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[2016] ZAGPPHC 596
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Nel v Davis N.O. and Another (50948/2011) [2016] ZAGPPHC 596 (30 June 2016)
HIGH
COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Not
reportable
Not
of interest to other Judges
CASE
NO: 50948/2011
30/6/2016
In
the matter between:
ANITA
HELENA
NEL
Applicant
and
ADV.
NORMAN DAVIS SC
N.O.
First
Respondent
ANDRIES
DE
BRUYN
Second
Respondent
JUDGMENT
MAKGOKA.
J
[1]
This is an opposed application. The applicant (Ms Nel) initially
sought an order reviewing and setting aside a report made to
this
Court by the first respondent (the referee). pursuant to s
19bis
of
the Supreme Court Act 59 of 1959, and substituting it with an order
in certain terms, to which I shall refer shortly. The referee
had
been appointed to oversee the debatement of accounts between Ms Nel
and the second respondent (Mr de Bruyn), following the
dissolution of
a partnership between them. In his report, the referee made a finding
that Ms Nel is not entitled to the benefit
of a starting capital or
value of a certain immovable property. She is aggrieved with that
finding.
[2]
In prayer 2.1 of her notice of motion, Ms Nel had sought an order
that she is entitled to the sole proceeds of two immovable
properties
which belonged to the partnership. In prayer 2.2 she sought, in the
alternative, an order that she is entitled to the
value of the
properties as at 21 April 2006, before the properties' net proceeds
are shared on a 50% basis. For the sake of completeness,
the notice
of motion reads as follows:
'1. That the decision of
the first respondent be reviewed and set aside;
2. That (the) court
substitutes the order of the first respondent with the following:
2.1.
The applicant is entitled to the sole proceeds of
the portion 284 (a portion of portion 12) of the Farm The Willows
340, JR, Gauteng,
Willow Glen, Pretoria and Plot […] Glenmore,
Kwazulu-Natal;
2.2.
In the alternative to 2.1 that the applicant is
entitled to the Value of the aforesaid properties as at 21 April 2006
before the
properties' net proceeds are shared on a 50% basis;
2.3.
The applicant and the second respondent share the
net proceeds of the properties on a 50% basis;
2.4.
Any donation tax payable by the applicant are
costs of the property;
2.5.
The second respondent must pay the transfer duty,
if any, in the respect of acquiring an interest in the properties;
3. In the alternative to
prayer 2, cancellation of the settlement agreement is confirmed;
4. That the applicant be
granted leave to withdraw her notice of withdrawal under case number
3483/13 .'
[3]
In his revised written submissions, Mr
Davies,
counsel for Ms
Nel, abandoned the relief sought in prayers 2.1, 2.3, 2.4, 2.5, 3 and
4. Counsel narrowed the relief to the alternative
prayer in prayer
2.2 of the notice of motion, as set out above, in terms of which Ms
Nel asserts that she is entitled to the value
of the two properties
as at 21 April 2006, before the properties' net proceeds are shared
on a 50% basis. The relief sought by
Ms Nel is opposed by Mr de Bruyn
who also has launched a counter-application for the adoption of the
referee's report in its totality,
without any modifications. The
referee is not taking part in the present application, and abides the
decision of this Court.
[4]
Ms Nel and Mr de Bruyn are former business partners. In terms of an
agreement reached during the debatement of the accounts,
the
partnership between the parties endured for the period 1 January 2005
to 11 February 2013. The parties held membership and
business
interests in a number of entities, including Woodlyn Steel &
Pipes CC, ADB Builders Yard CC, and Plant Hire Ltd, L&H
Beleggings CC and Platinum Mile Investment 405 (Pty) Ltd. They
entered into a written partnership agreement on 21 April 2006, in
terms of which it was recorded and agreed that each held a 50%
interest in four immovable properties. Only two of those properties
are relevant for the present purposes: the Glenmore property in
Kwazulu-Natal and the Willows property in Gauteng, Pretoria. The
properties were registered in the name of Ms Nel. Jn terms of the
agreement, she undertook not to deal with any of the properties
without the written consent of Mr de Bruyn. The genesis of the
dispute between the parties is clause 4 of the partnership agreement.
It reads as follows:
'Die Eerste Party (Mr de
Bruyn) en Tweede party (Ms Nel) onderneem om by die verkoop van die
eiendomme ‘n verrekeningstaat
op te stel of te laast opstel vir
die doel om die belang van elke party in die netto opbrings te
betaal.'
[5]
The business relationship between the parties broke down, resulting
in litigation between the parties in this Court. Mr de Bruyn
instituted action against Ms Nel in 2011 under case number
50948/2011, while the latter instituted action against Mr de Bruyn in
2013 under case number 3483/2013. Mr de Bruyn's case was settled on 8
February 2013, on the following terms:
1.
That all disputes, claims and outstanding
litigation between them were settled including (the) applicant's
action under Case No.
3483/13;
2.
They acknowledged that they had a partnership in
the properties;
3.
Each party held a 50% interest in the partnership
and hence a 50% interest in both of the properties;
4.
That the partnership is dissolved;
5.
That there be a rendering and debating of
accounts to determine each party's financial interest in respect of
its 50% interest;
6.
That the debating of the accounts should be
referred to a senior counsel as a referee, whose finding shall be
final and binding
without any recourse to any appeal;
7.
All outstanding litigation or enquiries would be
withdrawn;
8.
That the agreement may be made an order of court.
[6]
On 11 February 2011 the settlement agreement of the parties referred
to above, was made an order of this Court. The partnership
was
dissolved and the parties had to render accounts and debate them
before the referee, who was appointed in terms of s 19bis1
to referee
the debatement of accounts by the parties arising from the
dissolution of their partnership. The relevant parts of s
19bis
[1]
read as follows:
‘
1. In any civil
proceedings any court of a provincial or local division may, with the
consent of the parties, refer-
(a)
…
(b)
Any matter which relates wholly in part to
accounts; or
(c)
Any other matter arising in such proceedings, for
enquiry and report to a referee, and the court may adopt the report
of any such
referee, either wholly or in part, and either with or
without modifications, or may remit such report for further enquiry
or report
or consideration by such referee, or make such other order
in regard thereto as may be necessary or desirable.
2. Any such report or any
part thereof which is adopted by the court, whether with or without
modifications, shall have effect if
it were a finding by the court in
a civil proceedings in question.
3. Any such referee shall
for the purpose of such enquiry have such powers and shall conduct
the enquiry in such manner as may be
prescribed by a special order of
court or by rules of court.'
[7]
The referee had to determine the net value or interests of the
Glenmore and Willows properties for the determination of the
parties'
respective interests in the two properties at the dissolution of the
partnership. The parties agreed that the minimum
value of the Willows
property was R6,2 million. As to the value of that property at the
commencement of the partnership, Ms Nel
contended that its value was
R5,4 million, which she said, constituted her contribution to the
partnership with a 'starting value'
in that amount. It was submitted
on her behalf that the contribution of the Willows property should be
retained as a 'starting
capital' contribution before any division of
partnership interest or assets taking place. In other words, the
submission to the
referee was that the value of the Willows property
would be deemed to be a starting value, and that at the dissolution
of the partnership,
such value should be deducted prior to the
determination of the 'net proceeds'.
[8]
In his report to the Court, the referee found that there was no
indication of an intention of the parties that the Willows property
was to be retained by Ms Nel and merely placed at the partnership's
disposal for use. The referee noted that both the Glenmore
and
Willows properties had been treated on the same footing, both in
terms of how they were contributed to the partnership, and
how they
were treated during the existence of the partnership. He therefore
found no basis to conclude that the Willows property
was to be
treated differently from the Glenmore property at the date of
dissolution of the partnership. Furthermore, said the referee,
there
was no retention claimed by Ms Nel on the starting value of the
Willows property at any given stage.
[9]
The other consideration which the referee took into account was that
the partnership agreement was concluded subsequent to the
agreed
starting date of the partnership, and no mention was made in the
agreement of 'starting values' being accorded to Ms Nel.
On the
contrary, noted the referee, Ms Nel conceded in the agreement that
the plaintiff had 50% interest in the immovable properties.
The 'net
proceeds' referred to in the agreement, according to the referee,
referred to the value after satisfaction of the bonds
registered
against the property, which were in existence at the time and of
which both parties were aware. Also, according to the
referee, the
'net proceeds', in the context of the agreement, referred to the
proceeds derived from the sale of the property, and
not a
recalculation of partnership interests by way of liquidation.
[10]
The referee also referred to the applicable law with regard to how
the contributions by partners at the dissolution of the
partnership
should be dealt with. He noted the contention on behalf of Mr de
Bruyn that at common law, each partner must contribute
to the
partnership, which contribution need not be in the form of assets. He
further noted, with reference to the relevant case
law, that a
distinction should be made between circumstances where a property
formed part of partnership assets or has merely been
made available
for use by the partnership. The referee further considered the
contention on behalf of Mr de Bruyn that because
his contribution was
not monetary, it would be impossible for him to determine the exact
amount of each party's contribution made
during the existence of the
partnership. Again, he made reference to the applicable case law such
as
Fink v Fink
1945 WLD 226
(Fink); Isaacs v Isaacs
1949
(1) SA 952
(C) (Isaacs);
Herman v Faclier
1949 (4) SA 377
(C);
V (also known
as
L) v De Wet NO
1953 (1) SA 612
(O).
[11]
The referee made the following findings in respect of Ms Nel's claim
to the 'starting value' in respect of the Willows property:
'[D]efendant had not
during the existence of the partnership deemed a significant
contribution to have been made by the property
"from her own
pocket." Had this been so, one would have expected her to have
raised the issue of either R5,4 million
or at the very least the
R1,25 million at the time of the agreement of 21 April 2006 or at any
subsequent stage, the latest of
such stage of course then being the
settlement agreement dated 11 February 2013. This was not done.'
[12]
Ms Nel joins issue with these findings, and seeks to persuade this
Court not to adopt the portion of the referee's report in
respect of
the Willows property, on the basis that the referee should have found
that that she was entitled to be awarded the supposed
starting
capital contribution, before the sharing of the partnership profits
on a 50% basis. On her behalf, Mr.
Davies
attacked the report
of the referee primarily on the ground that the referee committed an
error of law in interpreting the partnership
agreement. It was
contended that the referee failed to apply the trite principle that
in the liquidation of a partnership, a partner
is entitled to the
return of his or her capital investment before the division of the
partnership profits are shared in the applicable
ratio.
[13]
Counsel contended that on the basis of common law, and the intention
of parties as to be inferred from the partnership agreement,
Ms Nel
ought to have been awarded the starting capital value, or the initial
capital contribution, before there was distribution
of the
partnership net proceeds. Counsel relied on
Robson v Theron
1978
(1) SA 841
(A) for the above contention. The essence of counsel's
argument can therefore be summed up as follows. The referee erred in
law
in not explicitly addressing the question of start-up capital in
the context of a partnership agreement, and in overlooking the
common
law position that the contribution of the Willows property should be
compensated as Ms Nel's capital contribution. Counsel
was at pains to
point out that there is nothing in the partnership agreement which
gainsays Ms Nel's expectation, which is a natural
consequence of the
partnership agreement.
[14]
To consider the contention in a proper legal context, it is prudent
to refer briefly to the nature of a partnership. Over 100
years ago,
this court, accepting Pothier's
[2]
formulation of the essentialia of a partnership, said the following
in
Joubert
v Tarry
1915
TPD 277
at 280-1:
'First that each of the
partners bring something into the partnership, or binds himself to
bring something into it whether it be
money, or his labour of skill.
The second essential is that the business should be carried on for
the joint benefit of both parties.
The third is that the object
should be to make profit. Finally the contract between the parties
should be a legitimate contract
... where all these four essentials
are present, in the absence of something showing that the contract
between the parties is not
an agreement of partnership; the Court
must come to the conclusion that it is a partnership.
[15]
In
Pezzutto v Dreyer
[1992] ZASCA 46
;
1992 (3) SA 379
(A) at 390 it was
confirmed that where the above four requirements are found to be
present, a court would find that a partnership
has been established,
unless such a conclusion is negativated by a contrary intention
disclosed on a correct construction of the
agreement between the
parties. It was also there held that the contribution by each partner
need not be of the same character,
quantity or a value. Each partner
must contribute something 'appreciable' i.e something of commercial
value, although such contribution
need not be capable of exact
pecuniary assessment, as for example where a partner contributes his
labour or skill. See also
Bester v Van Niekerk
1960 (2) SA 779
(A) at 783H - 784A;
Purdon v Muller
1961 (2) SA 211
(A) at 218
8-D;
Standard General Insurance Co v Hennop
1954 (4) SA 560
(A) 565A;
The Commissioner of Taxes
1958 (1) PH T4 (SR);
Loots
v Niewenhuizen en n ander
1997 (1) SA 351
(T) at 367H-J.
[16]
The other important principle in respect of partnerships is this.
Where it is impossible to say that one partner contributed
more than
the other, the partners are entitled to share equally in the profits
and in the assets of the business which have been
acquired by the use
of partnership funds. See
Fink
at 242. In
Isaacs
the
following was said at 961:
'It is clear law that on
dissolution each party gets a proportionate share of the assets
according to his or her contribution, and
it is only when their
respective contributions were equal or it is impossible to say that
one has contributed more than the other
than they share equally.'
[17]
It seems to me that there is no dispute as to whether the parties are
entitled to share the partnership assets equally at the
dissolution
of the partnership. The issue is what constitutes the value to be
shared. According to Ms Nel, the sharing should occur
after she had
been allocated what she says is the 'starting value' of the property.
The referee made this point in in his report:
'During the debate it
appears that the defendant (Ms Nel) was in agreement that it was
impossible or impractical to attempt to make
a specific determination
as to the value of each party's contributions during the existence of
the partnership and that the division
should simply be a 50/50
division of the assets (subject of course to the defendant's
contention regarding the starting value of
the property...'
[18]
Essentially, the contention on behalf of Ms Nel is that factors such
as skill, labour and knowledge as contributions are irrelevant,
and
only a financial contribution which can be proved, should be taken
into account. I do not agree. That conceptualization is
at odds with
the authorities on our law of partnership, as explained above.
[19]
It is common cause that Mr de Bruyn contributed time, knowledge,
skill and labour to develop and improve the properties. This
was
considered by the referee, and he concluded that since Mr de Bruyn's
contribution could not be quantified in monetary terms,
it was
impossible for him to determine the respective partners'
contributions. I find nothing wrong with the reasoning adopted
by the
referee. By nature of the latter contribution, it is not possible to
determine the monetary value of the partners' contribution,
and in
particular, that of Mr de Bruyn. In fact, during the debatement of
the account the parties acknowledged this fact.
[20]
I turn now to briefly consider whether in all circumstances the Court
should adopt the referee's report, either in whole or
with any
modification. In
Wright v Wright
2015 (1) SA 262
(SCA) the
Supreme Court of Appeal authoritatively set out how a challenge to a
referee's factual findings in his or her report
is to be approached.
At para 8, the Court endorsed the High Court's finding that a court
is bound by the findings of a referee
contemplated in s
19bis,
unless it can be found that the conclusions arrived at by the
referee were unreasonable, irregular or wrong. At para 10, the Court
explained the position of a referee under s 19bis as follows:
'The position of a
referee under s
19bis
is ...similar to that of an expert
valuator who only makes factual findings but dissimilar to that of an
arbitrator who fulfils
a quasi-judicial function Within the
parameters of the
Arbitration Act 42 of 1965
. In this regard the
dictum of Boruchowltz J in
Perdikis v Jamieson
is apposite:
"It was held in
Bekker v RSA Factors
1983 (4) SA 568
(T) that a valuation can
be rectified on equttable grounds where the valuer does not exercise
the judgment of a reasonable man,
that is, his judgment is exercised
unreasonably, irregularly or wrongly so as to lead to a patently
inequitable result."
This is also the position
in respect of the referee's report - it can only be impugned on these
narrow grounds.'
[21]
In the present case, it was contended on behalf of Ms Nel that for
the referee to reach the conclusion he did, he had to interpret
the
partnership agreement, and such exercise involved a matter of law,
and not of fact. Thus, argued counsel, the attack falls
within the
narrow grounds set out in
Wright
as being 'wrong', on which
basis this Court should not adopt the portion of the report with
which Ms Nel is aggrieved. I accept,
without deciding, that the
referee had to consider a point of law as argued by Mr
Davies.
I
do not find anything 'wrong' with how the referee considered the
matter. I have, earlier in the judgment, referred to instances
where
the referee considered the relevant case law, which, in my view, he
correctly applied to the facts of the case.
[22]
To my mind, Ms Nel's insurmountable difficulty has always been the
common cause fact that Mr de Bruyn contributed labour and
skill to
improve and develop the property. Even if it is accepted that that
the referee was wrong in rejecting Ms Nel's claim to
the 'starting
value', it is immaterial, and nothing turns on that aspect, as the
contribution of Mr de Bruyn, which is common cause,
cannot not be
determined in monetary terms. That is where authorities like
Fink
and
Isaacs
become relevant. The result would still be that
because it is impossible to determine both partners' contributions,
the partners
have to share the partnership assets and profits
equally.
[23]
I accept that the referee was probably wrong in his reasoning that
because the 'starting value' in respect of the Willows property
has
never been claimed by Ms Nel in any of the agreements concluded
between the parties, it could therefore not be claimed in any
subsequent dissolution of the partnership. It is correct, as argued
by Mr
Davies,
with reference to
Robson v Theron,
that
failure to deal with a particular partnership asset or liability by
way of contract by no means excludes the operation of the
actio
pro socio
and the proper liquidation of the partnership assets
and dividends. However, that case is distinguishable from the present
one because
the principle in that case would be applicable where the
contributions of all partners can be determined, whereas in the
present
case that is not possible. It follows that the application
should be dismissed, and the counter-application should be granted.
[24]
With regard to costs, counsel for Mr de Bruyn, Mr
Vermeulen,
urged
me to order costs against Ms Nel on a punitive scale of attorney and
client. This aspect was canvassed in the answering affidavit,
and in
the written submissions on behalf of Mr de Bruyn. It was argued that
the application is ma/a
fide.
This was premised on the fact
that she had accepted that there was a partnership, and that the
proceeds had to be shared equally,
and that she entered into a
settlement agreement and accepted all processes in terms of that
agreement. 'All of a sudden' it was
argued, and only after receiving
the valuation report in respect of the Willows property, which did
not suit her, she launched
the present application in order to
prolong her obligation to comply with the decisions in the referee's
report. Obviously, for
the duration of the delay, she would be
benefitting from the property.
[25]
The ordinary rule is that the successful party is awarded costs as
between party and party. See
Va/kin v Daggafontein Mines Ltd
1960
(2) SA 507
(W) at 516;
AA Alloy Foundry (Pfy) v Titaco Projects
(Pfy) Ltd
2000 (2) SA 639
para 20. A costs order on an attorney
and client scale is an extra-ordinary one which should not be easily
resorted to, and only
when by reason of special considerations,
arising either from the circumstances which gave rise to the action
or from the conduct
of a party, should a court in a particular case
deem it just, to ensure that the other party is not out of pocket in
respect of
the expense caused to it by the litigation. See
Ne/ v
Waterberg Landbouwers Ko-operatiewe Vereneging
1946 AD 597
AT
607; and
Waar v Louw
1977 (3) SA 297(0)
at 303).
[26]
As such, the order should not be granted lightly, as courts look upon
such orders with disfavour and are loath to penalize
a person who has
exercised a right to obtain a judicial decision on any complaint such
party may have. See
Van Wyk v Millington
1948 (1) SA 1205
(C)
at 1215;
Moosa v La/loo
1957 (4) SA 207
(D);
De
Goede
v Venter
1959 (3) SA 959
(0) at 963;
Cape Town Municipality v
LF Boshoff Investments (Pty) Ltd
1969 (2) SA 256
(C) at 272G-H.
[27]
In the present case, I agree with the submissions on behalf of Mr de
Bruyn. What is more, when one has regard to the prayers
in the notice
of motion, Ms Nel, without any reasonable basis, sought to extricate
herself from all the agreements she had entered
into, including the
one which was made an order of this Court. In the introduction to
this judgment, I referred in full, the orders
that she sought. Those
prayers were, wisely, in my view, abandoned by her counsel, Mr
Davies,
in the written submissions on her behalf. Mr
Davies
apparently came into the matter late, and to his credit, he
forthwith advised Ms Nel to abandon the hopeless prayers sought in
the
notice of motion.
[28] In addition, the
founding affidavit is replete with irrelevant matter, like the
Promotion of Administrative Justice Act (PAJA),
which is clearly not
applicable here. She also placed in issue, the existence of a
partnership, despite the fact that she had conceded
to that in a
written agreement. That, in my view, is a clear manifestation of
ma/a
tides.
Iam therefore satisfied that to mark this Court's
approval, Ms Nel should
be
ordered to pay the costs of the application on a scale as between
attorney and client.
[29]
In the result the following order is made:
1.
The application is dismissed with costs, such
costs to be paid by the applicant on a scale as between attorney and
client;
2.
The counter-application is granted with costs;
3.
The report of the referee, Norman Davis SC, under
case number 50948/2011, is adopted in whole, without any
modifications, in terms
of sections 19bis(1)(c) of the Supreme Court
Act 59 of 1959, read, to the extent necessary, with
section 38
of the
Superior Courts Act 10 of 2013
.
__________________
T.M.
Makgoka
Judge
of the High Court
Date
of judgment:
30 June 2016
For
the Applicant:
Adv. SW Davies
Instructed
by:
Dempster McKinnon Attorneys
Barnard & Patel
Attorneys, Pretoria
For
the Second Respondent: Adv. PJ
Vermeulen
Instructed
by:
JPA Venter Attorneys, Pretoria
No
appearance for the first Respondent
[1]
The section has since been replaced by
s 38
of the
Superior Courts
Act 10 of 2013
.
[2]
Pothier: A Treatise on the Contract of Partnership (Tudor's
translation)