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[2016] ZAWCHC 143
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Truter and Another v Munsfeld and Others (6704/2016) [2016] ZAWCHC 143 (26 October 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION,
CAPE TOWN
REPORTABLE
CASE
NO: 6704 / 2016
In
the matter between:
DANIEL
GERHARDUS
TRUTER
First
Plaintiff
DANIEL
GERHARDUS TRUTER N.O
as
Trustee of the Onderkloof
Trust
Second
Plaintiff
and
BEAT
FELIX
MUNSFELD
First
Defendant
BEAT
FELIX MUNSFELD N.O
As
Trustee of the Onderkloof
Trust
Second
Defendant
ONDERKLOOF
ESTATE
(PTY)
LTD
Third
Defendant
JUDGMENT
DELIVERED ON 26 OCTOBER 2016
GAMBLE,
J:
[1]
On 22 April 2016 the First Plaintiff (a
local farmer) issued summons against the First Defendant (a Swiss
national and local investor)
claiming an order for the appointment of
a liquidator to liquidate the alleged partnership of which those two
parties are said
to be partners, the realisation of the such
partnership assets, the preparation of a final account, the payment
of that which is
allegedly due to each partner and costs of suit. On
23 June 2016 the first defendant filed a plea and counterclaim to the
particulars
of claim as also a notice of exception that the
particulars of claim are bad in law and lack averments necessary to
sustain the
first plaintiff’s cause of action. The exception
was then set down for argument.
[2]
Notwithstanding
the filing of the plea and counterclaim, it is common cause that the
court must decide the exception on the basis
of the allegations
contained in the particulars of claim alone, assuming the facts
stated therein to be true and correct, and without
having regard to
any facts extraneous thereto.
[1]
In order to succeed with the exception, the first defendant must, in
such circumstances, persuade the court that upon every possible
interpretation, the pleading in question and, in particular, the
document(s) upon which it is based, disclose no cause of action.
[2]
[3]
The anomaly in this matter is, however,
that the first defendant has filed a detailed plea to the particulars
of claim and a lengthy
and substantial counterclaim. How, in such
circumstances, can a complaint be raised that the particulars of
claim disclose no cause
of action? After all, the first defendant has
dealt therewith, seemingly without any difficulty. When the matter
commenced I put
this conundrum to counsel for the excipient, Mr RGL
Stelzner SC, and enquired whether the points of law raised by way of
exception
could not effectively be dealt with at trial as either
points
in limine
or
during argument at the conclusion of the evidence. Counsel’s
reply was that the first defendant might then be penalised
with an
adverse costs order for failing to note an exception. He went on to
point out that, given the substantial counterclaim
preferred by the
first defendant against the first plaintiff, there would in all
likelihood be a trial between the parties. Before
that trial
commenced, said counsel, it was necessary to determine whether there
was a case for the first defendant to answer, or
whether the trial
would proceed only in respect of the claim in reconvention.
[4]
Counsel
for the first plaintiff, Mr CJ Grobler, was prepared to argue the
matter on exception and it was on that basis that argument
continued.
Both parties accepted that if the exception was upheld, the first
plaintiff should be afforded an opportunity to amend
the particulars
of claim, if so advised. Given that it is generally not the role of
the court to raise issues which the parties
do not want argued
[3]
,
argument on the exception went ahead.
[5]
At
the heart of the parties dispute is some 65 ha of agricultural land
nestling at the foot of Sir Lowry’s Pass in the Hottentots
Holland Basin near Somerset West. A farm known as “Onderkloof”
is owned by the Onderkloof Trust (“the trust”)
of which
the first plaintiff and the first defendant are the trustees.
[4]
The commercial acitivities on Onderkloof, comprising a wine farm and
a guest house, are conducted by the third defendant, Onderkloof
Estate (Pty) Ltd (“the company”). The shares in the
company are held by the first plaintiff (as to 20%) and the first
defendant (as to 80%), both of whom are directors thereof. Judging
from the allegations made in the particulars of claim, it would
appear that the first plaintiff was the party charged with the
day-to-day running of the farming activities on the farm.
[6]
In
the particulars of claim the first plaintiff claims that during the
period 1997 -1998 he and the first defendant concluded a
partnership
agreement which was terminated during December 2011. The terms of the
partnership agreement so pleaded contain all
the necessary averments
to sustain a claim that a partnership was concluded between them
viz
that
each of the parties brought something into the partnership (or bound
himself to bring something into it), that the business
of the
partnership would be carried on for the joint benefit of both parties
and that the object thereof was to make a profit.
[5]
So far so good.
[7]
The
first defendant, with reliance on
Hughes
[6]
argues that on a proper construction of the particulars of claim the
first plaintiff has not alleged a cause of action which can
give rise
to the relief that he claims i.e. the appointment of a liquidator. It
is contended that the first plaintiff has not succeeded
in alleging
that a partnership agreement properly so called came into being
between him and the first defendant in their personal
capacities.
Rather, it is said that the first plaintiff’s allegations are
consistent with an initial understanding between
the 2 parties
interested in running the farming business to form a company and a
trust, with the company carrying on the farming
activities as an
entity independent of the 2 individuals in their personal capacities,
and further, independent of the trust which
holds the agricultural
land in trust for the benefit of the beneficiaries in terms of, and
subject to, the trust deed.
[8]
Effectively the argument is that whatever
the initial understanding between the parties may have been in the
process of setting
up these two separate legal entities, any such
agreement has been overtaken by the subsequent establishment of the
trust and the
company. In other words, says the first defendant, the
parties’ business affairs,
inter
se,
and the payment of that which is
due to any or either of them, must be unbundled in terms of company
law and trust law. The appointment
of a liquidator as claimed in the
particulars of claim in terms of the law applicable to the
dissolution of a partnership with
the powers sought to be granted to
such liquidator, cannot legally address the dissolution of either the
company or the trust:
each such entity must be dissolved in terms of
the relevant legal prescripts applicable to the appropriate branch of
the law.
[9]
In argument Mr Grobler accepted the
approach advanced in
Hughes
but went on to argue that the
establishment of the trust and the company in the present case did
not
per se
preclude the existence of a prior oral agreement of partnership. He
contended that there may be room for residual legal obligations
between the first plaintiff and first defendant flowing from such
oral agreement, and to this end it was submitted that the hearing
of
oral evidence would be necessary to establish exactly how these 2
individuals intended to regulate their rights and obligations
inter
se.
I am prepared, for present
purposes, to assume that oral evidence may establish such a residual
agreement.
[10]
Nevertheless,
it appears that at the core of the argument for the first defendant
lies the form of relief to which the first plaintiff
is entitled
should he succed in his claims as presently formulated. If he can
successfully persuade the trial court that there
was an oral
agreement of partnership he is entitled to relief flowing from the
general principles applicable to the
actio
pro socio
[7]
.
But
even if the first plaintiff is able to establish that there was an
agreement of partnership as pleaded, the liquidator whom
he seeks to
have appointed will be able to do no more than dissolve that
partnership. That liquidator will not be empowered to
wind up the
company nor will s/he be empowered to act as the trustee charged with
the dissolution of the trust. For, as the Supreme
Court of Appeal
pointed out in
Morar
N.O.,
there is a clear distinction to be drawn between the powers to be
exercised by a person charged with the dissolution of a partnership
on the one hand and a legal entity such as a private company on the
other, which, while it may have many of the characteristics
of a
partnership, is a fundamentally different legal creature with its
status sourced in legislation and not the common law.
[8]
[11]
The applicant in
Morar
N.O.
had
been appointed to dissolve a partnership. In the process he ran into
some difficulties in fulfilling his mandate and he accordingly
approached the court for wider powers, including powers of subpoena
and interrogation akin to those available to liquidators under
the
winding-up provisions of the 1973 Companies Act. He also sought an
order compelling the parties to the litigation to contribute
towards
the cost of the litigation and the dissolution process. Mr Morar’s
application was dismissed by the High Court in
Pietermaritzburg which
granted him leave to appeal to the SCA. In that court, the judgment
of the court
a quo
was
upheld, with the court making the following comments which are of
relevance here :
“
[18]
When the court appoints a liquidator for a partnership it is
remedying the failure of the partners to attend to the liquidation
of
the partnership by agreement. Such failure may arise from
disagreement
over the need to
appoint a liquidator, or over the identity of the liquidator or over
the powers that the liquidator should enjoy.
That being so it is
logical to take as one’s starting point the powers that the
partners could themselves confer by agreement,
if they were not in a
state of hostilities. The court is then asked to do no more than
resolve a dispute between the partners over
the appointment of the
liquidator or over the liquidator’s powers. It does so in a way
that the parties themselves could
have done. The disagreement arises
in consequence of the one partner refusing to agree to the liquidator
being appointed or the
liquidator having a particular power and that
can be characterised as a breach of the obligations of co-operation
and good faith
that are central to all partnerships. The court is
then merely enforcing the contractual obligations of the partners
themselves…..
[20] In argument it
was submitted that the appointment and functions of the liquidator of
a partnership are largely equivalent to
those of the liquidator of a
company under the old Companies Act. However the analogy is false.
Unlike partnerships, companies
only exist under the legislation under
which they are constituted, which governs their creation, operation
and liquidation. Although
in some jurisdictions partnerships are
regulated by statute that is not the case in South Africa. In our law
the general approach
to partnerships is that the creation, operation
and dissolution depends upon the terms of the agreement concluded by
the parties.
If there are disputes at any stage of the relationship
those are resolved by the courts under the general rules governing
contracts
and in terms of the
actio pro socio.
Whatever policy
reasons might exist for bringing about some degree of equivalence
between partnerships and companies, the legislature
has not done so.”
[12]
In consequence of this
dictum,
it is clear that the liquidator sought
to be appointed by the plaintiff will only be empowered to dissolve
the alleged partnership
under the
action
pro socio
. Regardless as to whether the
evidence to be adduced by the first plaintiff establishes that
partnership, further appointments
will be necessary for someone to
attend to the winding up of the company and the sequestration of the
trust. To that end the relief
sought in the particulars of claim is
defective in that it does not make provision for the appointment of
any person other than
a liquidator of the partnership. To the extent
that it is argued that there may be residual obligations of
partnership outside
of the formation of the company and the trust,
the appointment of a liquidator to dissolve the partnership is
correctly sought
in the prayers in the particulars of claim as
currently drawn.
[13]
However, insofar as the company and the
trust must perforce be wound up or sequestrated, as the case may be,
it will be necessary
for the appointment of such further person(s) in
due course to handle these functions. Notionally, I suppose, the
liquidator of
the partnership could approach the court at that stage
for an order appointing such person(s) but it seems to me that that
would
be an unnecessary waste of costs in circumstances where such
appointment can (and properly should) be made by the trial court.
That court will be called upon to decide, firstly, whether there is
room for a residual agreement of partnership, or whether the
situation is similar to that in
Hughes
in consequence whereof the company and the trust will be found to be
the embodiment of the parties’ agreement of association.
Either
way, the appointment of additional stewards to attend to the
dissolution of those entities will be required to give effect
to the
termination of those vehicles of joint endeavour. To the extent that
the particulars of claim do not cover that eventuality,
they are
deficient and do not disclose a cause of action in relation to either
the dissolution of the company or the trust, legal
steps which are
essential to enable the parties to then go their separate ways.
[14]
In the circumstances, I am of the view that
the exception is properly taken and that it should be upheld with
costs.
ORDER
OF COURT
1.
The exception to the particulars of claim
is upheld with costs.
2.
The first, second and third plaintiffs are
afforded one month within which to amend their particulars of claim.
__________________
GAMBLE
J
[1]
Gallagher
Group Ltd and Another v IO Tech Manufacturing (Pty) Ltd and Others
2014(2)
SA 157 (GNP) at [19].
[2]
Francis
v Sharp and Others
2004(3)
SA 230 (C) at 237 F-G
[3]
Fischer
v Ramahlele and Others
2014
(4) SA 614
(SCA) at [13]
[4]
They are before the court in this capacity as second plaintiff and
second defendant respectively.
[5]
Joubert
v Tarry & Co
1915
TPD 277
;
Purdon
v Gilmour
1961
(2) SA 211
(A)
[6]
Hughes
v Ridley
2010(1)
SA 381 (KZP)
[7]
Morar
NO v Akoo
2011
(6) SA 311
(SCA) at [9]
et
seq.
[8]
Ebrahimi
v Westbourne Galleries Ltd and Others
[1972]
2 All ER 492
(HL)
at 500