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[2017] ZAGPJHC 129
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F v F (12469/2016) [2017] ZAGPJHC 129 (10 May 2017)
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REPUBLIC
OF SOUTH AFRICA
HIGH
COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 12469/2016
In
the matter between:
D
F
Plaintiff
and
L
F
First
Defendant
L
F
N.O.
Second
Defendant
iPROTECT
TRUSTEES (PTY) LIMITED
N.O.
Third
Defendant
JUDGMENT
Barrie
AJ:
1.
The plaintiff in this
matter is Mr D. F. (“Mr F.”). The first defendant
is Ms L. F. (“Ms F.”), in
her personal capacity. Ms
F. is also the second defendant. She is cited as second
defendant in her capacity as trustee
of the XXXX YYYY Trust (“the
trust”). The third defendant is the second trustee of the
trust, iProtect Trustees
(Pty).
2.
Ms F. and the third
defendant are the only trustees of the trust. I shall herein
refer to them as “the trustees”
when referring to them
jointly, in their capacity as trustees of the trust..
3.
In terms of his
particulars of claim, Mr F. seeks, among others, repayment of a sum
of R3.5 million that he paid to the trustees
on 23 January
2015. He made the payment in accordance with the terms of a
written agreement, termed a “Settlement Agreement”
(“the
settlement agreement” or “the agreement”), that he
had earlier, at a time before the trust had been
established, reached
with Ms F.. The introductory clause of the settlement agreement
indicates that it arose from termination
of a personal relationship
between Mr and Ms F. (who I shall refer to as “Mr and Ms F.”
or as “the F.es”).
4.
Apart from his claim
against the trustees for repayment of the R3.5 million, Mr F.
seeks repayment from Ms F. in her personal
capacity (i.e. as first
defendant) of a sum of USD 587 573.53 that he paid to her in
terms of the settlement agreement and,
as an alternative to his
R3.5 million claim against the trustees, damages of R3.5 million
against Ms F., again in her
personal capacity.
5.
On what I have before me
it appears that only Ms F. is defending the action. There is no
notice of intention to defend from
the third defendant in the court
file, nor any other indication that the third defendant is
participating, or intends to participate,
in the litigation.
6.
Ms F. has, both as first
and second defendant, delivered an exception to Mr F.’s
particulars of claim, but only in relation
to the claim against the
trustees for repayment of the R3.5 million.
7.
Mr L Hollander,
instructed by attorneys Darryl Furman & Associates, appeared
before me on behalf of the excipient, Ms F..
Mr W J Vermeulen
SC, with Ms M Maschwitz, instructed by attorneys Paul Friedman &
Associates Inc., appeared for Mr F.
8.
The
particulars of claim state that Mr and Ms F. concluded the settlement
agreement during September 2014.
[1]
The settlement agreement sought to achieve agreement between them
regarding their parental responsibilities and rights pertaining
to
their minor child, XXXX, as well as regarding the tertiary education
of ZZZZ
[2]
. It also sought
to achieve settlement of all monetary obligations between the F.es
arising from the termination of their
relationship
[3]
.
Only the terms of the settlement agreement that are relevant to the
first subject are now relevant.
9.
Mr
and Ms F. in terms of the settlement agreement agreed that their
parental responsibilities and rights regarding the minor child,
as
referred to in sections 18(2)(a)(b) and (c)
[4]
of the Children’s Act, 2005, would continue to be exercised by
them jointly, but that the minor child’s primary place
of
residence would be with Ms F.. They spelt out in some detail
what Mr F.’s rights of contact with the minor child
would be.
Although the particulars of claim are not entirely clear on this
point, it appears that the actuating cause of
the action is Ms F.’s
allegedly not allowing Mr F. to have contact with the minor child as
had been agreed in terms of the
settlement agreement.
10.
The particulars of claim
quote from the clause of the agreement in terms of which Mr F. made
payment of the sum of R3.5 million
that he now claims from the
trustees. The subclauses that are relevant to the exception
provide that:
“
3.
MAINTENANCE FOR
XXXX & ZZZZ
3.1
The parties agree that D. shall make a once-off maintenance payment
in respect of ZZZZ and XXXX in the amount of R3,500,000.00
(‘the
maintenance amount’).
3.2
The maintenance amount shall be paid to the bank account to be opened
for the XXXX YYYY Trust, of which trust Aaaa and/or Bbbb
Cccc and/or
Dddd (from Eeee Pharmacy) will be appointed trustees to administer
the maintenance amount for XXXX and ZZZZ’s
best interests.
”
11.
Further subclauses of
clause 3 of the agreement specify, among other things, what the
obligations of the to be appointed trustees
would be in administering
the R3.5 million trust fund.
12.
It appears that the F.es’
original intention regarding who the trustees of the trust other than
Ms F. would be, was not implemented.
The trust was eventually
established in terms of a separate deed of trust (“the trust
deed”) appointing Ms F. and the
third defendant as trustees.
A copy of the trust deed is annexed to the particulars of claim.
Mr F. was in terms thereof
the founder of the trust, which related to
an initial trust fund of R500.00 that he would settle on the
trustees.
13.
Mr
and Ms F.’ signatures to the trust deed are dated 5 November
2014, but that of the third defendant’s representative
5
December 2014. The trustees’ status and obligations as
trustees of the trust would have arisen at the time that Mr
F.
settled the initial trust fund on the trustees. No averments in
this regard are made in terms of the particulars of claim,
but it was
accepted by all in argument that this occurred after the settlement
agreement had been concluded.
[5]
14.
The
particulars of claim allege that Mr F., pursuant to clause 3.1 of the
settlement agreement, made payment to the trustees of
the
R3,5 million
[6]
and then go
on to state as follows:
“
12.
In concluding the agreement as aforesaid, the First Defendant
misrepresented to the Plaintiff that she was willing and/or able
to
implement the agreement in respect of the material terms as quoted
above.
13.
In truth and in fact, at the time when the First Defendant made such
misrepresentations to the Plaintiff as aforesaid, the First
Defendant
well knew that she had no intention of complying with the material
terms of the agreement and in fact her sole intention
was to
appropriate the amount of USD 587 573,53 and to procure the
appropriation by the Trust of the amount of R3 500 000,00
in the knowledge that she would, after the appropriation of the
aforesaid amounts refuse to comply with any of the obligations
in
terms of clause 2 of the agreement; alternatively, that she would
repudiate the agreement without having complied with her obligations
in terms of clause 2 of the agreement.
14.
The Plaintiff was induced by such misrepresentations to enter into
the agreement and to make payment of the amounts foreshadowed
in the
agreement to the First, Second and Third Defendants, in their
aforesaid capacities, whereas had he known the true facts,
he would
not have concluded the agreement at all, nor would he have made the
payments as aforesaid.
15.
The First Defendant, in making the aforesaid misrepresentations, was
actuated by the intention to defraud the Plaintiff by inducing
him to
enter into the agreement and to make the payments as referred to in
paragraphs 10.1 and 10.2 above.
16.
The Plaintiff was in fact induced by the aforesaid misrepresentations
to enter into the agreement and to make the payments as
referred to
in paragraphs 10.1 and 10.2 above.
17.
Absent the misrepresentations, the Plaintiff would not have entered
into the agreement, and would not have made the payments
as
aforesaid.
18.
As a result of the agreement having been induced by fraud, such
agreement is voidable at the instance of the Plaintiff, and
the
Plaintiff hereby elects to withdraw from the agreement on account of
such agreement having been induced by fraud;
alternatively
,
that the Plaintiff hereby cancels the agreement.
19.
In the premises, the First Defendant is liable to repay the Plaintiff
in the amount of USD 587 573,53.
20.
The Second and Third Defendants in their capacities as trustees of
the Trust are liable to repay the amount of R3 500 000,00
to the Plaintiff;
alternatively
,
as a result of the First Defendant’s misrepresentation as
aforesaid, the Plaintiff suffered damages in the amount of
R3 500 000,00,
being the amount which the Plaintiff paid to
the Second and Third Defendants in their capacities as trustees of
the Trust and which
amount, but for the First Defendant’s
misrepresentation, the Plaintiff would not have paid.
"
15.
Ms F.’ exception is
to the effect that:
“
2.
The basis upon which the Plaintiff claims repayment from the Trust of
the amount of R3 500 000,00 is:
2.1
a written agreement concluded between the Plaintiff and the First
Defendant, a copy of which is annexure ‘
DF1
’ to
the Plaintiff’s particulars of claim (‘the agreement’);
2.2
the Plaintiff having made payment to the Trust in the amount of
R3 500 000,00 pursuant to the conclusion of the agreement;
2.3
the agreement allegedly being voidable at the instance of the
Plaintiff consequent upon an alleged fraudulent misrepresentation
on
the part of the First Defendant prior to the conclusion of the
agreement which allegedly induced the Plaintiff to conclude the
agreement;
2.4
the plaintiff electing to withdraw from the agreement alternatively
cancelling the agreement consequent upon the agreement being
voidable
as alleged by the Plaintiff; and
2.5
the Trust being obliged, in the circumstances referred to in
paragraphs 2.1 to 2.4 above, to repay to the Plaintiff the amount
of
R3 500 000,00.
3.
The Trust is not a party to the agreement. This is apparent
ex
facie
the agreement,
and the Plaintiff does not plead as much.
4.
By virtue of the Trust not being a party to the agreement, and
notwithstanding that the Plaintiff made payment to the Trust of
the
amount of R3 500 000,00 pursuant to the agreement,
ex
facie
the Plaintiff’s
particulars of claim the cancellation by the Plaintiff of the
agreement does not give rise to an obligation
on the part of the
Trust to repay to the Plaintiff the amount of R3 500 000,00.
5.
In the premises:
5.1
The Plaintiff’s particulars of claim lack averments necessary
to sustain a cause of action against the Trust.
5.2
The Plaintiff’s particulars of claim are excipiable in respect
of the Trust.
”
16.
Mr Hollander’s
argument that the particulars of claim are excipiable in relation to
the claim against the trustees was, simply,
that a claim for
restitution of the R3.5 million cannot lie against the trustee
because the trust had not yet been
established at the time when the
F.es concluded the settlement agreement, the trustees were not party
to the agreement, nor to
the misrepresentations that, allegedly,
occurred when it was concluded.
17.
Mr
Vermeulen’s argument was that, because Ms F. was always going
to be a trustee of the trust, the material misrepresentations
that Ms
F. allegedly committed that induced Mr F., among others, to agree to
pay the R3.5 million to the prospective trustees
of the trust,
have to be attributed to the trustees. She was, accordingly,
not an independent third party, as suggested by
Mr Hollander.
He also argued that clauses 3.1 and 3.2 of the settlement agreement
constituted a
stipulatio
alter
[7]
.
He argued that the trustees, on taking office and on acceptance
of the benefit bestowed on them in terms of the
stipulatio
alteri
,
acceded to the settlement agreement and that it was, accordingly, not
correct that they were not party thereto.
18.
I
suggested to Mr Vermeulen that if the relevant clauses of the
settlement agreement were a
stipulation
alteri
,
it might well not, in law, be necessary that Ms F.’s alleged
misrepresentations be attributed to the trustees to entitle
Mr F. to
resile from the settlement agreement and to reclaim restitution from
the trustees. Mr Vermeulen’s response
was that the
principle that a party to a contract cannot claim rescission on the
basis of a misrepresentation emanating from a
third party, as
affirmed in
Karabus
Motors (1959) Ltd v Van Eck
[8]
,
was an insurmountable obstacle to Mr F.’s relying merely on Ms
F.’s alleged misrepresentations at the time that the
settlement
agreement was concluded, as a basis for reclaiming the R3.5 million
later paid to the trustees, on their taking office.
He,
accordingly, squarely based his submissions that the exception has to
be refused on his argument that Ms F.’s alleged
misrepresentations have to be attributed to the trustees.
19.
The problem with Mr
Vermeulen’s argument is that the particulars of claim are not
framed to accommodate potential attributing
of Ms F.’s alleged
misrepresentations to the trustees. If paragraph 13 of the
particulars of claim had been worded
so as also to cover Ms F.’s
intentions at the time that the trustees accepted the benefit
bestowed on them, the particulars
of claim would have disclosed a
cause of action that would have obviated the cause of complaint set
out in Ms F.’s exception.
However, the particulars of
claim confine Mr F.’s alleged entitlement to rescind the
settlement agreement as arising from
Ms F.’s alleged
misrepresentations at the time that the settlement agreement was
concluded.
20.
The exception can,
nevertheless, not be upheld.
21.
Mr Vermeulen’s
submission that clauses 3.1 and 3.2 of the settlement agreement
constitute a
stipulatio
alteri
for the
benefit of the prospective trustees of the trust (as beneficiaries,
but as trustees for the purposes and subject to the
obligations set
out in the further subclauses of clause 3) is, undoubtedly, correct.
Mr F. performed in terms of the
stipulatio
alteri
when he paid
the R3.5 million to the trustees in January 2015.
22.
In
McCullough
v Fernwood Estate Ltd
[9]
Innes CJ described a
stipulatio
alteri
in the following terms:
“
An
agreement for the benefit of a third person is often referred to in
the books as a stipulation. This must not be taken,
however, in
the narrow meaning of the Civil law, for in that sense the
stipulatio
did
not exist in Holland. It is merely a convenient expression to
denote that the object of the agreement is to secure some
advantage
for the third person. It may happen that the benefit carries
with it a corresponding obligation. And in such
a case it
follows that the two would go together. The third person could
not take advantage of one term of the contract and
reject the other.
The acceptance of the benefit would involve the undertaking of the
consequent obligation. The third person
having once notified
his acceptance and thus established a
vinculum
juris
between
himself and the promisor would be liable to be sued, as well as
entitled to sue. If, for instance, the stipulated
benefit took
the form of an option to purchase specified property at a certain
price, the acceptance of the offer would involve
a liability to pay
the price which could be legally enforced. Otherwise the third
person would be in the position of being
able to sue upon a contract
involving reciprocal obligations without being liable to an action if
he refused to discharge his part
of them.
”
[10]
23.
The
late Professor JC de Wet, in the introduction to his (second)
doctoral thesis
Die
Ontwikkeling van die Ooreenkoms ten Behoewe van
‘
n
Derde
[11]
described
the
stipulatio
alteri
in
the following terms:
“’
n
Ooreenkoms ten behoewe van ’n derde is ’n ooreenkoms
tussen twee persone (A. en B., waardeur die een (B., die promittens)
hom teenoor die ander (A., die stipulans) en ‘n derde person
(D.) wil verbind om aan die derde ’n reg te laat toekom.
Slegs A., die stipulans en B., die promittens, is handelende partye.
D., die derde, neem gladnie deel aan die onderhandeling
nie.
”
[12]
24.
In
Crookes
N.O. & another v Watson & others
[13]
Centlivres CJ
[14]
stated that:
“
Dr
de Wet in his learned thesis on ‘
Die
Ontwikkeling van die Ooreenkoms ten Behoewe van ‘n Derde
’
discusses the authorities at length and on page 141 says that there
were three theories which I gather to be as follows:
(1)
As soon as the agreement is executed between the settlor and the
trustees (for convenience sake I am using the terms I have
used in
this judgment) the beneficiary obtains an irrevocable right.
(2)
The beneficiary obtains no right on the mere execution of the
agreement between the settlor and the trustees. The agreement
constitutes an offer of a donation by the settlor to the beneficiary
through acceptance of which the beneficiary obtains a
jus
perfectum
against the
trustees.
(3)
The beneficiary does obtain a right on the mere execution of the
agreement between the settlor and the trustees, but his right
is
dependent on the will of the settlor who can before the beneficiary
accepts discharge the trustees of the obligation to hand
over the
subject matter of the agreement to the beneficiary.
Dr
de Wet favours the third theory which he says is that of the majority
of the commentators. The learned writer criticises
the
decisions of this Court in
Van
der Plank N.O. v Otto
1912 AD 353
, and
McCullough
v Fernwood Estate Ltd
1920 AD 204
, in which the second theory was adopted.
”
[15]
25.
The
learned Chief Justice, with reference to the judgment in
Commissioner
of Inland Revenue v Estate Crewe & Another
[16]
,
concluded that
“
As
Dr de Wet has pointed out in his valuable treatise there were three
theories, the second of which was deliberately chosen by
this court
and it seems to me that it is now too late to ask this court to
depart from its previous decisions.
”
[17]
26.
The
more recent judgment in
Pieterse
v Shrosbree N.O. & others; Shrosbree N.O. v Love &
others
[18]
,
as is often the case when a
stipulatio
alteri
is at issue, related to life insurance policies. In the
unanimous judgment of the Supreme Court of Appeal, delivered by
Ponnan AJA, it is stated that:
“
[8]
A contract of life insurance comes into existence when a person (the
proposer) proposes for the insurance which is accepted
by the
insurer. The person on whose death the insurance is payable is
the life insured. The person who is entitled
to enforce the
benefits payable under the policy is the owner. The proposer,
the life insured and the owner may be the same
person or two or three
different persons. A proposer may effect the insurance either
in his/her own favour or in favour of
someone else. If the
proposer effects the insurance in favour of someone else, the
contract of insurance is a contract for
the benefit of a third party
and may be accepted by such third party who thereupon becomes the
owner. Policies commonly entitle
the owner to nominate a
beneficiary on condition that the nomination will confer no rights on
the nominated beneficiary during
the owner's lifetime. The
legal nature of such a nomination is a
stipulatio
alteri
(a
contract for the benefit of a third person).
[9]
In such a case, the policy holder (the
stipulans
)
contracts with the insurer (the
promittens
)
that an agreed offer would be made by the insurer to a third party
(the beneficiary) with the intention that, on acceptance of
the offer
by that beneficiary, a contract will be established between the
beneficiary and the insurer. What is required is
an intention
on the part of the original contracting parties that the benefit,
upon acceptance by the beneficiary, would confer
rights that are
enforceable at the instance of the beneficiary against the insurer,
for that intention is at the '
very
heart of the stipulatio alteri
'
(Ellison Kahn '
Extension
Clauses in Insurance Contracts
'
(1952) 69 SALJ 53
at 56). Thus the beneficiary, by adopting the
benefit, becomes a party to the contract (see
Total
South Africa (Pty) Ltd v Bekker NO
[1991] ZASCA 183
;
1992 (1) SA 617
(A) at 625D-G).
”
[19]
27.
The authority for the
statement that “
the
beneficiary, by adopting the benefit, becomes a party to the
contract
” is,
ultimately, the judgment of Schreiner JA in
Crookes
v Watson
to the
effect that:
“…
in
the legal sense, which alone is relevant, what is not very
appropriately styled a contract for the benefit of a third person
is
not simply a contract designed to benefit a third person; it is a
contract between two persons that is designed to enable a
third
person to come in as a party to a contract with one of the other
two
”
[20]
,
and
“
The
typical contract for the benefit of a third person is one where A and
B make a contract in order that C may be enabled, by notifying
A, to
become a party to a contract between himself and A. What
contractual rights exist between A and B pending acceptance
by C and
how far after such acceptance it is still possible for contractual
relations between A and B to persist are matters on
which differences
of opinion are possible; but broadly speaking the idea of such
transactions is that B drops out when C accepts
and thenceforward it
is A and C who are bound to each other.
”
[21]
28.
Albeit
that the judgment of Schreiner JA was a judgment dissenting from the
majority of the court
[22]
,
Schreiner JA’s above pronouncements are regarded as
authoritative. They have, however, been interpreted to connote
that the beneficiary comes in as a party to the original contract
between the stipulator and the promisor.
[23]
It is also important to note that Schreiner JA’s statement that
“
B
drops out when C accepts and thenceforward it is A and C who are
bound to each other
”
is not expressed as inherent to the
stipulatio
alteri
as such, but as expressing in general terms what a
stipulatio
alteri
seeks to achieve.
29.
The
authors Van Huyssteen, Lubbe and Reinecke in Chapter 9 of the
current, 5
th
edition, of
Contract:
General Principles
,
under the heading “
The
Construction of a Third Party Contract
”,
state as follows regarding the jurisprudential underpinnings of the
stipulatio
alteri
:
[24]
“
9.92
In order
to fully understand the nature and consequences of a contract in
favour of a beneficiary, there must be clarity about its
structure.
The crucial issue is whether or not the beneficiary acquires an
immediate, if conditional, right upon the conclusion
of the third
party contract or merely an expectation (
spes
).
9.93
There are
three main streams of thought on the construction of a contract in
favour of a beneficiary. According to a fairly
generally held
view, the promisor is under a duty towards the stipulator to make and
uphold an offer to the beneficiary. The
content of the offer
apparently is an undertaking by the promisor to render the benefit,
as described in the original contract,
to the beneficiary.
9.94
Upon
acceptance of this offer a second contract comes into being, namely a
contract between the promisor and the beneficiary. This
second
contract (not the original contract) is the source of the
beneficiary’s rights and duties. It is said that the
stipulator drops out of the picture as soon as the beneficiary
accepts. This second contract appears to be nothing but an
ordinary contract concluded in the ordinary way by offer and
acceptance which incidentally flows from a so-called contract in
favour of a third party.
9.95
Should
this construction be accepted, the new contract between the promisor
and the beneficiary would have to be treated like any
other contract,
for example where misrepresentation occurred during the conclusion of
the second contract. However, there
is no guidance from the
case law as to the effect of such a misrepresentation. In terms
of this construction not only rights
but also duties may be created
in this way for a third party. A disadvantage of the
construction is that, before acceptance,
the beneficiary has nothing
more than an offer at her disposal and this cannot serve as a basis
for any interim protection.
9.96
A second
opinion is that a contract in favour of a beneficiary is a contract
in terms of which the stipulator and the promisor intend
to create a
right for the beneficiary as an outsider by means of the very
contract between the two of them. It is suggested
that,
although the courts have often used a variety of expressions to
explain what exactly the beneficiary must accept, the most
satisfactory interpretation would be that the beneficiary must accept
not an offer but the benefit, that is to say the right that
the
original parties intended to create for her.
9.97
In terms
of this approach, acceptance does not mean acceptance of an ordinary
offer, but it is a unilateral juristic act that serves
to confirm and
stabilise the right that the beneficiary is intended to derive from
the contract between the stipulator and the
promisor. At the
same time, acceptance provides justification for conferring a right
on the beneficiary under the original
contract between the stipulator
and the promisor, in spite of the fact that the beneficiary was not a
party to that contract and
possibly did not even know of it.
9.98
According
to this view there is only one contract, but this single contract
gives birth to two obligations. The first obligation
exists
between the stipulator and the promisor and the second exists between
the promisor and the beneficiary. In view of
this, there is no
reason why the stipulator should disappear from the scene after
acceptance by the beneficiary (she, after all,
retains an interest in
the execution of the contract), and there is also no reason why the
original contract must undergo a metamorphosis
into a tripartite
contract.
9.99
In terms
of the one contract approach, acceptance by the beneficiary can be
seen as a potestative suspensive condition that qualifies
the
intended obligation between the promisor and the third party. In
the case of a revocable benefit two additional conditions
apply,
namely that the stipulator does not revoke the benefit before a valid
acceptance is made and that the beneficiary survives
the stipulator.
The beneficiary derives an immediate right from this
conditional obligation but it is probably not amenable
to cession.
This conditional right becomes unconditional when the
beneficiary accepts or confirms it by a unilateral declaration
of
intent.
9.100
The
existence of the conditional right explains why there is no real need
for a formal offer to be made by the promisor to the beneficiary
and
also why neither the stipulator nor the promisor, acting alone, can
prevent the beneficiary from accepting an irrevocable benefit.
It
also explains why the executor of a deceased beneficiary is entitled
to accept the benefit after her death (in case of
an irrevocable
nomination) and why the beneficiary may confirm her right despite the
death of the stipulator or the promisor and
despite the insolvency of
the stipulator.
9.101
Assuming
that there is only one contract, rescission of the contract due to
misrepresentation, or any other legal ground, will extinguish
all
rights created by it, including the right of the beneficiary. The
same applies where the founding contract is cancelled
due to breach
of contract by the stipulator. On the other hand, any
misrepresentation by the beneficiary during acceptance
is of no
significance. These matters have, however, not been put to the
test before the courts as yet.
9.102
The
important advantage of the one contract approach is that it presents
a basis for interim protection of the beneficiary because
of the
acknowledgment that she has an immediate, if conditional, right.
9.103
Could the
beneficiary also be burdened by duties in terms of the one contract
approach? Since the beneficiary is required
to accept the
benefit if she wants to enforce it, she must decide whether to accept
or reject the proposed obligation in its entirety,
including the
rights as well as the duties. This would be in conflict with
the common law principle that a contract in favour
of a third party
can create rights for the beneficiary but no duties.
9.104
The
approach which enjoys the most support in the case law also involves
two contracts, but it differs from the two contracts approach
sketched above. It can be regarded as a hybrid approach in that
it combines the first two approaches. Thus in
Pieterse
v Shrosbree NO and Others; Shrosbree NO v Love and others
,
involving a beneficiary nomination in a life policy, the Supreme
Court of Appeal stated that the stipulator requires the promisor
in
terms of the contract in favour of a third party to make an agreed
offer to the beneficiary, so that a contract can be concluded
between
the promisor and the beneficiary. The court spoke of an
‘agreed’ offer but did not throw any light on
its
contents except to declare that, upon acceptance of this ‘agreed
offer’, the beneficiary derives a right from the
original
contract between the stipulator and the promisor. The
beneficiary must therefore look to the promisor to render
the benefit
to her. Moreover, the court confirms that, upon acceptance, the
erstwhile third party becomes a party to the
original contract.
9.105
It would
seem that the ‘agreed offer’ denotes an offer to invite
the beneficiary to become a party to the original contract
between
the stipulator and the promisor. After acceptance, the
beneficiary would presumably be in the same position as the
one in
which she would have been if, from the start, she had accepted the
benefit under the contract. She would also incur
any
corresponding duties. If this interpretation of the court’s
view is correct, the original contract has changed
colours by
becoming either a tripartite agreement or else an amended contract
between the promisor and the beneficiary (if the
stipulator in fact
disappears, as we are given to understand in certain cases). The
function of the second contract would
then be to effect such a
change.
9.106
The court
in
Pieterse
did not express itself on whether or not, prior to acceptance of the
benefit, a beneficiary acquires any right, whether contingent
or
otherwise. However, on a previous occasion the Supreme Court of
Appeal did state that before acceptance of the benefit
a beneficiary
in terms of a life policy has nothing more than the power to accept
an offer addressed to her. Consequently,
where the beneficiary
was insolvent and refused to accept the benefit on offer, her trustee
could not lay claim to the policy by
accepting the benefit.
9.107
In
a subsequent case,
Unitrans
Freight (Pty) Ltd v Santam Ltd
,
it was categorically emphasised that prior to acceptance a third
party has no right whatsoever, whether contingent or otherwise.
According to the court, the beneficiary has nothing more than a
mere expectation (spes), which could, for instance, not survive
her
death. Why it is necessary to deny a beneficiary a conditional
right at all costs is not clear – is it perhaps
a leftover of
the English doctrine of privity of contract? Unfortunately,
both decisions are not of an incisive nature but
rather superficial
in that they did not consider all the ramifications, such as whether
such a point of view leaves room for any
interim protection of the
beneficiary. Whether these decisions will be the final word on
the matter remains to be seen.
”
[25]
30.
The
authors favour the second “
stream
of thought
”,
which, essentially, represents the viewpoint of Professor De
Wet
[26]
. They conclude
that:
“
9.108
It is not
perfectly certain which construction of a contract in favour of a
beneficiary will eventually be preferred by the courts.
There
is support for each of the above approaches, for some more than for
others, but no absolute
finality
has been achieved. In the light of the protection to which a
third party is entitled even before acceptance and which
he or she up
to now enjoyed to some degree, preference is given to the view that
the beneficiary derives an immediate, though conditional,
right from
the original contract between the stipulator and the promisor and
that this right is merely confirmed and
stabilised
by acceptance. No second contract is involved. The third
party does not join the original contracting parties
and,
consequently, the original contract is not changed into a tripartite
agreement. This simple construction is not in conflict
with any basic
principle. Moreover, it makes it possible to convincingly label
the contract between the stipulator and the
promisor as a contract in
favour of an outsider or third party.
”
31.
The statement in the
excerpt quoted above from the judgment in
Pieterse
v Shrosbree N.O. & Others
that the agreement between the stipulator and the promisor is to the
effect that the promisor “
would
”
make an agreed offer to the beneficiary (i.e. will make the offer at
some future time, after the agreement between the stipulator
and the
promisor had been concluded) is not part of the
ratio
decidendi
of the
judgment and is not supported by any authority that I could find.
It, moreover, seems to me to be contrary to what
was stated in the
excerpts from
McCullough
v Fernwood Estate Ltd
and
Crookes &
another v Watson & others
,
quoted above, that emphasise that the benefit that is (or will, at an
appointed time, become) open for the beneficiary to accept,
arises
immediately when the agreement between the stipulator and the
promisor is concluded. Also, if the beneficiary, “
by
adopting the benefit becomes a party to the contract
“
between the stipulator and the
promisor, it can hardly arise from an offer that the promisor, alone,
made to the beneficiary.
32.
Applying
traditional offer and acceptance methodology to the
stipulatio
alteri
confuses matters. Offer/acceptance methodology is a lawyer’s
tool that assists to determine whether agreement has been
achieved
between parties and, if so, when and where it occurred.
Although a benefit bestowed in terms of a
stipulatio
alteri
is, speaking generally, a type of offer that is (or will become) open
for the beneficiary to accept, it does not readily fit into
traditional offer/acceptance methodology, which proceeds from the
premise that, to constitute an offer, the intention of the one
party
to contract with the other party on certain terms has to be
communicated to the other party.
[27]
That does not apply to a benefit bestowed on a third party in terms
of a
stipulatio
alteri
.
[28]
33.
33.1
The
essence of a
stipulatio
alteri
is an
agreement between the stipulator and the promisor in terms of which
the promisor undertakes to deliver something to the beneficiary
(or
to do or refrain from doing something relating to the beneficiary),
if and when the beneficiary accepts the benefit arising
from their
agreement.
33.2
The
“benefit” may, in given circumstances, have other agreed
strings attached to it that are intended to burden the
beneficiary,
if he/she were to accept it. It may also in terms of the
agreement between the stipulator and the promisor not
be susceptible
of being accepted immediately, but only at some future time.
33.3
The
benefit conferred in this manner is not an offer (in the strict
sense), but the product of the agreement between the stipulator
and
the promisor. Accordingly, the existence and validity of the
benefit bestowed are dependent upon the existence and validity
of the
agreement between the stipulator and the promisor that sought to
create it.
[29]
33.4
It
is then for the beneficiary (when he/she learns, by whatever means,
that it the benefit available for him/her to accept) to decide
whether to accept or refuse the benefit.
33.5
This,
potentially, brings the traditional offer/acceptance methodology into
play, but only regarding the question whether the beneficiary’s
right to claim performance in terms of the benefit has been
established.
[30]
Until
that occurs the stipulator and promisor are able, by mutual
agreement, to revoke the benefit
[31]
.
33.6
But
the benefit that is available for the beneficiary to accept is not
made available by the promisor alone. It is a benefit
of fixed
content agreed to by the stipulator and the promisor that is in terms
of the contract that they have made, available to
the beneficiary to
accept.
33.7
If
the beneficiary accepts the benefit he/she accepts it as is, i.e.
subject to such obligations that the stipulator and the promisor
sought to impose on the beneficiary and, subject to any deficiencies
that might, potentially, attach to the agreement that brought
it into
existence. In that sense the beneficiary, by accepting the
benefit, accedes to the original contract between the
stipulator and
the promisor, but the extent to which he/she becomes party to
obligations owed by or to the original parties (or,
indeed,
potentially to further third parties, as is the case here) depends on
the content of the benefit “package”
that he/she has
accepted and, thus, agreed to.
33.8
In
the simplest form of a
stipulatio
alteri
[32]
,
the beneficiary’s acceptance of the benefit entitles him/her to
claim performance from the promisor of whatever the promisor
undertook (towards the stipulator) to perform towards the
beneficiary. The beneficiary’s acceptance does not carry
with it any necessary corolary that the stipulator’s status as
a party to the overall contractual arrangement in terms of
the
stipulatio
alteri
falls away.
34.
My
conclusion is, accordingly, that if a stipulator by material
misrepresentation induces a promisor to agree to a
stipulatio
alteri
conferring a benefit on a third party beneficiary, and the promisor
elects to rescind the agreement on the basis of the stipulator’s
misrepresentation, the
stipulatio
alteri
is
rescinded and with it the benefit conferred on the third party
beneficiary.
[33]
If the
third party beneficiary has already accepted the benefit conferred on
him/her, and performance by the promisor in
terms thereof has already
taken place, the rescission gives rise to an obligation on the part
of the third party beneficiary to
restore, insofar as it is possible
to do so, what he/she received in terms of the benefit accepted and
executed. The obligation
of the promisor to perform in terms of
the benefit conferred by the
stipulatio
alteri
and,
in so doing, to deliver or to do or not to do (whatever the nature
and content of the benefit conferred might have been) cannot
be
viewed independently of the agreement between the stipulator and the
promisor in terms of which the benefit arose.
35.
Karabus Motors
is, of course, good authority,
but only as far as it goes. Insofar as Watermeyer J stated
that:
“
(i)
t
is a general rule of our law that if the fraud which induces a
contract does not proceed from one of the parties, but from an
independent third person, it will have no effect upon the contract.
The fraud must be the fraud of one of the parties or
of a third party
acting in collusion with, or as the agent of, one of the parties
”,
he
addressed a contractual relationship between two parties in the usual
course and not a
stipulatio alteri
that is voidable at the
instance of a party thereto on the basis of the misrepresentation of
his/her counter-party.
36.
In these premises, Ms
F.’s exception, fails.
37.
Ms F. defends the action
in her personal capacity, as well as in her capacity as trustee of
the trust. As I have referred
to already, there is no notice of
intention to defend from the third defendant and no indication that
the third defendant is actively
participating in the proceedings, or
intends to do so. No argument was addressed to me regarding
whether a costs order can
or should be given against Ms F. in her
capacity as trustee of the trust, or, indeed, regarding whether she,
as only one of the
two trustees of the trust, can solely and without
intervention or consent of the third defendant defend the action
insofar as it
seeks relief against the trustees jointly.
38.
The
trust deed that forms part of the papers makes it clear that the
trustees have to act jointly and, if they are unable to agree
to do
so, the resultant dispute, disagreement or deadlock has to be
referred to a mediator, whose decision
[34]
would then be final and binding on the trustees.
39.
In these circumstances, I
cannot grant an order of costs against Ms F. in her capacity as
second defendant, i.e. as trustee of the
trust. I am, in any
event, of the view that a costs order, that will ultimately operate
against the trust fund, will, in
all circumstances, be inappropriate.
WHEREFORE
I order that:
1.
The exception against the
plaintiff’s particulars of claim is dismissed.
2.
The first defendant is to
pay the plaintiff’s costs of the exception.
3.
The taxing master shall
allow the plaintiff’s costs of employing two counsel.
_______________________
F.
G. BARRIE
Acting
Judge of the High Court
APPEARANCES:
COUNSEL
FOR THE EXCIPIENT /
FIRST
AND SECOND DEFENDANT
:
L HOLLANDER
ATTORNEYS
FOR EXCIPIENT /
FIRST
AND SECOND DEFENDANT
:
DARRYL FURMAN & ASSOCIATES
COUNSEL
FOR THE RESPONDENT /
PLAINTIFF:
W J VERMEULEN SC
M
MASCHWITZ
ATTORNEY
FOR RESPONDENT / PLAINTIFF:
PAUL FRIEDMAN &
ASSOCIATES INC.
DATE
OF HEARING:
24
OCTOBER 2016.
DATE
OF JUDGMENT:
24
OCTOBER 2016.
[1]
That might be a mistake. The copy of the settlement agreement
annexed to the particulars of claim reflects that Mr F. signed
it on
1 December 2014.
[2]
My assumption is that ZZZZ is also a child, but is now a major.
However, save that the settlement agreement refers to Mr
and Ms F.
as having “
parental
responsibilities
”
regarding ZZZZ’s tertiary education, my assumption is
unconfirmed and might be wrong.
[3]
In clause 2
thereof.
[4]
Respectively, the responsibilities and rights to care for a child,
to maintain contact with a child, and to act as guardian of
a child.
[5]
Which has the concomitant that Ms F. could not have acted as
representative of the trustees when she concluded the settlement
agreement.
[6]
On 23 January 2015, as referred to already.
[7]
The Latin description is used here in preference to the term
“
contract/agreement
for the benefit of a third party
”
(Afrikaans: “
Kontrak/ooreenkoms
ten behoewe van ‘n derde party
”),
because it is concise and also conveys (as does the Afrikaans
“
beding
ten behoewe van ‘n derde
”,
translating to “
contractual
provision for the benefit of a third party
”)
that, in given circumstances, the relevant contractual provision(s)
may be part only of an agreement of wider import.
[8]
Karabus Motors (1959) Ltd v
Van Eck
1962 (1) SA 451
(C).
[9]
McCullough v Fernwood
Estate Ltd
1920 AD 204.
[10]
McCullough v Fernwood
Estate Ltd
1920 AD 204
, at
205-206.
[11]
JC de Wet
Die
Ontwikkeling van die Ooreenkoms ten Behoewe van
‘
n Derde
(thesis, Leiden) (1940) published by AW Sijthoff’s Uitgevers
Maatschappij N.V.
[12]
“
An
agreement for the benefit of a third party is an agreement between
two persons (A and B), whereby the one (B, the promittens)
seeks to
bind himself towards the other (A, the stipulans) and a third person
(D), to bestow a right on the third party.
Only A, the
stipulans, and B, the promittens, are participating parties; D, the
third, does not participate in the conclusion
(negotiation) of the
contract.
”;
See also
De Wet &
Van Wyk
Kontraktereg en
Handelsreg
(5
th
ed) Vol 1 pp 103 and 108.
[13]
Crookes N.O. & another
v Watson & others
1956
(1) SA 277 (A).
[14]
Whose conclusions were concurred in by Van den Heever JA and Steyn
JA.
[15]
Crookes N.O. & another
v Watson & others
1956
(1) SA 277
(A) at 286A-D
[16]
Commissioner for Inland
Revenue v Estate Crewe & another
1943 AD 756.
[17]
Crookes N.O. & another
v Watson & others
1956
(1) SA 277
(A) at 287C-D.
[18]
Pieterse v Shrosbree N.O. &
others
2005 (1) SA 309
(SCA).
[19]
Pieterse v Shrosbree N.O. &
others
2005 (1) SA 309
(SCA) at par [8] and [9].
[20]
Crookes N.O. & Another
v Watson & others
1956
(1) SA 277
(A) at 291A-C.
[21]
Crookes N.O. & Another
v Watson & others
1956
(1) SA 277
(A) at 291E-G.
[22]
Concurred in by Fagan JA, who gave a separate judgment.
[23]
See
Total
South Africa (Pty) Ltd v Bekker NO
[1991] ZASCA 183
;
1992 (1) SA
617
(A) at 625D-G
;
Joel Melamed v Hurwitz v
Cleveland Estates (Pty) Ltd
[1984] ZASCA 4
;
1984 (3) SA 155
A at 172D-E.
[24]
L F van Huyssteen, G F Lubbe, M F B Reinecke
Contract:
General Principles
(5
th
edition) pp 262-266 (footnotes omitted).
[25]
Unitrans
Freight (Pty) Ltd v Santam Ltd
is reported
at 2004 (6) SA 21 (SCA).
[26]
Who, in terms of his thesis, came to the conclusion that the common
law authorities provided no clarity and were quite inconclusive
on
the subject. De Wet,
op.
cit.
at pp 140-146.
[27]
Van Huyssteen, Lubbe & Reinecke
Contract:
General Principles
(5
th
edition) pp 263, footnote 172.
[28]
Mutual Life Insurance Co of
New York v Hotz
1911 AD
556
at 567 – 568.
[29]
Matters of severability left aside.
[30]
See Farlam & Hathaway,
Contract
– Cases, Materials and Commentary
(3
rd
edition) by GF Lubbe and CM Murray (1988) note 3 at p 408.
[31]
Unless they
had agreed that it would be irrevocable. Acceptance of
potential irrevocability of a
stipulatio
alteri
is, of course, destructive of the notion that, pending acceptance of
the benefit, the beneficiary has nothing more than a so-called
spes
,
i.e. a hope or expectation to obtain an enforceable right if and
when he/she accepts the benefit (as opposed to a conditional,
and
sometimes tenuous, right to accept the benefit, enabling the
beneficiary, on exercising that right, to claim performance
of the
promised subject matter of the benefit). If the stipulator and
promisor’s agreement to confer the benefit
on the beneficiary
is, before acceptance of the benefit by the beneficiary, simply a
matter operating contractually between the
stipulator and promisor,
not conferring any legal right on the beneficiary, there would be no
reason, in principle, why the stipulator
and the promisor would not
be able, by their later agreement before the beneficiary accepts the
benefit, to undo an “irrevocable”
stipulatio
alteri
.
[32]
An
undertaking by the promisor gratuitously to perform something that
would be to the beneficiary’s advantage.
[33]
Which conclusion is, to my mind, not at all incompatible with the
notion that the beneficiary,“
by
adopting the benefit becomes a party to the contract
“.
[34]
Save regarding matters pertaining to the remuneration and/or
monetary consideration (payable to the trustees).