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Richter N.O. and Others v Richter and Others (1988/2017) [2018] ZAFSHC 45 (10 May 2018)

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Trusts and Estates
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Brief Summary

Trusts — Trustees’ duties — Claims against former trustees for improper conduct — Plaintiffs, as joint trustees of three trusts, sued former trustees for losses due to alleged unlawful actions during their tenure — Defendants excepted to particulars of claim, arguing lack of necessary averments and vagueness — Court held that the claims arose from a single cause of action related to the defendants' conduct as trustees, and that the plaintiffs sufficiently alleged improper conduct, thus the exception was dismissed.

Comprehensive Summary

Summary of Judgment


Introduction


This judgment concerned an exception brought in civil proceedings in the Free State Division of the High Court. The plaintiffs, acting in their capacities as the joint trustees of three trusts, issued summons against three defendants who were former trustees of those trusts. The summons advanced multiple claims, collectively quantified at approximately R20 million, for alleged losses suffered by the trusts arising from the defendants’ conduct during their respective periods of office as trustees.


The defendants, as excipients, delivered an exception to the plaintiffs’ particulars of claim. They contended, on various grounds, that the particulars of claim were vague and embarrassing and/or lacked averments necessary to sustain an action as contemplated in Uniform Rule 23(1). The matter before the court was therefore interlocutory in nature, aimed at determining whether the pleading was legally excipiable rather than whether the plaintiffs’ claims would ultimately succeed at trial.


The subject-matter of the dispute was the alleged mismanagement and improper administration of trust affairs, including alleged improprieties in relation to the leasing of trust property, disposal of livestock, diversion of proceeds between trusts, and alleged unauthorised payments to trustees. The plaintiffs’ case, as pleaded, sought to recover losses allegedly sustained by the trusts as a result of such conduct.


Material Facts


The court treated as material the pleaded background that three trusts, namely the Verlaat Trust, Leeukop Trust, and Leeukop Boerdery Trust, were established largely by members of the Richter family, and that their activities appeared to have been interwoven. After the death of the tenth plaintiff’s father in December 2007, the first defendant (the tenth plaintiff’s mother) was a trustee and later appointed the second and third defendants as trustees at different points in time.


It was common cause on the pleadings, and accepted by the court for purposes of the exception, that the plaintiffs were appointed as trustees only from November 2015, and that by the time of their appointment the defendants had resigned as trustees. The pleaded period during which the impugned conduct occurred was described as being on an ongoing basis approximately between 2009 and 2013.


The pleaded conduct relied upon by the plaintiffs (without the court engaging with evidentiary detail) included allegations that the defendants, during their tenure, engaged in conduct such as leasing trust properties at rentals below market-related levels, selling trust livestock and diverting proceeds to another trust, and paying remuneration to trustees (especially the first defendant) in circumstances where it was alleged that they were not entitled to such remuneration or lacked authority. The pleaded consequence was loss and prejudice to the trusts.


The exception was directed not at all claims, but at specified claims (the judgment recorded that claims C, E, F and I were not attacked). The material disputed aspects for exception purposes were not disputes of fact, but disputes about whether the particulars of claim contained necessary averments and were sufficiently clear to enable a proper plea, including whether the pleadings properly dealt with alleged beneficiary status, potential non-joinder, and whether certain alleged wrongful acts could found liability where defendants allegedly acted prior to formal authorisation by the Master.


Legal Issues


The central questions the court was required to determine were whether the particulars of claim, read as they stood, were excipiable because they either failed to disclose a cause of action or were vague and embarrassing within the meaning of Uniform Rule 23(1).


In particular, the exception raised legal questions concerning whether the plaintiffs’ pleading was defective because it alleged the tenth plaintiff to be the sole capital beneficiary of the Boerdery Trust without pleading facts said to be necessary to sustain that allegation, and whether the pleading gave rise to an inference of potential non-joinder of other blood relatives alleged to have a direct and substantial interest.


A further legal issue concerned the relationship between trustees’ authority and the Trust Property Control Act 57 of 1988, in circumstances where some impugned conduct was alleged to have occurred at times when the defendants had not yet been issued with letters of authority by the Master. This raised, in the court’s framing, whether a point of law could properly be decided on exception regarding liability for conduct preceding formal authorisation, or whether that was a matter more appropriately determined at trial.


The dispute before the court was therefore primarily one of law and pleading sufficiency, including the application of established principles governing exceptions, rather than an adjudication on the underlying merits of the damages claims.


Court’s Reasoning


The court approached the matter by applying the established principles governing exceptions under Uniform Rule 23(1). It emphasised that an exception requires the pleading to be assessed as it stands, and that no extraneous facts may be introduced. The excipient bears the burden of persuading the court that on every reasonable interpretation the pleading can bear, it discloses no cause of action (or that it is so vague as to cause genuine embarrassment). The court further noted the function of an exception as a procedural mechanism designed to dispose of cases (or parts of cases) expeditiously where a clear legal point can be determined without the need to lead evidence.


On the defendants’ attack directed at multiple claims relating to alleged contraventions of the Trust Property Control Act on the basis that the defendants allegedly acted before being authorised by the Master, the court accepted that this issue implicated questions about trustees’ authority and potential liability for conduct occurring prior to formal authorisation. However, the court reasoned that the matter was not appropriately resolved on exception at this stage. It held that the issue could only properly be dealt with by the trial court, after hearing evidence, and that it might require interpretation of trust-related law that fell outside the scope of what an exception is intended to determine.


The court further reasoned that the plaintiffs’ pleading presented an arguable case. It could not be said that on every reasonable interpretation the particulars of claim failed to disclose a cause of action. In respect of the remaining grounds of exception (including those relating to the beneficiary allegations, joinder-related inferences, and alleged vagueness in claims for repayment), the court accepted the plaintiffs’ submissions as persuasive and concluded that the defendants would be in a position to plead to the particulars of claim. The court was not satisfied that the pleading caused the defendants real embarrassment, as required for an exception based on vagueness.


In adopting this approach, the court aligned itself with authority cautioning against assessing pleadings with a “high powered magnifying glass” and reiterated that where an exception does not raise a dispositive point of law, an excipient must make out a strong and clear case to succeed. The court also observed that dismissal of an exception does not finally dispose of the issues raised and that such points may be revisited at trial.


Outcome and Relief


The court dismissed the exception. It ordered that the exception was dismissed with costs.


The court also recorded that dismissal of an exception in these circumstances does not finally determine the issues raised, and that the point may be argued again at trial.


Cases Cited


Colonial Industries Ltd v Provincial Insurance Co Ltd 1920 CPD 627.


South African National Parks v Ras 2002 (2) SA 737 (C).


Legislation Cited


Trust Property Control Act 57 of 1988.


Rules of Court Cited


Uniform Rule 23(1).


Held


The court held that the plaintiffs’ particulars of claim, assessed on the basis required for exceptions, disclosed an arguable cause of action and were not shown to be vague and embarrassing in a manner causing real prejudice to the defendants’ ability to plead. It further held that key contentions raised by the defendants, particularly those relating to trustees’ authority and potential liability in relation to conduct preceding the Master’s letters of authority, were matters more appropriately determined by the trial court after evidence had been led. The exception was accordingly dismissed with costs.


LEGAL PRINCIPLES


The judgment applied the principle that an exception under Uniform Rule 23(1) is determined on the pleading as it stands, and the court will not have regard to facts outside the pleaded case. The excipient bears the burden of establishing that on every reasonable interpretation the pleading can bear, it discloses no cause of action, failing which the exception must fail.


It further applied the principle that an exception is aimed at obtaining a decision on a point of law capable of disposing of the whole or part of the case without leading evidence, and is not a vehicle for determining disputed matters better left for trial. Where an exception does not raise a dispositive legal point, the excipient must show real embarrassment and prejudice arising from the alleged vagueness, and courts should not approach pleadings with excessive technical scrutiny.


The judgment also confirmed that dismissal of an exception does not finally resolve the issues raised by the exception and is not appealable in the ordinary course, as such issues may be re-argued at the trial stage.

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[2018] ZAFSHC 45
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Richter N.O. and Others v Richter and Others (1988/2017) [2018] ZAFSHC 45 (10 May 2018)

IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No: 1988/2017
In
the matter between:
CHRISTIAAN
GEORGE FREDERIK RICHTER N.O

First Plaintiff
JULIA
HELEN VAN WYK
N.O

Second Plaintiff
DEON
PIETER ROUSSOUW
N.O

Third Plaintiff
(in
their capacities as joint Trustees of the Verlaat Trust)
CHRISTIAAN
GEORGE FREDERIK RICHTER N.O

Fourth Plaintiff
JULIA
HELEN VAN WYK
N.O

Fifth Plaintiff
DEON
PIETER ROUSSOUW
N.O

Sixth Plaintiff
(in
their capacities as joint Trustees of the Leeukop Trust)
CHRISTIAAN
GEORGE FREDERIK RICHTER N.O

Seventh Plaintiff
JULIA
HELEN VAN WYK
N.O

Eighth Plaintiff
DEON
PIETER ROUSSOUW
N.O

Ninth Plaintiff
(in
their capacities as joint Trustees of the Leeukop
Boerdery
Trust)
CHRISTIAAN
GEORGE FREDERIK RICHTER

Tenth Plaintiff
and
ELMINE
RICHTER
First Defendant
ALBERTUS
JACOBUS SAAYMAN

Second Defendant
JACOBUS
FRANSCOIS DU PLESSIS
Third

Defendant
JUDGMENT
CORAM:
NAIDOO J
HEARD
ON:
22 SEPTEMBER 2017
DELIVERED
ON:
10
MAY 2018
INTRODUCTION
[1]
The plaintiffs  in their capacities as joint trustees of the
Verlaat Trust, Leeukop Trust and the Leeukop Boerdery Trust
(the
Boerdery Trust), issued summons against the three defendants, who are
former trustees of the various aforementioned Trusts.
The summons
contained various claims, totalling approximately R20 million, on
behalf of all three Trusts, for losses suffered by
the Trusts as a
result of improper and/or unlawful conduct on the part of the
defendants during their tenure as the trustees of
the Trusts. The
defendants took exception to the Particulars of Claim on various
grounds, alleging that the Particulars of Claim
lack averments to
sustain an action, and are vague and embarrassing. Adv JG Bergenthuin
SC appeared for the defendants/excipients
and Adv GD Wickins appeared
for the plaintiffs.
[2]
The three Trusts were established largely by the tenth plaintiff’s
father, Johan Heinrich Richter and grandfather, Christiaan
George
Frederik Richter, and were essentially administered by the Richter
family. The activities of the three Trusts appear to
have been
interwoven with each other. After the 10
th
plaintiff’s
father passed away in December 2007, the first defendant (mother of
the 10
th
plaintiff) who was a trustee appointed the second
and third defendants as trustees at different times over the
following years.
The plaintiffs were appointed as trustees of the
three Trusts from November 2015. By that time the defendants had all
resigned
as trustees.
[3]
The claims in respect of the Trusts arose as a result of the actions
of the first defendant, as well as those of the second
and third
defendants as they were appointed, which actions were conducted on an
ongoing basis from 2009 to 2013, and involved,
inter alia, leasing
Trust properties at rentals below the market standard, selling
livestock belonging to the relevant Trust and
diverting the proceeds
thereof to another Trust and paying remuneration to trustees
(especially the first defendant), where they
appear not to be
entitled to such remuneration or did so without authority. The
allegation is that such actions on the part of
the trustees resulted
in loss and prejudice to the Trusts.
[4]
The Exception is, in summary, based on the following grounds:
4.1 The plaintiffs claim
that the tenth plaintiff is the sole capital beneficiary of the
Boerdery Trust. The Trust Deed provides
for the substitution of the
two capital beneficiaries (the 10
th
plaintiff and his
father), in the event of them dying, by their blood relatives or
spouses (“hulle bloed of aanverwante”).
The tenth
plaintiff can only be the sole capital beneficiary if his father was
not survived by children. No allegation is made
in the Particulars of
Claim that the father, Johan Heinrich Richter, is not survived by
children, rendering such Particulars excipiable.
4.2 The plaintiffs allege
that Johan Heinrich Richter chose the tenth plaintiff, the first
defendant and Elri as income beneficiaries
of the Boerdery Trust, the
latter of whom could only be chosen from the capital beneficiaries,
their blood relatives or other related
persons. This leads to the
“overwhelming” inference that Johan Heinrich Richter was
survived by blood relatives, who
ought to have been joined in the
action as interested parties, which was not done.
4.3  Claims A, B, D,
G and H have been assailed on the basis that the plaintiffs allege
improper or unlawful conduct, in contravention
of the Trust Property
Control Act 57 of 1988 (the Act), on the part of the defendants at a
time when they had not been appointed
by the Master of the High Court
(the Master) as trustees and as such had no authority to act. They
could, therefore, not be in
conflict with the Act. I will elaborate
on this aspect later in this judgment.
4.4  Claims J and K
which are for repayment of two amounts of money which the first
defendant paid to herself from the Boerdery
Trust, during the period
December 2007 to November 2011. The complaint is that the summons
does not indicate why two different
amounts are claimed for the same
period and on the same grounds. The Particulars also do not reflect
how these amounts are computed.
4.5  The plaintiffs
allege that the first and third defendants
“purported”
to represent the Trusts when concluding the
lease agreements relating to the properties belonging to the Trusts.
The objection
is to the lack of clarity regarding why the defendants
only purported to represent the Trusts.
[5]
Uniform Rule 23(1) is applicable to the exception and the relevant
portion provides that where any pleading is vague and embarrassing
or
lacks averments which are necessary to sustain an action or defence,
as the case may be, the opposing party may deliver an exception

thereto. Some guiding principles in dealing with exceptions, as
established in a long line of cases in our law, are that the impugned

pleading must be looked at as it stands and no facts extraneous to
the pleading may be brought into issue. The excipient bears
the onus
of persuading the court that on every interpretation that the
pleading can reasonably bear, no cause of action or defence
is
disclosed. If the excipient cannot do this, the exception should not
be upheld. An exception is a useful tool to exclude cases
without
merit, and the purpose of an exception is to dispose of a case or
part thereof expeditiously. Furthermore, it is designed
to obtain a
decision on a point of law on a point of law which will dispose of
the case in total or part thereof. This avoids the
needs to lead
unnecessary evidence. An exception can be taken to portions of a
pleading, provided they are self-contained and amount
to separate
claims. An exception cannot be taken to particulars of claim on the
ground that it does not support one or more of
several claims arising
from the same cause of action.
[Erasmus, Superior Court Practice,
2
nd
Edition, page D1- 294 and 295]
[6]
The Particulars of Claim in this matter reflect 11 claims on
behalf of the three Trusts mentioned above. As is evident from what
I
have said earlier, Claims C, E, F and I are not under attack in the
Exception.  From the facts set out in the Particulars
of Claim,
it is evident that the activities of the three Trusts were closely
interwoven and that the defendants were initially
trustees of the
Trusts, albeit at different times. The actions of the trustees, prior
to the appointment of the plaintiffs as trustees
in 2015, have given
rise to the cause of action in this matter. This is the period
approximately between 2009 and 2013. In my view,
the various claims
have arisen from that one cause of action. The exception relating to
Claims A, B, D G and H relates to the actions
of the defendants as
trustees, prior to the issue of the letters of Authority by the
Master, formally appointing them to act as
Trustees. Mr Bergenthuin
argued that prior to the issue of the letter of authority by the
Master the defendants could not be regarded
as trustees as defined in
the Act, and therefore, could not contravene the provisions of the
Act, upon which the plaintiffs placed
sole reliance Hence in respect
of those claims, the plaintiffs had not established a cause of
action.
[7]
It was further argued for the defendants that the plaintiffs did not
aver that as a result of Johan Richter not being survived
by blood
relatives, that the 10
th
plaintiff was the sole capital
beneficiary of the Trust. In addition the fact that the first
defendant and Elrie were also named
as income beneficiaries (together
with the 10
th
plaintiff) created the inference that Johan
Richter was survived by blood relatives who had to be joined as
parties to the action.
These omissions by the plaintiffs rendered the
Particulars of Claim excipiable. With regard to Claims J and K, the
defendants allege
that such claims are vague and embarrassing because
there is no indication why two amounts of money are claimed for the
same period
and that the lack of detail as to the computation of such
amounts, prevented the defendants from being able to plead thereto.
[8]
Mr Wickins argued that with regard to the issue of non-joinder, the
defendants fail in the exception to name the surviving children
of
Johan Richter and ought to have raised this by way of a plea in
abatement, in which they set out the names and identities of
any such
surviving children. It is not for the plaintiffs to plead in the
negative that Johan Richter is not survived by any children.
The mere
allegation that the tenth plaintiff is the sole capital beneficiary
speaks for itself and is sufficient for the defendants
to plead
thereto.
[9]
With regard to the exception relating to the lack of authority by the
Master for the trustees to act in respect of the letting
of Trust
property, he argued that trustees who are nominated (in the Trust
Deed for example) and who accept the nomination (as
the defendants
did), they can be held personally liable in delict, even if they were
not formally authorised by the Master. In
addition, Mr Wickins argued
that the defendants’ contention that the plaintiffs did not
make allegations to sustain claims
in delict is misplaced because the
plaintiffs did in fact do so , namely, detailing the defendants’
conduct in letting Trust
property at lower than prevailing market
rates, selling Trust property and diverting monies away from the
Trust to which the monies
belonged, that they failed to act
reasonably and with the degree of care and skill expected of someone
who manages the affairs
of another, and alleging the wrongfulness of
the defendants’ conduct, which caused loss to the Trusts. The
amount of such
loss or damage was specified.
[10]
He contended therefore, that all the claims included allegations
which encompassed the defendants’ failure to act in
accordance
with their common law duties. Therefore, none of the plaintiffs’
claims are premised exclusively on the defendants’
breach of
their statutory duties. Claims B and H relate to sub-claims for three
different periods, two of which related to periods
after the
defendants’ were authorised to act as trustees. Even if the
court were to find that the Master’s authority
was a
pre-requisite for the claims, the deletion of the one claim will not
result in a situation where the plaintiffs have not
disclosed a cause
of action.
[11]
With regard to Claims J and K relating to monies that the first
defendant paid to herself, Mr Wickins correctly made the point
that
the issue of the trustees’ authority was not raised with regard
to these claims in the Notice of Exception, so that
it is
impermissible to do so now. The objection regarding the lack of
detail regarding the reasons for two amounts being claimed
for the
same period and the absence of how these amounts were calculated is
not well taken , as the defendants did not allege any
prejudice as a
result thereof and would be able to plead thereto. Any further
details required could have been requested by way
of further
particulars for trial.
[12]
The approach to an exception is that unless it is taken for the
purpose of raising a point of law, which could settle the dispute

between the parties, the excipient must make out a very strong and
clear case before he can succeed. Courts are also implored not
to
look at the impugned pleading with a high powered magnifying glass.
The court must first determine if there is a point of law
to be
decided which would dispose of the matter in total or partly. If not,
the court must determine if the pleading causes real
embarrassment as
a result of faults therein. If the excipient cannot convince the
court that there is such a point of law or real
embarrassment, the
exception must fail. [
Colonial Industries Ltd V Provincial
Insurance Co Ltd
1920 CPD 627
; South African National Parks v Ras
2002(2) SA 737 (C)]
[13]
The arguments raised by Mr Wickins as detailed above are persuasive.
In my view, the issue of the authority of the trustees
to act only
after authorised to do so by the Master, and whether they would
attract any liability for such acts prior to being
authorised by the
Master, can only be properly dealt with by the trial court, after
considering all the evidence. Such an exercise
may very well call for
an interpretation of the law in relation to Trusts, which falls
outside the scope of the matter before this
court. In my view the
plaintiffs have raised an arguable case and it cannot be said that on
every reasonable interpretation that
can be given, the Particulars of
Claim in this matter do not disclose a cause of action. Similarly, in
respect of the other grounds
of exception raised which I have
mentioned, Mr Wickins raised persuasive arguments for rejecting such
grounds. I am of the view
that the defendants would be in a position
to plead to the Particulars of Claim, which do appear to disclose a
cause of action
and cannot be said to cause any real embarrassment to
the defendants.
[14]
The dismissal of an exception, where it is
presented and argued as such, does not finally dispose of the issue
raised by the exception
and is not appealable. The point could be
re-argued at the trial.
(Erasmus
Superior Court Practice, 2
nd
Edition, D1-294)
. In my view, an undue
harshness will be brought to bear upon the plaintiffs if the
exception were upheld in the light of what I
have said above. I find
that the issues raised by the exception cannot be sustained at this
stage.
[15]
In the circumstances, the following order is made:
The
Exception is dismissed with costs
________________
S.
NAIDOO, J
On
behalf of Excipient:
Adv.
JG Bergenthuin
SC
Instructed
by:

Cilliers and
Reynders
c/o Graham Attorneys
14 Torbet Street
Noordhoek
Bloemfontein
(Ref: CIL2/0004)
On
behalf of Plaintiff:

Adv. GD Wickins
Instructed
by:

Brooks &
Braadvedt Attorneys
c/o Mudzusi & Majiedt
Inc
Honey Chambers
Northridge Mall
Kenneth Kaunda Road
Bloemfontein
(Ref:
127795)

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