Cape Concentrate (Pty) Ltd (In Liqiudation) and Others v Pagdens Incorporated and Others (2338/2019) [2020] ZAECPEHC 25; [2020] 4 All SA 61 (ECP) (28 July 2020)

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[2020] ZAECPEHC 25
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Cape Concentrate (Pty) Ltd (In Liqiudation) and Others v Pagdens Incorporated and Others (2338/2019) [2020] ZAECPEHC 25; [2020] 4 All SA 61 (ECP) (28 July 2020)

REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE LOCAL
DIVISION – PORT ELIZABETH
Case
No: 2338/2019
In
the matter between:
CAPE
CONCENTRATE (PTY) LTD (IN
LIQIUDATION)
First Plaintiff
CLOETE
MURRAY
N.O.
Second
Plaintiff
THOMAS
CHRISTOPHER VAN ZYL
N.O.
Third Plaintiff
RAPHAEL
GRANT BRINK
N.O.
Fourth
Plaintiff
CAROL-ANN
SCHROEDER
N.O.
Fifth Plaintiff
[IN THEIR CAPACITIES AS
DULY APPOINTED JOINT
LIQUDATORS
OF THE FIRST PLAINTIFF]
and
PAGDENS
INCORPORATED
First
Defendant
WILHELM
MALAN DE
KOCK
Second Defendant
ROBERT
HAMILTON
PARKER
Third
Defendant
BRETT
ANDREW
WEDDELL
Fourth Defendant
PATRIC
JOHN
DAVIS
Fifth
Defendant
JOHANNES
PAULUS LE ROUX EKSTEEN
Sixth
Defendant
NICOLE
KARSTEN
Seventh Defendant
JUDGMENT
MAKAULA
J:
A.
Introduction
:
[1]
This is an application in terms of Rule 23(1) of the Uniform Rules of
Court.
The application is premised on the summons issued by the
plaintiff (respondent in this matter) on 20 August 2019.  In it,
the plaintiffs’ claim payment in the sum of R23 000 000.00
(Twenty Three Million Rands) plus interest.  The defendants

(applicants herein) excepted to the summons on various grounds.
The defendants seek an order that the Plaintiffs Particulars
of Claim
be struck out and the plaintiffs be offered an opportunity to within
the prescribed period deliver amended Particulars
of Claim failing
which the claim be dismissed with costs.
B.
The Parties
:
[2]
The first plaintiff is described as a private company in liquidation
duly registered
and incorporated in terms of the Company Laws of the
Republic of South Africa.  The second to fifth plaintiff are
cited in
their official capacities as Insolvency Practitioners.
[3]
The first defendant is cited as a private company incorporated and
registered under
the Companies Act (Act 61 of 1973) as an
incorporated attorneys firm with the registration number
1989/001124/21 and with its registered
address at 18 Castle Hill,
Central, Port - Elizabeth, Eastern Cape.  The second to seventh
defendants are cited in their capacities
as attorneys and directors
of the first defendant.  They are sued jointly and severally
with the first defendant for all its
liabilities.
C.
The Particulars of Claim
:
[4]
In part, the Particulars of Claim read thus:
“
14
The first plaintiff was placed in final winding-up on 29 March 2016
by order of Court.
15
The second to fourth plaintiffs are the appointed joint liquidators
of the first
plaintiff.
16
During the period September 2014 to January 2015, the first plaintiff
paid to
the first defendant sums totalling R23, 000,000.00, which
were held by the first defendant in trust on behalf of the first
plaintiff.
17
The first defendant was liable to repay to the first plaintiff the
sum of R23,
000,000.00 on demand.
18
This action serves as demand for payment.
19
The defendants are accordingly liable to make payment to the
plaintiffs of the
sum of R23, 000,000.00 together with interest
thereon from 8 May 2015 to date of payment, a
tempora morae.
WHEREFORE
the plaintiffs claim from the defendants, jointly
and severally, the one paying the others to be absolved”.
D.
The Exceptions
:
[5]
The defendants raised various grounds of Exception claiming that the
Particulars of
Claim are vague and embarrassing and lacking in
averments necessary to sustain a claim against them.
[6]
The grounds of exception are well captured by the plaintiffs in their
Heads of Argument
as follows:
6.1
that the particulars of claim lack the averments necessary to sustain
a cause of action
against the second to seventh defendants;
6.2
that the particulars of claim are vague and embarrassing in that they
lack sufficient
particularity in respect of the number of payments,
the amount of each such payment, when each such payment was made and
by when
and to whom was it paid;
6.3
that the particulars of claim are vague and embarrassing
alternatively lack averments
to sustain the plaintiff’s claims,
in that no allegations are made relevant to an agreement in terms of
which the sum of
R23 million was held by the first defendant in trust
on behalf of the first plaintiff;
6.4
that the particulars of claim are vague and embarrassing
alternatively lack averments
to sustain the plaintiff’s claim
in that no allegations are made with regard to the agreement relied
upon creating an obligation
to repay the sum of R23 million and
particularly in respect of that agreement;
6.5
that the particulars of claim lack averments necessary to sustain the
plaintiffs’
claim in that the plaintiffs do not plead any
basis, arising from fact or law, creating an entitlement to
mora
interest and then from 8 May 2015.
E.
The First Ground of Exception
:
[7]
The first ground referred to in paragraph 6.1 is based on the
allegations that the
first defendant is a firm of Attorneys
registered as a private company incorporated and registered as such
under the Companies
Act, (Act 61 of 1973).  The second to
seventh defendant’s liability is premised on the allegation
that as the current
directors of the first defendant they are jointly
and severally liable with the first defendant for all its
liabilities.
The defendants aver that the plaintiffs fail to
allege any basis in law on which the second to seventh defendants can
be held jointly
and severally liable with the first defendant for all
of its liabilities.  The defendants contend that such
allegations disclose
no sound basis in law for such liability and
therefore the plaintiffs fail in this regard to disclose a cause of
action against
them.
[8]
Mr
Ford,
counsel
for the defendants,  submitted that the Particulars of Claim
lack the averments necessary to satisfy the requirements
of the
Attorneys Act 53 of 1979 (the Attorneys Act), as amended by the Legal
Practice Act 28 of 2014 (the LPA) which was the act
applicable at the
time of the issue of summons.  He submitted that the plaintiffs
failed to allege any basis for the liability
of the second to seventh
defendants for the debts of the first defendant which has been
described as a private company.  He
referred to the provisions
of section 23(1)(a) of the Attorneys Act, 53 of 1979 as amended by
the LPA, and sections 20 and 53 of
the Companies Act 61 of 1973 as
amended.  He argued that as at the time of the issue of the
summons, the first defendant was
not a private company but a personal
liability company.  The defendants submitted that the second to
seventh defendants could
not be held to be jointly and severally
liable for the debts of the first defendant.  The defendants
argued that liability
could only lie with those directors of the
first defendant who were as such at the time the debt and liabilities
arose.  Therefore,
the defendants averred that the Particulars
of Claim lack the necessary factual and legal averments that are
required to sustain
whether at the time the second to seventh
defendants were liable for the debts of the first defendant.
That is so because
at the time of the issue of the summons, the first
defendant was a personal liability company in terms of
section 34
of
the
Legal Practice Act read
together with Transitional Arrangements
enacted by
sections 2
and
section 4
of Schedule 5 of the
Companies
Act 71 of 2008
.  The transitional provisions talks to section
53(b) of the Companies Act of 1973.  Furthermore, the defendants
argued
that even if it where pleaded that first defendant is a
personal liability company, allegations would still have to be made
by
the plaintiffs that the liability or debt was contracted at a time
when the other defendants were directors of the first defendant.
[9]
In respect of the second ground of exception, the defendants argued
that paragraph
16 of the Particulars of Claim lacks particularity as
to the number of payments which were made that add up to the amount
claimed,
when, by whom and the period each payment was made.
Lack of particularity in that regard makes the allegation vague and
embarrassing
and prejudices the defendants.
[10]
In respect of the third exception, the defendants plead that monies
are not just paid in attorneys
trust account.  There should be
foundational reasons or an agreement as to the money was paid and how
it should be dealt with.
[11]
Fourthly, the defendants contend that it embarrasses them to
speculate regarding the terms why
the money was paid, and the
obligations of the parties in respect of the retention of the amount
in the trust account.  Lack
of such averments in the Particulars
of Claim makes the summons to be excipiable.
[12]
In respect of paragraph 17 of the Particulars of Claim, the
defendants allege that it fails to:
(a)
to detail the agreement relied upon creating such an obligation;
(b)
when, where and by whom such agreement was concluded;
(c)
the material terms relevant to that agreement;
(d)
if no agreement was reached, on what basis in fact or law that
creates
that obligation to pay; and
(e)
that there are many different possibilities from which the
obligation, if any may in fact
or law arise and therefore the
defendants may not be called  upon by the plaintiff to speculate
in that regard.
[13]
In respect of the interest claimed, the defendants aver that there is
a conflict between paragraphs
18 and 19 of the Particulars of Claim.
The conflict arises from the fact that paragraph 18 alleges that
“this action”
serves as a demand and paragraph 19 on the
other hand alleges that
mora
interest
starts to run from 8 May 2015 thus contradicting paragraph 18.
The defendants argued in this regard that there are
no facts or other
basis in law that would sustain a claim for interest a
tempora
morae
from 8 May 2015 resulting in the
defendants having to speculate in respect thereof.
[14]
The plaintiffs argued that the exceptions raised have no merit in
that they are directed at specific
parts or paragraphs of the cause
of action.  The plaintiffs contended that it sufficed for it to
have furnished only those
particulars which are strictly necessary to
enable the defendants to plead.  In respect of the first ground,
Mr
Smit
,
who appeared for the plaintiffs, submitted that the court in
De
Waal Alberts and Two Others v Nel NO
[1]
(Alberts)
held that the legal implications of section 53 of the Companies Act
and section 23 of the Attorneys Act impose on directors, past
and
present, a statutory liability to the directors
singuli
et
in
solidum
for the companies debts and liabilities.  He submitted that the
position has not changed.
[15]
In respect of the second ground, the plaintiff averred that the
Particulars of Claim are clear
that the amount was paid in by the
first plaintiff to the first defendant.  Furthermore, the
complaint that the Particulars
of Claim are vague and embarrassing
cannot be found on the mere averment that they are lacking in
particularity, so it was argued
by the plaintiffs.  The
plaintiffs contended that there cannot be prejudice to the defendants
based on lack of such particularity
on the same reasons that the
amount was deposited by the first plaintiff to the first defendant’s
account.
[16]
In respect of the third and fourth grounds of exception, the
plaintiffs relied on the matter
of
Fuhri
v Geyser NO
[2]
in arguing that the defendants have an obligation to repay the first
plaintiff as the trust creditor not based on any agreement.
In
the alterative, the plaintiffs submitted that its claim may be
founded on a
quasi-vindicatory
claim in that the amount was held in trust on behalf of the first
plaintiff and therefore, the amount was “earmarked”
for
the first plaintiff.  The submission further goes to state that
the defendants should plead the conclusion of any agreement
which
disentitle the first plaintiff from payment of the amount held on its
behalf in trust, otherwise the particularity sought
could be obtained
in trial preparation.
[17]
Lastly the argument of the plaintiffs in respect of the fifth ground
of exception is that the
plaintiffs plead that the payments were made
to the first defendant’s trust account from September 2014 to
January 2015 and
the plaintiff does not rely on any agreement for the
first defendant to pay interest and in the absence thereof, the
plaintiffs
are entitled to interest at the prescribed legal rate in
terms of the Prescribed Rate of Interest Act
[3]
.
The plaintiffs further submit that this does not render the
Particulars of Claim excipiable and no serious prejudice can
be
contended for.
F.
Legal Requirements for an
Exception
:
[18]
The general principles of law applicable to an exception were
succinctly dealt with in
Lockhat
and Others v Minister of Interior
[4]
as follows:
“
In
the first place when a question of insufficient particularity is
raised on exception, the excipient undertakes the burden of

satisfying the Court that the declaration as it stands, does not
state the nature, extent, and, and grounds of the cause of action.

In other words, he must      make out a case of
embarrassment by reference to the pleadings alone,
Deane
v Deane,
1955(3) SA (N).  If an
exception on the ground that certain allegations are vague and
embarrassing is to succeed, then it must
be shown that the defendant,
at any rate for the purposes of his plea, is substantially
embarrassed by the vagueness or lack of
particularity.
Jooste
v Jooste,
197 NPD 305
at p. 307. . . .
The object of all pleadings is that a succinct
statement of the grounds upon
which a claim is made or resisted shall
be set forth shortly and concisely; and where such statement is
vague, it is either meaningless
or capable of more than one meaning.
It is embarrassing in that it cannot be gathered from it what ground
is relied on by
the pleader.
Leathern
v Tredoux,
1911 32 NPD 346
,
per
DOVE-WILSON, J.P., at p. 348.  As long as a declaration
reasonably states the nature, extent, and grounds of the cause of

action, the Court will not as a rule, strike out paragraphs as vague
and embarrassing, provided the information given is reasonably

sufficient and provided it does not appear to the Court that the
paragraphs cannot be pleaded to by the defendant”.
[19]
In addition to the above, the pleader must plead a clear and concise
statement of the material
facts upon which he or she relies for the
claim
[5]
.  The pleader’s
initial duty is to allege the facts upon which he relies on and his
second duty is to set out the conclusions
of law which, according to
him or her follow from the pleaded facts
[6]
.
(G)
Analysis
:
[20]
In paragraph 6 of the Particulars of Claim, the facts and the law
pleaded are that the first
defendant as at 20 August 2019, the date
on which the summons was issued, was a “private company
incorporated and registered
under the Companies Act, 1973 (Act 61 of
1973) as an incorporated attorneys firm. . . .”  The joint
and several liability
of the second to seventh defendants is premised
on the basis that the second to seventh defendants are Attorneys and
Directors
of the first defendant.  Furthermore, paragraph 16 of
the particulars of claim states that the amounts were paid to the
first
defendant “during the period September 2014 to January
2015”.
[21]
The Attorneys Act 53 of 1979 (the Act) was applicable at the time the
payments were allegedly
paid into the trust account of the first
defendant.  Section 23(1)(a) of the Act defines a juristic
person that may conduct
an attorney’s practice thus:
“
23(1)
A private company may, notwithstanding anything to the contrary
contained in this Act,   conduct a
practice if –
(a)
Such company is incorporated and registered as a private company
under the
Companies Act, 1973 (Act No 61 of 1973),
with a share capital, and its    memorandum of
association provides that
all present
and past directors
of the company
shall
be liable jointly and severally with the company for the debts and
liabilities of the company contracted
during their periods of office
”.
(Emphasis   added).
[22]
Section 23(1)(b) of the Act provides that
only
natural persons who are practitioners and who are in possession of
current fidelity fund certificates are eligible to be members
or
shareholders of the company.
[23]
The provisions of section 23(1)(a) are peremptory and stipulate that
the directors of the private
company are only held jointly and
severally with the private company only for the debts and liabilities
of the company which were
contracted during their periods of office.
In the instant matter, there are no allegations or averments made by
the plaintiff
as to whether the second to seventh defendants were
directors of the first defendant at the time the money was deposited
during
the period September 2014 to January 2015.  All that
paragraph 13 says is that as directors of the first defendant they
are
liable jointly and severally with the first defendant.
[24]
The Attorneys Act 53 of 1979 was amended by the Attorneys Amendment
Act 40 of 2014.  Section
23 thereof provides that:
“
23
Juristic person may conduct a practice. –
(1)
A company may, notwithstanding anything to the contrary contained in
this Act,
conduct a practice if –
(a)
such company is a
personal liability
company
contemplated in the
Companies Act, 2008 (Act No. 71 of 2008);
(b)
only natural persons who are practitioners and who are in possession
of current fidelity
fund certificates are members or shareholders of
the company or persons having any interest in the shares of the
company.
. .”  (My emphasis)
[25]
In terms of the Attorneys Amendment Act, a juristic person running an
attorneys practice is no
longer described as a private company but a
personal liability company.  This suggests therefore that as at
the time the summons
was issued the first defendant was no longer a
private company but a personal liability company in terms of the
Attorneys Amendment
Act.
[26]
The Attorneys Act was repealed by the introduction of the Legal
Practice Act
[7]
(the LPA).
Section 34(5)(b) of the LPA provides that attorneys may only practice
as part of a commercial juristic entity
referred to in subsection
34(7).  Section 34(7) provides that:
“
A
commercial juristic entity may be established to conduct a legal
practice provided that, in terms   of its founding documents
–
(a)
its shareholding, partnership or membership as the case may be, is
comprised
exclusively of attorneys;
(b)
provision is made for legal services to be rendered only by or under
the  supervision
of admitted and enrolled attorneys; and
(c)
all present and past shareholders,
partners or members
, as the case may
be,
are
liable jointly and severally together
with the commercial juristic entity
for
–
(i)
the debts and liabilities of the
commercial juristic entity as are or were
contracted during their period of
office
; and
(ii)
in respect of any theft committed during their period of office”.

(Emphasis added)
[27]
Section 84 of the LPA stipulates that every attorney who practices or
deemed to practice for
his or her own account either alone or in
partnership or a director of a practice which is a juristic entity
must be in possession
of a Fidelity Fund Certificate.  Section
86 of the LPA requires that every attorney who practices in terms of
section 84(1)
referred to above must operate a trust account.
Section 86(2) provides that every trust account practice must deposit
to
the trust bank account as soon as possible after receipt, money
held on behalf of any person.  Section 86(3) provides that
a
trust account practice may, on its own accord, invest any money which
is not immediately required for any particular purpose
in a separate
savings trust account or other interest bearing account.
Section 86(4) requires that a trust account practice,
on instructions
of any person, open a separate trust savings account or other
interest bearing account for the purposes of investing
thereon any
money deposited in the trust account of that practice, on behalf of
such person which the practice exercises exclusive
control as
trustee, agent or stakeholder or in an fiduciary capacity.
[28]
Importantly, for purposes hereof are the provisions of section 86(5)
which stipulates that the
interest derived from an investment in
terms of section 86(2) and (3) accrue to the Fidelity Fund and must
be paid over to it.
Interest accrued in terms of section 86(4)
investment must be paid over to the person on whose instruction the
money was invested
but 5% thereof shall be paid to the Fidelity Fund.
[29]
The first defendant is described by the plaintiffs as a “private
company incorporated and
registered under the Companies Act, 1973
(Act 61 of 1973). . . .”  Section 20 of the Companies Act
61 of 1973 (Act 61
of 1973) deals with the meaning of a “private
company” and cessation of its privileges.  Of importance
for the
present matter is section 53(b) of Act 61 of 1973 which
provides as follows:
“
53
Memorandum may contain special conditions and may provide for
unlimited liability of
directors. – The memorandum of a
company may, in addition to the requirements of section 52, -
(a)
. . .
(b)
in the case of a private company, provide that the
directors
and past
directors
shall be liable jointly and severally, together with the company, for
such debts and liabilities of the company as are
or were contracted
during their periods of office, in which
case the said directors and past
directors shall be so liable
”.
(My underlining)
[30]
Act 61 of 1973 was repealed by the Companies Act 71 of 2008 (Act 71
of 2008).  Schedule
5 of Act 71 of 2008 provides for the
Transitional Arrangements.  Paragraph 2 thereof deals with the
continuation of the pre-existing
companies.  Effectively
paragraph 2 stipulates that pre-existing companies incorporated in
terms of Act 61 of 1973 continue
to exist as such as if they were
incorporated and registered in terms of Act 71 of 2008 with the same
name and registered number
previously assigned.  Paragraph 4(b)
thereof provides:
“
4.
Memorandum of Incorporation and Rules. –
(1)
Every pre-existing company –
(a)
. . .
(b)
the Articles of which imposed personal liability on its directors or
past
directors, as contemplated in section 53(b) of the
previous Act, is  deemed to have amended its Memorandum of
Incorporation
as of the  general effective date to expressly
state that it is a personal liability  company, and to have
changed its
name in so far as required to comply with section 11(3).
. . .”
[31]
The effect of Schedule 5 paragraph 4(b) read with the provisions of
the LPA is that an attorney’s
law firm is changed to be a
personal liability company and shall continue to be such.
Section 8 of Act 71 of 2008 deals with
the categories of companies
which may be formed and incorporated in terms thereof.  Section
8 provides for two categories
of companies viz profit and non-profit
companies.  Amongst the two types of profit companies is a
personal liability company.
Section 8(c) states that a profit
company is a personal liability company if -
“
(i)
it meets the criteria of a
private company; and
(ii)
its Memorandum of Incorporation states that it is a personal
liability company;
or . . .”
[32]
It is clear from the facts of this matter that as at the time of the
issue of the summons, the
provisions of Act 71 of 2008 were
applicable.  The description of the first defendant and the
liability of the second to seventh
defendants jointly and severally
with the first defendant is of significance and should have been in
line with the Attorneys Act
and Act 71 of 2008.  It is incorrect
for the plaintiff to have described the first defendant as “a
private company incorporated
and registered under the Companies Act
61 of 1973”.  Based on the provisions of both the LPA and
Act 71 of 2008, as
dealt with in the preceding paragraphs, the
defendants correctly excepted to paragraph 6 of the Particulars of
Claim.
[33]
Similarly, the liability of the second to seventh defendants “jointly
and severally”
with the first defendant is excipiable.
Their liability does not flow from them being current directors of
the first defendant.
Flowing from the legislative prescripts
dealt with above their liability cannot be blanket or carte blanche.
The plaintiff
needed to spell out the basis of each of their
liability jointly and severally.  The liability of the directors
of a law practice
has been dealt in section 34(7)(cc) of the LPA as
follows:
“
7.
A commercial juristic entity may be established to conduct a legal
practice provided
that, in terms of its founding documents –
(a)
. . .
(b)
. . .
(c)
all present and past shareholders,
partners or members, as the case may be
,
are
liable jointly and severally
together with the
commercial juristic
entity
for -
(i)
the debts and liabilities of the
commercial juristic entity as are or were
contracted during their period of
office
; and
(ii)
in respect of any theft committed during their period of office”.

(My   underlining)
[34]
It is undoubtedly so that the Particulars of Claim as they stand do
not make averments necessary
in terms of the aforesaid legislation as
to when the second to seventh defendants became the attorneys and
directors of the first
defendant in order for them to be held jointly
and severally with the first defendant.  Furthermore, there are
no factual
allegations from which such can be inferred from the
Particulars of Claim.
[35]
Mr
Smit
referred
me to the matter of
De
Waal Alberts and Two Others v Nel
[8]
(
Alberts
).
The facts and the issues discussed in
Alberts
are
different from the present matter.  The plaintiff (respondent on
appeal) in
Alberts
is a trustee of a company called Mackee Trust.  The defendants
(appellants) were sued in their representative capacities as

directors of a firm of attorneys practising as such as a private
company duly incorporated in terms of sections 32 and 49 (4) of
the
Companies Act 61 of 1977 having a share capital and a memorandum of
association incorporating the provisions of section 53(b)
of the
Companies Act.  The company was cited as the first defendant.
The directors of the law firm were cited as the
second to the
eleventh defendants.  The second, fourth and seventh defendants
were the appellants, before the Supreme Court
of Appeal (SCA) and the
other defendants did not appeal.
[36]
The plaintiff in
Alberts
sued the defendants based on a
guarantee made and signed by the authorised signatories of the first
defendant (the company).
The defendants filed a notice of
intention to defend pursuant to which the plaintiff applied for
summary judgment.  The court
a quo
granted the summary
judgment and that decision was confirmed by the full court.
With the leave of the SCA the matter was
argued before the SCA.
The SCA crystalized the issues before it as follows:
“
Whether:
(a) summary judgment should have been granted by the court of first
instance;
(b)
the full court was correct in holding that the co-directors of the
company     were precluded
from appealing
against the order”.
[37]
In respect of the second issue the SCA had regard to the provisions
of section 53(b) of the Companies
Act 61 of 1973 read with section 23
of the Attorneys Act 53 of 1979.  I have dealt with the
provisions of both sections 53(b)
and 23 above.  Tshiqi JA
[9]
,
as she then was, correctly found as follows:
“
The
legal implications of section 53 of the companies Act and section 23
of the Attorneys Act are

that they impose on directors, past and present, a statutory
liability to the creditors
singuli
et in     solidum
for companies’ debts and liabilities.  They are also
liable for any debts and liabilities    incurred before
a
company’s liquidation.  (See
Fundtrust
(Pty) Ltd (In Liquidation) v Van Deventer
1997(1)
SA 710 (A))  A creditor may pursue a claim against any one of
the debtors and it remains   for the debtors so
sued to claim
against each other a proportionate share of the debt”.
[10]
[38]
As it can be seen from the facts above and the reasoning of the SCA,
the present facts differ
remarkably.  I say so because the
directors seemingly did not contest their liability based entirely on
the provisions of
sections 53(b) and section 23 of the two Acts.
Therefore, it was never an issue before the court
a
quo
or the SCA whether they were
directors of the first defendant at the time of the issue of the
guarantee.  The SCA did not
deal with that aspect because it was
not an issue before it.  Therefore the facts in
Alberts
are distinguishable from the present
matter.
[39]
The provisions of section 53 of the Companies Act and those of
section 23 of the Attorneys Act are
peremptory when it comes to the
liability of the directors jointly and severally.  They both
provide that the past and present
directors of the company “
shall
”
be liable jointly and severally with the company for the debts and
liabilities contracted “
during
their periods of office
”.
[40]
Paragraph 13 of the Particulars of Claim stands to be excepted to
because firstly it fails to
allege any basis in law on which the
second to seventh defendants are held to be liable.
Furthermore, there is no reference
to the provisions of section 53(b)
of the Company Act as amended by the provisions of the
Companies Act
71 of 2008
read with section 23 of the Attorneys Act 53 of 1973 as
amended by the provisions of the LPA.  Of relevance is what was
stated
in
Fundtrust
(Pty) Ltd
(
in
liquidation v Van Deventer
[11]
)
also cited with approval in
Alberts
supra
[12]
by Hefer JA
[13]
as follows:
“
It
is apparent that the particulars of claim were lacking,
not
in additional allegations of fact
, but
in
a specific reference to section
53(b)
.  In this regard the Court
a
quo (per
Tebbutt J) said:
It is
not necessary in a pleading, even where the pleader relies on a
particular statute or  section of a statute,
for
him to refer in terms to it provided that he formulates his case
clearly
(see
Ketteringham
v City of Cape Town
1934
AD 80
at 90) or,
put
differently, it is
sufficient,
if
the facts are pleaded from which the conclusion can be drawn that
the
provisions
of the statute apply
(see
Price
v Price
1946
CPD 59
;
Wasmuth
v Jacobs
1987
(3) SA 629 (SWA) at 6341).  In my view, the plaintiff has
pleaded all the factual   allegations so as
to justify
reliance on section 53(b)”
[14]
.
(Emphasis added)
[41]
The same cannot be said in the instant matter because allegations of
fact or specific reference
to section 53(b) are lacking.
H.
Second Exception
:
[42]
The defendant excepted to paragraph 16 of the Particulars of Claim on
the basis that it is vague
and embarrassing because it lacks
particularity in fact as it does not attempt to identify:
(a)
the number of payments;
(b)
the amount of each such payment;
(c)
when each such payment was made;
(d)
by whom it was made; and
(e)
to whom.
[43]
The defendants then submitted that lack of such particularity renders
the allegation vague and
embarrassing and thus the defendants are
prejudiced in having to deal there with.
[44]
The plaintiff argued that in respect of (d) and (e) above, paragraph
16 makes it plain that it
is the first plaintiff who paid to the
first defendant the sums totalling to R23 million.  In respect
of (a) – (c) the
plaintiffs submitted that there can be no
prejudice to the defendant because R23 million was paid to and
received by the first
defendant who held it in trust on behalf of the
first plaintiff.  Furthermore, so submitted the plaintiffs,
vagueness and
embarrassment cannot be founded on merely an averment
that paragraph 16 of the Particulars of Claim lacks particularity.
[45]
Running the risk of repeating myself, any practising attorney in
terms of the Attorneys Act (as
amended) and legal practitioner
referred to in terms of section 84(1) of the LPA, is required to keep
a trust account.  The
trust account is for the purposes of
depositing thereto any money held by the legal practitioner in trust
on behalf of any person
i.e. the trust creditor.  Both Acts
further state that monies held in trust may be invested in a separate
trust savings account
or any other interest bearing account any money
which is not immediately required for any particular purpose
[15]
.
Interest derived from such an investment shall be paid over to the
Fidelity Fund.  Furthermore, a legal practitioner
or a trust
account practice may on instructions of any trust creditor invest the
money in a separate bearing account on behalf
of that person.
The interest accrued shall be for the benefit of that person provided
5% of that interest shall be paid over
to the Fidelity Fund
[16]
.
[46]
There is always an underlying reason why monies are held in trust.
That presupposes an
agreement or contract between the trust creditor
and the trust account practice, like for instance, trust funds held
pending the
transfer of a property (sale agreements) or moneys held
in terms of any commercial agreement which is under negotiation.
Monies may also be paid into the trust account in an instance where a
claim has been settled pending an appointment of a
curator
bonis
.  It is only logical that
there is always an underlying reason why money is paid into trust
practice accounts.  Deposits
of large sums of money are the ones
envisaged by the LPA for consideration of opening interest bearing
accounts either for the
benefit of the Fidelity Fund or that of a
trust creditor.  In most instances, it is for the benefit of the
trust creditor.
Generally, interest from the money held in
trust is for the benefit of the fund.
[47]
There has to be a foundational agreement or arrangement why money is
paid into a trust practice
account.  I am unable to comprehend
on what basis interest is sought in this matter.  It is
inconceivable that such an
amount can be paid to the first defendant
without an instruction as to why it is to be held in a trust account
and on whose behalf.
The plaintiff claims
mora
interest as from May 2015.  That it is so, suggests that there
was an agreement or contract relied upon.  Unfortunately
the
terms thereof have not been pleaded.  It is therefore expected
of the defendants to object to payment of interest.
Paragraph
16 is lacking the necessary averments to sustain the cause of
action.  The
facta probanda
is lacking which would alert the defendants as to the case they have
to meet.
I.
Third to Fourth Exceptions
:
[48]
In a nutshell the defendants contended that the Particulars of Claim
are vague and embarrassing
alternatively lack averments necessary to
sustain a cause of action because no allegations relevant to an
agreement are made in
terms of which the amount was held in trust.
No particularity as to the nature and the terms of the agreement are
pleaded.
In response, the plaintiff relying on the case of
Furhi
v Geyser NO and Another
[17]
,
submitted that trust creditors of attorneys have a right to payment
of whatever is due to them by virtue of being trust creditors.

Furthermore, the plaintiff’s cause of action is not founded
upon an agreement but rather on the first plaintiff having become
a
trust creditor alternatively on the
quasi-vindicatory
claim.
[49]
The Particulars of Claim state that the first plaintiff is a private
company in liquidation and
the second to fifth plaintiff are
insolvency practitioners.  Thereafter the defendants are
described and the capacity upon
which they are sued.  The
description of the parties is covered from paragraph 1 – 13 and
15.  Paragraph 14 states
that the plaintiff was placed under
final liquidation on 26 March 2016 by order of court.  I have
dealt with paragraph 16
above.  Paragraph 17, 18 and 19 state
that the first defendant was liable to pay the first plaintiff the
sum of R23 million
on demand and that the summons serve as such
demand and therefore interest started to run on 8 May 2015 to date of
payment a
tempora morae.
[50]
The Particulars of Claim are silent on what basis was the money
deposited in the trust account
of the first defendant, and by whom.
Such information is relevant for purposes of establishing whether
there was an agreement
or a reason why it was deposited.  To
illustrate this, a possibility cannot be excluded that the money was
paid into the trust
account by the first defendant to be held in
trust on behalf of a legal entity or creditor of the first plaintiff
and to be released
upon fulfilment of a certain condition.  The
Particulars of Claim state that the amount was paid in at different
intervals
between September 2014 and January 2015.  Certainly
the amount is a sum total of those payments.  It is essential to
reflect the payments as they were made and by whom were they paid.
This information is pertinent and should have been pleaded
to enable
the defendants to know which case they have to plead to.  The
relationship between the parties which led the first
plaintiff to pay
the money is necessary to give an indication of the terms or the
obligation to pay the money over to the first
plaintiff.  I
agree with Mr
Ford,
that
the obligation to hold the money on behalf of the first plaintiff
must have arisen from an agreement or by law, neither of
which has
been alleged.
J.
Fifth Exception
:
[51]
The first plaintiff submitted that it does not rely on any agreement
for it to claim interest
a
tempore morae
from 8 May 2015.  The first plaintiff states that in the absence
of any agreement with the first defendant to pay interest,
the first
plaintiff is entitled to it in terms of the prescribed rate.
[52]
I agree with Mr
Ford
that 8 May 2015 as the date from which
interest should run is contrary to paragraph 18 of the Particulars of
Claim which states
that:
“
This
action serves as demand for payment”.
There
is no reason advanced why the interest has to run from 8 May 2015.
There is no basis laid out on the Particulars of
Claim as to why this
should be the date from which interest should be paid.  Mr
Smit
in argument submitted that if the defendants know of any agreement
they must plead it.  This latter submission was raised
even in
respect of the third and fourth exceptions.  With respect, I do
not agree.  The first plaintiff should make out
a case on its
Particulars of Claim to which the defendants must plead.
[53]
Mr
Smit
referred
me to
Lodhi
5 Properties Investments CC and Others v Firstrand Bank Limited
[18]
(
Lodhi
5)
where
Maya JA, as she then was, stated as follows:
“
On
the question of interest, it seems to me that the appellant’s
argument misconceives the

nature of the interest sought here – that it was not based on
the enforcement of a contractual

undertaking but rather on
Lodhis
5’s
default.  It is trite
that a party which has been deprived of the
use of its capital for a
period of time has suffered a loss which, in
the normal course of events, will

be compensated by an award or
mora
interest.  The term
mora
simply means delay or default;
interest
a
tempore morae
constitutes the
damages that flow naturally
(without
the need to place    the debtor in
mora
)
from the contract itself by reason of a
debtor having failed to perform a
contractual obligation within the agreed
time
.
Lodhi
5
unlawfully delayed payment of its
outstanding
debt to the bank.  It
is therefore liable to compensate the bank
for its
failure to
perform on the due date
at the legal rate as prescribed by section 1(2) of the Act”.
(Emphasis

added)
[54]
The judgment in
Lodhi 5
does not support the argument of Mr
Smit,
or to put it differently, it is
distinguishable from the matter under discussion.  It is
apparent from the above excerpt that
the appellant was in default of
a contract or agreement between it and the bank.  The appellant,
as the judgment says, “failed
to perform a contractual
obligation within the agreed time”.  Furthermore, it says
the appellant is “. . . therefore
liable to compensate the bank
for its failure to perform on the due date”.  So there was
a contractual obligation to
pay on that date.
[55]
In the instant matter there is no averment that 8 May 2015 was a due
date for the payment of
the amount as per an agreement or any other
reason.  There is no basis laid factually or in law which
indicates that the payment
was due on 8 May 2015.  This date is
not even the date on which the summons was issued.  I find
therefore that paragraph
19 lacks the necessary averments to sustain
a cause of action.
[56]
Consequently, I make the following order.
1.
The exception is upheld with costs.
2.
The Particulars of Claim are struck out and the plaintiff is afforded
an

opportunity, if so advised, to within 15 (fifteen) days deliver

amended
Particulars of Claim failing which the plaintiff’s
claims are
dismissed with

costs.
_____________________
M MAKAULA
Judge
of the High Court
Appearances
:
Counsel
for the Plaintiff’s, Adv JE Smit, Sandton, instructed by
Werksmans Incorporated, Sandton, c/o DTS Attorneys, Port
Elizabeth
Counsel
for the Defendant’s, Adv EAS Ford (SC) and Adv JJ Nepgen,
instructed by Rushmere Noach Inc, Port Elizabeth
Date
of
hearing:
13 February 2020
Date
judgment delivered:

28 July 2020
[1]
(128/2018)
ZA
SCA 33 (28 March 2019);
De
Waal Alberts v Louis Nel NO 2019 JDR 0671
(SCA)
;
Alberts and Others v Nel NO
[2019] JOL 42488
(SCA).
[2]
1976
(1) SA 746 (N).
[3]
55
of 1975.
[4]
1960
(3) SA 765
(D) at 777 A – E.
[5]
Rule
18 (4)
stipulates
that “every pleading shall contain a clear and concise
statement of the material facts upon which the pleader
relies for
his claim, . . . as the case may be, with sufficient particularity
to enable the opposite party to reply thereto”.
[6]
Erasmus;
Superior Court Practice 2
nd
Edition Van Loggerenberg Volume 2 RS 11, 2019, D1-233.
[7]
Act
28 of 2014.
[8]
See
footnote 1 above.
[9]
Alberts
supra.
[10]
Alberts
supra at para 13.
[11]
1997
(1) All SA 644 (A).
[12]
ZA
SCA 33 (28 March 2019).
[13]
Supra
in
paragraph 6.
[14]
Fundtrust
at 747 g-h.
[15]
Section
78(2)(a) of the Attorneys Act 53 of 1979 and section 86(3) read with
section 5(e)
of
the LPA.
[16]
Sections
4 and 5(b) of the LPA.
[17]
1979(1)
SA 747 (N).
[18]
2015(3)
All SA 32 (SCA) at paragraph 23.