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
>>
2021
>>
[2021] ZAWCHC 205
|
|
McHugh N.O and Others v Wright (5641/2020) [2021] ZAWCHC 205 (19 October 2021)
Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
Case number: 5641/2020
Before: The Hon. Mr Justice Binns-Ward
Hearing: 14 October 2021
Judgment:
19 October 2021
In the
matter between:
DONALD
ANTHONY McHUGH
N.O.
First
Applicant
RITA
MARIE KELLY
N.O.
Second
Applicant
ARNOLD
SCHOLTZ
N.O.
Third Applicant
(In
their capacities as joint trustees of the
McHugh
Family Trust IT1516/2001)
RITA
MARIE KELLY
N.O.
Fourth
Applicant
(In her
capacity as executrix of the
Estate
late John James Anthony McHugh)
and
PAUL
MICHAEL
WRIGHT
Respondent
JUDGMENT
(Delivered by email to the parties and release to SAFLII.)
BINNS-WARD J:
[1]
Donald Anthony McHugh, Rita Marie Kelly and
Arnold Scholtz have applied for an order directing Paul Michael
Wright (‘Wright’)
to furnish security for their costs in
the proceedings he has instituted in case no. 5641/2020 in which they
have been cited as
respondents. They all bring the application
in their capacities as the joint trustees of McHugh Family Trust
(‘the
family trust’) and Rita Kelly does so also in her
capacity as the executrix of the deceased estate of the late John
James
Anthony McHugh (‘JJA McHugh’). Wright, who
lives in England, opposed the application.
[2]
Wright was born out of an extramarital
relationship between JJA McHugh and Frances Celine McHugh. He
was given up for adoption
at the time of his birth and brought up in
England by his adoptive parents. JJA McHugh had four other
children born of his
marriage with Mary Philomena McHugh. The
aforementioned Donald McHugh and Rita Kelly are two of the four
offspring born of
that marriage. They live in Northern
Ireland. The late JJA McHugh divorced his wife at the time
of Wright’s
birth and thereafter lived in a so-called common
law marriage relationship with the aforementioned Frances McHugh
until the latter’s
death in September 2014. It seems that
JJA McHugh’s four children born of his civil law marriage were
all initially
hostile to his partner, Frances McHugh, but, with the
exception of Rita Kelly, they eventually came to accept her
[3]
Wright’s biological parents
established contact with him during 2007, when he was in his
mid-twenties. Familial relations
were built up, and Wright
started visiting his biological parents at their home in Northern
Ireland. On occasion he also
accompanied them on holiday to
South Africa, where JJA McHugh had substantial proprietary interests
housed in the aforementioned
family trust, which is registered with
the Master of the High Court at Cape Town. Wright has also
enjoyed the use of a holiday
house in Hermanus for his own family
holidays. It is apparent from the papers that the house was
owned by the late JJA McHugh
in a company. The joint trustees
of the family trust are the aforementioned Donald McHugh, Rita Kelly
and Arnold Scholtz
(the latter as representative of ASL Trustdienste
(Pty) Ltd).
[4]
In his founding affidavit in case no.
5641/2020, Wright testified that JJA McHugh had informed him during a
conversation in September
2015, when Wright was in Ireland for the
anniversary commemoration of his natural mother’s death, that
he had provided for
Wright in his will. Wright was told that he
would share equally with his half-siblings in JJA McHugh’s
South African
assets as a co-beneficiary of a testamentary trust.
He said that JJA McHugh had warned him that his half-sister Rita
Kelly
would probably be ‘very unhappy’ when she
discovered that he had been made a beneficiary.
[5]
According to Wright, JJA McHugh explained
the scheme of his South African will to him and cautioned that Rita
Kelly might prevail
on her siblings to assist her in excluding him
from his inheritance. He advised Wright that he should not
succumb to any
pressure to resign as trustee of the testamentary
trust ‘
as it would then be
extremely difficult for
[Wright]
to
prevent
[his half-siblings]
from
disinheriting
[him]’.
Wright said that JJA McHugh had advised him that if he was pressured
to ‘
exit the trust
’
he ‘
should not do so for less than
£1 million
’.
[6]
Wright testified that JJA McHugh told him
that, in the context of problems he had had with the revenue service
in Ireland after
a breakup with a former business partner, he
(McHugh) had drafted a cession document in terms of which he would
purport to cede
his loan account in the family trust to his four
children to put it out of reach of the tax authority. He had
never got around
to signing the document, which had been left undated
so that it could be used if required. He advised Wright that he
believed
that Rita Kelly, who attended to the accounting aspects of
his businesses, might still have a copy of the uncompleted deed of
cession
and that he was concerned that she might forge his signature
on the document to circumvent the provisions of his will.
[7]
According to Wright, JJA McHugh proposed
that he should engage a ‘signature expert’ to investigate
any documents that
came to light after his death that had the effect
of nullifying the provisions of his will. Wright averred that
he had asked
JJA McHugh whether there was not something he could do
to pre-empt any possible dispute concerning Wright’s
inheritance,
but that McHugh responded that he expected that there
would be a dispute in the family in any event and that the best he
could
do was to express ‘his wishes of inheritance’ in
his will.
[8]
The late JJA McHugh died on 28 May 2016.
Wright travelled from England to be by his father’s side. He
was at his
bedside, together with his four half-siblings, when his
father passed away. In terms of his last will and testament
disposing
of his South African estate, which was executed at Caledon
on 29 January 2013, JJA McHugh left his substantial loan account
claim
against the family trust to a testamentary trust to be
established with John-Paul McHugh (a sibling of the aforementioned
Donald
McHugh and Rita Kelly), Wright, Rita Kelly and Arnold Scholz
nominated to be the trustees thereof. According to the terms
of
clause 2.2.3 of the will (which is not well drafted), ‘(t)
he
beneficiaries
[of the testamentary
trust]
shall include the following
persons and trusts, namely:
2.2.3.1.
Frances Celine McHugh;
2.2.3.2.
The descendants of John James Anthony McHugh born from
a legal
marriage including adopted children;
2.2.3.3.
Any trust formed for the benefit of the beneficiaries
set out in
paragraphs 2.2.3.1 and 2.2.3.2 above.
2.2.3.4.
…
2.2.3.5.
...
’
[9]
The late JJA McHugh appointed the same
persons whom he had nominated to be the trustees of the testamentary
trust, including Wright,
also to be the co-executors of his South
African deceased estate.
[10]
It will be apparent that on a literalist
construction of clause 2.2.3.2 of the will Wright does not qualify to
be a beneficiary
of the testamentary trust. He contends,
however, that the surrounding circumstances are such as to indicate
that it was with
reference to him that the clause includes ‘adopted
children’. The clause does not read entirely sensibly
even
on a literalist construction and, as I have noted, there are
other indications that the testamentary instrument was not well
drafted.
There is in any event the consideration that
s 2D(1)(b)
of the
Wills Act 7 of 1953
sv ‘
Interpretation
of wills
’ provides that in the
interpretation of wills, unless the context otherwise indicates, ‘
the
fact that any person was born out of wedlock shall be ignored in
determining his relationship to the testator or another person
for
the purposes of a will
’.
Part of the context that a court would have to consider in the
current matter is the the testator’s nomination
of Wright,
along with all his other children, as co-executor of his South
African estate and co-trustee of the testamentary trust
and whether
any inference can be drawn therefrom. The proper interpretation
of the clause will be one of the two principal
issues in the action
Wright intends to institute.
[11]
Not long after the death of the late JJA
McHugh, Wright was requested to renounce his nomination as a
co-executor of the South African
deceased estate. He was told
that this would facilitate the more efficient administration of the
estate. On the basis
of that information, and after a
discussion with his half-sibling, John Paul McHugh, who also
renounced his nomination as a co-executor,
he acceded to the request.
Arnold Scholtz must also have stepped aside because Rita Kelly
has ended up being the sole executrix
of the estate, and in that
capacity has nominated a local address in Kleinmond as her South
African
domicilium citandi et
executandi
.
[12]
In February 2017, Wright was approached by
Guthrie & Theron attorneys to also renounce his appointment as a
co-trustee of the
testamentary trust. He says he was led to
understand that this was because the number of trustees exceeded the
maximum permitted
in terms of the testamentary directions concerning
the establishment of the trust. He refused to do so. He
emailed
the attorneys on 27 February 2017, stating ‘
The
will states that at all times there should be a minimum of two
trustees and a maximum of six trustees. We were currently
at
four trustees before John Paul McHugh’s “informed”
resignation. My father placed me as a trustee and
I wish to
remain a trustee.
’
[13]
Wright encountered difficulty in obtaining
information from Guthrie & Theron about the progress being made
concerning the establishment
of the testamentary trust. He
eventually became so frustrated that he appointed solicitors to look
into the matter.
The solicitors wrote to Guthrie & Theron
in this regard by email on 20 November 2018. Guthrie &
Theron responded
on 3 December 2018 and confirmed that the
testamentary trust had not been established because the asset with
which it was to be
invested in terms of the will (i.e. JJA McHugh’s
aforementioned loan account claim) had been ceded in equal shares to
Wright’s
four half-siblings, including Donald McHugh and Rita
Kelly.
[14]
Guthrie & Theron forwarded an extract
from the notes to the unaudited financial statements of the family
trust for the year
ended 28 February 2017. The extract
reflected that the trust had, as at the end of February 2016, been
indebted to JJA McHugh
in the amount of R89 772 139.
The notes recorded that ‘
On 25
April 2016, the loan owing to JJA McHugh was ceded, assigned and
all the rights, title and interest in and to the amount
owing to him
was ceded and repayable to him on demand in equal parts to
[his four children born of his marriage to Mary Philomena McHugh]’.
[15]
Wright thereafter obtained a copy of the
cession documents. These showed that the cession had occurred
in two parts.
The first deed of cession dated 21 April 2016 was
a cession of the JJA McHugh’s loan account in the family trust
in the amount
of R71 688 714 and the second deed of cession
dated 25 April 2016 was in respect of all the cedent’s right,
title
and interest in the said loan account.
[16]
Mindful of the conversation he had with JJA
McHugh in September 2015 concerning the possibility that Rita Kelly
might forge a cession
of the loan claim against the family trust,
Wright instructed his local attorneys to engage a handwriting expert
to investigate
the authenticity of JJA McHugh’s apparent
signatures on the cession documents. The attorneys procured the
assistance
of Mrs Yvette Palm, who has 25 years’ experience as
a specialist examiner of ‘questioned documents’.
According
to her forensic report, Ms Palm’s specialised
training includes, amongst other courses and seminars, three years’
theoretical
and practical in-service training in the examination of
questioned documents with the Questioned Document Unit of the
forensic
science laboratory of the South African Police Service,
attendance at an advanced programme in forensic criminalistics,
specifically
directed to the examination of question documents, at
the University of South Africa, and a course presented by the United
States
Secret Service Forensic Document Laboratory on counterfeit
forensics. She has reportedly testified as an expert witness on
numerous occasions in courts in South Africa, Botswana, Zambia and
Hong Kong. Ms Palm compared the cedent’s signatures
on
the two aforementioned deeds of cession, dated 21 and 25 April 2016,
respectively, with each other and also with the signatures
of the
late JJA McHugh on his will and on the annexure thereto, which were
executed on 29 January 2013.
[17]
It is not necessary for present purposes to
go into Ms Palm’s opinion in any detail. Suffice it to
say that she ventured
‘conclusively’ that the signature
on the document dated 25 April 2016 was a tracing of the
signature on the document
dated 21 April 2016. Ms Palm also
opined that the fact that the signature on the cession document dated
21 April 2016 was
‘
far superior in
quality
’ to that of the signature
on the documents executed in January 2013, when JJA McHugh was
younger and presumably in better
health, suggested that the signature
on the document dated 21 April 2016 ‘
is
not an authentic signature
’.
Ms Palm pointed out that ‘(t)
he
non availability of specimen signatures of the signatory for the
period 2016 restricts a full examination at this time
’.
She stated that she would in all probability ‘revise’ her
findings if such further specimens became available.
The
context suggests that by ‘revise’ the witnesss meant
‘expand upon’.
[18]
Ms Palm worked from the copies of the
relevant documents that had been made available to Wright. She also
made it clear that her
degree of conviction would be assisted if the
original documents were made available to her.
[19]
On the basis of the evidence summarised in
the foregoing paragraphs, Wright obtained an interdict prohibiting
the trustees of the
family trust from alienating its assets pending
the determination of the action he intends to institute for the
setting aside of
the cession of the loan account to his half
siblings. He has also obtained an order staying the final
winding up of the deceased
estate until his principal claim for a
setting aside of the apparent cessions and recognition as a
beneficiary of the testamentary
trust has been determined. The
interdictory relief was granted
ex parte
in terms of Part A of Wright’s notice of motion in case no.
5641/2020.
[20]
In terms of Part B of the notice of motion
in the principal application, which is somewhat inelegantly worded,
Wright is seeking
the following relief:
1.
That the Ninth Respondent
[the
Master of the High Court, Cape Town]
be
ordered to grant the Applicant letters of executorship within 14 days
of submitting the Acceptance of Trust as executor with
them in the
estate of the late JJ McHugh with the reference number 7524/20174
(hereafter “the Estate”).
2.
Leave from this Honourable Court
that the Applicant may institute the action alone as co-executor in
the Estate.
3.
In the alternative to prayers 1 and
2 above that the Applicant be granted leave to institute the Action
on behalf of the Estate
in his representative capacity as a
beneficiary of the Estate;
[
[1]
]
4.
In the alternative to prayers 1, 2
and 3 above, that the relief in terms of Part A be extended until the
finalisation of the action
to be instituted by the Applicant in his
personal capacity, within 90 days of this Order.
5.
That the costs of Part A and Part B
of this notice of motion be paid by the First to Eight (sic)
respondents, jointly and severally,
the one paying the others to be
absolved.
6.
Further and/or alternative relief.
[21]
Wright has alleged that this court has
jurisdiction in the principal proceedings by virtue of the following
features of the case:
1.
The deceased estate, which he alleges is
the creditor in respect of the loan account in the family trust, is
registered with the
Master of the High Court in Cape Town;
2.
The testamentary trust to be established in
terms of the will of the late JJA McHugh falls to be registered with
the Master in Cape
Town; and
3.
The family trust, which is the debtor in
respect of the deceased’s loan account is registered with the
Master in Cape Town
and the assets held in it are in this country,
with most of them being in this court’s territorial
jurisdiction.
[22]
The supporting affidavit in the application
for security of costs was made by the locally based trustee of the
family trust, Arnold
Scholtz. Its content was anodyne and
largely uncontentious. It said little more than that Wright is
a
peregrinus
without assets in South Africa and that he had failed to respond to
the notice in terms of Uniform
Rule 47
that had been served on him.
Mr Scholtz argued that as Wright had trouble securing the funds to
pay his own expert (a fact
disclosed in Wright’s founding
affidavit in the principal application), it would be unlikely that he
would be able to pay
any costs awarded to the trustees of the family
trust or the executrix of the deceased estate. An affidavit by
an attorney
from Guthrie & Theron was also filed explaining the
history of the administration of the deceased estate of JJA McHugh
and
offering a motivated opinion that the respondents’ costs in
the principal application would be ‘considerable’.
The attorney also expressed concern that it would be difficult for
his clients to recover any costs awarded in their favour from
Wright.
[23]
None of the opposing respondents in the
principal application has delivered answering papers yet. Rita
Kelly, in her capacity
as co-trustee and executrix, delivered a
replying affidavit in the security for costs application. Her
affidavit pointed
out that the expense of conducting the principal
proceedings would entail, apart from anything else, the travel
expenses of the
parties who live abroad. It seems that Ms Kelly
had in mind the action proceedings that Wright seeks leave to
institute in
Part B of the notice of motion in the principal
application. She explains that she did not deal with the merits
of the issue
in dispute in any detail because she was advised that
they were not relevant to the application for security. She
averred
that the relationship between JJA McHugh and Frances McHugh
had been ‘tumultuous’ and described Frances McHugh as an
alcoholic. Ms Kelly also stated that relations between Wright
and JJA McHugh were strained and, without providing illuminating
particularity, referred in that regard to a dispute about a claim by
Wright to a pension benefit of the late Frances McHugh.
[24]
Ms Kelly averred that the cession document
was prepared by an attorney at Guthrie & Theron on the
instructions of JJA McHugh,
who had given express instructions that
Wright should be excluded as a cessionary. She shed no light on
the execution of
two such documents four days apart. Ms Kelly
also stressed that the terms of the will, which refer to the
‘
descendants of John James Anthony
McHugh born from a legal marriage including adopted children
’
according to their literal tenor exclude Wright as a beneficiary of
the contemplated testamentary trust.
[25]
Ms Kelly chose not to deal with the report
of Ms Yvette Palm because a copy of it had not been attached to
Wright’s opposing
affidavit in the security application.
Ms Kelly would, of course, have been aware of the report by virtue of
it having been
put in under a confirmatory affidavit by Ms Palm as
part of the founding papers in the principal application. It
is, clear,
however, from what Ms Kelly did say that she denies the
implication that the cedent’s signature on the cession
documents
was forged. It would be difficult in any event for Ms
Kelly to deal meaningfully with Ms Palm’s report without the
assistance of an equivalent expert, and I accept that it was not
incumbent on the applicants in the security application to engage
an
expert for the purposes of these interlocutory proceedings.
They were reasonably entitled to await the determination of
security
application before further incurring the costs of opposing the
principal application.
[26]
The principles by which courts determine
applications for security for costs were comprehensively reviewed in
Magida v Minister of Police
1987 (1) SA 1
(A). It is a matter of discretion, and there is
no numerus clausus of factors to which a court may have regard in
arriving
at a decision it considers to be just in the peculiar
circumstances of a given case. It has been held that the
discretion
is a strict or true one, and accordingly the court’s
decision is one that may interfered with on appeal only in narrow
circumstances;
see
Giddey NO v
JC Barnard and Partners
[2006] ZACC 13
;
2007 (5)
SA 525
(CC) at para 20-22.
[27]
In
Magida
,
Joubert JA identified that an
incola
enjoyed no right under the common law to require a non-domiciled
foreigner claimant to provide security for his costs as a matter
of
course. Quoting from Kersteman,
[2]
Hollandsch Rechtsgeleert Woordenboek
sv ‘cautie juratoir’, the learned judge of appeal noted
that ‘(i)
t was a matter of
practice in the Dutch courts that a Judge should hold an inquiry to
investigate the merits of the matter fully.
The approach of the
Judge was not to protect the interests of the incola to the fullest
extent. He had a judicial discretion
to grant or refuse the
furnishing of security ... by having due regard to the peculiar
circumstances of the case as well as considerations
of equity and
fairness to both the incola and the non-domiciled foreigner.
’
[3]
The learned judge’s review of the common law writers’
treatment of the question led him to conclude that ‘(t)
he
Dutch jurists ... certainly did not consider the dice to be loaded
against a non-domiciled foreigner
.’
On the contrary, the fundamental considerations were equity and
justice. He referred to the following
statement in
Saker
& Co v Grainge
r
1937 AD 223
at 227
on which the applicants’ counsel relied in the current matter,
viz. ‘
The principle underlying
this practice
[i.e. ordering
peregrini
to furnish security]
is that in
proceedings initiated by a
peregrinus
the Court is entitled to protect an
incola
to the fullest extent
’, and
explained that it ‘
should be read
subject to the qualification that it is only applicable
after
the court, in the exercise of its judicial discretion
[in accordance with the applicable principles]
had
come to the conclusion that the
peregrinus
should not be absolved from furnishing security for costs
’.
[4]
Joubert JA emphasised that there was no justification ‘
for
requiring the Court to exercise its discretion in favour of a
peregrinus only sparingly
’.
[5]
[28]
In
Shepstone &
Wylie and Others v Geyser N.O.
1998 (3)
SA 1036
(SCA) at 1045G-1046C, Hefer JA disapproved of the idea that
applications for the provision of security for costs should be
approached
with any predisposition towards the grant or refusal of
the relief. The learned judge of appeal endorsed the approach
articulated
by Peter Gibson LJ in
Keary
Developments Ltd v Tarmac Construction Ltd and Another
[1995] 3 All ER 534
(CA) at 540a- b as follows: ‘
The
court must carry out a balancing exercise. On the one hand it must
weigh the injustice to the plaintiff if prevented from pursuing
a
proper claim by an order for security. Against that, it must weigh
the injustice to the defendant if no security is ordered and
at the
trial the plaintiff’s claim fails and the defendant finds
himself unable to recover from the plaintiff the costs which
have
been incurred by him in defence of the claim
’.
It is apparent from the judgment in
Shepstone
& Wylie
, which was concerned with
the provision of security in terms of s 13 of the Companies Act 61 of
1973, that the appeal court saw
no reason to draw a distinction in
the applicable principles between an application under the statutory
provision and one brought
under the common law in terms of Uniform
Rule 47 such as in the current case.
[29]
The dictum in
Keary
subsequently also enjoyed the endorsement of the Constitutional Court
in
Giddey
supra,
in para 30. Also dealing with an application for security in
terms of s 13 of the Companies Act, O’Regan
J writing for
the court in that case said ‘
The
balancing exercise proposed by the Supreme Court of Appeal in
Shepstone v Wylie
’s
case ... acknowledges
[the need for the
court to bear in mind a claimant’s right in terms of s 34
of the Constitution
[6]
]
(albeit without express reference to the
Constitution). On one side of the scale must be weighed the
potential injustice to
the plaintiff or applicant if it is prevented
from pursuing a legitimate claim. This incorporates a
recognition of the importance
of the right of access to courts.
On the other side of the scale must be placed the potential injustice
to the defendant
if it succeeds in its defence but cannot recover its
costs. Relevant considerations in performing this balancing exercise
will
include the likelihood that the effect of an order to furnish
security will be to terminate the plaintiffs action; the attempts
the
plaintiff has made find financial assistance from its shareholders or
creditors; the question whether it is the conduct of
the defendant
that has caused the financial difficulties of the plaintiff; as well
as the nature of the plaintiffs action.
’
[30]
The applicants contend that because the
family trust is a locally registered trust and the deceased estate is
locally administered
they fall to be regarded as
incolae
,
notwithstanding that Donald McHugh and Rita Kelly reside in Northern
Ireland. They say that the deceased estate and the
family trust
may encounter difficulty recovering its costs from Wright, who is
admittedly a
peregrinus
with no assets in this country, if the respondents are successful in
opposing the proceedings instituted by him.
[31]
I do not consider that it is especially
important to characterise the foreign respondents in their
representative capacities as
peregrini
or
incolae
.
The principles that I have just rehearsed make it clear that that is
not a primary consideration. I accept though
that the
respondents will be put to the trouble of having to have any costs
order made in their favour by this court recognised
by the courts in
England and Wales in order to be able to execute it against Wright’s
assets. An English solicitor
has testified, however, that that
should not present any technical difficulty. I am nevertheless
mindful that if the situation
arises executing against Wright’s
assets will probably entail the respondents incurring further expense
in the foreign jurisdiction
to obtain the required recognition of
this court’s order.
[32]
A more fundamental consideration in my view
is that it is apparent on the factual evidence that Wright may in any
event not have
sufficient exigible assets to satisfy an adverse costs
order. His only exigible asset appears to be his residential
property
in England. He claims that it has a market value of
approximately £218 000 and is already encumbered to the
extent
of about £140 000. He earns an income of
£2 200 per month, which is modest. He has already
had
to borrow £10 000 to fund his own costs in the
litigation and candidly admits that he will be unable to obtain
further
loans from financial institutions and will therefore be
dependant on his family to provide him with financial support to
proceed
with the litigation. It is evident that Wright had some
difficulty even to get sufficient funds together to pay for the
handwriting
expert’s fee.
[33]
In all the circumstances Wright is going to
be stretched to afford his own legal costs, let alone also those of
the respondents
if he is unsuccessful in the litigation. That
is a factor weighing in favour of the parties seeking security for
their costs,
but, as the principles rehearsed above show, it is not,
of itself, a decisive one.
[34]
It is also a factor that demonstrates that
Wright’s ability to pursue the litigation could well be
frustrated if he were required
to put up security for the
respondent’s costs. That is a consideration that demands
careful thought in respect of his
right in terms of s 34 of the
Constitution. It is authoritatively established, however, that
a party’s right under
s 34 of the Bill of Rights by itself
affords no trump card against an order to put up security for costs.
As the appeal court
noted in
Shepstone &
Wylie
supra, ‘
...
the fact that an order of security will put an end to the litigation
does not by itself provide sufficient reason for refusing
it. It is a
possibility inherent in the very concept of a provision like s 13
[of
the 1973 Companies Act]
which comes into
operation whenever it appears to the Court that the plaintiff or
applicant will not be able to pay the defendant
or respondents costs
in the event of the latter being successful in his defence. If there
is no evidence either way, the mere possibility
the order will
effectively terminate the litigation can plainly not affect the
Court’s decision. It only becomes a factor
once it is
established as a probability by the plaintiff or applicant. And even
if it is established, it remains no more than a
factor to be taken
into account; by itself it does not provide sufficient reason for
refusing an order
’.
[7]
[35]
All of the aforegoing goes to show how
sensitive a balancing exercise is required in the fair determination
of the current application.
It drives me back to the passage
from para 30 of the judgment in
Giddey
’s
case quoted in paragraph [29]
above.
[36]
It weighs with me that Wright did not
embark on the litigation frivolously. The background
circumstances, at least on his
version, were such that he had cause
to be concerned about the genuineness of the cession of the loan
claim. He had a forensic
examination of the impugned deeds of
cession undertaken at a cost he could not easily afford before he
instituted the litigation.
The result of that examination by an
expert whose evidence has been accepted by the courts in a number of
cases to which Wright’s
counsel drew attention
[8]
supports the conclusion that his claim, while its success is by no
means guaranteed, is certainly not fanciful.
[37]
It also weighs with me that the handwriting
expert’s opinion suggests that there is a cognisable
possibility that Wright may
have uncovered a grievous fraud. A
rightminded court would be reluctant to make an order the practical
effect whereof would
be to block a proper investigation of the
allegation, when it is clear that it has been seriously made. I
stress that in
making that observation I should not be misread to be
in any way pre-empting the determination whether there was a
forgery.
It is clear that further investigation will occur
before the trial in any action concerning the issue and, apart from
any contesting
expert opinion that the applicants may obtain, the
evidence of the attorney whom Ms Kelly says was instructed to draft
the cession
documents could be decisively adverse to Wright’s
claim. All I am saying is that Wright has laid a cogent basis
for
his allegations of fraud to be tried, and a court will, in the
interests of upholding the law, be reluctant to deprive a litigant
who cogently alleges he is the victim of fraud of a trial of his
case.
[38]
Another factor that weighs with me is that
the litigation is, as argued by Wright’s counsel, potentially
for the benefit not
only of Wright personally, but also of all of
others of the late JJA McHugh’s descendants as the other
beneficiaries of the
intended testamentary trust.
[39]
I also do not overlook that Rita Kelly and
Donald McHugh find themselves in a conflicted position in the
litigation since the allegation
concerning their execution of the
deeds of cession and acceptance of cession goes against them
personally, and therefore gives
rise to an issue that creates the
potential for a conflict between their personal interest and their
interests and duties in their
respective representative capacities as
trustees of the family trust and, in Rita Kelly’s case,
executrix of the deceased
estate. Uninvolved trustees or
executors in their position would ordinarily have abided the decision
of the court because
the primary issue in contestation does not
affect the proprietary interests of the trust and affects the
position of the deceased
estate only insofar as there is a dispute
between individuals who potentially stand to benefit in terms of the
will. An objective
executor or one acting at arm’s length
would ordinarily leave it to the contestants whose personal interests
are primarily
in issue to litigate the dispute and abide the result.
The same would go for the trustees in respect of a dispute between
individuals as to the ownership of a loan claim against the family
trust. (Indeed, although it is peripheral to the question
I
must decide in this application, I think there might well be merit in
the observation en passant by Mr
Brink
,
who appeared for Wright, that the trustees should be earnestly
considering whether they should not be applying for a so-called
Beddoe
order in the current litigation.
[9]
)
[40]
The import of the considerations identified
in the preceding paragraph is that there is good reason to regard the
litigation as
being essentially between
peregrini
on both sides. It just happens that it is the interest in
respect of which they are litigating that is sited in this country.
It is debatable whether the family trust and the deceased estate,
although their representatives are necessary parties in the principal
case, should be playing an active part in the litigation. And
even if they choose to, it is very possible that if the litigation
were decided in Wright’s favour certain of the trustees and the
executrix, rather than the trust or the deceased estate,
would be
ordered to bear the costs out of their own pockets.
[41]
Weighing all the aforegoing considerations
in the balance I have decided that in the peculiar circumstances of
the case the scales
tip against ordering Wright to provide security
for the applicants’ costs. The application will therefore
be refused.
[42]
As to costs, I consider that it would be
fair to both sides in the circumstances to direct that the costs of
the application for
security stand over for determination in the
principal case. Although the applicants have been unsuccessful,
I do think that
it was unreasonable of them to have applied for
security. The incidence of the liability for the costs should
follow the
determination whether there was a forgery as alleged by
Wright, and if there was, who was responsible for it. If the
forgery
is established the court seized of the principal case would
be likely to hold that the persons who were party to the forgery
should
be personally responsible for Wright’s costs, as well as
any costs incurred by the representatives of the family trust and
the
deceased estate. On the other hand, if Wright loses in the
principal case, it might well be just that the costs of this
application should follow the result. The decision is therefore
best left until the end of the day.
[43]
An order is made in the following terms:
1.
The application for security for costs is
refused.
2.
Costs shall stand over for determination
with the principal case.
A.G. BINNS-WARD
Judge
of the High Court
APPEARANCES
Applicants’
counsel:
G.C. Le Roux
Applicant’s
attorneys:
Guthrie & Theron Attorneys
Kleinmond
MGH Attorneys
Cape Town
Respondent’s
attorneys:
Adam Brink
Respondent’s
attorneys:
Van Wyk Van Heerden Attorneys
Paarl
Heyns and Partners
Cape Town
[1]
Relief akin to the so-called ‘
Beningfield
exception’ (after the Privy Council’s advice in
Baxter
v Beningfield
8 NLR 81;
[1886]
UKPC 49)
endorsed as part of our law in
Gross
and Others v Pentz
[1996] ZASCA 78
;
1996 (4) SA 617
(A)
at 628.
[2]
Franciscus Lievens Kersteman (1728-?93), a Dutch
jurist who produced much of his written work whilst serving out a
very lengthy
prison sentence for swindling a jeweller in the Hague.
[3]
At 11I- 12C.
[4]
At 14F-G.
[5]
At 14F.
[6]
Section 34 of the Bill of Rights provides:
‘
Everyone has the right to have
any dispute that can be resolved by the application of law decided
in a fair public hearing before
a court or, where appropriate,
another independent and impartial tribunal or forum.
’
[7]
At 1046G-I.
[8]
I
ncluding one of my own
judgments, in
Yokwana v Yokwana
[2013] ZAWCHC 22
(13 February 2013).
[9]
After the case of
Re Beddoe, Downes v Cottam
[1893] 1 Ch 547
(CA), as to which see the discussion in
Stander and Others v
Schwulst and Others
2008 (1) SA 81
(C) from para 48.