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[2017] ZAKZPHC 71
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Breetzke and Others v Alexander and Others (AR298/16) [2017] ZAKZPHC 71 (5 May 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: AR298/16
In
the matter between:
GAVIN
ANTHONY BREETZKE
FIRST
APPLICANT
MICHAEL
JOHN BREETZKE
SECOND
APPLICANT
MARGARET
ANN BREETZKE
THIRD
APPLICANT
and
ROBERT
EDWARD ALEXANDER
FIRST
RESPONDENT
ZININGI
PROPERTIES (PROPRIETARY)
LIMITED
SECOND
RESPONDENT
RODNEY
JOHN TROTTER
THIRD
RESPONDENT
STUART
RICHARD HOWES
FOURTH
RESPONDENT
JUDGMENT
Delivered
on
5
MAY 2017
POYO
DLWATI J:
[1]
This is an appeal against the order of Moodley J upholding the
respondents’ exception to the appellants’ particulars
of
claim. The appellants were also granted leave to amend their
particulars of claim within 20 days of the date of granting the
order, failing which the respondents could apply for the remaining
relief as set out in paragraph (b) and (c) of the exception,
dated 23
March 2015.
[2]
The
appellants are the trustees of the St Francis Trust (SF Trust), and
they are appointed in terms of Letters of Authority issued
to them by
the Assistant Master of this Court on 12 July 2012. They are suing in
their capacities as the trustees of the SF Trust.
The first appellant
is also a trustee of the Sleepy Hollow Trust (SH Trust), and is
appointed in terms of Letters of Authority
issued to him by the
Assistant Master of this Court on 7 February 2006. He is, however,
not suing or acting in that capacity in
these proceedings.
[3]
The
first respondent is also a duly appointed trustee of the SH Trust. He
is also a trustee of the June Alexander Family Trust (JAF
Trust), and
is appointed in terms of Letters of Authority issued by the Assistant
Master of this court on 31 October 2003. He is
also the sole
shareholder of the second respondent. He is sued in his personal
capacity and in his capacity as trustee of both
the SH Trust and JAF
Trust. In terms of paragraph 8 of the appellants’ particulars
of claim, there is no relief sought against
the first, third and
fourth respondents in their capacities as trustees of SH and JAF
trusts but are merely cited by virtue of
their interest in the
outcome of these proceedings.
[4]
In
order to fully comprehend the issues raised in this appeal, it is
necessary to sketch out a brief background of the facts that
give
rise to this appeal. The SF and JAF trusts were each 50%
beneficiaries of the SH Trust. The SH Trust was the owner of a large
portfolio of immovable property. The first appellant represented the
SF Trust in the SH Trust whilst the first respondent represented
the
JAF trust. The third respondent is also a trustee of the SH trust.
The first appellant, first and third respondents owed fiduciary
duties
to the SH trust which are listed in paragraph 13 of the appellants’
particulars of claim by virtue of their roles as
trustees of SH
Trust.
[5]
According
to the appellants, the first respondent breached his fiduciary duty
to the SH Trust and its beneficiaries by allowing
certain immovable
property, for ease of reference described as the SARS property, to be
sold to the second respondent at a price
lower than the price
previously negotiated on behalf of the SH Trust with another party.
Thereafter, the first respondent caused
the second respondent to sell
the property to a third party at a price higher than the price paid
for by the second respondent
to the SH Trust. This third party is the
one that had previously shown interest and offered to buy the SARS
property before it
was sold to the second respondent. In this regard
the first, alternatively the second respondent, unduly benefited in
terms of
the sale of the SARS property in the amount of R19 283 000
which ought to have been the benefit received by the SH Trust.
[6]
The
appellants, therefore, based on the above, alleged that the first
respondent was in breach of his fiduciary duty to the SH Trust
and
its beneficiaries in that:
(a)
the first respondent did not act with the utmost good faith towards
the SH Trust and its beneficiaries;
(b)
the first respondent put his own interests first, alternatively,
allowed his own interests, or those of the second respondent,
to
conflict with that of the SH Trust and its beneficiaries;
(c)
the first respondent ought not to have purchased the property
portfolio for himself (through the second respondent); alternatively,
he ought not to have done so without full disclosure to the other
trustees of the SH Trust regarding the opportunity which had
presented itself to dispose of the SARS property at a profit and
without obtaining their informed consent thereto;
(d)
the first respondent ought to have accounted to the SH Trust for the
said benefit.
It
was on the basis of the above grounds that the appellants, in their
representative capacities as trustees of the SF trust, were
entitled
to require the first, alternatively, the second respondents to
disgorge the said benefit and to pay the amount thereof
to the SH
Trust.
[7]
The
respondents excepted to the appellants’ particulars of claim on
the grounds that the papers do not disclose a cause of
action and or
that they lack the averments necessary to sustain the action against
the respondents. It was averred in the exception
that since the
appellants are trustees of the SF Trust, the SF Trust is therefore
the claimant. Furthermore, since it is not averred
that any claim is
being made on behalf of the SH Trust, nor any relief sought against
it, no action can succeed against the aforesaid
trust in the absence
of the said trust as a party to these proceedings, whether directly
or otherwise.
[8]
It
was further averred in the exception that since it was the
appellants’ claim that the first respondent should have
accounted
to the SH Trust for the benefit derived, the appellants
then, in their representative capacities as trustees of the SF Trust,
which
in turn is a beneficiary of the SH Trust, were entitled to
require the first or second respondent to pay the amount of the
benefit
to the SH Trust. These averments, therefore, would result in
the action for the payment of any benefit obtained by the first
respondent
and second respondents to the SH Trust. The trustees of
the SF Trust therefore, had no legal right or standing to make a
claim
on behalf of the SH Trust as such claim could only be sustained
if made by the trustees of the SH Trust or by its beneficiaries.
[9]
The
appellants thereafter filed a notice of amendment of their
particulars of claim which was objected to by the respondents. In
the
amendment the appellants sought to delete the whole of sub-paragraph
31(c) which read as follows:
‘
[the
first respondent] ought not to have purchased the property portfolio
for himself (through the second defendant); alternatively,
he ought
not to have done so without full disclosure to the other Trustees of
the SH Trust of the opportunity which had presented
itself without
obtaining their informed consent thereto’.
The
appellants also sought to delete the whole of the prayer and
substitute it with a new one. The respondents objected to the
amendments on the basis that the amendments do not meet the complaint
in the exception and to allow the amendment would result in
the
particulars of claim which are excipiable on the same basis, namely
that they still did not disclose a cause of action and
or lack the
averments necessary to sustain an action against the respondents.
[10]
It
was for those reasons that the exception was set down for argument
and Moodley J upheld the exception and allowed the appellants
leave
to amend their particulars of claim. The issues in this appeal are
whether:
(a)
the appellants have
locus standi in judicio
; and
(b)
whether the availability to the appellants of a direct action
precluded the representative action which was advanced.
[11]
Mr
Acker
SC
argued and acknowledged that whilst the learned judge
a
quo
was correct in finding that the action brought by the appellants was
a representative one, she however erred in finding that both
counsel
had agreed during argument that the
Beningfield
exception only applied when a beneficiary had no recourse to a direct
action against the defaulting trustee. Mr Dickson
SC
,
on behalf of the respondents confirmed that there was never an
agreement on this issue between the parties and to the extent that
the learned judge recorded an agreement, she had indeed erred.
[12]
Mr
Acker further argued that the dispute between the parties lied in the
issue whether a party who had recourse through a direct
action can
also sue on the basis of a representative capacity. He contended that
because the action concerns a breach of a fiduciary
duty by one of
the trustees of the SH Trust the remaining trustees could not
themselves bring such an action as in law the trustees
must act
jointly. It was in those circumstances that the beneficiaries were
afforded the right to rely upon the
Beningfield
exception and bring the action on the SH Trust’s behalf, so
went the argument. Mr Acker relied on the principle laid down
in
Beningfield
v Baxter
(1886) 12 AC 167
(PC) and quoted with approval in our law in
Gross
and others v Pentz
[1996] ZASCA 78
;
1996 (4) SA 617(A)
at 628G to H.
[13]
Mr
Dickson, on the other hand, submitted that the appellants’
particulars of claim lacked the necessary
locus
standi
to sue in a representative action and could not sustain such action
by relying on the
Beningfield
exception. He further contended that on the pleadings as they stood
the true plaintiff was the SF Trust and not the appellants
acting for
the SH Trust. The appellants therefore did not need the
Beningfield
exception because they have a vested right in the SH Trust as holders
of vested interests accruing to the SF Trust. The claim therefore
sustained a direct action by the SF Trust against the first
respondent in his personal capacity, so went the argument.
[14]
The
following principle was held in
Trustees
for the time being of the Children’s Resources Centre Trust and
others v Pioneer Foods (Pty) Ltd and others (Legal
Resources Centre
as
amicus curiae
)
2013 (1) All SA 648
(SCA) at para 36
‘
The
test on exception is whether on all possible readings of the facts no
cause of action is made out. It is for the defendant to
satisfy the
Court that the conclusion of law for which the plaintiff contends
cannot be supported upon every interpretation
that can be put
upon the facts
’
.
In
Giantsos
NO v Giantsos
2015 JDR 1642 (GJ) at para 19 the court held that
‘
The
exception on the allegations of being vague and embarrassing is
intended to cover the case where, although a cause of action
appears
in the summons there is some defect or incompleteness in the manner
in which it is set out, which results in embarrassment
to the
defendant. It strikes at the formulation of the cause of action and
not its legal validity
’
.
[15]
Against
this background then, one must examine the appellants’
particulars of claim and answer the question to be answered
in this
appeal which is whether a representative action is restricted to a
situation where the beneficiaries have no direct action
available to
them. Put differently, were the appellants precluded from bringing a
representative action because the direct action
was available to
them. Both counsel referred us to
Gross
referred
to supra. They had also referred the court
a
quo
to this case.
[16]
In
Gross
,
one of the testator’s children instituted an action against the
executor for breach of trust in which two other beneficiaries
knowingly participated. The beneficiaries therefore sought for the
removal of the executor from office as trustee of the trust
and an
order that some monies be paid to the trust jointly and severally by
the defendants. The action was opposed by the defendants
who raised
various exceptions to the plaintiff’s particulars of claim. One
of the exceptions was that the plaintiff had no
locus
standi in judicio
and was not entitled in law to the relief claimed since he was not a
trustee to the trust. The trustee, Gross, had, immediately
after the
action was instituted, resigned as trustee.
[17]
The
plaintiff objected to this exception on the basis that the
resignation of Gross as a trustee did not deprive him of
locus
standi
which he had when the action was instituted even if the resignation
vested the other trustee with
locus
standi
and
she could sue Gross personally in respect of the claim. The
defendant’s denial of plaintiff’s
locus
standi
was based upon the submission that in law only the trustee or
trustees are entitled to take action to recover damages for injury
to
a trust estate, a beneficiary has no standing to do so. Authorities
on case law were referred to in support of this submission.
[18]
Corbett
CJ at page 625A-B held that it must be accepted as a general rule of
our law that the proper person to act in legal proceedings
on behalf
of a deceased estate is the executor thereof and that normally a
beneficiary in the estate does not have
locus
standi
to do so. The same principle applies to the trustee appointed in
terms of a testamentary trust. He went on to state that a distinction
must however, be drawn between actions brought on behalf of a trust
to, for instance, recover trust assets or to nullify transactions
entered into by the trust or to recover damages from a third party,
on the one hand, and, on the other hand, actions brought by
the trust
beneficiaries in their own right against the trustee for the
maladministration of the trust estate, or for failing to
pay or
transfer to beneficiaries what is due to them under the trust, or
transferring to one beneficiary what is not due to him.
He referred
to the former type as a representative action and to the latter as a
direct action.
[19]
The general rule therefore applies to a representative action. There
is however an exception to the general rule. That exception
was set
out as follows in
Beningfield
vs Baxter
(referred to supra): where an executor cannot sue, because his own
acts and conduct, with reference to the testator’s estate,
are
impeached, relief, which (as against a stranger) could be sought by
the executor alone, may be obtained at the suit of a party
beneficially interested in the proper performance of his duty. The
exception was named after the case and was termed the
Beningfield
exception.
This meant that a beneficiary could sue a defaulting trustee or
executor as the defaulting or delinquent trustee could
not be
expected to sue himself. Corbett CJ held at page 631B-C that the rule
should be that where in a case there are joint trustees,
for the
purpose of deciding the issues of the
locus
standi
of
the claimant both trustees must be assumed to be liable for the
breach of trust.
[20]
In the present matter, the appellants are suing as trustees of the SF
Trust for payment to the SH Trust by the first, or alternatively
the
second respondent. This, no doubt, is a representative action. The
action is one brought on behalf of the trust estate. Since
this is a
representative action the general rule applies. It was argued
that the appellants had
locus
standi
on the basis of the
Beningfield
exception which is that where a trustee cannot sue because his own
actions and conduct are impeached then the relief which could
be
sought by the trustees/trustee alone can be obtained at the suit of a
party beneficially interested in the proper performance
of his duty.
[21]
The counter argument on behalf of the respondents was that even if
the
Beningfield
exception found application, the particulars
of claim do not contain the necessary averments that the trustee’s
actions (i.e.
the first respondent’s) are impeached and
therefore he cannot sue and hence the relief is sought by the
beneficiaries. There
are also no averments that the SF trustees
(appellants) are suing also in their personal capacities as
beneficiaries of the SF
and SH Trusts. It was further submitted that
even if the direct action was available to the appellants, the
particulars of claim,
as they stood, do not disclose the cause of
action under the direct action either. It was further argued that on
the pleadings,
as they stood, the true plaintiff was the SF Trust,
and not the appellants acting on behalf of the SH Trust, and that the
latter
would accommodate the
Beningfield
exception.
[22]
In terms of paragraph 8 of the particulars of claim, there is no
relief sought against the first and third respondents in their
capacities as trustees of SH Trust and JAF Trust. The same applies to
the fourth respondent in his capacity as the trustee of SH
Trust.
They are all merely cited because of their interest in the outcome of
the proceedings, if any. The appellants on the other
hand are suing
in their capacities as trustees of the SF Trust. They do not sue as
beneficiaries of the SH Trust nor on behalf
of the SH Trust. In my
view they lack the capacity to sue in a representative action or a
direct action. In a representative action,
which the appellants
purport to be contending, the action must be on behalf of the trust
and the exception (
Beningfield
)
will apply where the trustees’ action is impeached. In this
matter, however there is no averment that the appellants are
acting
on behalf of SH Trust. The facts pleaded by the appellants therefore
do not bring the appellants within the scope of the
Beningfield
exception.
[23]
The direct action on the other hand would be applicable where the
appellants are suing in their own capacities as beneficiaries
of SH
Trust against the delinquent trustee. However, even if it can be said
that the first respondent was a ‘delinquent trustee’
there is no averment that the appellants are suing in their own
capacities as beneficiaries of SH Trust. They again lack the
necessary
locus
standi
in my view. Whilst the averment is that the first and second
respondents must disgorge the benefit they received and pay it to
the
SH Trust, this can in no way mean that the action is therefore on
behalf of the SH Trust. At best it is for the benefit of
SH Trust.
There is therefore no claim made in either version that the
appellants are acting on behalf of the SH Trust. The trustees
of SF
Trust have not averred the basis of why they are making the claim on
behalf of SH Trust.
[24]
Whilst it is common cause that the Honourable Judge
a
quo
erred in holding that both counsel had agreed that the
Beningfield
exception only applied when a beneficiary had no recourse to direct
action against the defaulting trustee, I, however, hold that
view.
This is so because the beneficiaries have a recourse which is a
direct action against a delinquent trustee. The
Beningfield
exception cannot apply in this particular case regarding a
representative action because the first respondent is not being sued
in his capacity as trustee of SH Trust. There is therefore nothing
stopping the trustees of the SF trust as beneficiaries of the
SH
Trust from suing the first respondent in his capacity as trustee of
SH Trust. There is also nothing stopping them from instituting
a
direct action. The
Beningfield
exception
is meant to help someone who otherwise would have no
locus
standi.
It
cannot be abused where the direct action is available.
[25]
Mr Acker in his heads of argument contended that our courts have
recognised that the Constitution requires that in certain
circumstances, a trust beneficiary be accorded
locus
standi in judicio
to protect its interest in a trust by instituting action on behalf of
that trust. He referred us to the case of
Bafokeng
Tribe v Impala Platinum Limited and others
1999 (3) SA 517
(BH), the court was dealing with the matter in the
context of section 38 of the Constitution. At page 550E, Friedman JP
made it
clear that the Constitution concentrates on giving redress
and relief where a right is infringed. That has not been pleaded in
the matter in
casu
.
There is no allegation in the particulars of claim that there is an
infringement or the threat of an infringement of a fundamental
right
as envisaged by section 38. In any event the appellants have a direct
recourse available to them against the respondents
in a correctly
formulated cause of action. Section 38 in my view caters for
situations where the parties would have no
locus
standi
at all.
[26]
I, therefore, am satisfied that the particulars of claim as they
stand are excipiable as they do not disclose the appellants’
locus standi
against the respondents as currently cited in the
action. I therefore do not believe that there is any reason to
disturb the court
a quo’s overall conclusion in the matter. I
agree with her finding that the respondents have discharged their
onus of establishing
that the particulars of claim lack the necessary
averments to establish the appellant’s
locus standi
in
order to sustain a claim. The appeal should therefore fail.
Order
[27]
In the result, I make the following order:
‘
the
appeal is dismissed with costs’.
________________
POYO
DLWATI J
I
agree
________________
HADEBE
AJ
________________
GORDON AJ
APPEARANCES
Date
of Hearing: 06 February 2017
Date
of Judgment: 05 May 2017
Counsel
for Applicant: Adv B A Acker SC
Instructed
by: Barkers c/o Cajee Setsubi Chetty Inc.
Respondent:
Adv A J Dickson SC
Instructed
by: J Leslie Smith & Company