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[2018] ZAKZPHC 64
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Breetzke N.O v Alexander and Others (12922/2014P) [2018] ZAKZPHC 64 (9 November 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO: 12922/2014P
In
the matter between:
GAVIN
ANOTHONY BREETZKE N.O.
First
Plaintiff
MICHAEL
JOHN BREETZKE N.O.
Second Plaintiff
MARGARET
ANNE BREETZKE N.O.
Third Plaintiff
and
ROBERT
EDWARD ALEXANDER
First
Defendant
ZININGI
PROPERTIES (PTY) LTD
Second Defendant
RODNEY
JOHN TROTTER N.O.
Third Defendant
BRETT
DENNIS BERRIMAN N.O.
Fourth Defendant
ANGELA
CLAIRE ALEXANDER N.O.
Fifth Defendant
JUDGMENT
Vahed
J
:
[1]
The
defendants have taken exception to the plaintiffs’ particulars
of claim on the basis that they do not disclose a cause
of action
against the second defendant and/or lack the averments necessary to
sustain actions against the second defendant. I will
describe the
nature of the exception shortly.
[2]
Shortly
after the action was initially commenced during September 2014 the
defendants took exception to the plaintiffs’ particulars
of
claim in the form that those particulars of claim then existed. That
exception was held to be good and was the subject of a
judgment
delivered by this court on 8 September 2015. That judgment was
subsequently confirmed on appeal by the Full Court. Thereafter
the
Supreme Court of Appeal refused an application for leave to appeal.
The consequence of that was that the plaintiffs were given
leave to
amend the particulars of claim which they then did.
[3]
The
defendants delivered a further exception during February 2018 and the
plaintiffs further amended their particulars of claim
as a
consequence.
[4]
This
is yet a further exception.
[5]
The
three plaintiffs are the three trustees of the St. Francis Trust,
that trust being the actual claimant in this matter. The claim
mounted against the first defendant is based upon his alleged breach
of his fiduciary duty to the Sleepy Hollow Trust and its
beneficiaries.
[6]
The
Sleepy Hollow Trust is a trust in which the trustees are the first
and second plaintiffs and the first and third defendants.
The St.
Francis Trust (i.e. the true plaintiff) and the June Alexander Family
Trust were equal beneficiaries (50% each) of the
Sleepy Hollow Trust
and each has a vested interest in the Sleepy Hollow Trust.
[7]
The
claim against the first defendant is against him in his personal
capacity and also in his representative capacity as a trustee
of both
the Sleepy Hollow Trust and the June Alexander Family Trust. It is
also alleged in the particulars of claim (in the amended
form which
is now the subject matter of the present exception) that the first
defendant is the sole director and shareholder of
the second
defendant. The second defendant is alleged to be a company duly
incorporated as such and which carries on business in
matters
relating to immovable property. As the defendants point out, the
second defendant is not alleged to be anything but a duly
incorporated company.
[8]
The
particulars of claim also allege that the second defendant was
nominated as the purchaser of 50% of the shares from the Sleepy
Hollow Trust and in respect of which it was alleged that the second
defendant was “… a company nominated by the first
defendant which was owned and/or controlled by him and/or in which he
had a financial interest.”.
[9]
The
Sleepy Hollow Trust owned several properties including the one
described as “The SARS property”.
[10]
At
the instance of the first defendant the Sleepy Hollow Trust resolved
to sell certain of the immovable properties, including the
SARS
property. The first defendant nominated the second defendant, which
as I have indicated he controlled, to purchase properties
from the
Sleepy Hollow Trust, including the SARS property for a price of
approximately R90 million.
[11]
During
this period the first defendant knew that another entity, Delta, was
eager to purchase the SARS property and that he could
cause the
second defendant to on sell the SARS property to Delta at a profit.
The first defendant did not disclose the opportunity
to sell to Delta
to the trustees of the Sleepy Hollow Trust.
[12]
The
second defendant purchased the SARS property from the Sleepy Hollow
Trust and then on-sold the SARS property to Delta, along
with other
properties. The price paid for the SARS property was R110 million.
This was R19.283 million more that the second defendant
paid to the
Sleepy Hollow Trust for the SARS property.
[13]
As
against that background the plaintiffs allege that the second
defendant benefitted by the said sum of R 19.283 million and that
in
addition the second defendant knowingly participated in the first
defendant’s breach of trust in respect of the fiduciary
obligation he (i.e. the first defendant) owed to the Sleepy Hollow
Trust.
[14]
It is
against that background that the exception is taken with the
defendants contending in the exception that:-
a)
There
are no allegations of wrongdoing by or in respect of the second
defendant and the allegation is of knowledge of the first
defendant’s
breach of trust;
b)
No
allegations are made in order to pierce the veil of the separate
legal personality of a company.
[15]
In
argument before me Mr
Acker
SC, who with Mr
Boulle
appeared for the plaintiffs acknowledged that the claim against the
second defendant was properly founded in delict under the
Lex
Aqulia
and asserted that the pleadings contained sufficient allegations of
intentional conduct on the part of the second defendant and
that the
plaintiffs were relying on
dolus
and not on negligence because the second defendant’s conduct
was said to be intentional. Thereafter, he contended the plaintiffs’
claim properly fell into place because of the allegation that the
second defendant’s knowing participation in the breach
of trust
by the first defendant was sufficient to found a delictual claim
against the second defendant.
[16]
Mr
Acker
continued by acknowledging that the plaintiffs’ loss was in the
form of pure economic loss and that based on the authority
of
Gross
and others v Pentz
1966 (4) SA 617
(A), which in turn relied on
Yorkshire
Insurance Co Ltd v Barclays Bank
1929 WLD 200
, contend that the mere allegation of a knowing
participation in a breach of trust was sufficient to found a
delictual claim.
[17]
With
due respect, I am of the view that the reliance on those authorities
is misplaced and this is demonstrated by the fact that
Corbett CJ, in
the majority judgment in
Gross
,
indicated that the merits of the plaintiff’s cause of action
were not relevant for the purposes of deciding the case before
him.
[18]
An
exception is to be judged on the pleading being excepted to as it
stands and no facts outside the pleading can be taken into
consideration. It must be established that on any and every
interpretation of the pleading no cause of action is disclosed. See
in this regard
Minister
of Safety and Security and another v Hamilton
2001(3) SA 50 (SCA) at para 5 and
Lewis
v Oneanate (Pty) Ltd and another
[1992] ZASCA 174
;
1992 (4) SA 811
(AD) at 817 F – G.
[19]
Mr
Acker’s concession that the case against the defendant remains
one founded in delict on the
Lex
Aqulia
is significant. In
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
2015 (1) SA 1
(CC) the following is said (footnotes omitted):-
“
[20]
Wrongfulness is an element of delictual liability. It functions to
determine whether the infliction of culpably caused harm
demands the
imposition of liability or, conversely, whether 'the social, economic
and others costs are just too high to justify
the use of the law of
delict for the resolution of the particular issue'. Wrongfulness
typically acts as a brake on liability,
particularly in areas of the
law of delict where it is undesirable or overly burdensome to impose
liability.
[21]
Previously, it was contentious what the wrongfulness enquiry
entailed, but this is no longer the case. The growing coherence
in
this area of our law is due in large part to decisions of the Supreme
Court of Appeal over the last decade. Endorsing these
developments,
this court in
Loureiro
recently
articulated that the wrongfulness enquiry focuses on—
'the
[harm-causing] conduct and goes to whether the policy and legal
convictions of the community, constitutionally understood,
regard it
as acceptable. It is based on the duty not to cause harm —
indeed to respect rights — and questions the reasonableness
of
imposing liability.'
The
statement that harm-causing conduct is wrongful expresses the
conclusion that public or legal policy considerations require
that
the conduct, if paired with fault, is actionable. And if conduct is
not wrongful, the intention is to convey the converse:
'that public
or legal policy considerations determine that there should be no
liability; that the potential defendant should not
be subjected to a
claim for damages', notwithstanding his or her fault.
[22]
Wrongfulness is generally uncontentious in cases of positive conduct
that harms the person or property of another. Conduct
of this kind is
prima facie wrongful.
9
However,
in cases of pure economic loss — that is to say, where
financial loss is sustained by a plaintiff with no accompanying
physical harm to her person or property — the criterion of
wrongfulness assumes special importance. In contrast to cases
of
physical harm, conduct causing pure economic loss is not prima facie
wrongful. Our law of delict protects rights and, in
cases of
non-physical invasion, the infringement of rights may not be as
clearly apparent as in direct physical infringement. There
is no
general right not to be caused pure economic loss.
[23]
So our law is generally reluctant to recognise pure economic loss
claims, especially where it would constitute an extension
of the law
of delict. Wrongfulness must be positively established. It has
thus far been established in limited categories
of cases, like
intentional interferences in contractual relations or negligent
misstatements, where the plaintiff can show a right
or legally
recognised interest that the defendant infringed.
[24]
In addition, if claims for pure economic loss are too freely
recognised, there is the risk of 'liability in an indeterminate
amount for an indeterminate time to an indeterminate class'. Pure
economic losses, unlike losses resulting from physical harm to
person
or property —
'are
not subject to the law of physics and can spread widely and
unpredictably, for example, where people react to incorrect
information
in a news report, or where the malfunction of an
electricity network causes shut-downs, expenses and loss of profits
to businesses
that depend on electricity'.
[25]
So the element of wrongfulness provides the necessary check on
liability in these circumstances. It functions in this context
to
curb liability and, in doing so, to ensure that unmanageably wide or
indeterminate liability does not eventuate and that liability
is not
inappropriately allocated. But it should be noted — and this
was unfortunately given little attention in argument
— that the
element of causation (particularly legal causation, which is itself
based on policy considerations) is also a
mechanism of control in
pure economic loss cases that can work in tandem with wrongfulness.”
[20]
Following
upon that, in
Masstores
(Pty) Ltd v Pick and Pay Retailers (Pty) Ltd
2017
(1) SA 613
(CC), it was held (footnotes omitted):-
“
[46]
Our law has often sought guidance in English law in cases involving
some kind of commercial interference in the trade of another,
because
'the analysis of the problem to be found in English cases is often
illuminating and can be of assistance to solving the
problem of how
to apply the principles of our own law to the facts of a particular
case'. This must of course be done both with
the general caution
expressed by this court of comparable context and text, and the
particular caution that here those cases must
be reconciled with
Aquilian principles. In English law two distinct torts have been
recognised in this field, namely the 'procurement
of breach of
contract' and 'unlawful interference with economic
interests'. The first probably inspired our own inducement
form
of delict, but it is the latter that is relevant in deciding whether
extension for another form is called for in our
law. In
OBG
Ltd
the
House of Lords in effect held that the means used by the third party
to prevent performance must be independent of the
normal means used
in contractual interference cases. Transposed here, it would mean
that something more than Masstores' breach
of its own lease with
Hyprop is required: the unlawfulness of that breach vis-à-vis
Hyprop does not automatically translate
into delictual wrongfulness
as against Pick n Pay.
[47]
So analogous reasoning from existing authority does not yet make a
compelling case for extension. That may be an indication
that none
should take place, or perhaps that it should rather be sought in
general principles.
…
[52]
Is there nevertheless room for a delictual claim to be found
elsewhere? Yes, possibly. The justification for the claim would
then
not, however, lie in the direct infringement of Pick n Pay's
contractual exclusive trade rights, or a breach of the duty to
respect them, but in the possibly unreasonable manner that Masstores
used or exercised its own rights. Liability in these kinds
of
circumstances has been variously described as being grounded in
malice, or as an abuse of rights, or where the level of
intention and other fault-related elements such as 'motive to
cause' are highly relevant in establishing wrongfulness. But
to
extend Pick n Pay's pleaded case to this kind of situation would be a
step too far. Despite the challenge to the alleged unlawfulness
of
its conduct by Masstores, Pick n Pay did not seek to widen it. It is
an issue that needs to wait for another day.”
[21]
Drawing
on those principles it is fair to restate the basic principles that
the requirements of an aqulian action are a) a wrongful
act or
omission; b) fault; c) causation; and; d) patrimonial loss. These
issues, especially the wrongfulness of an act or omission
must be
justified and pleaded and proved, especially in cases of pure
economic loss.
[22]
The
second defendant’s knowing participation in the sale of the
SARS property does not, in and of itself, suggest that its
act was
wrongful. The second defendant must be judged to be a separate, at
arm’s length, corporate entity and its commercial
activity,
prima
facie
,
is not wrongful in the ordinary course.
[23]
Mr
Acker
has pertinently said that this case is not about piercing the
corporate veil and that the knowledge imputed to the first defendant
is not to be imputed to the second defendant. The second defendant
could just as well have been a remote third party sitting at
a coffee
shop and overhearing a conversation unfolding at a table nearby
[24]
That
being the case the plaintiffs must make out a separate and
independent case, properly grounded in delict, in order for it to
succeed against the second defendant. There are no allegations to
sustain this and in my view the exception is well taken.
[25]
I
accordingly grant the following Order:-
a)
The
defendants’ exception dated 5 April 2018 is upheld;
b)
The
claim and prayer against the second defendant is struck out;
c)
The
plaintiffs are given leave to amend the particulars of claim, such
amendment to be effected within fifteen (15) days of the
date of this
order;
d)
The
plaintiffs, jointly and severally, are directed to pay the costs of
the exception, such costs to include those reserved on previous
occasions.
Vahed J
Case Information
Date of Hearing
: 30 October 2018
Date of Judgment : 9
November 2018
Counsel for the
Plaintiffs’ : B A Acker SC with A J Boulle
Instructed
by
: Barkers Attorneys
Tel:
031 580 7400
Ref:
JG Murdoch / M Boukaert / STF1/0001
Counsel for the
Defendants’ : A J Dickson SC
Instructed
by
: J Leslie Smith & Company Inc.
Tel:
033 845 9700
Ref:
Mr W Smith/tm/14FL1058