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[2017] ZAKZDHC 32
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Khan NO and Another v Maxprop Holdings (Pty) Ltd (5419/2012) [2017] ZAKZDHC 32 (18 August 2017)
IN HIGH COURT OF SOUTH
AFRICA
KWAZULU-NATAL LOCAL
DIVISION, DURBAN
CASE
NO: 5419/2012
RAHIM
KHAN
N.O.
First
Plaintiff/First Applicant
THAMSANQA
EUGENE MSHENGU N.O.
Second
Plaintiff/Second Applicant
and
MAXPROP
HOLDINGS (PTY)
LTD
Defendant
/ Respondent
and
GARLICKE
& BOUSFIELD
INCORPORATED
Third
Party
JUDGMENT
Delivered
on:
18 August 2017
ORDER:
1. The application in terms of Rule
28(4) by the plaintiffs for leave to amend their particulars of claim
is refused.
2. The plaintiffs’ claim against
the defendant is dismissed.
3. The defendant’s claim against
the third party is dismissed.
4. The plaintiffs are directed to pay
the costs of the defendant and the third party, such costs to include
the costs of Senior
Counsel where employed. The costs of the second
Senior Counsel, where employed, shall be taxed on the scale
applicable to Junior
Counsel.
MOODLEY
J:
Introduction:
[1]
This is an application in terms of Rule 28(4) by the plaintiffs for
leave to amend their particulars of claim to the summons
they caused
to be issued on 2 July 2012. The application is opposed by the
defendant and the third party.
[1]
[2]
Th
e
application for condonation of the late filing of the Rule
28(4) application, which was not opposed, was granted at the
commencement
of the hearing of the application.
Litigation
History
[3]
The late CB Cowan (the deceased) was a duly qualified and practising
attorney, who was an executive consultant with an incorporated
firm
of attorneys, Garlicke & Bousfield (the third party), at the time
of his death. From about 2004 until his death on 24
November 2010,
Cowan ran an unlawful pyramid or Ponzi scheme, which paid investors
interest on their investments at highly favourable
rates. The
defendant, Maxprop Holdings (Pty) Ltd, was an investor in Cowan’s
scheme. This scheme was exposed on Cowan’s
death, when it was
also ascertained that he was insolvent. His estate was finally
sequestrated on 27 May 2011.
[4]
The plaintiffs, who are the joint trustees in Cowan’s insolvent
deceased estate, have sued the defendant for repayment
to the
deceased estate of the sum which the defendant received in excess of
the investments it made in Cowan’s scheme. The
plaintiffs
allege that certain payments of interest to the defendant amounted to
dispositions by the deceased of his property made
without value as
contemplated by s 26(1)(a), alternatively s 26(1)(b), of the
Insolvency Act 24 of 1936 (‘the Act’)
in circumstances
where, immediately after such disposition, the liabilities of the
deceased exceeded his assets. They contend that
the dispositions are
therefore liable to be set aside in terms of s 32(1) of the Act.
[5]
The defendant pleaded and joined Garlicke & Bousfield in the
action as the third party. The third party excepted to the
plaintiff’s particulars of claim on the basis that the
particulars did not disclose a cause of action in that:
5.1 the plaintiffs had not made any
allegation from which it could be concluded in law that the payments
allegedly received by Cowan
from the defendant or any investor for
the purposes of his scheme became his property and part of his
estate.
5.2 The allegation was that such
payments were stolen by Cowan and accordingly his estate could not
have been reduced or diminished
by any payment made by him to the
defendant.
5.3
Any payment by Cowan
accordingly did not constitute a disposition or a disposition of his
property and could not be set aside under
the
Insolvency Act. The
plaintiffs therefore had no valid claim against the defendant.
[2]
[6]
At the hearing of the exception, the defendant sought an order in
terms of
Rule 33(4)
that the issue of whether the plaintiffs’
particulars of claim disclosed a cause of action be separated and
heard as a first
issue together with the third party’s
exception, which was granted by Bezuidenhout AJ (as he then was).
[7]
On 17 December 2013 the exception was upheld by Bezuidenhout AJ who
held that according to the averments in the particulars
of claim:
the
money was never to be paid to the deceased for his own benefit;
7.1 although the deceased may have
received or solicited the money, it was never intended to be paid
into his personal account nor
did it appear from the particulars of
claim that it was paid into an account of the deceased or transferred
thereto, or into an
account of an entity which was under his direct
control;
7.2 the money was paid into the trust
account of Garlicke & Bousfield; the payments of capital and
interest were secured by
undertakings in the name of Garlicke &
Bousfield;
7.3 there was no indication that the
money paid to the defendant was from the deceased’s account or
an account directly or
indirectly under his control;
7.4 therefore the funds were never
Cowan’s property or part of his deceased estate or paid
therefrom;
7.5 as it was averred further that
Cowan stole the money obtained from investors, he could never acquire
ownership of the money
nor could it become part of his estate; and
7.6
therefore the allegation that
the Trustees have a claim against the defendant was not sustainable
and the particulars of claim did
not disclose a cause of action.
[3]
[8]
Bezuidenhout AJ granted the plaintiffs leave to amend their
particulars of claim within 30 days of his order. He also granted
leave to the defendant to apply for the dismissal of the claim
against it and to the third party to apply for the dismissal of
the
third party claim against it, if the notice to amend was not
delivered timeously or if an objection to the proposed amendments
in
the notice delivered was sustained.
The
Application to Amend
[9]
The plaintiffs subsequently delivered on 21 February 2014 a notice of
their intention to amend the particulars of claim by substituting
paragraphs 7 to 16 with the following paragraphs:
‘
7. At all material times:
7.1 The deceased was a duly qualified,
admitted and practising attorney.
7.2 The deceased was an executive
consultant with Garlicke & Bousfield Inc a professional
incorporated firm of attorneys, practising
at 7 Torsvale Crescent, La
Lucia Ridge, Umhlanga, Durban and elsewhere.
8.1 During the period from about 1
January 2004 to the date of the deceased’s death the deceased
operated an unlawful multiplication
or pyramid scheme in terms of
which the deceased solicited funds from investors and used such funds
to pay other investors without
there being any lawful causa for such
receipts or payment.
8.2 The scheme was fraudulent and
unlawful and in contravention of the provisions of s11 of the Banks
Act 94 of 1990 and the provisions
of the Consumer Affairs (Unfair
Business Practices Act), 1988 (Act 71 of 1988), and as such void.
8.3 The deceased exercised control
over the funds invested by participants in the scheme (of which the
defendant was one) by directing
how and when the amounts contributed
by participants should be paid and to whom.
8.4 The deceased benefited from the
scheme either through theft or through purported commissions on
so-called investments.
9. The schedule annexure ‘POC1’
hereto sets out particulars of the payments made by the defendant by
way of investments
in the deceased’s unlawful scheme, the
recipients of such amounts chosen by the deceased from time to time,
as well as particulars
of the interest payments made to the defendant
pursuant to such scheme.
10. The deceased unlawfully and
without just cause in the pursuance of the said scheme paid or caused
to be paid the total amount
of R286 295 996,00 to the defendant. This
amount exceeded the amount which the defendant paid to the scheme by
R21 525 996,47.
The latter amount was paid without just cause and
unlawfully and pursuant to the unlawful scheme conducted by the
deceased, and
the defendant was thereby unjustly enriched at the
deceased’s expense.
11. Even if the payments do not
constitute unjust enrichment under [10] above,
[4]
each of the payments constituting the R21 525 996.47 made by the
deceased to the defendant constituted a disposition without value
by
the deceased as contemplated in s26(1)(a), alternatively s 26(1)(b)
of the Insolvency Act, 1936 (Act 24 of 1936) and were made
at a time
when immediately after such dispositions, the liabilities of the
deceased exceeded the value of his assets.
12. Accordingly, the said dispositions
are liable to be set aside in terms of
s32(1)
of the
Insolvency Act.’
[10
]
The defendant and third party objected to the amendments proposed in
the notice and duly delivered their grounds in terms of
Rule 28(3)
,
contending that:
10.1 the plaintiffs’ particulars
of claim, as sought to be amended, would still fail to disclose a
cause of action because,
although it is alleged in the proposed
paragraph 8.3 that Cowan exercised ‘control over the funds
invested by participants
in the scheme (of which the defendant was
one)’:
10.1.1. there would be no allegation
that any part of the funds allegedly ‘solicited’ by Cowan
from investors and ‘used’
by him to pay other investors,
and over which he allegedly exercised control, became his property
and part of his estate, and no
allegation from which it could
reasonably be concluded that the funds became his property and part
of his estate.
10.1.2. In the proposed paragraph 10,
it is alleged that the plaintiffs seek to recover from the defendant
a part of the total amount
which was paid to the defendant ‘at
the deceased’s expense’. But there is no allegation that
the aforesaid payments
were made from funds which were Cowan’s
property and formed part of his estate, and not merely funds over
which he exercised
control. There is therefore no basis on which it
can reasonably be concluded that any payments were made at Cowan’s
expense.
10.2 Alternatively, the particulars of
claim as sought to be amended would be vague and embarrassing in one
or more of the following
respects:
10.2.1. the basis on which it is
alleged that any part of the funds allegedly ‘solicited’
and ‘used’ or
‘controlled’ by Cowan became
his property and a part of his estate is not clear. Therefore the
defendant and third
party do not know what case they have to meet.
10.2.2. In the proposed paragraph 8.4
it is alleged that ‘the deceased benefited from the scheme
either through theft or through
purported commissions on so-called
investments’. It is not clear how any benefit ‘through
theft’ could have formed
a part of Cowan’s estate or how
‘purported commissions on so-called investments’ pursuant
to an allegedly ‘fraudulent
and unlawful’ scheme (in the
proposed para 8.2) could have constituted part of the deceased
estate.
10.2.3. It is unclear from the
proposed paragraph 10 whether the plaintiffs’ case is that the
total amount of R286 295 996
paid to the defendant formed part of
Cowan’s estate or whether only R21 525 996.47 thereof is
alleged to have formed a part
of his estate.
10.2.4. The amount claimed by the
plaintiffs as exceeding the sum paid by the defendant, does not
accord with the payment by the
defendant as reflected in annexure
‘POC1’ to the particulars of claim.
[11]
The plaintiffs consequently proceeded with their application in terms
of
Rule 28(4)
read with
Rule 6(11)
, but seek to amend their
particulars of claim further by substituting:
11.1. paragraph 10 to read as follows:
‘
The deceased unlawfully and
without just cause in pursuance of the said scheme paid or caused to
be paid to the Defendant an amount
of R17 794 813,01, on account of
interest, on the investments made by the Defendant in the scheme.
Such amount is particularised
in the schedule, annexure ‘POC’.
The said amount was paid without just cause, unlawfully and pursuant
to the scheme
conducted by the deceased, and the Defendant was
thereby unjustly enriched at the deceased’s expense.’
11.2. the amount of R17 794 813,01 for
the amount of R21 525 996,47 in para 11 and paras 1 and 2 of the
prayer to the plaintiffs’
Particulars of Claim.
[12]
The third party does not object to the proposed further amendment,
which seeks to address paragraphs 10.2.3 and 10.2.4 of the
grounds of
objection set out above.
[13]
The main issue for determination is whether the amendments proposed
by the plaintiffs will render the particulars of claim
excipiable.
Excipiable
pleadings
[14]
It appears appropriate to briefly restate the legal principles
pertaining to exceptions which are relevant to a determination
of
whether the proposed amendments to the particulars of claim will cure
the deficiencies complained of or whether the particulars
of claim if
amended as proposed, will be excipiable.
[15]
The objective of an exception is to raise and obtain an expeditious
and economical decision on questions of law which are apparent
on the
face of the pleadings
[5]
and which will dispose of the case in whole or in part and avoid the
leading of unnecessary evidence at the trial,
[6]
or to protect a party against an embarrassment which results from
some defect or incompleteness in the manner in which the cause
of
action is set out. An exception that a cause of action is not
disclosed by a pleading ‘cannot succeed unless it be shown
that
ex facie
the
allegations made by a plaintiff and any document upon which his or
her cause of action may be based, the claim
is
(not may be) bad in
law’.
[7]
An exception that a pleading is vague and embarrassing strikes at the
formulation of the cause of action and not its legal validity.
[8]
[16]
Rule 18(4)
requires every pleading to contain ‘
a clear and
concise statement of the material facts upon which the pleader relies
for his claim… with sufficient particularity
to enable the
opposite party to reply thereto
’.
Rule 20(2)
requires a
declaration to ‘
set forth the nature of the claim
’
and ‘
the conclusions of law which the plaintiff shall be
entitled to deduce from the facts stated therein
’.
It
is generally accepted that these rules require the plaintiff’s
particulars of claim or declaration to disclose a cause
of action.
[9]
The plaintiff must also plead:
‘
a
complete cause of action which identifies the issues upon which the
plaintiff seeks to rely, and on which evidence will be led,
in
intelligible and lucid form and which allows the defendant to plead
to it.’
[10]
[17]
In
McKenzie v Farmers’
Co-operative Meat Industries Ltd
[11]
‘
cause of action
’
was defined by the Appellate Division as:
‘
.
. . every fact which it would be necessary for the plaintiff to
prove, if traversed, in order to support his right to the judgment
of
the Court. It does not comprise every piece of evidence which is
necessary to prove each fact, but every fact which is necessary
to be
proved.’
The
definition relates only to ‘material facts’,
[12]
and the facts which must be proved in order to disclose a cause of
action (the
facta probanda
).
Therefore, ‘it is not sufficient to plead a conclusion without
alleging the material facts which, if proved, would warrant
that
conclusion.’
[13]
[18]
An excipient alleges that the pleading objected to, taken as it
stands, is legally invalid for its purpose. Therefore the pleading
must be looked at as a whole,
[14]
no additional facts may be adduced by either party, no reference may
be made to any other document and the court must assume that
the
facts alleged in the relevant pleading are correct.
[15]
A measure of conjecture may be permissible,
[16]
but this does not mean that the court is obliged to accept the
alleged inferences and conclusions which are not warranted by
allegations
of fact or are clearly untrue or so improbable that they
cannot be accepted.
[17]
[19]
In order to succeed an excipient who alleges that no cause of action
or defence is disclosed has the duty to persuade the court
that the
pleading is excipiable on every interpretation that can reasonably be
attached to it.
[18]
If evidence can be led which can disclose a cause of action alleged
in the pleading, that pleading is not excipiable. A pleading
is only
excipiable on the basis that no possible evidence led on the
pleadings can disclose a cause of action.
[19]
[20]
If a plaintiff relies on a particular section of a statute, he must
‘allege all the facts necessary to bring his claim
within the
statute, otherwise, if these cannot be implied, the summons discloses
no cause of action. If the relevant statute contains
an express
prohibition, the plaintiff must plead the required facts, failing
which his particulars of claim would fail to disclose
a cause of
action.
[20]
Dispositions
without value
[21]
The plaintiffs seek to impeach the payments made by the deceased to
the defendant on the basis that such payments constituted
a
disposition without value as contemplated in
s 26(1)(a)
,
alternatively
s 26(1)(b)
,
[21]
of the Act at a time when immediately after such dispositions, the
liabilities of the deceased exceeded the value of his assets;
the
said dispositions are liable to be set aside in terms of s 32(1) of
the Act.
[22]
In order to succeed, the trustee must prove
(a)
that there was a
disposition of property;
(b)
that it was made by the
insolvent;
(c)
when
it was made;
(d)
in
whose favour or for whose benefit it was made; and
(e)
that value was not
received.
[22]
It is therefore fundamental that the transaction should have involved
a ‘disposition of property’ by the insolvent
as defined
in s 2 of the Act. Consequently it must first be determined whether
there was a ‘disposition’ before the
provisions of s 26
are considered.
[23]
[23]
In s 2 ‘disposition’ is defined as: ‘any transfer
or abandonment of rights to property and includes a sale,
lease,
mortgage, pledge, delivery, payment, release, compromise, donation or
any contract therefor, but does not include a disposition
in
compliance with an order of the court.’
'
Property'
means ‘movable or immovable property wherever situate within
the Republic, and includes contingent interests in
property other
than the contingent interests of a
fidei commissary
heir or
legatee.’
‘
Movable
property’ is defined as ‘every kind of property and every
right or interest which is not immovable property.’
[24]
A disposition of property includes every act by which an insolvent
parts with an asset
in
his estate
(
my
emphasis)
, whether such
asset is a
corpus,
a
sum of money or a right of action. The property which is the subject
of the disposition
must
belong to the debtor
and
not to the person to whom it is delivered or anybody else
(my
emphasis).
Movable property
also includes incorporeal rights.
[24]
A right to obtain ownership is itself property which may be the
subject of a disposition.
[25]
If what is alleged to have been disposed of does not fall within the
very wide definition of 'property', there cannot have been
a
disposition thereof in terms of the Act.
[26]
The
Particulars of Claim (as sought to be amended)
[25]
Mr
Kemp SC
,
who represented the plaintiffs, argued that the particulars of claim
convey that Cowan was in control of the funds entrusted to
him: he
operated an unlawful pyramid scheme, he solicited funds from
investors, including the defendant, and dictated payment of
the
investment funds and the interest, although the funds were paid into
trust accounts and in law owned by others. Mr
Kemp
submitted that the relevant
question is the degree of control exercised by Cowan over the pyramid
scheme and investment funds –
and as Cowan had control, the
rights of control and the ability to control the funds, the payments
of the benefits should be treated
as though it was a disposition of
his property as contemplated by s 26 of the Act. Mr
Kemp
relied on
De
Villiers v Kaplan
(supra)
in which the court held at that the right of disposal of an attorney
over the money in his trust account, was as ‘much
a right or
interest in the nature of movable property as a right of action, a
right to claim movable property or to claim an inheritance,’
[27]
and therefore constituted property within the meaning of s 2 of the
Act.
[26]
In
De Villiers v Kaplan
(supra) the plaintiff, as trustee of
the insolvent estate of an attorney, Katz, sued the defendant for an
order in terms of s 29
of the Act setting aside a number of payments
made by Katz out of his trust account in respect of betting
transactions he had with
defendant. At the time his trust account had
insufficient funds to pay the claims of trust creditors. In an
exception to the declaration,
it was contended on defendant's behalf
that Katz had not disposed of his property.
[27]
In his judgment, Van Winsen J held that the insolvent’s right
of disposal constituted 'property' within the meaning of
s 2 because:
‘…
although
the amount in the trust account was not, while it was still in such
account, an asset belonging to Katz, he had a right
of disposal over
such amount which right empowered him to deal with it in such a way
as to make it, or an amount equivalent thereto,
part
of his assets
. Clearly such
a right of disposal over amounts in his trust account has a monetary
value. In the case where he directed the money
to be paid to his
trust creditors
he would be
released from his obligations
to
them. Where he directed the payment of the excess in the account to
his personal creditors or to
himself his estate would thereby be benefited
.
Even were he to disregard the obligation resting upon him to utilise
the amount in his trust account for the purposes for which
it was
entrusted to him and thereby abuse his right to dispose of such
amount, such action on his part could, in certain circumstances,
inure to his benefit.
’
[28]
(my emphases)
[28]
Therefore if the insolvent’s right of disposal is to constitute
‘movable property’ in terms of s 2 of the
Act, he must be
empowered to deal with the trust funds so that they become part of
his assets or he must exercise the right of
disposal by directing
funds from the trust account to the benefit of his estate or to
become part of his assets.
[29]
Similarly in
S v Kotze,
[29]
to which I have also been referred to by Mr
Kemp
,
the accused used funds in his principal’s trust account, over
which he had full control, to settle his private debt. Therefore
the
relevant economic effect of the transaction is that there was a
benefit to the accused’s estate.
[30]
The plaintiffs do not make these necessary allegations in the amended
paragraph 8.3 or anywhere else in the proposed amendments:
there is
no allegation that Cowan was empowered to deal with funds in the
trust account of Garlicke & Bousfield, specifically
the funds
invested in the pyramid scheme, to make them part of his estate or
that those funds from the trust account became part
of his property
and an asset in his estate.
[31]
There is a clear distinction between the manner in which Katz
disposed of funds in his trust account for benefit of his estate
and
the manner in which Cowan manipulated investment funds as alleged in
proposed paragraphs 8.1 and 8.3. Cowan was also not a
sole
practitioner like Katz who exercised full control over his trust
account, and it is not alleged that Cowan had control over
the trust
account of Garlicke & Bousfield. In my view, the mere allegation
that Cowan controlled the movement of the invested
funds in the
proposed paragraph 8.3 is inadequate to demonstrate that he had a
right to property as contemplated by s 2 of the
Act. I am also not
persuaded that the right Cowan had over the invested funds to pay or
direct payment diminished his estate, as
contended by Mr
Kemp
.
[32]
Annexure ‘POC1’ to the particulars of claim sets out the
identities of the recipients in Cowan’s scheme,
interest and
commission paid. But, as pointed out by Mr
Ellis SC
, who, with
Mr
Salmon SC
, represented the third party, Cowan is not
amongst these recipients nor is there any reference to an account in
his name. Therefore,
although Cowan may have exercised control over
the invested funds as alleged in the proposed paragraph 8.3,
according to Annexure
‘POC1’ no funds were received by
him from the scheme, nor may it be reasonably concluded therefrom
that his estate
received a benefit from the scheme.
[33]
Consequently I am not persuaded that the degree of control exercised
by Cowan as alleged by the plaintiffs suffices to constitute
‘property’ as defined in s 2 of the Act. Although the
proposed amendment seeks to cure the finding by Bezuidenhout
AJ that
there was no indication that the money paid to the defendant was from
Cowan’s account or an account directly or indirectly
under his
control, the finding by Bezuidenhout AJ that the funds were never
Cowan’s property or part of his estate or paid
therefrom, will
remain undisturbed despite the proposed amendment. Nor, as contended
by the defendant and the third party, will
there be an allegation
from which it can reasonably concluded that the funds became his
property and part of his estate.
[34]
Further, as properly submitted by Mr
Ellis
,
in order to constitute a disposition, a payment must consist of ‘a
transfer or abandonment of a right’ and it is not
alleged that
Cowan had such a right.
[30]
Even if it is assumed that the particulars of claim (if amended) are
correct, they will remain deficient as the allegation of Cowan’s
right to property, which is crucial to the existence of a cause of
action, is not made.
[31]
[35]
In the proposed paragraph 8.2, the plaintiffs allege that Cowan’s
scheme was fraudulent and unlawful; it contravened
the Banks Act 94
of 1990 and the Consumer Affairs (Unfair Business Practices) Act 71
of 1988; and was void. Mr
Kemp
correctly submitted that it
cannot be disputed that Cowan ran a pyramid scheme, and that benefits
that investors received from pyramid
schemes have been classified as
dispositions under s 26 of the Act. He referenced this submission
with the judgments in
Visser
en ’n Ander v Rousseau en Andere NNO
[32]
and
Fourie NO & others v
Edeling NO & others
,
[33]
which he argued were pertinent authority for a finding in this
application that the claim for repayment of the benefit derived
by
the defendant by the trustees of Cowan’s insolvent estate is
covered by the ambit of s 26, especially as the proposed
particulars
of claim approximate the claims by the insolvent liquidators in the
two cases.
[36]
I am however of the view that there is merit in Mr
Ellis’s
response that the situation
in the Krion pyramid scheme, which is the focal subject in
Fourie,
differs substantially from
the alleged facts in this matter. Mrs M Prinsloo the directing mind
of the Krion scheme controlled funds
in corporate entities
which
she herself controlled
and
which were all liquidated subject to a consolidation order issued by
the High Court, in terms of which the estates of the corporate
entities which conducted the scheme were consolidated. The corporate
entities were jointly referred to as ‘the investment
scheme’.
The first significant distinction which consequently may be drawn
between
Fourie
and
the present case is that Prinsloo controlled funds in the corporate
entities which were under her control.
[34]
There is no allegation that Cowan controlled the trust account of
Garlicke & Bousfield. Secondly, the estate of
the
investment scheme
‘concluded’
by Prinsloo was declared insolvent, and all payments by the
investment scheme
to
investors were set aside as dispositions in terms of s 30 of the
Act.
[35]
In the present matter, it is the estate of Cowan, Prinsloo’s
counterpart, that has been sequestrated and the impugned payments
are
claimed from his estate, although Cowan’s pyramid scheme was
not conducted through his estate and the investment funds
were not
administered through his estate.
[37]
It is correctly submitted by Mr
Ellis
that nowhere in the
affidavits in support of the application for the amendment is it
averred that the monies allegedly paid to the
defendant vested in
Cowan; no evidence is alluded to of any payments made to Cowan or
into any account controlled by him, or to
any payments made to the
defendant out of monies vesting in Cowan.
[38]
Therefore although particulars of claim in this matter may
approximate the liquidator’s claim and the particulars in
Fourie
, in view of the fundamental distinctions set out in the
preceding paragraphs, I am unable to find that
Fourie
provides
authority that the payments to the defendant claimed by the
plaintiffs are dispositions from Cowan’s estate, as
contemplated in s 26 (1) of the Act.
[39]
In the proposed paragraph 8.4 the plaintiffs allege that Cowan
benefitted from his scheme ‘either through theft or through
purported commissions on so-called investments’, which is the
only money which Cowan is alleged to have received some benefit.
But
there is no allegation that ‘the purported commissions’
were paid to Cowan or that he used this money to pay the
‘interest’
to the defendant, which the plaintiffs allege is a disposition as
contemplated in s 26(1) of the Act. Annexure
‘PO1’ to the
particulars of claim do not reflect any payment to Cowan although
‘commission’ is reflected
on the document. There is also
no proposed allegation which approximates with the submission that
‘it is clear that the commission
on the amounts passing through
the Cowan scheme was shared between G&B and Cowan’.
[36]
[40]
It also follows from the proposed paragraph 8.4, as argued by Mr
Dickson SC
,
who represented the defendant, that the scheme was fraudulent and
unlawful, and Cowan could not earn commissions on the ‘investments’.
Mr
Ellis
also
correctly contended that a person who receives money through fraud or
theft cannot possibly have any legal right thereto capable
of being
transferred in order to constitute a disposition.
[37]
[41]
If it cannot be concluded from the particulars of claim, as sought to
be amended, that Cowan made a disposition of property,
it follows
that the defendant could not have been enriched at Cowan’s
expense, as alleged in the proposed paragraph 10.
[42]
In the premises, having considered the proposed amendments and the
particulars of claim incorporating the proposed amendments
as a
whole, I am satisfied that the plaintiffs have not alleged all the
material facts necessary to bring their claim within s
26 of the Act;
and as no evidence may be led of
facta probanda
which are not
alleged, and right to property as defined in the Act cannot be
implied, I am compelled to conclude that the particulars
of claim as
sought to be amended, disclose no cause of action and will therefore
be excipiable. This conclusion is, in my view,
fatal to the
application for amendment.
[43]
It is therefore not necessary to consider Mr
Kemp’s
objection to ‘the triable issue contention’ raised by
the third party.
Dismissal
of the Action
[44]
The plaintiffs strongly resist the dismissal of the action as prayed
for by the defendant and the third party, and contend
that if this
application is refused they should be given leave to apply for an
amendment in response to this judgment, particularly
as Bezuidenhout
AJ did not rule on or consider the proposed amendments, and this is a
matter that deserves to be ventilated at
a trial.
[45]
I can take no issue with the submission that ‘in cases where an
exception has successfully been taken to a plaintiff's
initial
pleading, whether it be a declaration or the further particulars of a
combined summons, on the ground that it discloses
no cause of action,
the invariable practice of our Courts has been to order that the
pleading be set aside and that the plaintiff
be given leave, if so
advised, to file an amended pleading within a certain period of
time.
[38]
I am also mindful that the dismissal of the action will have serious
consequences for the plaintiffs, as cautioned by Corbett CJ
in
Group
Five Building.
[39]
[46]
However I cannot ignore the fact that the plaintiffs have already
been given a proper opportunity to amend their particulars
when the
exception was upheld by Bezuidenhout AJ, and their proposed
amendments seek to address the deficiencies identified by
my learned
brother.
[40]
It is also relevant that the objections by the defendant and third
party to the amendments are essentially the same as the grounds
raised in the exception delivered by the third party. And the
conclusions I have reached in this judgment have the same basis in
law as applied by Bezuidenhout AJ in his judgment. A mere submission
that this matter deserves to be ventilated at a trial is inadequate
to show that the plaintiffs should be given a further opportunity to
amend their pleading. A further similar order will, in my
view, be an
indulgence and serve only to extend the matter unjustifiably.
Costs
[47]
There is no reason why costs should not follow the result.
[48]
The plaintiffs and defendant were represented by senior counsel. The
third party was represented by two senior counsel. No
specific
representations were made as to why the costs of two senior counsel
should be allowed, nor am I satisfied I should exercise
my discretion
in favour of such an order. I am however of the view that costs of
the second senior on the scale applicable to Junior
Counsel is
appropriate.
Order
[49]
The following order does issue:
1. The application in terms of Rule
28(4) by the plaintiffs for leave to amend their particulars of claim
is refused.
2. The plaintiffs’ claim against
the defendant is dismissed.
3. The defendant’s claim against
the third party is dismissed.
4. The plaintiffs are directed to pay
the costs of the defendant and the third party, such costs to include
the costs of Senior
Counsel where employed. The costs of the second
Senior Counsel, where employed, shall be taxed on the scale
applicable to Junior
Counsel.
___________________
MOODLEY
J
APPEARANCES
For
the Plaintiffs:
Advocate K J Kemp SC
Instructed
by
Geyser Du Toit Louw & Kitching
PINETOWN
INC.
7
GREATHEAD LANE
PINETOWN
3610
TEL:
031 – 702 0331
c/o
RANDLES INC.
LEVEL
2, MAHOGANY COURT REDLANDS ESTATE
1
GEORGE MACFARLANE LANE
WEMBLEY,
PIETERMARITZBURG
TEL:
033 – 392 800
REF:
A van LINGEN
For
the Defendants:
Advocate A J Dickson SC
Instructed
by
FRANCOIS MEDALIE & CO.
DX
1, PINETOWN
REF:
DGF/pag/02/M082/012
TEL:
031 – 702 4315/6
C/O:
STOWELL & CO.
DX
20, PIETERMARITZBURG
REF:
CJCampbell/FRA4/0003/LW
TEL:
033 – 845 0500
For
the Third Party:
Advocate P Ellis SC Advocate R J Salmon SC
Instructed
by
GARLICKE & BOUSFIELD INC.
7
TORSVALE CRESCENT
LA
LUCIA RIDGE OFFICE ESTATE
LA
LUCIA
REF:
CJ SEGER/G136
C/O:
VENNS
281
PIETERMARITZ STREET
PIETERMARITZBURG
3201
TEL:
033 – 355 3100
REF:
R Stuart-Hill/Bernice
[1]
The parties are referred to as they are in the action.
[2]
Judgment of Bezuidenhout AJ para 2.
[3]
Judgment para 13.4-14.12.
[4]
Per para 19 of the plaintiff’s HoA
[5]
Commissioner for Inland Revenue v Viljoen & others
1995 (4) SA
476
(E) at 481.
[6]
Dharumpal Transport (Pty) Ltd v Dharumpal
1956 (1) SA 700
(A) at
706E.
[7]
Vermeulen v Goose Valley Investments (Pty) Ltd
2001 (3) SA 986
(SCA)
para 7.
[8]
Trope & others v South African Reserve Bank
[1993] ZASCA 54
;
1993 (3) SA 264
(A)
at 269H-I.
[9]
Van Loggerenberg Erasmus: Superior Court Practice Vol 2 at D1-301.
[10]
Jowell v Bramwell-Jones & others
1998 (1) SA 836
(W) at 902G-H.
[11]
1922 AD 16
at 23; Stols v Garlicke & Bousfield Inc
2012 (4) SA
415
(KZP) para 10.
[12]
See Evins v Shield Insurance Co Ltd
1980 (2) SA 814
(A) at
825G:’”Cause of action” is ordinarily used to
describe the factual basis, the set of material facts,
that begets
the plaintiff's legal right of action…’.
[13]
Du Plessis NO v Phelps
1995 (4) SA 165
(C) at 172D.
[14]
Nel & others NNO v McArthur & others
2003 (4) SA 142
(T) at
149F.
[15]
Salzmann v Holmes
1914 AD 152
at 156; Picbel Groep Voorsorgfonds v
Somerville
[2013] 2 All SA 692
(SCA) at [7].
[16]
Davenport Corner Tea Room (Pty) Ltd v Joubert
1962 (2) SA 709
(D) at
716D-E: ‘A measure of conjecture is undoubtedly both
permissible and proper, but the shield should not be allowed
to
protect the respondent where it is composed entirely of conjectural
and speculative hypotheses lacking any real foundation
in the
pleadings or in the obvious facts’.
[17]
Natal Fresh Produce Growers’ Association & others v
Agroserve (Pty) Ltd & others
1990 (4) SA 749
(N) at 754J-755B;
TWK Agriculture Ltd v NCT Forestry Co-operative Ltd
2006 (6) SA 20
(N) para 5; Brooks v Minister of Safety and Security
[2007] ZAWCHC 51
;
2008 (2) SA 397
(C) para 12.
[18]
Lewis v Oneanate (Pty) Ltd & another
[1992] ZASCA 174
;
1992 (4) SA 811
(A) at
817F; First National Bank of Southern Africa Ltd v Perry NO
2001 (3)
SA 960
(SCA) para 6; H v Fetal Assessment Centre
2015 (2) SA 193
(CC) para 10.
[19]
McKelvey v Cowan NO
1980 (4) SA 525
(Z) at 526D-E.
[20]
Erasmus note 7 at D1-305.
[21]
Section 26 provides: ‘Disposition without value:
(1)
Every disposition of property not made for value may be set aside by
the court if such disposition was made by an insolvent-
(a)
more than two years before the sequestration of his estate, and it
is proved that, immediately after the disposition was made,
the
liabilities of the insolvent exceeded his assets;
(b)
within two years of the sequestration of his estate, and the person
claiming under or benefited by the disposition is unable
to prove
that, immediately after the disposition was made, the assets of the
insolvent exceeded his liabilities:
Provided
that if it is proved that the liabilities of the insolvent at any
time after the making of the disposition exceeded his
assets by less
than the value of the property disposed of, it may be set aside only
to the extent of such excess.’
[22]
Rousseau & others NO v Visser & another
1989 (2) SA 289
(C)
at 307; Louw NO v DMA Fishing Enterprises (Pty) Ltd & another
2002 (2) SA163 (SE) at 165.
[23]
Bertelsmann et al Mars: The Law of Insolvency in South Africa 9 ed,
2008, ch13-p250 para13.2.
[24]
Bank of Lisbon and South Africa Ltd v The Master
1987 (1) SA 276
(A)
at 290I.
[25]
De Villiers, NO v Kaplan 1960 (4) SA 476 (C).
[26]
Mars: The Law of Insolvency note 21 at ch13-p251; Stern & Ruskin
NO v Appleson 1951 (3) SA 800 (W).
[27]
De Villiers v Kaplan at 479F-G.
[28]
Ibid at 479C-E.
[29]
1965 (1) SA 118 (A).
[30]
De Villiers v Kaplan at 480B-C. 31 See para 17 of this judgment. 32
1990 (1) SA 139 (A).
[31]
See para 17 of this judgment.
[32]
1990 (1) SA 139 (A)
[33]
[2005] 4 All SA 393 (SCA).
[34]
See also Janse van Rensburg v Botha (758/10)
[2011] ZASCA 72
(25 May
2011).
[35]
Fourie para 4.
[36]
Para 21 Plaintiff’s concise HoA
[37]
Nissan South Africa (Pty) Ltd v Marnitz NO & Others (Stand 186
Areoport (Pty) Ltd Intervening)
2005 (1) SA 441
(SCA) para 23.
[38]
Group Five Building Ltd v Government of the Republic of South Africa
(Minister of Public Works and Land Affairs)
[1993] ZASCA 4
;
1993 (2) SA 593
(A) at
602C-D.
[39]
Ibid at 603A.
[40]
Cf Constantaras v BCE Foodservice Equipment (Pty) Ltd
2007 (6) SA
338
(SCA) para 31-32.