of the trustees, the other trustees
were not aware that
he had provided the resolution to the respondents or signed the PLA
and SMA and that the authority to sign
documentation did not equate
to authority to conclude binding juristic acts. In addition, Mrs
Costa disputed the respondents’
locus
standi
to seek to enforce the plant
breeders’ rights in relation to the Flavor Fall varietal
planted on the farm and denied that
there had been any threatened or
actual infringement of the plant breeders’ rights.
[13]
Subsequent to the filing of Mrs Costa’s
answering affidavit, the respondents’ notice of motion was
amended to seek in
the further alternative, in the event of it being
held that the agreements were not binding on the KBT for want of
authority to
bind the trust, an order declaring that Mr Costa
breached his warranty of authority to represent the trust in
concluding the agreements.
The respondents contended that the
appellants sought to hide behind the supposedly separate identities
of Mr Costa, the KBT and
the ACT and that if Mr Costa lacked actual
authority to execute the PLA and SMA, he held the ostensible
authority to do so.
[14]
The matter came before a single judge in
this division on 23 November 2012 who referred two issues to oral
evidence:
1.
whether the late Mr Costa was authorised to
conclude the PLA and SMA on behalf of the KBT; and
2.
assuming he had not been so authorised,
whether the KBT should nevertheless he held to be bound by PLA and
SMA by reason of any
pertinent abuse of the trust form by Mr Costa
and/or Mrs Costa and Mr Coetzee.
[15]
In June 2013 Mrs Costa, on behalf of the
KBT, brought a counter-application in which an urgent declaration was
sought that the SMA
and PLA had been validly cancelled and were of no
force and effect; that the interim order made on 23 November 2012 had
lapsed
due to the respondents’ failure to comply with the time
limits provided for discovery, alternatively that it be varied on
the
basis of changed circumstances. After the matter was determined not
to be urgent, it was ordered that the counter-application
be heard
together with the issues referred to oral evidence.
[16]
The parties agreed that the issues to be
determined at the hearing of oral evidence were:
1.
whether Mr Costa had actual or ostensible
authority to enter into the two agreements and if not, whether the
KBT was nonetheless
bound by the agreements as a result of an abuse
of the trust form;
2.
if Mr Costa was not authorised and the KBT
is not bound, whether Mr Costa breached his warranty of authority;
3.
whether if the KBT was bound by the SMA and
PLA, whether the agreements have been validly cancelled by the KBT or
should be enforced;
4.
if the SMA is void or not binding on the
KBT, whether the respondents are entitled to the interdictory relief
in respect of the
removal, delivery and/or destruction of the Flavor
Fall varietal; and
5.
costs.
[17]
At the hearing on these issues three
witnesses testified: Mr Burger for the respondents; and Mrs Costa and
Mr Coetzee for the appellants.
The evidence showed that the
resolution of 8 March 2007 was the only resolution of the KBT of
general import signed by all three
trustees. It had been telefaxed to
the respondents from the home shared by Mr and Mrs Costa when the
respondents had sought from
Mr Costa proof of authority to contract
on behalf of the KBT and Mrs Costa had sent the same resolution to
Absa Bank in 2009 for
a different purpose. Also shown was the fact
that no minutes or trust resolutions existed in respect of a number
of KBT transactions.
[18]
The Court
a
quo
determined that on the
probabilities Mr Costa had actual authority to contract with the
respondents on behalf of the KBT but that
in any event, at the very
least, ostensible authority had been established. Mrs Costa and Mr
Coetzee were found to have left Mr
Costa ‘
armed
with the resolution, to have free reign over the business affairs of
the KBT
’ and the respondents
acted reasonably on the representation made by Mr Costa that he had
authority to contract on behalf
of the KBT. The authority conferred
by the resolution, which was never revoked by the trustees, did not
restrict Mr Costa to the
signature of particular documents and Mr
Costa signed the agreements on behalf of the KBT. The KBT was found
to be bound by the
PLA and SMA and to have been in breach of the
agreements since its repudiation of the PLA and SMA in May 2012. The
cancellation
of the agreements by the KBT was determined to be
invalid in there was no proven breach of such agreements by the
respondents.
Furthermore, the KBT was found to be in
mora
since May 2012 given its refusal to deliver all of the fruit to the
respondents that it was obliged to in accordance with the terms
of
the SMA. As a result, the KBT was not entitled to cancel the
agreements on the basis that a party in
mora
may not exact performance by the other, or cancel, until it has cured
its breach. The Court
a quo
found that the respondents were excused from making any performance
which would require the cooperation of the KBT. In addition,
effect
was given to the terms of the non-propagation agreement with relief
granted against the appellants in their personal capacities
and the
appellants’ counter-application was dismissed.
Discussion
[19]
It
is trite that a trust
is
not a legal person unless statute provides otherwise,
[1]
being
an
accumulation
of assets and liabilities that form the separate entity of a trust
estate. Its estate vests in the trustees who are
required in their
administration of the estate to exercise fiduciary responsibility
over it on behalf of and in the interests of
another.
[2]
Given its lack of legal personality, a
trust
can only act through its trustees in the manner specified in the
trust deed and, u
nless
the contrary is stated in the trust deed, the trustees must act
jointly if the trust estate is to be bound by their acts.
[3]
While the primary responsibility for ensuring compliance with the
formalities of the trust deed and the authority conferred by
it lies
with the trustees,
[4]
an
outsider dealing with a trust has a manifest interest in ensuring
that trustees have authority to act.
[5]
[20]
While clause 6.2.10 of the KBT trust deed
empowers the trustees to institute of defend legal proceedings,
clause 5.3 requires that:
‘
Tensy
spesifiek andersins bepaal in hierdie trustakte, sal besluite wat die
trustees neem, geskied by wyse van ‘n gewone meederheid
van die
stemme van trustees teenwoording op ‘n vergadering
.’
[21]
Where a decision is not taken at a meeting,
clause 5.5 entitles all trustees to sign a decision taken in writing
even if in more
than one document.
[22]
Although decisions of a trust must be taken
in accordance with the provisions of the trust deed, t
he law
of agency permits trustees, subject to the terms of the trust deed,
expressly or impliedly to authorise someone to act on
their behalf
and that person may be one of the trustees.
‘…
The
fact that trustees have to act jointly does not mean that the
ordinary principles of the law of agency do not apply. The trustees
may expressly or impliedly authorise someone to act on their behalf
and that person may be one of the trustees. There is no reason
why a
third party may not act on the ostensible authority of one of the
trustees, but whether a particular trustee has the ostensible
authority to act on behalf of the other trustees is a matter of fact
and not one of law
.’
[6]
[23]
Authority
to act may be actual or ostensible subject to the provisions of the
trust deed. It is expressed when it is given by express
words, such
as the resolution passed by trustees authorising one of the numbers
to sign documents. It is implied when it is inferred
from the conduct
of the parties in circumstances such as when a representation is made
by words or conduct that the agent had authority
to act, when the
representation is made in a form which reasonably leads to outsiders
acting on the strength of it and place reliance
on it and when the
reasonableness of that reliance leads to resultant prejudice being
caused.
[7]
Where
there is no
challenge
raised in the pleadings to the authority of a trustee to act (such as
is the case on appeal in relation to Mrs Costa’s
authority to
litigate) it must be accepted that the requisite authority existed
even in spite of the absence of a resolution to prove such
authority
.
[8]
[24]
The resolution provided to the respondents
by Mr Costa authorised him as a trustee to sign ‘
the
necessary documentation
’ with no
specific reference made to the PLA or SMA, nor to ‘
the
’
documentation referenced in the resolution. Mrs Costa’s claim
that the resolution had been passed to enable Mr Costa
to sign the
documents to take transfer of the farm was not supported by the fact
that on the same day a resolution empowering Mr
Costa to sign the
necessary documentation to take transfer of the farm had been signed
by trustees. Furthermore, Mrs Costa did
not dispute that the same
resolution provided by Mr Costa to the respondents had on a different
occasion been provided to Absa
Bank for a different purpose. In so
doing it is apparent that the resolution relied upon by Mr Costa had
been used previously as
a resolution of general import to facilitate
trust business.
[25]
Counsel
for the appellants sought to rely on the decision of the Supreme
Court of Appeal in
Niewoudt
NO v Vrystaat Mielies (Edms) Bpk
[9]
in which a clause in a trust deed was found to apply only to the
signing of documents for official purposes. In that matter the
relevant clause provided that:
‘
23.4
Die trustees kan een of meer van hulle magtig om alle dokumente
vir amptelike doeleindes wat vir die administrasie van die trust
en
ter uitvoering van enige transaksie wat met die trust se sake verband
hou, nodig is, namens die trustees te teken.
’
[26]
The facts of
Nieuwoudt
are however distinguishable from the current matter in that clause
5.5 of the KBT trust deed, which provides that a written decision
signed by all trustees has the same force and effect as if such
decision was taken at a duly constituted meeting of trustees, does
not limit such decision to official documents only. In this respect
the trust deed considered in
Nieuwoudt
and the terms of the KBT trust deed are
distinct.
[27]
The evidence shows that Mr Costa was the
central figure in the establishment, structure and operation of the
KBT, the ACT and the
Botterkloof farm. The vehicle of the family
trusts he had created was used by him in circumstances in which he
and his wife were
both trustees and
simultaneously among the
principal beneficiaries of the KBT. Mr
Costa
farmed the land which was owned by the KBT, notionally renting from
the KBT and the ACT those portions of the land owned by
each trust
although he paid no rental to either trust with the ‘rental’
income allegedly earned by the KBT paid to
Mr Costa as a ‘rental
distribution received’. No resolution of the KBT authorised the
rental of the farm by Mr Costa
or the payment of the rental
distributions to him.
[28]
Mr Coetzee, the third trustee of the KBT,
confirmed in evidence that it was accepted by trustees that Mr Costa
could sign documentation
on behalf of the trust and that Mr and Mrs
Costa were entitled ‘on their own’ to make use of the
resolution which Mr
Costa had provided to the respondents. In her
evidence Mrs Costa conceded that the authority conferred by the
resolution did not
restrict Mr Costa to sign particular documents and
that no other resolution of general import authorised Mr Costa’s
signature
of documents on behalf of the KBT, including the
transactions he undertook to apply for the KBT’s VAT
registration and for
loan finance to acquire the property.
[29]
The VAT paid by the KBT on the purchase
price of the farm was paid out to Mr Costa without any resolution
passed authorising this
distribution to him.
All contracts
were kept at the home of Mr and Mrs Costa from where Mrs Costa
undertook the trust administration. No trust minutes
were kept and
with 500 clients Mr Coetzee accepted that he was not part of the
day-to-day activities of the trust but would be
approached regarding
trust decisions Mr or Mrs Costa wished to take and was prepared to
give effect to their wishes.
[30]
Mr
Costa
represented
to the respondents that he had authority to conclude the PLA and SMA
by indicating as much verbally and through his
conduct, providing the
respondents on request with proof of such authority in the form of a
copy of the 8 March 2007 resolution.
This resolution on the face of
it gave him express authority to act on behalf of the other trustees
of the KBT and led the Court
a
quo
to
find that actual authority existed with the result that the
agreements concluded were determined to be binding upon the KBT.
trustees
conferred the necessary authority on Mr Costa to undertake the
juristic acts that he did binding the KBT.
[10]
[31]
In
Hely-Hutchinson
v
Brayhead
Ltd and Another,
[11]
which
has been incorporated into our law,
[12]
Lord Denning MR explained the concepts of actual and apparent
authority as follows:
‘
[A]
ctual
authority may be express or implied. It is express when it is
given by express words, such as when a board of directors
pass a
resolution which authorises two of their number to sign cheques.
It is implied when it is inferred from the conduct
of the parties and
the circumstances of the case, such as when the board of directors
appoint one of their number to be managing
director. They
thereby impliedly authorise him to do all such things as fall within
the usual scope of that office.
Actual authority, express or
implied, is binding as between the company and the agent, and also as
between the company and others,
whether they are within the company
or outside it. Ostensible or apparent authority is the
authority of an agent as it appears
to others. It often
coincides with actual authority. Thus, when the board appoint
one of their number to be managing
director, they invest him not only
with implied authority, but also with ostensible authority to do all
such things as fall within
the usual scope of that office.
Other people who see him acting as managing director are entitled to
assume that he has the
usual authority of a managing director.
But sometimes ostensible authority exceeds actual authority.
For instance,
when the board appoint the managing director, they may
expressly limit his authority by saying he is not to order goods
worth more
than £500 without the sanction of the board.
In that case his actual authority is subject to the £500
limitation,
but his ostensible authority includes all the usual
authority of a managing director. The company is bound by his
ostensible
authority in his dealings with those who do not know of
the limitation..
.’
[32]
Actual
authority and ostensible or apparent authority are the opposite sides
of the same coin.
[13]
From
the terms of the resolution of 8 March 2007, which resolution had not
been revoked by the trustees, Mr Costa had been granted
authority to
sign documentation on behalf of the KBT. Mrs Costa accepting in
evidence that this authority was not limited to particular
documents.
As much was borne out by not only Mr Costa’s conduct but also
by Mrs Costa’s own use of the same resolution
and by Mr
Coetzee’s admission that the resolution could be used by Mr or
Mrs Costa.
[33]
It
is so that a third party is not entitled to assume, merely from the
fact that one trustee can be authorised to exercise the powers
of all
of them, that such authorisation has been given.
[14]
At the same time our Courts have held that
trusts
are to function in accordance with principles of business efficacy,
sound commercial accountability and the reasonable expectations
of
outsiders who deal with them
in
a manner that ensures that the trust form is not abused
.
As
was stated by Cameron JA in
Land
& Agricultural Bank of SA v Parker and others
[15]
:
‘
The
courts
have the power and the duty to evolve the law of trusts by adapting
the trust idea to the principles of our law (Braun v
Blann and Botha
NNO and another).
[16]
This power may have to be invoked to ensure that trusts function in
accordance with principles of business efficacy, sound commercial
accountability and the reasonable expectations of outsiders who deal
with them.
[17]
This could be achieved through methods appropriate to each case.
[37.1]
As mentioned earlier, within its scope the rule that outsiders
contracting with an entity and dealing in good faith may assume
that
acts performed within its constitution and powers have been properly
and duly performed, and are not bound to inquire whether
acts of
internal management have been regular, may well in suitable cases
have a useful role to play in safeguarding outsiders
from unwarranted
contestation of liability by trusts that conclude business
transactions.
[37.2]
The inference may in appropriate cases be drawn that the trustee who
concluded the allegedly unauthorised transaction
was in fact
authorised to conduct the business in question as the agent of the
other trustees. (In Nieuwoudt, the matter was sent
back for evidence
to be heard on how the farmer there conducted the ordinary business
of farming without being authorised thereto
by his wife, the other
trustee.) Such an inference may in a suitable case be drawn from the
fact that the other trustees previously
permitted the trustee or
trustees in effective charge of affairs free rein to conclude
contracts. A close identity of interests
between
trustee-beneficiaries, as in most family trusts, may make it possible
for the inference of implied or express authority
to be more readily
drawn.
[37.3]
It may be necessary to go further and extend well-established
principles to trusts by holding in a suitable case that the
trustees’
conduct invites the inference that the trust form was a mere cover
for the conduct of business ‘as before’,
and that the
assets allegedly vesting in trustees in fact belong to one or more of
the trustees and so may be used in satisfaction
of debts to the
repayment of which the trustees purported to bind the trust. Where
trustees of a family trust, including the founder,
act in breach of
the duties imposed by the trust deed, and purport on their sole
authority to enter into contracts binding the
trust, that may provide
evidence that the trust form is a veneer that in justice should be
pierced in the interests of creditors
.’
[34]
Mr Costa presented the respondents with the
resolution which authorised his signature of ‘
the
’
documentation on behalf of the KBT. This resolution evidenced his
express authority, even in spite of its reference to ‘
the
’
documentation and the date of such resolution. It is of relevance
that Mr Costa provided the resolution to the respondents
in response
to their request that he evidence his authority and that he conducted
himself in accordance with this authority, not
only vis-à-vis
the respondents but in relation to other third parties. Furthermore,
no other resolution of general import
was used by Mr Costa or the
trustees of the KBT in undertaking transactions on behalf of the KBT.
As trustees and beneficiaries
of a family trust
Mr and Mrs
Costa had a close identity of interests, with Mr Coetzee informed of
the decisions Mr and Mrs Costa wished to make relating
to the KBT. In
addition,
Mrs Costa undertook the KBT’s
administration and used an office at their home to do so, keeping all
relevant documentation
relating to the KBT at this office which
support a conclusion that she was aware of the agreements signed and
of the resolution
having been provided by Mr Costa to the respondents
to prove his authority to do so.
[35]
The probabilities do not support a
conclusion that the PLA and SMA were entered into between the
respondents and Mr Costa in his
personal capacity in the course of
his farming business. This is so given that the trees of the Flavor
Fall varietal supplied were
planted on land owned by the KBT, as a
consequence of which the trustees of the KBT held a direct interest
in the benefits which
accrued from 2009 to the KBT under the terms of
agreements and flowing from the planting of the trees on the trust’s
land.
Given this fact, it is material that had the trustees not
granted to Mr Costa the authority to enter into the PLA and SMA with
the respondents, they did not raise this until 2011. Mrs Costa’s
role in the administration of the KBT and her relationship
to Mr
Costa, make this failure even more remarkable. Having regard to all
of these circumstances, the finding of the Court
a
quo
cannot be faulted that on the facts
if actual authority did not exist, ostensible authority certainly
did.
[36]
In
May 2012 when the PLA and SMA were purportedly cancelled there was no
evidence of a proven breach of the agreements by the respondents.
It
follows that the purported cancellation of the PLA and SMA by the
appellants was invalid and that from this date the KBT was
in
mora
.
The appellants’ contention that the performance required
of the respondents was to make payment to the KBT in respect
of fruit
already delivered and that such payment was not dependant upon KBT
continuing to supply fruit to the respondents is without
merit. A
party in breach of the terms of an agreement is not entitled to exact
performance by the other party, nor cancel, until
it had cured its
breach.
[18]
Given the breach
of the agreements by the appellants the respondents were excused from
making any performance that would require
the cooperation of the KBT.
[37]
In respect of the relief sought by the
respondents relating to the plant breeder’s rights, the Court
a
quo
correctly concluded that the
respondents had provided the KBT with a certificate of plant
breeder’s rights which indicated
Zaiger’s Inc. Genetics
as the registered holder of the rights in respect of the Flavor Fall
variety. The respondents were
shown as the authorised agent and
licensee granted exclusive rights to exploit the Flavor Fall variety
in South Africa. There was
no dispute that the KBT owned the property
on which all the Flavor Fall trees had been planted, in compliance
with the terms of
the PLA. In terms of s 23 read with s 23A of
the Plant Breeders Act 15 of 1976, the KBT was precluded from
producing, marketing
or selling the variety other than by way of a
prior licence under s 25 or s 27 of the Act. The respondents
accordingly held
the necessary
locus
standi
to enforce the plant breeder’s
rights and consequently were entitled to the interdictory relief
sought. With only certain
aspects of the relief in relation to the
plant breeders’ rights sought in the alternative in the event
that the SMA was found
to be void or not binding on the KBT, the
Court
a quo
did not misdirect itself in the manner it approached the issue.
[38]
In
making an order of specific performance against the trustees of the
KBT in their personal capacities the Court
a
quo
relied on this as ‘
one
of those unusual cases where wider relief, in order to ensure
compliance
’
in circumstances in which there had been no objection raised to this
(amended) relief. An order made against the trustees
of the KBT in
their personal capacities was not warranted on the facts of this
case. As a general rule a trustee is sued in his
or her official
capacity save for limited circumstances in which a trustee may hold
himself or herself out to undertake personal
responsibility or where
personal liability is incurred for example as a result of wrongful
conduct or arising from a breach of
trust.
[19]
Holding the trustees in their personal capacities to be liable
anticipates the failure on the part of the trustees of the KBT to
comply with their official obligations as such under the terms of the
order of Court in circumstances in which contempt proceedings
provide
an appropriate mechanism to enforce compliance with the order were
there to be none. It follows that save for setting
aside that
part of the orders of the Court
a
quo
made against the appellants in their personal capacities, the appeal
falls to be dismissed.
[39]
There is no reason as to why the costs of
this appeal should not follow the result with such costs to include
the costs of two counsel.
Order
[40]
In the result, I propose that an order is
made in the following terms:
1.
Subject to paragraph 2 below the appeal is
dismissed with costs, including the costs of two counsel.
2.
Paragraphs 2, 3, 4 and 5 of the orders of
the Court
a quo
are altered only to the extent that the word ‘personally’
as it appears in each paragraph is removed and substituted
with the
words ‘in their official capacities’.
K M SAVAGE
Judge of the High
Court
I agree and it is so
ordered.
YEKISO
J
JUDGE
OF THE HIGH COURT
VELDHUIZEN,
J
[1]
I have read the judgment of Savage J but,
unfortunately, do not agree with her conclusion. These are my
reasons. Her judgment contains
the history of the matter and I do not
find it necessary to repeat it.
[2]
It
is settled law that trustees of a trust must act jointly unless the
trust deed provides otherwise.
[20]
[3]
Therefore, in an application or action
where a contract allegedly entered into between the claimant and a
trust is relied on the
starting point must be the trust’s trust
deed. Clause 5.3 of the KBT trust deed provides:
‘
Tensy
spesifiek andersins bepaal in hierdie trustakte, sal besluite wat die
trustees neem, geskied by wyse van ‘n gewone meederheid
van die
stemme van trustees teenwoording op ‘n vergadering
.’
[4]
The applicants relied on a resolution dated
8 March 2007 as authority for Mr Costa to have entered into the PLA
and SMA agreements.
This resolution, which was signed by all three
the trustees for the time being, reads:
‘…
Alberto
Costa in his capacity as trustee of the Klein Botrivier Trust IT
852/2007 is hereby appointed and authorized to sign the
necessary
documentation
.’
[5]
The trial judge found that this resolution
constituted actual authority for Mr Costa to enter into the
agreements. I do not
agree. Although trustees may appoint someone to
act on its behalf, it is clear to me that the resolution relied upon
by the respondents
could never have been brought into existence for
the purpose of empowering Mr Costa to conclude all and any agreements
on behalf
of the trust and more especially the entering into the PLA
and SMA agreements. It is significant that these agreements were only
entered into more than two years after the resolution had been taken.
This fortifies my view that the resolution was given for
a different
purpose and was not to serve as a general mandate to enter into
agreements on behalf of the trust. The plain language
of the
resolution, in any event, simply authorizes Mr Costa to sign ‘the
necessary documentation’. It refers to specific
documentation
and not all or any documentation. It is not a general authority
empowering him to conclude agreements on behalf of
the trust.
[6]
The trial court also concluded that, should
the resolution not constitute actual authority, Mr Costa had
ostensible authority to
enter into the agreements on behalf of KBT.
This was not the case made out by the respondents in their founding
affidavit.
[7]
In the founding affidavit Mr NJ Steenkamp
stated:
’
25.
I in any event had every reason to believe – quite apart from
the content of the resolution itself – that Alberto
did have
the authority of his co-trustees to contract on behalf of the Trust
and no reason to think that he was misleading in that
regard. As I
have stated above, Alberto was solely responsible for the management
and control of the farming operations and consequently
in effective
charge of the Trust’s business affairs. In all the years I
dealt with Alberto and the Trust, all its affairs
and dealings were
conducted with Alberto, and that included monetary and financial
matters, contracts etc.’
[8]
One must distinguish between the day-to-day
running of farming operations and the entering into of agreements on
behalf of the trust.
Steenkamp states that Mr Costa attended to
‘financial matters, contracts etc.’ but does not give any
facts to support
this statement. In this matter, we know that Mr.
Costa leased the farm from the trust and it is therefore not
surprizing that he
would have attended to the day-to-day management
of the farming operations. Without more information that does not
justify the
inference that he has authority to enter into all and any
agreements on behalf of the trust. This much the respondents must
have
realized. Why else would they insist on a written resolution
authorizing Mr. Costa to enter into the
PLA
and SMA agreements?
[9]
After Mr. Costa’s death
correspondence followed between the parties’ attorneys. I find
the letter of the respondents’
attorney dated 28 June 2012
significant. This letter sets out the history and then continues as
follows:
‘
In
dealing with the above and so as to present our clients view on the
position we find ourselves in we need to distinguish between
the two
agreements:
1.
For present purposes, and if accepted that no resolution existed
authorising Mr. Costa to enter into the Loan agreement, such
agreement was indeed void
ab initio.
2.
As far as the SMA is concerned we also accept the fact that no
resolution exists authorising Mr Costa to enter into such agreement
on behalf of the Trust. That would then potentially also lead thereto
that the agreement be void
ab initio
. This however is not
necessarily the case. You will note from the agreement that although
it clearly was envisaged that the parties
would be out client
Unlimited Fruit contracting with the Trust the late Mr Costa, on
signing the agreement, added his own name
in his own handwriting so
as to be one of the contracting parties. The typed reference to the
Trust was not deleted.
3.
In light of the aforementioned it stands to be reasoned that the
contracting parties therefore were either Alberto Costa and
the Trust
jointly and our client Unlimited Fruit or, as the surrounding facts
suggest, the intention was that Alberto Costa altogether
replaced the
Trust as the party contracting with Unlimited Fruit.
4.
Up and until March 2011 the relationship in respect to the SMA was
between Unlimited Fruit and Alberto Costa personally. All
payments
were made to Mr Costa directly into his bank account and there was no
question of the involvement of the Trust at all.’
[10]
It appears that, at least insofar as the
SMA is concerned, the respondents themselves did not regard the trust
to be a party thereto.
[11]
We do not here have to do with a party who
did not appreciate the requirement for the entering into of a
contract with a trust.
The respondents’ employees knew full
well that a trust resolution was required before they could enter
into a binding agreement
with it. Not only was the resolution
presented to them by Mr. Costa more than two years old but it also
could not have conveyed
to them that it constituted authority for Mr.
Costa to enter into the agreements.
[12]
It is my conclusion that no binding
agreements between the trust and the respondents came into being. For
this reason, the respondents’
claims should have been
dismissed.
[13]
It follows that the applicants claim for
cancellation of the contract(s) was ill founded for the reason that
there were no contracts
in existence to cancel. I agree that their
claim for cancellation, was rightly dismissed although for different
reasons.
[14]
This brings me to the interdictory relief
that was granted. The requirements for a final interdict was laid
down in
Setlogelo v Setlogelo
1914 AD 221
at 227. An applicant must show the existence of a clear
right; that an injury had been committed or is reasonably
apprehended;
and the absence of any other satisfactory remedy.
[15]
I am prepared to accept that the
respondents have shown that they have a clear right to the Flavor
Fall plums and nectarines varietal.
The difficulty I have is with the
second requirement. This requirement received very little attention
in the trial court’s
judgment. I could find no evidence that
the appellants were infringing the respondents’ rights or
intended to do so. In my
view the respondents had failed prove the
second requirement for a final interdict and the trial court erred in
granting it.
[16]
In the result I would make the following
order: the appellants’ appeal:
(a)
in respect of the main application is
upheld with costs including the costs of two counsel and the orders
of the trial court is
replaced with the following order:
(i)
The applicants’ applications are
dismissed with costs including the costs of two counsel;
(b)
in respect of the interlocutory
application, is dismissed with costs.
A.H. VELDHUIZEN,
J
JUDGE
OF THE HIGH COURT
[1]
Commissioner
for Inland Revenue v MacNeillie’s Estate
1961
(3) SA 833
(A) 840D-H;
Commissioner
for Inland Revenue v Friedman NO
[1992] ZASCA 190
;
1993
(1) SA 353
(A) 370E-I.
[2]
Land
& Agricultural bank of SA v Parker and another
2005 (2) SA 77
(SCA) at para 20.
[3]
Nieuwoudt
NO v Vrystaat Mielies (Edms) Bpk
[4]
2005 (2) SA 77
(SCA) at para 12. Parker at para 33.
[5]
Nieuwoudt
NO v Vrystaat Mielies (Edms) Bpk
2004
(3) SA 486
(SCA) at para 24.
Standard
Bank of South Africa Ltd v Koekemoer
case number 73/03, judgment of 27 May 2004, para 12
[6]
Nieuwoudt
and Another NNO v Vrystaat Mieles (Edms) Bpk
2004 (3) SA 486
(SCA) at para 23.
[7]
NBS
Bank Ltd v Cape Produce Co (Pty) Ltd and others
2002 (1) SA 396
at para 26 citing
Hely-Hutchinson
v Brayhead Ltd and another
3 All ER 98
at 102A.
[8]
Ganes
and another v Telecom Namibia Ltd
[2004] 2 All SA 609
(SCA) at para 19. See too
Eskom
v Soweto City Council
1992
(2) SA 703(W)
at 705C-J.
[9]
2004 (3) SA 486
(SCA) at para 10.
[10]
Kerr
Law
of Agency
4th
ed (LexisNexis Butterworths, Durban 2006) at 27.
[11]
[1968]
1 QB 549
(CA) at 583 A-G.
[12]
See
NBS
Bank
(supra);
Northern
Metropolitan Local Council v Company Unique Finance (Pty) Ltd
2012
(5) SA 323
(SCA); and
Glofinco
v Absa Bank
2002
(6) SA 470
(SCA).
[13]
Makate
v Vodacom (Pty) Ltd
(CCT52/15)
[2016] ZACC 13
at para 45.
[14]
Chevron
Engineering (Pty) Ltd v Nkambule and others
2004 (3) SA 495
(SCA) at para 22.
[15]
2005 (2) SA 77
(SCA) at para 37.
[16]
[1984] ZASCA 19
;
1984 (2) SA 850
(A) at 859F-G.
[17]
Compare Van Coppenhagen J in
Vrystaat
Mielies (Edms) Bpk v Nieuwoudt en ‘n ander NNO
2003 (2) SA 262
(O) at para 12.
[18]
Van
der Merwe et al
Contract:
General Principles
(5
th
ed) at 323
[19]
Honore’s
South
African Law of Trusts
(5
th
ed) at 29.
[20]
Niewoudt
and Another NNO v Vrystaat Mielies (Edms) Bpk
2004 (3) SA 493
(SCA);
Land
and Agricultural Development Bank of SA v Parker
[2004] 4 All SA 261
(SCA)