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[2016] ZAWCHC 211
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Seawright v Nedgroup Trust Limited NO and Others (10576/2014) [2016] ZAWCHC 211 (7 December 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
(Coram:
Holderness, AJ)
[Not
Reportable]
Case
number: 10576/2014
In
the matter between:
CAROLYNN
WINIFRED ANNE SEAWRIGHT
Plaintiff
and
NEDGROUP
TRUST LIMITED N.O.
First
Defendant
RICHARD
EDWARD HARRIS N.O
Second
Defendant
DAVID
DAWSON COSGROVE N.O.
Third
Defendant
JOHN
FAULKNER SELDON N.O.
Fourth
Defendant
MASTER
OF THE HIGH COURT
Fifth
Defendant
NEDGROUP
TRUST LIMITED
Sixth
Defendant
RICHARD
EDWARD LIMITED
Seventh
Defendant
DAVID
DAWSON COSGROVE
Eighth
Defendant
JOHN
FAULKNER SELDON
Ninth
Defendan
JUDGMENT
HOLDERNESS,
AJ
Introduction
[1]
This is an application by the plaintiff, in terms of Rule 28 (4), for
leave to amend her particulars of claim.
[2]
The amendments, if allowed, will introduce a new cause of action,
namely a claim for the termination of the Roy Seawright Trust
(“the
Trust”)
in terms of section 13 of the Trust Property
Control Act 57 of 1988.
[3] The first, third, fourth,
sixth, eighth and ninth defendants
(“the defendants”)
object to the proposed amendments
(‘the amendments”)
,
citing the following grounds of objection:
3.1 they seek to introduce an
entirely new cause of action and claim, namely the termination of the
Trust;
3.2 they are
bad in law or lack a
bona
fide
factual substratum;
3.3 they are prejudicial to the
defendants due to their introduction at this late stage of the
proceedings; and
3.4 if the amendments are
effected, the ultimate beneficiaries (described more fully below)
will have a direct and substantial interest
in the outcome of the new
claim, and that there has accordingly been a material misjoinder.
Existing
claim for the removal of trustees
[4]
In June 2014 the plaintiff, who is presently 78 years old and is the
sole surviving direct beneficiary of the Trust, instituted
action
against the trustees of the Trust, for an order removing them as
trustees based on their alleged misconduct, and directing
the Master
to appoint new trustees.
[5]
The plaintiff’s particulars of claim, as they now stand, are
dated 15 December 2015. The particulars of claim were previously
amended to join the first, second, third and fourth defendants
(“the trustees”)
in their personal capacities and
to include a claim for costs
de bonis propriis
against them.
[6]
Pleadings are closed, requests and replies for trial particulars have
been exchanged and, according to the defendants, the matter
is ripe
for hearing.
[7]
The plaintiff has given notice of her intention to further amend her
particulars of claim, and the defendants have objected
to certain of
the amendments sought, namely proposed new paragraphs 109A, 110A,
117A, 119A and 125 A, and a proposed new prayer
A of the particulars
of claim.
[8]
Due to a typographical error, the heading in paragraph 2 of the
notice of objection omitted reference to paragraphs 82A, 82T,
95A and
99A of the particulars of claim as they are sought to be amended.
These proposed new paragraphs are part of the new cause
of action,
and consequently are also subject to the objection.
[9]
The plaintiff does not persist in seeking the introduction of the
proposed new paragraph 109A, she does, however, persist in
seeking
the remaining amendments, to which the defendants object.
[10]
The amendments fall into two categories, namely:
i)
Amendments
aimed at expanding the grounds of trustees’ alleged misconduct,
and for a declaratory as to the manner in which
the trustees’
discretion should (or should not) be exercised.
ii)
Amendments
aimed at introducing a new cause of action, namely for termination of
the Trust.
[11]
The three principal grounds on which the defendants object to the
amendments are as follows:
i)
They
seek to introduce an entirely new cause of action, namely the
termination of the Trust, which is not competent on the facts
pleaded, and accordingly, the particulars of claim, if amended, will
be excipiable;
ii)
the
introduction of this new cause of action is sought at a late stage in
the proceedings; and
iii)
the
new cause of action involves a direct and substantial interest of
third parties, who may be prejudicially affected by the judgment
of
the court, resulting in a material non-joinder.
[12] The defendants, quite
correctly, do not allege that the amendments, if effected at this
late stage in the proceedings, will
cause prejudice which cannot be
cured by an appropriate costs order.
The
principles applicable to amendments
[13]
In deciding whether or not to grant an application for an amendment
the question is essentially what the interests of justice
demand, and
a practical rule is that an amendment will always be granted unless
it is sought in bad faith or will cause an injustice
to the other
side which cannot be cured by an appropriate costs order.
[1]
[14]
As emphasised by the defendants, amendments cannot be obtained merely
for the asking. The litigant seeking leave to amend is
asking for an
indulgence and must show that there is a factual foundation for the
amendment, and that
prima
facie
there
is “
something
deserving of consideration, a triable issue”.
It
is generally the case that an amendment will not be allowed where it
would render the pleading excipiable.
[2]
[15]
The power of the court to allow material amendments is limited only
by considerations of prejudice or injustice to the other
side.
[3]
[16]
The general approach of our courts is that amendments will not be
allowed where they are mala fide or will cause an injustice
to
prejudice to the other party which cannot be cured by an appropriate
costs order.
[17]
A court hearing an application for an amendment has a discretion
whether or not to grant it, a discretion which has to be exercised
judicially.
[18]
With regard to the introduction of potentially excipiable claims by
amendments, in
Crawford-Brunt
v Kavnat and Another
[4]
Tebbutt AJ (as he then was) held that, ‘
If
the pleading would appear to be possibly open to exception or even if
the court is of opinion that the question of whether or
not the
pleading is excipiable is arguable, it would seem to be the more
correct course to allow the amendment.’
[19]
In the unreported decision of Bozalek J, in
Linpac
Plastics SA (Pty) Ltd and Another v du Plessis and Others
[5]
,
referred
to above, the learned judge went so far as to say that when the
ground of objection to an amendment is that the proposed
amendment
would render the pleading excipiable, it must be clear that “
the
exception would, in effect, be unanswerable”
[6]
.
[20]
It is well established that, save in exceptional cases, where the
balance of convenience or some such reason might render another
course desirable, an amendment ought not to be allowed where it would
render the pleading to be amended excipiable.
[21]
Stated in another way, the issue which the amendment proposes to
introduce must be a triable issue, that is “
an
issue which, if it can be proved by the evidence foreshadowed in the
application foreshadowed in the application for the amendment,
will
be viable or relevant; or which, as a matter of probability, will be
proved by the evidence so foreshadowed.”
[7]
Termination
of the trust – Section 13 of the Trust Property Control Act 57
of 1998
[22]
In determining whether or not to allow the amendments, the principle
issue for determination is whether the facts, as pleaded
by the
plaintiff, bring the claim for termination of the Trust within the
ambit of section 13 of the Trust Property Control Act
57 of 1998
(“the Act”).
[23]
Section 13 of the Act provides as follows:
“
If a
trust instrument contains any provision which brings about
consequences which in the opinion of the court the founder of a
trust
did not contemplate or foresee and which-
(a) hampers
the achievement of the objects of the founder; or
(b)
prejudices the interests of beneficiaries; or
(c) is in
conflict with the public interest,
the court may, on application
of the trustee or any person who in the opinion of the court has a
sufficient interest in the trust
property, delete or vary any such
provision or make in respect thereof any order which such court deems
just, including an order
whereby particular trust property is
substituted for particular other property, or an order terminating
the trust.”
Grounds
of objection
[24]
Mr. Dickerson SC (who appeared with Mr. Brown, on behalf of the
defendants), argued that there is no factual basis for the
new cause
of action sought to be introduced,
viz
the
termination of the Trust, and therefore the amendment will render the
particulars of claim excipiable, and, in applying the
principle in
Evins
v Shield Insurance Co Ltd
[8]
,
all of the
facta
probanda
for the new claim had to be established.
[25]
As correctly stated on behalf of the defendants, section 13 of the
Act postulates two jurisdictional facts for the exercise
of the
court’s power. Firstly, the objective requirement contained in
section 13(1)(b), namely that a provision of the trust
deed has
brought about one of the consequences mentioned in section 13(a),(b)
or (c) of the Act, and secondly, the subjective requirement
that the
founder of the Trust did not, at the time of establishing the Trust,
contemplate or foresee such a result.
[26]
A compelling argument by the defendants was that the clauses which it
is alleged by the plaintiff gave rise to the unforeseen
consequences
are “standard trust clauses”, and, if the trustees, in
their “sole and absolute discretion”,
decided to withhold
the payment of benefits to the plaintiff, it cannot be said that when
they exercised their power this could
not have been foreseen.
[27]
In my view, it need not be shown by the party seeking leave to amend
that there is supporting evidence which will establish
that the
provision in question was unusual, all that need be shown is that
such party will be in a position to establish at the
trial that the
consequence of such provision was unforeseen, or was not contemplated
by the founder of the Trust.
[28]
Put differently, it goes without saying that the founder would
reasonably have foreseen that the trustees in their discretion
may
have withheld the payment of benefits to the primary beneficiaries,
however it may be shown that he did not forsee the consequences
of
the provisions affording them an unfettered discretion, namely the
devising of a scheme to preserve the trust patrimony for
the final
beneficiaries or substitution parties. At the very minimum, this
issue is arguable and needs to be properly ventilated
at trial.
[29]
In
Gowar
and another v Gowar and others
[9]
the
SCA stated the position as follows:
“
Thus,
s 13 of the Act is to the effect that the court may, on application
of the trustee or any person who, amongst others, has
sufficient
interest in the trust property, delete or vary y any such provision
in a trust deed which brings about the result specified
in this
section, or grant ‘an order terminating the trust’.
Cameron et al state that the provisions have
both subjective and
objective criteria. The former relate to the founder’s
lack of foresight or contemplation and the
latter relate to prejudice
to the trust project, beneficiaries or the public interest.
These criteria must be satisfied before
the court can intervene.
Accordingly, as I see it, for the purposes of s 13 of the Act the
appellants had to establish on a balance
of probabilities that any
provision of the trust deed has brought about any one of the
consequences mentioned in s 13(a), (b) or
(c) of the Act, and that
the founder of the trust did not, at the time the trust was
established, contemplate or foresee such a
result.”
[30]
The approach adopted by Mr. Duminy SC, who appeared with Mr. Tyler on
behalf of the plaintiff, was to predicate each of the
proposed
amendments upon existing, antecedent paragraphs in the particulars of
claim, in which the allegations of misconduct by
the trustees were
already set out.
[31]
In relation to each of the amendments objected to by the defendants,
the plaintiff has alleged that the misconduct in each
of the
preceding paragraphs also amounted to “
consequences which
the donor did not contemplate or foresee… which hampered the
achievement of the objects of the donor and/or
prejudiced the
interests of the beneficiaries
.”
[32]
In other words, the challenged amendments specifically invoke
sections 13 (a) and (b) of the Act in relation to the antecedent
facts.
[33] It is appropriate at this
stage to briefly outline the facts as outlined in the particulars of
claim as they presently stand.
Factual
background
[34]
The Trust was established on 9 June 1994 by the plaintiff’s
father, Mr. Robert Morton Felix Seawright (“
the founder”
or “
the donor”
), as a discretionary
inter vivos
trust.
[35]
Richard Edward Harris
(“Harris”),
the second and
seventh defendant, who, has not objected to any of the proposed
amendments, is the founder’s nephew and the
plaintiff’s
first cousin, and was one of the original trustees of the Trust, an
office which he still holds.
[36]
The income and capital beneficiaries of the trust are designated in
clause 4 of the trust deed. The plaintiff is the sole surviving
beneficiary designated as such in clause 4.
[37]
The founder died on 9 January 2001.
[38]
On the pleadings it is common cause that over the period of 11 years,
from the date of the founder’s death to February
2012, the
total capital value of the trust has more than doubled, from
R19,263,580 to R50,099,376. The present value of the trust
assets is
estimated to be R75,000,000.
[39]
It is further common cause that, over the same period, the trustees
paid benefits to the plaintiff, whether from income or
capital, in an
amount of approximately R1,745,317, and that they made secured loans
to her in an aggregate amount of R283,495.
The Trust has not made any
other payment to any other beneficiaries.
[40]
The thrust of the plaintiff’s case is that the trustees
conceived and implemented, or failed to detect and prevent, an
unlawful and improper scheme, the central object of which was to
withhold the assets from the plaintiff, so that the assets might
be
preserved substantially intact for the ultimate beneficiaries,
described by the plaintiff as the “substitution parties”,
namely the beneficiaries of the two trusts upon whom the assets of
the trust will ultimately devolve (upon the death of the plaintiff).
[41]
On the basis of the aforesaid misconduct, which includes allegations
regarding the formation of an offshore trust which, in
breach of the
terms of the trust deed, is alleged to include terms and conditions
which differ from those in the trust deed of
the Trust, the plaintiff
seeks the removal of the trustees.
[42]
The plaintiff asserts that the facts alleged in support of some of
the discrete instances of misconduct cited in the particulars
of
claim, also fall within the ambit of section 13 of the Act.
[43]
Accordingly, the plaintiff asserts that the facts alleged in the
particulars of claim also justify the termination of the Trust.
[44]
The defendants say that, although the facts alleged (if proved) will
sustain the removal of the trustees, those facts do not
in law
sustain the termination of the Trust, and therefore the amendments
will introduce an excipiable cause of action into the
particulars of
claim.
[45]
It is clear from the wording of section 13 of the Act that the court
has a very wide discretion in determining whether to grant
relief
such as terminating a trust.
[46]
It is of course not for me at this stage to determine whether the
plaintiff has reasonable prospects of succeeding with her
new claim,
but rather to determine whether, on the facts sought to be introduced
in the amendments, she has laid a factual foundation
for such claim,
and accordingly that such claim is not excipiable.
[47]
The fact that the amendments will introduce a new cause of action is
not, to my mind, a basis upon which to refuse leave to
amend.
[48]
If, as an example, there was no evidence available to support the
claim and therefore no prospect of the plaintiff ultimately
proving
the claim at trial, this would constitute a ground upon which to
refuse the application for leave to amend.
[49]
It is not clear that this is the case in the present matter.
[50]
In the preamble to the trust deed, the donor declared that he was
desirous of establishing the Trust “
with the intention of
benefiting the BENEFICIARIES on the terms and conditions to the
intents and purposes hereinafter set out.”
[51] Clause 4 of the Trust deed
provides as follows:
“
DISPOSAL
OF INCOME AND / OR CAPITAL
Until the
termination date hereinafter referred to, the nett income and / or
capital of the Trust Funds may in the absolute discretion
of the
TRUSTEES, be used for the benefit of any one or more of the DONOR,
his descendants and their spouses or any Trust of which
any of the
aforegoing persons is or may become a Beneficiary, as the TRUSTEES
shall deem fit and they shall accumulate any income
not used.”
[52]
Clause 5 of the Trust deed provides that the Trust shall terminate
fifty years after the death of the donor or such other date
determined by the trustees in terms of clause 5.3.
[53]
In terms of clause 5.2, the balance of the capital (including any
accumulated income) held by the Trust as at the termination
date was
to devolve upon the donor’s children, the plaintiff and her
sister, Linda Veronica Seawright (“Linda”),
in equal
shares, or if any one shall have predeceased the termination date,
upon her issue per stirpes, failing issue, upon the
surviving child
of the donor with issue of any predeceased child taking in place of
the parent per stirpes.
[54]
Linda emigrated to and became a resident of the United States of
America during 1978, and remained there until her death on
17
November 2009. She never received any benefits from the Trust.
[55]
In the premises the plaintiff is the sole remaining natural person
who is a beneficiary of the Trust.
[56]
Only in the event of there being no such persons, as referred to in
paragraph 52 above
in esse,
would the balance of the capital
and any accumulated income devolve upon the substitution
beneficiaries, namely the trustees for
the time being of the Barton
Mark Trust, failing such trust for whatever reason, upon the Trustees
for the time being of the Clifford
Harris Usufructuary Trust.
[57]
There is no indication that the donor required any portion of the
trust
corpus
to be preserved for the ultimate or second tier
beneficiaries, referred to by the plaintiff as the “substitution
parties”,
namely the Barton Mark Trust and the Clifford Harris
Usufructuary Trust
(“the substitution parties”)
.
[58]
The beneficiaries of the substitution parties are, or include,
Harris, his siblings, or their issue. Accordingly, after the
death of
the plaintiff, anything that succeeds to the substitution parties,
will inure to the benefit of Harris and his family.
[59]
The plaintiff contends that this is the central purpose of the
trustee’s unlawful and improper scheme, which will come
to
successful fruition upon her death.
[60]
In terms of the amendments sought, the plaintiff relies on the
numerous allegations of misconduct levelled against the trustees
(which, for the purpose of determining whether the new cause of
action will be excipiable, must be accepted as being true), as
a
consequence of the provisions in the Trust deed, including of course
the provisions affording them unfettered discretion to manage
the
assets of the trust in their “
sole and absolute discretion”.
[61]
As an example, the plaintiff pleads in the proposed amendments that
clause 3.7 of the Trust deed, in terms of which the trustees
had the
power, at their sole discretion, to create or cause to be created a
trust, or trusts, anywhere in the world upon the same
terms as the
Trust
mutatis mutandis,
for the benefit of any
beneficiary of the Trust, and to transfer to any such trust/s “
such
portion of the Trust Capital as shall in the sole and absolute
discretion of the TRUSTEES represent the share of the BENEFICIARY
concerned in this Trust.”
[62]
In paragraphs 82B to 82T of the proposed amendment the plaintiff has
fully set out the facts underpinning the irregular foreign
exchange
transaction claim that it seeks to introduce, namely the creation of
an offshore trust by the Trustees as a scheme aimed
at avoiding
section 9
of the
Currency and Exchanges Act 9 of 1933
, in terms of
which, absent permission from the South African Reserve Bank, no
person is permitted to enter into any transaction
whereby capital or
the right to capital is to be directly or indirectly exported from
the Republic.
[63]
Without delving into each of the proposed amendments, the pattern
followed by the Plaintiff is to include, after each instance
of
misconduct and as an alternative claim to the removal of the
trustees, a claim in terms of
section 13
, alleging that the
misconduct, which arose from the exercise of rights or powers
conferred by specific provisions of the Trust
deed, ‘
brought
about consequences which the donor did not contemplate or foresee”,
to then set out what these consequences were, and lastly to state
that such consequences hampered the achievement of the objects
of the
donor and or prejudiced the beneficiaries.
[64]
The defendants contend that neither of the jurisdictional
requirements set forth in section 13 of the Act have been established
in the proposed amendments.
[65]
The main thrust of the defendants’ argument in this regard is
that the impugned clauses, which are alleged to have resulted
in
consequences not foreseen by the donor, are standard trust clauses of
the sort which would not ‘
give rise to any disquiet of the
sort that would allow one to invoke section 13 relief.
[66] As set out more fully above,
to my mind the issue is not whether the clauses in question are
standard trust clauses or not,
but rather whether such clauses were
foreseeable by the founder.
[67]
It would appear,
ex facie
the allegations in the particulars
of claim and the amendments, that there is a factual basis for the
claim of termination, namely
that the donor or founder intended the
Trust to be managed by the trustees for the benefit of the primary
beneficiaries, and not
to be preserved largely intact for the family
members of the trustees who stood to ultimately benefit from the
preservation of
the Trust
corpus.
[68]
Inasmuch as the
de facto
situation appears to be that, if
ultimately proved, this unforeseen consequence will have the effect
of hampering the achievement
of the objects of the founder, namely to
provide financially for his daughters and / or prejudices the
interests of beneficiaries,
I am of the view that the amendment will
not render the particulars of the claim excipiable, and that any
prejudice arising from
the filing of the amendment at this late stage
of the proceedings is not fatal to the application for leave to
amend.
[69]
Regarding the ground of objection based on the alleged misjoinder of
the substitution parties, the plaintiff has pleaded that
in terms of
the deed of trust, the substitution parties are
not
among the
income and capital beneficiaries expressly identified in terms
thereof, and that they have no more than a
spes
of succeeding
to an undeterminable balance upon the death of the plaintiff, and
that the realisation of the
spes
was, and remains,
suspensively conditional upon whether the plaintiff survives to the
termination date
.
[70]
Although it is, of course, highly unlikely that the plaintiff will
survive beyond the termination date, I need not consider
this issue
further, nor the objection based on a misjoinder, as the plea of
misjoinder can be raised any time after the amendments
have been
effected.
[71]
I am satisfied that, notwithstanding the advanced stage in
proceedings,
prima
facie
a triable issue exists for the amendments sought, as envisaged in the
Ciba-Geigy
(Pty) Ltd
case
[10]
and that the exception relied upon by the defendants, while fairly
arguable, is not unanswerable.
[72]
I am mindful of the delays and further costs occasioned by these
substantial further amendments at this advanced stage of proceedings,
and as the plaintiff has failed to give any reason for only
introducing the termination claim at this late stage, and in view of
the fact that the defendants’ objections were reasonable and
were not baseless nor vexatious, each party shall bear their
own
costs in relation to arguing the application for amendments.
[73]
As provided for in Rule 28(9), the plaintiff shall be liable for any
costs occasioned by the amendments.
[74]
In the circumstances I make the following order:
74.1 The
plaintiff may effect every amendment of her particulars of claim as
set out in her `Notice of Intention to Amend, dated
6 July 2016, to
which the first, third, fourth, sixth, eighth and ninth defendants
have not objected in their Notice of Objection,
dated 1 August 2016;
74.2 The
plaintiff is given leave to amend her particulars of claim by
introducing thereto 82A, 82T, 95A, 99A, 110A, 117A, 119A
and 125A and
paryer A, as set out in her Notice of Intention Further to Amend,
dated 6 July 2016;
74.3 The plaintiff shall pay any
costs relating to the filing of any further pleadings, notices
and any further pre-trial
steps occasioned by the amendments, and the
costs of the hearing, including the preparation of heads of argument
shall be paid
by the Trust, including the costs of two counsel.
________________
HOLDERNESS, AJ
ACTING JUDGE OF THE HIGH
COURT
APPEARANCES
For the
Plaintiff:
Adv Duminy SC and Adv T Tyler
For the
Defendant(s):
Adv Dickerson SC and Adv AD Brown
Date(s) of
Hearing:
7 November 2016
Judgment
delivered on:
7 December 2016
[1]
Affordable
Medicines Trust and Others v Minister of Health and
Others
[2005]
ZACC 3
;
2006
(3) SA 247
(CC)
at para
[9]
.
[2]
Drakensberg
Bank Ltd (under judicial management) v Combined Engineering (Pty)
Ltd and Another
1967
(3) SA 632
(D)
at 641A, cited with approval in
Ciba-Geigy
(Pty) Ltd v Lushof Farms (Pty) Ltd & Another.
[3]
Devonia
Shipping Ltd v MV Luis (Yeoman Shipping Co Ltd intervening)
1994
(2) SA 363
(C) at 369G.
[4]
1967
(4) SA 308
(C) at 310G.
[5]
(2381/2008)
[2012] ZAWCHC 392
(14 December 2012)
[6]
At
para 16
[7]
Erasmus
supra
at D1-338, Footnote 7
[8]
1980
(2) SA 814
(A) at 838C-839F
[9]
2016
(5) SA 225
(SCA) at [34]
[10]
Ciba-Geigy v Lushof Farms (Pty) Ltd en ‘n
ander
2002 (2) SA 447
at 462H, and the
authorities cited therein