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[2021] ZAWCHC 102
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Brimble-Hannath v Hannath and Others (3239/2021) [2021] ZAWCHC 102 (25 May 2021)
Republic
of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
Case number: 3239/2021
Before: The Hon. Mr Justice Binns-Ward
Hearing: 19 May 2021
Judgment: 25 May 2021
In the
matter between:
SALLY
ANN
BRIMBLE-HANNATH
Applicant
and
ERICA
LOUISE
HANNATH
First Respondent
CAROLYN
LAURA
FISHER
Second
Respondent
BDO
BUSINESS SERVICES (PTY) LTD
Third Respondent
MASTER
OF THE HIGH
COURT
Fourth Respondent
JUDGMENT
(Delivered by email to the parties’ legal representatives
and by release to SAFLII.
The judgment shall be deemed to have been handed down at 10h00 on
25 May 2021.)
BINNS-WARD
J:
[1]
This is a case that should never have come
before court if only the parties on both sides had dealt with the
issues more constructively
than they did. It is unfortunate
that it has because the matter concerns the winding up of a deceased
estate of relatively
modest value, which, to the disadvantage of
everyone concerned, will be materially eroded by the cost of the
litigation.
The applicant is the widow of the testator, to whom
she had been married out of community property with the exclusion of
the accrual
system. The first and second respondents are the
co-executrixes of the deceased estate. They are the daughters
of the
testator by a previous marriage. The third respondent is
a company specialising in the provision of consulting and advisory
services that was appointed by the first and second respondents to
assist them with the administration of the estate. No
relief
was sought against the third respondent, and it did not participate
in the proceedings. The evidence suggests that
the third
respondent has attended to the practical administrative work in the
winding up of the deceased estate. The Master
was cited as the
fourth respondent.
[2]
The will is a simple one. Apart from
a few modest monetary bequests (which are uncontentious), it grants
the applicant for
the remainder of her life the right to use and
reside at the Noordhoek property that had been her and the testator’s
place
of residence at the time of the latter’s demise and
provides for the residue of the estate, including the forementioned
Noordhoek
property, to devolve on an existing trust of which the
first and second respondents are (with one other) co-trustees and
also beneficiaries.
[3]
The will did not provide any settlement on
the applicant to provide for her maintenance. It is undisputed
that she is entitled
in the circumstances to make a claim against the
deceased estate in terms of the Maintenance of Surviving Spouses Act
27 of 1990.
[4]
The applicant’s previous attorney did
in fact submit a claim under the Act on her behalf in the sum of
R6 212 480.
It was stated in the baldest terms, with
little information to enable the executors to assess its
reasonableness with regard to
the criteria set out in s 3 of the
Act.
[1]
The executrixes, as they were entitled in terms of
s 32
of the
Administration of Estates Act 66 of 1965
, and quite justifiably in
the circumstances, called upon the applicant to substantiate the
quantum of her maintenance claim on
affidavit. She failed to
respond to the request, notwithstanding a reminder. In the
result, the liquidation and distribution
account lodged by the
executrixes made no provision in respect of her claim. The
applicant’s maintenance claim was
therefore effectively
rejected by the executrixes.
[5]
The applicant lodged an objection to the
liquidation and distribution account and very shortly thereafter,
before her objection
was determined, instituted the current
application for the removal of the executrixes. She has invoked
s 54(1)(a)(v)
of the
Administration of Estates Act, which
provides that the Court may remove an executor from office if it is
satisfied that it is undesirable that he should act as the
executor
of the estate concerned. The basis for the application is the
applicant’s allegation that the first and second
respondents
are unsuitable to remain as executrixes because they have a conflict
of interest.
[6]
The alleged conflict of interest is said to
arise from the first and second respondent’s position as
trustees and beneficiaries
of the trust to which the testator left
the bulk of his estate. In their capacities as trustees, the
first and second respondents
lodged a claim by the trust against the
deceased estate in the sum of approximately R4,4 million predicated
on the deceased’s
debit loan account. The second
respondent testified that the deceased had borrowed the amount from
the trust to purchase
the Noordhoek Property. The trustees’
claim is reflected as having been accepted by the executrixes in the
liquidation
and distribution account they lodged with the Master.
The applicant questions the existence of any such claim and complains
that the first and second respondents have denied her access to the
trust’s records to investigate it.
[7]
The applicant avers that the trust’s
claim against the deceased estate ‘eats into the finite pie’
available in
the deceased estate to satisfy her maintenance claim.
Judged by the information in the liquidation and distribution
account,
that is an understatement. From the figures provided
in the account it is apparent that were both claims accepted at their
stated values the estate would be unable to meet them in full, and
accordingly demonstrably insolvent.
[8]
The applicant’s current attorney
(apparently the third she has engaged since the testator’s
death), who appeared on
her behalf at the hearing, argued that the
current matter was comparable on its facts to the matter of
Grobbelaar v Grobbelaar
1959 (4) SA 719
(A). He submitted that the Appellate Division’s
judgment in that matter was dispositive of the current case.
[9]
In
Grobbelaar
,
the testamentary executor of the deceased estate was one of the
testator’s sons. The testator had been married in
community of property and had a joint a will with his wife in terms
of which their estate devolved first on the surviving spouse
and
thereafter on the couple’s children in equal shares. The
principal assets in the estate were certain farms.
After his
wife’s death the testator subdivided the farmland to be able to
sell part of it to the respondent and to donate
another part to
another of his sons, Hendrik Petrus, to whom he then also sold an
additional portion. To give effect to the
forementioned sales
and donation the deceased needed the written consent of all his
children. All the children duly provided
their consent, save
for the appellant. The transactions could therefore not be
executed, but the deceased registered mortgage
bonds over the subject
properties in favour of the two sons to whom he had intended to
transfer them. The bonds were ostensibly
to secure claims by
the two sons for the value of improvements that they had effected to
the properties. After the testator’s
death, the
respondent, in his capacity as executor, gave notice that because the
estate was illiquid it would be necessary to sell
the properties by
public auction to settle the secured debts, including that allegedly
owed to himself. The appellant objected
on the grounds that he
disputed the validity of the registered mortgage bonds. He
sought an interdict prohibiting the sale
of the property pending the
determination of the dispute as well as an order removing the
respondent as executor of the estate
on the grounds that he had a
material conflict of interest.
[10]
At p.724D-725A of
Grobbelaar
,
Van Blerk JA summed up the legal position that applied on the facts
of the case as follows:
Dit blyk
uit die stukke dat respondent as eksekuteur die kapitale bedrae van
die twee verbande van £2,750 en £10,000,
ten gunste van
homself en Hendrik Petrus onderskeidelik, erken as eise teen die
boedel; terwyl appellant die eise betwis. Mnr.
Jacobs
namens
respondent het toegegee dat die twee eise verminder moet word met
£6,000, synde £4,000 die kooppryse van
die gronde wat
respondent en Hendrik Petrus gekoop het, plus £2,000 die waarde
van die grond aan Hendrik Petrus geskenk;
maar nêrens in die
stukke word hierdie toegewing deur of die respondent of Hendrik
Petrus gemaak nie. Die kontensie van appellant
is dat die verbande
vir fiktiewe eise gegee is, bloot as 'n uitweg om later transport van
die beswaarde eiendom vir die verbandnemers
te laat kry; iets wat die
testateur nie teweeg kon bring nie as gevolg van appellant se
weiering om toe te stem tot die kansellasie
van die bestaande verband
ten aansien van die kinders se moedersporsie.
Dit is
duidelik dat hier 'n wesenlike botsing bestaan tussen die persoonlike
belange van die respondent en die van die boedel
waardeur 'n toestand
geskep is wat respondent se posisie as eksekuteur vir hom onhoudbaar
maak. Hy bevind hom in die onmoontlike
posisie dat hy enersyds as
skuldeiser van die boedel sal moet veg vir sy eis en andersyds in sy
hoedanigheid as eksekuteur die
boedel sal moet verdedig teen
dieselfde eis. In hierdie rol sal hy genoodsaak wees om kant te kies.
Hy kan nie onsydig of onpartydig
bly nie.
'n
Dergelike posisie het ontstaan in die saak van
Barnett v
Estate Beattie
,
1928 CPD 482
, 'n appèl teen 'n beslissing
van die Hooggeregshof van Suid Rhodesië, waar 'n eksekuteur vir
die rede uit sy amp ontset
is. Daar het die Hof heeltemal tereg
daarop gewys dat op hierdie stadium dit nie nodig is nie om in te
gaan op die geldigheid van
respondent se eis, want die vraag oor wie
reg of verkeerd is, is nie hier ter sprake nie.
Die
toestand wat in die onderhawige geval ontstaan kan slegs verhelp word
deur die respondent uit sy amp as eksekuteur te ontset.
Alleen
daardeur kan myns insiens die belange van die boedel gedien word soos
art. 99 van die Boedelwet dit uitdruk.
[2]
[11]
It was held in
Robinson
v Randfontein Estates Gold Mining Co Ltd
1921 AD 168
at 177-178 that ‘(w)
here
one
man
stands to another in a position of confidence involving a duty to
protect the interests of that other in a fiduciary relationship
he is
not allowed to ... place himself in a position where his interests
conflict with his duty. The principle underlies
an extensive
field of legal relationship guardian to his ward, a solicitor to his
client, an agent to his principal, afford examples
of persons
occupying such a position. As was pointed out in
The
Aberdeen Railway Company v
Blaikie Bros
..., the doctrine
is to be found in the civil law (Digest 18.1.34.7), and must of
necessity form part of every civilised system
of jurisprudence
.’
It was rightly accepted by both sides in the current matter that an
executor stands in a fiduciary relationship to
the beneficiaries in
respect of his administration of a deceased estate. The first
and second respondent stressed that the
applicant was not an heir or
legatee in the deceased estate. That might be true, but she is
undoubtedly a beneficiary. The
rule that a fiduciary cannot act
in a situation in which he or she has a conflict of interest has been
described as ‘
a strict one
’.
[3]
It applies ‘
not only to actual
conflicts of interest but also to those which are a real
possibility
’.
[4]
[12]
In the current case it falls to be
remembered that an executor also has a duty towards creditors of the
estate to exercise his or
her powers bona fide and with objectivity.
In dealing with a claim an executor is expected to assess its merits
on a fair
consideration of the facts and its legal merits.
[5]
Should an executor also be one of the creditors of the estate an
unenviable situation will arise in which he or she will
have to be
the judge of his or her own claim. In my view it is generally
undesirable that an executor should find him or
herself in such a
situation. It not only goes against basic principle that anyone
should be judge in their own case, it also
posits a potential
conflict between the executor’s interest as a creditor of the
deceased estate and his or her fiduciary
duty to administer it for
the benefit of the beneficiaries.
[13]
Arguing against the relief sought by the
applicant, counsel for the first and second respondents questioned
the applicant’s
bona fides. He emphasised her failure to
respond to the request by the executrixes for her to substantiate her
claim for
maintenance on affidavit and her inability to support her
suspicions about the genuineness of the trust’s loan account
claim
against the deceased estate. He argued that the applicant
had been unable to make any cogent allegations that the executrixes’
conduct had been demonstrably improper in any respect. He drew
attention to various authorities in which the actual conduct
of the
trustees or executors had been examined for the purposes of deciding
whether it was desirable for them to remain in office.
Implicit
in the exercise, as I understood the argument, was the submission
that a conflict of interest should not give cause per
se for an
executor’s removal, but only conduct by the executor in
demonstrable breach of his or her fiduciary duty.
He also
submitted that the court’s primary concern in exercising its
discretion in terms of
s 54(1)(a)(v)
of the
Administration of
Estates Act should
be the welfare of the deceased estate and its
efficient administration.
[6]
[14]
I agree that that applicant has not
demonstrated any misconduct by the trustees. It is unfortunate
however that the first
and second respondents were not willing to be
more open in providing the applicant with insight into the affairs of
the beneficiary
trust so as to demonstrate the validity of its loan
claim against the deceased estate. They were no doubt within
their rights
to decline an informal request by the applicant for
disclosure, but whether they were wise to have done so in the
peculiar circumstances
is questionable. Voluntary transparency
might have avoided the current litigation. It is clear that the
admittedly
strained relationship between the first and second
respondents and the applicant is not helping matters.
[15]
I also agree that the applicant’s own
behaviour has not been beyond reproach. It has not been
satisfactorily explained
why she did not provide the trustees with a
substantiated claim in support of her claim for maintenance or why
she failed to respond
to the request addressed to her to provide an
affidavit in support of the claim.
[16]
In my judgment, however, once it is
demonstrated that an executor finds him or herself in a conflicted
situation, that will generally
be sufficient on its own to render it
undesirable for the executor to remain in office. The position
may be different in
a case in which the conflict relates to an
isolated question in the administration of the estate, which can be
satisfactorily dealt
with independently by a co-executor not affected
by the conflict, but I prefer to refrain from making any
determination in that
regard for in the current case the terms of the
will require the decisions of the executors to be by majority vote
and I doubt
that the intention of that provision could be satisfied
in a situation in which the majority of the executors recused
themselves
from participation in the decision-making.
[17]
I am also not in agreement with the
argument that proof of misconduct is required to remove an executor
that has a conflict of interest.
On the contrary, it is the
existence of the conflict of interest by itself that renders it
inappropriate that anyone charged with
a fiduciary duty affected by
the conflict should be the person called upon to fulfil the duty.
The rights or wrongs of the
conduct or positions of the protagonists
in the situation that gives rise to the identification of the
conflict of interest are
irrelevant. That much is illustrated
in the extract from the judgment in
Grobbelaar
quoted above, where Van Blerk JA said of the conflicting attitudes of
the appellant and the respondent in that case concerning
the validity
of the respondent-trustee’s claim against the deceased estate
‘
dit nie nodig is nie om in te
gaan op die geldigheid van respondent se eis, want die vraag oor wie
reg of verkeerd is, is nie hier
ter sprake nie
’.
[7]
[18]
The issue is whether it is appropriate when
a creditor’s claim by an executor of a deceased estate who is
also a beneficiary
in terms of the will is disputed by another
beneficiary that the executor should be charged with determining it.
I think
not; on the trite premise that no-one may be the judge in his
own cause. It matters not that there is a remedy available to
anyone dissatisfied by the executor’s decision by way of
objecting to the liquidation and distribution account or recourse
to
court. That would be the same as suggesting that anyone may be
the judge in their own cause so long as a right of appeal
is
available. It is an obviously untenable proposition. As
Margo J (Davidson and Franklin JJ concurring) noted
in
Die
Meester v Meyer en Andere
1975 (2) SA 1
(T) at 17D-E, ‘
In die geval van
botsende belange, is die blote feit dat ’n eksekuteur nie
onpartydig kan wees by die beoordeling van eise
teen die boedel nie,
prima facie grond vir sy verwydering.
Webster
v Webster en 'n Ander
,
1968 (3)
SA 386
(T) op bl. 388C - D.
’
[8]
In my view that consideration, when it arises, will ordinarily
determine how a court will exercise its discretion in terms
of
s 54(1)(a)(v)
of the
Administration of Estates Act. I
would therefore respectfully endorse the previously expressed view
that the mere existence of a demonstrated conflict of interest
affords prima facie sufficient ground for the removal of an executor
in terms of the provision. It seems to me to be axiomatic
that
it would ordinarily be undesirable for an executor affected by a
conflict of interest to remain in office.
[19]
I am accordingly satisfied, in the context
of the applicant disputing of the trust’s claim against the
estate, woolly as her
grounds for doing so might appear to be at this
stage, that it is undesirable that the first and second respondents,
who are the
co-trustees and beneficiaries of the trust, should remain
in office as executrixes of the deceased’s estate.
[20]
It will consequently be necessary for the
Master to appoint a substitute executor to finalise the winding up of
the estate.
It is evident that a representative of the third
respondent has been attending in a professional capacity to the
practical work
of administering the estate. I do not think that
it necessarily follows, because the third respondent was engaged by
the
first and second respondents, that the individual appointed by
the third respondent to do the work is compromised or unable to
complete it professionally. In the circumstances, especially
having regard to the limited value of the estate and the extent
to
which its administration has already been completed, I suggest,
without in any way intending to be prescriptive, that it might
be in
the best interests of the estate and the beneficiaries were the
Master, with an eye to limiting the incurrence of additional
costs of
administration, to consider appointing that person as the substitute
executor.
[21]
The following order is made:
1.
The first and second respondents be and are
hereby removed as executrixes of the Estate Late Stanley David
Hannath (Master’s
reference 9574/15).
2.
The first and second respondents are
directed forthwith to return to the fourth respondent their letters
of executorship.
3.
The fourth respondent is directed to
appoint a substitute executor to the forementioned Estate within 15
days of the service of
this order at the Master’s Office.
4.
The costs of this application incurred by
the applicant, of the one part, and the first and second respondents,
of the other part,
including those stood over for later determination
in the order granted by Hlophe JP on 23 March 2021, shall be
treated as
costs in the winding-up of the Estate.
A.G. BINNS-WARD
Judge
of the High Court
APPEARANCES
Applicant’s
attorney:
Michael
Wagener
Cape Town
First
and second respondents’ counsel:
J.K. Felix
First
and second respondents’ attorneys:
Michael Ward Attorney
Cape Town
[1]
Section 3
provides:
Determination
of reasonable maintenance needs
In the
determination of the reasonable maintenance needs of the survivor,
the following factors shall be taken into account in
addition to any
other factor which should be taken into account:
(a)
The amount in the estate of the deceased spouse available for
distribution to heirs and legatees;
(b)
the existing and expected means, earning capacity, financial needs
and obligations of the survivor and the subsistence of the marriage;
and
(c)
the standard of living of the survivor during the subsistence of
the
marriage and his age at the death of the deceased spouse.
[2]
‘
It appears from the papers that as
executor the respondent accepted as claims against the estate the
capital amounts of the two
mortgage bonds in favour of himself and
Hendrik Petrus respectively of £2,750 and £10,000,
whilst the appellant disputes
the claims. Mr Jacobs for the
respondent conceded that the two claims fell to be reduced by
£6,000, being £4000
in respect of the purchase prices of
the portions purchased by the respondent and Hendrik Petrus plus
£2000 as the value
of the land that had been donated to
Hendrik Petrus; but there was not any mention of that concession in
the papers by either
the respondent or Hendrik Petrus. The
contention of the appellant is that the mortgage bonds were
registered for fictitious
debts, merely as device to facilitate the
mortgagees later obtaining transfer of the encumbered properties;
something that the
testator had not been able to achieve by reason
of the appellant’s refusal to consent to the cancellation of
the existing
bond in respect of the children’s ‘mother’s
portion’.
It is
obvious that we have here a material conflict of interest between
the personal interest of the respondent and that of the
estate
whereby a situation has arisen that makes the respondent’s
position as executor untenable for him. He finds himself
in the
impossible position that on the one hand, as a creditor of the
estate, he will have to press his claim and on the other
hand, in
his capacity as executor, he will have to defend the estate against
that very claim. He will of necessity have
to choose a side.
He will not be able to remain neutral or impartial.
A comparable
situation arose in the matter of
Barnett v Estate Beattie
,
1928 CPD 482
, which was an appeal from a decision of the High Court
of Southern Rhodesia, in which an executor was removed from office
for
that reason. There, the Court quite rightly pointed out
that it was not necessary at that stage to go into the validity of
the respondent’s claim because the question of who was right
or wrong was not the issue.
The
situation that has arisen in the current case can be addressed by
removing the respondent from his office as executor.
It is
only in that manner that the interests of the estate can be served
as it is put in
section 99
of the
Administration of Estates
Act.’ (My
translation.)
[3]
Phillips v Fieldstone Africa (Pty) Ltd and
Another
2004 (3) SA 465
(SCA) at para
31.
[4]
Id.
[5]
Van Niekerk v Van Niekerk and Another
[2010] ZAKZPHC 85 (17 December
2010), 2011
(2) SA 145
(KZP),
[2011] 2 All SA 635
, at para 11.
[6]
Cf.
Gory v Kolver NO
and Others (Starke and Others Intervening)
[2006] ZACC 20
;
2007 (4) SA 97
(CC),
2007 (3) BCLR 249
at para 56, quoting
Die
Meester v Meyer en Andere
1975 (2) SA
1
(T) at 17F.
[7]
‘
... it is unnecessary to go into the
validity of the respondent’s claim, because the question of
who is right and who is
wrong is not the issue here’.
(My translation.)
[8]
‘
In the case of a conflict of interests,
the mere fact than an executor cannot be impartial in the
consideration of claims against
the estate is prima facie a ground
for his removal’.
Webster v
Webster en 'n Ander
,
1968 (3) SA 386
(T) at p. 388C – D’