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[2017] ZAGPPHC 833
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Moriting Life Administrators Limited (In Liquidation) v Centriq Life Insurance Company (CF) Limited and Another (11686/2015) [2017] ZAGPPHC 833 (27 February 2017)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 11686/2015
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
1/3/2017
In
the matter between:
MORITING LIFE
ADMINISTRATORS LIMITED
(IN
LIQUIDATION)
Applicant/Plaintiff
And
CENTRIQ LIFE INSURANCE
COMPANY
(CF)
LIMITED
1st
Respondent
CENTRIQ
INSURANCE HOLDINGS
LIMITED
2nd
Respondent
JUDGMENT
RAJAB-BUDLENDER AJ
1.
The Applicant (referred to herein as "Moriting"
or "the Plaintiff') applies for leave to amend its particulars
of
claim. The Respondents ("the Defendants") oppose the
proposed amendment primarily on the grounds that the amendment would
render the pleadings excipiable.
2.
The Plaintiff issued summons against the Defendants on
16 Februar1 2015. The Defendants delivered a notice of intention to
defend
the action and subsequently, during April 2015, delivered a
Rule 35(12) and 35 (14) notice calling for various documents. On 29
June 2015, the Defendants delivered a notice of exception in terms of
Rule 23(1). In the exception, the Defendants contended that
the
Plaintiff's particulars of claim lacked averments necessary to
sustain a cause of action, alternatively, that they were vague
and
embarrassing, on eight separate grounds.
3.
The Plaintiff delivered a notice of intention to amend
on 31 July 2015 in terms of Rule 28(1) to which the Defendants
objected on
seven grounds resulting in the present application. The
Defendants only persisted with three of those grounds of objection at
the
hearing of this matter. I therefore do not deal with the
remaining grounds of objection in this judgment.
Background
4.
Central to this dispute is an agreement concluded during
2001, between the parties ("the subscriber agreement").
Clause
3 of the subscriber agreement records that Moriting wishes to
develop and market and/or administer long term insurance products
under the first defendant's insurance licence and that the first
defendant is agreeable to doing so. In effect, the purpose of
the
agreement was to allow Moriting to conduct a funeral insurance
business under its licence, as Moriting lacked the necessary
regulatory approval to do so under its own name. To this end, a
specific "insurance cell" was created within the business
structure of the first defendant. The first defendant essentially
performed an administrative function in respect of the insurance
cell, in exchange for which it was entitled to an administration fee
of 3% of gross premiums received.
5.
According to the Plaintiff, it was the party bearing the
risk of profit and loss in the insurance business conducted through
the
insurance cell. Certain defined costs would be deducted from the
reserves standing to the credit of the insurance cell, and from
the
balance thereof (the distributable earnings) dividends would from
time to time be paid to Moriting.
6.
Moriting was provisionally wound up by order of court on
12 August 2011 and the final order was granted on 14 November 2012.
The
effective date of the winding up was 6 April 2011.
7.
The subscriber agreement was terminated, on the
Plaintiff's version, by the joint liquidators on 1 February 2012
alternatively during
November 2012.
8.
The Plaintiff's claims against the Defendant in the
action are:
8.1.
Claim
for payment of dividends declared in the amount of R4,236,000.00,
during the period December 2009 to July 2010 (prior to the
liquidation of the Plaintiff and termination of the subscriber
agreement). The Plaintiff alleges that the Defendant failed to make
payment of such dividends to it and instead, paid the dividends into
a different bank account at the instruction of unauthorised
third
parties after the Defendant had been informed of the third party's
lack of authority.
8.2.
A
claim for payment of R3,748,596.00 in relation to the payment of
dividends which the Defendant is allege to have owed to the Plaintiff
but which the Defendant purported to set off/deduct post liquidation
of the Plaintiff.
8.3.
Certain
delictual claims for damages in the alternative to the above.
9.
Subsequent to the Plaintiff delivering its heads of
argument, the Defendants delivered their heads of argument.
Thereafter, the
Defendants delivered a further supplementary
answering affidavit. The parties agreed that the further
supplementary affidavit would
form part of the papers in this matter.
I have considered the issues set out in the further supplementary
affidavit and in the
supplementary heads of argument filed by both
parties.
10.
The Defendants object to the proposed amendment on the
following grounds:
10.1.
First,
the Defendants object to the introduction of a tacit or implied term
of the subscriber agreement in the amended particulars
of claim;
10.2.
Second,
they object to the Plaintiff's reliance on section 341(2) of the
Companies Act, 61 of 1973 ("the old Companies Act")
as the
basis for certain of the claims which the Plaintiff seeks to advance;
10.3.
Third,
the Defendants object to the introduction of a delictual claim for
damages in the amended particulars of claim on the basis
inter
alia
that the Plaintiff is precluded from
making such a claim in the context of a contractual relationship
between the parties where
no legal duty exists between the parties in
terms of the contract.
11.
I deal with each of these objections in turn. However,
it is instructive to first consider the governing principles of law
with
respect to the amendment of pleadings.
The Correct Approach to
Amendments and Exceptions
12.
It is trite that our courts are inclined to grant
amendments to pleadings unless there is some prejudice caused to the
other party
or where the amendment would render the pleadings
excipiable. Moreover, it is generally accepted that a court will
allow an amendment
unless the application to amend is
mala
fide,
unless the amendment would cause an
injustice to the other side which cannot be compensated by an order
of costs, or unless the
parties cannot be put back in the same
position as they were when the pleading which is sought to be amended
was filed.
(Moo/man v Estate Moo/man
1927
CPD 27
at 29;
Macduff
&
Co
Ltd (in Liquidation) v Johannesburg
Consolidated Investment Company Ltd
1923
TPD 309
;
Imperial Bank Ltd v Barnard
and Others NNO
2013 (5) SA 612
(SCA)
at
para 8).
13.
The main grounds of objection in this case are that the
proposed amendments would render the particulars of claim excipiable.
Therefore,
in determining whether to grant leave to amend, I must
have regard to the principle laid down by our courts in relation to
exceptions.
In this regard, the Courts are, reluctant to decide upon
exception questions concerning the interpretation of a contract
(Sun
Packaging (Pty) Ltd v Vreulink
[1996] ZASCA 73
;
1996
(4) SA 176
(A) at 186J).
In other words, the
test on exception is whether on all possible readings of the facts no
cause of action may be made out.
(H v Fetal
Assessment Centre
2015
(2) SA 193
(CC); Children's Resource Centre Trust and Others v Pioneer Food
(Pty) Ltd and Others
2013 (2) SA 213
(SCA) para
36.)
14.
It is for the excipient to satisfy the court that the
conclusion of law for which the Plaintiff contends cannot be
supported on
every interpretation that can be put upon the facts.
This Court therefore must accept as correct the allegations contained
in the
particulars of claim, incorporating the proposed amendment,
and determine whether those allegations are capable of supporting the
Plaintiff's cause of action.
(Minister of
Law and Order v Kadir
[1994] ZASCA 138
;
1995 (1) SA 303
(A) at 318D-E,
Stewart and Another v
Botha and Another
[2008] ZASCA 84
;
2008 (6) SA 310
(SCA)
para 4).
15.
Our courts have also tended to allow amendments in order
to obtain a proper ventilation of the dispute between the parties and
to
advance good and efficient conduct of litigation. In the present
case, the Defendant objects to the amendment on the basis that
the
amendment would render the pleadings excipiable. In this regard, it
is clear that a court will not allow amendments where their
effect
would render such a pleading excipiable or where it does not cure an
excipiable pleading.
16.
The defect in the pleadings must appear
ex
facie
the pleadings and no extraneous facts
may be adduced to show that the pleading is excipiable
(Barnard
v Barnard
2000 (3) SA 741
(C) para 10).
An
excipient may, moreover, not go beyond the record to establish that
the pleadings are excipiable.
17.
In
Natal Joint Municipal
Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) at para 18
, the SCA
described the correct approach to the interpretative process as
follows:
'Interpretation is
the process of attributing meaning to the
words used in
a
document, be it legislation, some other
statutory instrument. or contract, having regard to the context
provided by reading the
particular provision or provisions in the
light of the document as
a
whole
and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must be
given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more than one
meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not subjective.
A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose
of the document. Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible
or businesslike for the
words actually used. To do
so
in
regard to a statute or statutory instrument is to cross the divide
between interpretation and legislation; in
a
contractual context it is to make a
contract for the parties other than the one they in fact made.
The 'inevitable
point of departure is the language of the provision itself'. read in
context and having regard to the purpose of
the provision and the
background to the preparation and production of the document
.
. .
..
.one
considers the context and the language together, with neither
predominating over the other.
This is the approach
that courts in South Africa should now follow, without the need to
cite authorities from an earlier era that
are not necessarily
consistent and frequently reflect an approach to interpretation that
is no longer appropriate."
18.
In light of the above principles, I now turn to consider
the grounds of objections raised by the Defendants.
The Grounds of Objection:
The First Ground
19.
The first ground of objection to the proposed objection
is the inclusion of a tacit term to the subscriber agreement. The
proposed
tacit term is to be introduced as paragraph 5.42 of the
particulars of claim. It reads as follows:
"It was a tacit
or implied term of the Subscriber Agreement that upon termination of
the Subscriber Agreement a final dividend
in respect of distributable
earnings available for distribution to the subscriber as defined in
clause 2.1.9 of the Subscriber
Agreement, would within a reasonable
time be declared and calculated in terms of clause 9.1 and paid to
the subscriber."
20.
The defendants contend that the proposed tacit term must
be read in the context of paragraph 41 of the amended particulars of
claim
where it is alleged that upon termination of the subscriber
agreement the first defendant, acting in terms of clause 9.1 declared
a final dividend of R8 500,116.00. They contend further that that
allegation must in turn be read with paragraph 45 of the particulars
of claim where the Plaintiff alleges that the final dividend was
incorrect because amongst others the first defendant's discretion
was
a narrow discretion, the first defendant unreasonably failed to
correctly calculate the amount available as distributable earnings,
the first defendant unreasonably failed to take into account the
correct financial condition and business position of the insurance,
the first defendant incorrectly deducted amounts from the dividend
and the first defendant failed to take into account that the
Plaintiff was in winding up. The defendants contend that it is clear
from the papers that a statutory actuary's determination was
made as
to the amount of the dividend that had to be paid to the Plaintiff
upon termination of the subscriber agreement. This determination
of
the dividend to be paid to the Plaintiff upon termination of the
subscriber agreement was dealt with in clause 14.6 of the subscriber
agreement. Clause 1.4.6 provides as follows:
“
Where the ceil
.being wound up still has obligations to customers under existing
policies of insurance, Nova without derogating
from its rights under
this agreement, will be obliged to meet such obligations. In this
regard, Nova shall 1·etain in the
cell sufficient funds to
meet all capital Adequacy
"
Requirements
and policy liabilities as determined by the actuary irrespective of
whether the policy holders are third parties or
the subscriber as the
first party.
[1]
21.
In this regard clause 14.6 clearly provides that the
first defendant must retain in the insurance cell the amount
determined by
the statutory actuary. The defendants argue that the
purpose of this clause is to ensure that the statutory actuary will
determine
how much can be paid out so that the amount determined by
the statutory actuary is retained in the insurance cell. The
defendants
therefore argue that there is no place in the subscriber
agreement for the existence of the tacit term proposed by the
Plaintiff
nor can the qualifications to the first defendant's
discretion in respect of dividends have any place in regard to the
final dividend.
The defendants argue that all of this is dealt with
by the statutory actuary and not by the first defendant. It flows
therefore,
they contend, that paragraphs 2, 13, 15 and 17 of the
notice of amendment must be disallowed.
22.
The Plaintiff contends in response to this ground of
objection, that in order to determine the existence and validity of a
tacit
term, a trial court would have to consider the question along
with evidence of admissible surrounding circumstances.
(Wilkins
NO v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
(A) at
144C)
Therefore, the Plaintiff contends that
the question of the existence or validity of the tacit term is
something to be determined
by the trial court and not by this Court.
23.
Moreover, the Plaintiff contends that the Subscriber
Agreement does not exclude the tacit or implied term proposed in the
amendment.
In this regard, it refers to clause 9.1 which provides:
"it is intended
that Nova shall, at its sole discretion, be entitled to declare
dividends in respect of the subscription shares
and any other
ordinary shares subscribed for by the Subscriber at the dividend
intervals described in the schedule. In exercising
its discretion
whether or not to declare dividends as aforesaid, Nova shall have
regard to the provisions of the Companies Act,
the Insurance Act and
the guidelines set out by the Actuarial Society of South Africa ...
relating to the declaration of dividends
by a long term insurer, the
availability of suitable distributable earnings, the financial
condition and business position of the
insurance cell at the time and
any other factors which, it, in its sole discretion, or which may be
brought to its attention by
the Subscriber, deems to be relevant in
exercising its discretion."
24.
Clause 14.6 must be read with Clause 14.2 of the
Subscriber Agreement, which provides:
"On termination
of this agreement, Nova shall, subject to compliance by it with the
relevant provisions of the Companies Act
and the Insurance Act, and
subject to the passing of the appropriate shareholders resolution,
acquire all the subscription shares
and other B ordinary shares held
by the subscriber at a price equal to the price of subscription
shares and B ordinary shares,
as may be determined by Nova's
statutory actuary, less the cost of such valuation, less all other
costs incurred by Nova associated
with such valuation and acquisition
process and subjection 14.6. Any determination by Nova's statutory
actuary shall be done on
the basis that Nova's statutory actual shall
act as an expert and not as an arbitrator or quasi-arbitrator and his
determination
shall be final and binding on the parties.”
25.
In other words, the price of the shares is contemplated
to be determined by the statutory actuary. Mr Brett SC pointed out in
argument
on behalf of the Plaintiff, that the effect of the judgment
of the SCA in
Natal Joint Municipal Pension
Fund v Endumeni Municipality
2012 (4)
SA 593
(SCA)
is that the process of
interpretation requires a consideration of all relevant and
admissible evidence, in context. This, he contended,
is a matter for
the trial court and not for this Court.
26.
Mr Green SC, on behalf of the Defendants contended that
there were two reasons why the Plaintiff's allegations of a tacit
term are
without merit. These are:
26.1.
The
alleged tacit term conflicts with the express language of the
contract and therefore does not raise a triable issue; and
26.2.
The
Plaintiff has not failed to place any evidence before this Court to
support the allegation of a tacit term. In contrast, the
Defendants
place the affidavit of Mr Blanc before the Court in which Mr Blanc
denies the existence of a tacit term.
27.
In relation to the argument that the tacit terms
conflict with the express terms of the agreement:
27.1.
The
argument made on behalf of the Defendants effectively requires me to
decide on the proper interpretation and
effect
of a contractual term, in the context of an
exception. Our courts have made clear that this is generally not
permissible and that
the interpretation of a contract is a matter
best left to a trial court.
(Sun Packaging
(Pty) Ltd
v
Vreulink
[1996] ZASCA 73
;
1996 (4) SA 176
(A) at
186J).
The
decision of the SCA in
Endumeni
strengthens
this position because it speaks of the need to take into account the
overall context in interpreting an agreement. That
is manifestly best
done at trial. Even if this is not correct as a general proposition,
it would seem to me to apply with particular
force in this case,
where the language of the agreement is ambiguous, and in the context
of a claim based on a tacit term which
is inherently linked to the
evidence of facts which will have to be led at trial.
28.
Moreover, I am not persuaded of the argument that the
Plaintiff ought to have put up evidence to support the tacit term as
part
of its amendment application. The objection raised to the
amendment was that it was excipiable. Therefore, the test I must
consider
is whether the pleading as amended is excipiable. Our courts
have made clear that in determining this issue, this Court must
assume
that all of the facts pleaded by the Plaintiff are true. I
therefore do not consider that in the context of an amendment and
objection
of this type that the Plaintiff was required to put up
evidence in order for the amendment to be granted. If the Plaintiff
cannot
demonstrate the relevant evidence at trial, then its claim
will be dismissed but it is not for this Court to prejudge in the
context
of an amendment application whether that evidence will be
forthcoming at trial.
29.
In the circumstances, I decline to uphold the first
ground of objection.
The Second Ground of
Objection
30.
The second ground on which the Defendants object deals
with the fact that the amended particulars of claim include an
allegation
that the Plaintiff was and remains unable to pay its
debts. The Defendant contends that this amounts to the Plaintiff
invoking
section 341(2) of the 1973 Companies Act ("the old
Companies Act"). Section 341(2) deals with dispositions and
share
transfers after winding up and provides that
"every
disposition of its property (including rights of action) by any
company being wound-up and unable to pay its debts made
after the
commencement of the winding up, shall be void unless the Court orders
otherwise."
31.
The Defendants contend that section 341(2) is only
operative if the Plaintiff is unable to pay its debts but the
financial statements
attached to the particulars of claim indicate
that the Plaintiff is in fact presently in a position to pay its
debts.
32.
According to the Defendant:
32.1.
The
Plaintiff was finally wound up on 14 November 2012.
32.2.
On
4 July 2013, the joint liquidators signed their report in terms of
section 402 of the old Companies Act. In the report, the joint
liquidators state that the Plaintiff's liabilities include a claim by
Manthata for R5 064 916.00, a claim by Ross for R3 160 645.00
and a
further claim of R2 252 162.00 (the disputed claims) and that the
assets of the Plaintiff are R10 385 986.00
32.3.
On
1 August 2014, one of the joint liquidators applied for the
expungement of the disputed claims and on 5 June 2015 the Master
confirmed that the disputed claims had been expunged.
32.4.
As
a result of this, the Plaintiff's liabilities, according to the
Defendant, are only R674 802.00.
32.5.
The
assets of the Plaintiff as at 21 May 2013 were R10 385 960.00, as
confirmed by the joint liquidators. This amount is admitted
by the
Plaintiff.
33.
However, according to the Plaintiff when it issued
summons against the Defendants on 16 February 2015:
33.1.
none
of the claims proved against Moriting had been expunged yet;
33.2.
the
Plaintiff's liabilities exceeded its assets;
33.3.
the
joint liquidators could not turn their backs on the claims and other
disputes involving Moriting and could consequently not
discharge any
concurrent debts;
33.4.
The
present L&D account is only a
first
account.
34.
In short, at the time that the summons was issued,
Moriting was unable to pay its debts. This is not disputed by the
Defendants.
35.
The Plaintiff further contends that it is not the
amendment which seeks to introduce reliance on section 341(2) of the
old Companies
Act into the particulars but that this was done in the
original particulars of claim at paragraph 49.2. This is indeed so.
The
original particulars of claim refer to section 341(2) of the old
Companies Act in relation to the purported set
off
or deductions by the Defendant. In this
regard, paragraph 49 of the original particulars of claim provides:
''49. However, in law
the purported set-off or deduction by Centriq Life is invalid for
inter alia the following reasons:-
49.1
a
purported set-off of
a
claim against a company in liquidation after
the institution of a concursus creditorum is invalid;
49.2
the
purported set-off amounts to one or more dispositions of property of
Moriting (including rights of action) as contemplated in
Section
341(2) of the 1973 Companies Act, after the effective date of the
winding-up of Moriting.
36.
The Plaintiff contends that notwithstanding the above,
there is no bar to it relying on Section 341(2) and that it has laid
the
relevant factual premise for doing so.
37.
The dispute between the parties in relation to this
ground of objection has therefore developed into a question of
precisely when
the Plaintiff's ability to pay its debt is to be
assessed. The Plaintiff relies on the judgment of the Supreme Court
of Appeal
("SCA") in
Sackstein No
v Proudfoot SA (Pty) Ltd
2006 (6) SA 358
(SCA)
as
authority for the proposition that the relevant time is when the
proceedings are instituted. The Defendants contend, in contrast,
relying on
Taylor and Steyn NNO v Koekemaer
1982 (1) SA 374
(T)
that the relevant
time is when a court is called upon to decide whether there is a
sustainable claim based on section 341(2).
Taylor
and Steyn's
case concerned the winding up of
a company and the applicability of section 415(1) of the 1973
Companies Act. This section contains,
as a jurisdictional fact, that
the company must be
unable to pay its debts.
Mr Green SC on behalf of the Defendants
argued that the effect of the Full Bench decision in
Taylor
and Steyn
is that the relevant time is when
the section is invoked by the liquidator, in other words, when the
liquidator actually enforces
the section or when the decision is
taken. The relevant section of the judgment is as follows:
"In my opinion,
therefore, the expression in s 415(1), "a company which is being
wound up and is unable to pay its debts",
bears its ordinary
meaning, namely a company which is unable to pay its debts at the
time that the section is invoked by the liquidator
or by a creditor
who has proved a claim.'
38.
He also argued that
Taylor and
Steyn
concerned a situation more akin to the
present one than that which faced the SCA in
Sackstein.
This, he argued, is because the SCA did not
consider a shifting ability to pay post the issuing of a summons as
was the case in
Taylor.
39.
In
Sackstein,
the
SCA was also faced with a provision of the old Companies Act, namely,
section 340(1) of that Act, which has language similar
to section
341(2). The SCA was called upon to decide
inter
alia
when a company must be unable to pay all
its debts for the purposes of section 340(1). The SCA considered
Taylor and Steyn’s
case
and held that the same construction must be applied to those sections
of the Companies Act which contain the identical or substantially
similar phrase, and ultimately concluded that the relevant time at
which the company must have been unable to pay its debts was
"at
the time that the present action was instituted."
In
so doing, the SCA referred to an earlier decision of that Court in
Standard Bank of South Africa v The Master
and Others 1999 (2) SA257 (SCA) at 263B.
In
that case, the SCA was faced with an enquiry by the Master in terms
of section 415 of the old Companies Act, after the approval
of final
liquidation and distribution account and after payment of dividends
in terms thereof but before the company had been dissolved
in terms
of section 419 of the Act. The question in that case was whether the
Master had acted
ultra vires
his
powers in conducting the enquiry at that stage. The Court in
Standard
Bank
placed weight on the practical
consideration that
"there would be no
call, for instance, to conduct an examination of directors and others
at an enquiry contemplated in ss415
or 417 where the company which is
being wound up is able to meet all its commitments."
The
Court went on to state that the real purpose of the inclusion of the
phrase
"being wound up and unable to pay
its debts"
is designed to address the
type of company hit by the provision and rather than impose a
timescale within which the holding of an
examination by the Master is
to take place. In the present case, the purpose of section 341(2) is
clearly to prevent and invalidate
dispositions of assets after the
concursus.
40.
In line with
Sackstein,
I
am of the view that the phrase
"at the
time that the present action was instituted'
means
at the time that the summons was issued in this case. The phrase
cannot mean, as the Defendants contend, that the relevant
time, is
when the court is called upon to decide whether there is a
sustainable claim based on section 341(2). The effect of the
Sackstein
decision is
to draw a line as to when the ability of a company to pay its debts
must be evaluated. The absence of such a line would
result in
uncertainty and render section 341(2) unenforceable by a litigant who
will often not know whether the company in question
will be able to
pay its debts at the time that the decision is taken. In other words,
if the relevant time at which a company must
be unable to pay its
debts, is when the court decides that question, a litigant could
never satisfy the jurisdictional requirements
of the section when
instituting proceedings because the inability of the company to pay
its debts would be unknown.
41.
I am therefore of the view that there is no merit in the
Defendant's argument that the Plaintiff failed to meet the
jurisdictional
requirement of being unable to pay its debts in terms
of section 341(2) of the old Companies Act.
The Third Ground of
Objection: The alternative delictual claims
42.
The amended particulars of claims contain two
alternative delictual claims in which damages are claimed. The first
alternative delictual
claim is advanced as an alternative to the set
off
claim and on the
premise that the R2 million loans to the Plaintiff were validly
concluded.
43.
The Plaintiff alleges that it suffered damages of R2
million as a result of the first defendant's negligence in breach of
a duty
of care owed by the first defendant to the Plaintiff to ensure
that any payment made to the plaintiff was made to the Plaintiff
on
the instruction of an authorised representative of the Plaintiff. The
duty arose, it is alleged, from the first defendant's
knowledge that
Mr Manthata was not a director and was not authorised to represent
the Plaintiff in nominating a bank account.
44.
The second delictual claim is made in the alternative to
the Subscriber Agreement claim. The Plaintiff is alleged to have
suffered
damages of R4.2 million as a result of the First Defendant's
negligence and breach of a duty of care owed by the First Defendant
to the Plaintiff to ensure that any payment made to the Plaintiff was
paid to the Plaintiff on the instruction of an authorised
representative of the Plaintiff.
45.
I deal with each in turn.
The R2 million delictual
claim
46.
The amended particulars of claim allege that the alleged
loans totaling R2 million were advanced by the First Defendant as
follows:
46.1.
On
22 November 2010, the sum of R500 000.00 was paid to Reed Hope
Phillips Attorneys;
46.2.
On
21 April 2011, after the effective date of winding up of the
Plaintiff, the sum of R500 000.00 was paid to Reed Hope Phillips
Attorneys;
46.3.
On
30 May 2011, after the effective date of winding up of the Plaintiff,
the sum of R500 000.00 was paid to Reed Hope Phillips Attorneys;
46.4.
On
29 June 2011, after the effective date of winding up of the
Plaintiff, the sum of R300 000.00 was paid to an entity described
as
lnyezi, controlled by Manthata, Ross and/or Deon Smith;
46.5.
On
24 August 2011, after the effective date of winding up of the
Plaintiff, the sum of R200 000.00 was paid to an entity described
as
lnyezi, controlled by Manthata, Ross and/or Deon Smith;
47.
The amended particulars of claim further alleged that
the loans advanced after the effective date of the winding up of the
Plaintiff
totaling R1.5 million are per se invalid due to the
concursus creditorum having been instituted. Such loans were also
void, according
to the Plaintiff because they were concluded by
individuals who lacked authority to represent the Plaintiff, to the
knowledge of
the Defendants. In addition, the loans were paid not to
the Plaintiff but to third parties.
48.
The Defendant objects to paragraph 23 of the amendment.
This paragraph of the amendment deals with paragraph 67 of the
amended particulars
of claim and inserts the following:
"and in the event
of it being found that one or more of the purported loans referred to
in 58 to 61 above were validly concluded
then..."
49.
The Defendants' objection is that if the R2 million
loans were validly concluded then the Plaintiff cannot advance a
sustainable
delictual claim. They say so because the Plaintiff
alleges that Mr Manthata concluded the R2 million loans but that he
was not
authorised to do so and hence the loans were invalid.
50.
According to the Defendant, the premise of the delictual
claim requires a postulation that Manthata was authorised to
represent
the Plaintiff in concluding the agreements and hence the R2
million loans are valid. The Defendants go further to argue that it
is the postulate that Manthata was authorised that presents the
difficulty for the delictual claim. Even if the legal duty relied
on
by the Plaintiff exists, that duty could not have been breached by
the First Defendant in paying the loans on the instructions
of
Manthata as the unauthorised representative of the Plaintiff because
that postulate of the delictual claim is that Manthata
was authorised
to represent the Plaintiff and conclude the R2 million loans.
51.
The Defendants are correct, in my view, that if the
loans were validly concluded, then there is an implied acceptance
that Mr Manthata
who concluded the loans on behalf of the Plaintiff,
was authorised to do so. However, the Plaintiff argues that its case
in the
alternative is not about whether the loans were validly
concluded but whether the pay out of the loans was valid. Therefore,
although
Mr Manthata may be found to have been authorised to conclude
the loan on behalf of the Plaintiff, the subsequent pay out of the
loan to parties other than the Plaintiff, was invalid and the
Defendants had a duty not to make such invalid pay out to third
parties. I note that the loan agreements do not specify the bank
accounts into which the payment of monies must be made. In the
circumstances, I am persuaded by the Plaintiff's argument that this
is best dealt with by a trial court and not en exception. There
may
well be evidence to be led on the context in which the loans were
concluded and the implications for the pay out of the loans.
52.
In the supplementary heads of argument, the Defendants
address the issues raised in their further supplementary answering
affidavit.
Of relevance to the objection to the R2 million delictual
claims, the Defendants state that it is factually incorrect that the
Plaintiff suffered a loss of R2 million because it is now common
cause that three separate amounts of R500 000.00 each were paid
to
Reed Hope Phillips and that those payments were
per
se
invalid. The amount of R1.5 million paid
to Reed Hope Phillips forms part of the Plaintiff's alternative
delictual claims advanced
in paragraph 67 of the particulars of
claim. Having now seen the liquidation and distribution account and
the liquidator's affidavit,
the Defendants contend that the Plaintiff
has not suffered damages of R2 million because it has recovered an
amount of R534 491.14.
That, it is contended means that the Plaintiff
has failed to raise a triable issue. The Defendants, in my view, miss
the point
in this regard.
53.
The implication of Liquidation and Distribution Accounts
and the invalid payments to Reed Hope Phillips do not go to the
question
of whether there is a triable issue or not. Rather, these
facts go to the question of quantum. If the Defendant is correct, the
Plaintiff will not be able to prove its alternative claim for R2
million. That is a question of fact to be determined at trial
and not
on exception.
(Living Hands (Pty) Ltd and
Another v Ditz and Others
2013 (2) SA 368
(GSJ) at para 17).
The
second alternative delictual claim
54.
In relation to the second alternative delictual claim,
the Defendants primary objection is that the particulars do not
contain sufficient
allegations to justify the existence of a legal
duty relied on by the Plaintiff and that the alternative delictual
claims should
accordingly be disallowed. They say so for the
following reasons:
54.1.
In
order to sustain the alternative delictual claims, the Plaintiff must
plead facts that support the alleged legal duty. The facts
alleged by
the Plaintiff relate to the first defendant's alleged knowledge that
Manthata had been removed as a director and that
he could not
instruct where the proceeds of the loans or the dividends had to be
paid to. This, amounts to an allegation that the
terms of the
Subscriber Agreement or the Loan Agreement were not complied with by
the first defendant. In other words, that the
first defendant
breached the terms of the contract. Therefore, according to the
Defendant, there is no need for the existence of
a separate legal
duty outside of the contract and the Plaintiff ought not to be
allowed to avoid its contractual claim.
55.
Both parties rely on the judgment of the SCA in
Viv's
Tippers (Edms) Bpk v Pha Phama Staff Services (Edms) Bpk h/a Pha
Phama Security
2010 (4)
SA
455
(SCA)
in support of their arguments. In
that case, the SCA held:
“
W
here
economic loss arises from a breach of contract, loss will of course
be limited. But a negligent breach of contract will not
necessarily
give rise to delictual liability. This court has held that where
there is a concurrent action in contract an action
in delict may be
precluded: Lillicrap, Wassenaar and Partners v Pilkington Brothers
(SA) (Pty) Ltd. But that case held only that
no claim is maintainable
in delict when the negligence relied on consists solely in the breach
of the contract. Where the claim
exists independently of the contract
(but would not exist, but for the existence of the contract), a
delictual claim for economic
loss may certainly lie. This is made
clear by Bayer South Africa (Pty) Ltd v Frost; and Holtzhausen v Absa
Bank Ltd.
[8] Accordingly it is
possible that the assumption of contractual duties is capable of
giving rise to delictual liability. The question
is whether there are
considerations of public or legal policy that require the imposition
of liability to cover pure economic loss
in the particular case."
56.
Mr Green SC, on behalf of the Defendants argued that
Viv's Tippers,
is
authority for the proposition that where parties have concluded a
contract which regulates their relationship there is no need
to
recognise separate legal duties outside the contractual matrix. This
is particularly so where the damages sought to be claimed
are of pure
economic loss as in the present case.
57.
Mr Brett SC, on behalf of the Plaintiff argued that
Viv's Tippers
is
authority for the proposition that the alternative delictual claims
should not be dismissed. He contended that the Plaintiff
had both a
contractual and delictual claim, arising from the contract and from
the conduct of the Defendant in relation to the
implementation of the
contract. He argued further that the principles of public policy and
legal policy dictate that liability
should be imposed. In relation to
the Defendants' argument that Manthata was authorised. Mr Brett SC
argued that sufficient facts
had been pleaded to establish that there
was a legal duty on the Defendants not to make payments to or deal
with Manthata. It is
correct that the particulars do allege a series
of facts around the notifications to the Defendants that Manthata was
not authorised
to represent the Plaintiff and that despite this, the
Defendants proceeded to engage with him. The Plaintiff has, in my
view, laid
a sufficient factual basis at the stage of exception for
the assertion that the Defendants bore a legal duty to the Plaintiff.
58.
Our courts have long grappled with questions of
delictual liability for pure economic loss.
Viv's
Tippers
is but one in a series of cases that
bear mentioning.
59.
In
Lillicrap, Wassenaar and
Partners v Pilkington Brothers (SA) (Pty) Ltd
1985
(1) SA 475
(A),
the then Appellate Division
held that a delictual remedy is not available to a Plaintiff where
the negligence relied upon arises
from a breach of a contractual
term. In
Trustees, Two Oceans Aquarium
Trust v Kantey
&
Templer
(Pty) Ltd
2006 (3) SA
138
(SCA),
the SCA went a step further and a
dismissed a claim for damages in finding that there was no reason for
legal liability for financial
loss caused by negligence to be
extended to a party who was in the position to avoid the risk of harm
by contractual means but
failed to do so. This was confirmed by the
SCA in
AB Ventures Ltd v Siemens Ltd
2011
(4) SA 614
(SCA),
where the Court warned
all parties to ensure that before they undertake any contractual
liability, they must carefully consider
whether the contract could
expose them to losses caused by other parties working on the same
project. In that case, the SCA held
that the appellant had failed to
avail itself of the protections afforded by a contract where it could
have stipulated that it
would not be liable for delays caused by
other contractors. The appellant in that case was held not to be able
to recover the losses
incurred by third parties' delays, from the
respondent, under the law of delict.
60.
In
Viv's Tippers,
Lewis
JA found that public policy would not allow the undermining of the
contract between the owner of the premises and the security
firm by
allowing a claim by a third party in a situation where the owner of
the premises was excluded from claiming from the security
firm. The
Court made an attempt to curtail the circumstances in which one can
succeed in a claim in delict for pure economic loss.
In
Country
Cloud Trading
CC
v
MEC, Department of Infrastructure Development
2014 (2) SA 214
(SCA),
the SCA again made clear that delictual
claims arising from damages sustained to parties flowing from the
terms of a contract, would
be disallowed. On appeal to the
Constitutional Court in
Country Cloud
Trading CC v MEC, Department of Infrastructure Development
2015 (1)
SA 1
(CC),
the Constitutional Court held
at para 65:
“
Where parties
take care to delineate their relationship by contractual boundaries,
the law should hesitate before scrubbing out
the lines they have laid
down by superimposing delictual liability. That could subvert their
autonomous dealings. This underscores
the broader point made by this
court in Barkhuizen that within bounds, contractual autonomy claims
some measure of respect."
61.
In relation to questions of whether public and legal
policy required a recognition of Country Cloud's delictual claims,
the Court
held that Country Cloud's non-vulnerability was highly
significant and militates against recognising it's claim.
62.
Applying these principles to the present case, the
Plaintiff's case is that the Defendants were instructed not to deal
with Manthata
and that he was not authorised to represent the
Plaintiff. Notwithstanding that, the Defendant dealt with Manthata to
the financial
detriment of the Plaintiff.
63.
The Plaintiff alleges that it is extremely vulnerable
because of the lack of protections afforded by the contract in
relation to
the accounts into which the monies ought to have been
paid into. That, it appears to me, is not especially persuasive
because it
was entirely within the province of the Plaintiff to
determine what terms were included in the Subscriber Agreement. The
fact that
it failed to ensure that it was adequately protected does
not easily justify this Court allowing it to enforce a delictual
claim
in such circumstances. Nevertheless, the dicta in
Viv's
Tippers
suggest that where the delict arises
separately but in the context of the contract, it can still possibly
give rise to a delictual
claim. Lewis JA recognised that his would
turn on questions of public policy which are to the decided by a
court on a case to case
basis.
"The
question is whether there are considerations of public or legal
policy that require the imposition of liability to cover
pure
economic loss in the particular case."
(
Viv's
Tippers
at para 8.)
64.
Questions of legal and public policy are therefore
relevant to the question before this Court as to whether the proposed
amendments
are will render the particulars of claim excipiable.
65.
In
Living Hands,
in
the context of an exception, the Court held:
“
A court must be
apprised of all the factors and circumstances relevant to the
enquiry. Although public policy considerations can
in some instances
be decided without
a
detailed
factual matrix, if this cannot be done, the issue of wrongfulness
cannot be decided on exception." (at para 17)
66.
In the present case, I am not persuaded that the public
policy issues can be decided without additional factual material.
There
are difficulties confronting the Plaintiffs and their claim
which may ultimately fail at trial. However, I am not satisfied that
the proposed amendment so clearly fails to raise a triable issue that
it can be precluded at
this
stage,
on exception.
67.
My conclusion is strengthened by the fact that one of
the purposes of an exception is to raise a substantive question of
law which
may have the effect of settling the dispute between the
parties. If the exception is not taken for that purpose, an
excipient,
should make out a very clear case before it would be
allowed to succeed.
(Living Hands
at
para 15). An exception taken against the present alternative claims
for damages will rot substantially dispose of the dispute
between the
parties. In the circumstances, I am not inclined to uphold the
objection.
Order
68.
I therefore make the following order:
68.1.
The application for
leave to amend the Plaintiff's particulars of claim in the respects
set out in the Plaintiff's notice of intention
to amend dated 31 July
2015, is granted.
68.2.
The Plaintiff is
directed to deliver its amended pages within ten days from date of
this Order.
68.3.
The Defendants are
directed to pay the cost of this application, including the costs of
two counsel.
N.RAJAB-BUDLENDER
ACTING
JUDGE OF THE
GAUTENG
DIVISION OF THE HIGH COURT,
PRETORIA
Date
of Judgment: 27 February 2017
Counsel
for the Plaintiff: Adv. J J Brett SC
Adv.
Ernst Kromhout
Instructed
by: Gildenhuys Malatji Inc
Counsel
for the Respondents: Adv. I P Green SC
Instructed
by Clyde & Co c/o Friedland,
Hart
Solomon & Nicolson,
Pretoria.
[1]
Nova
subsequently changed its name to Centriq Life Insurance Company
Limited (the First Defendant.)