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[2013] ZAKZDHC 63
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Middleton v Middleton and Others (6440/2010) [2013] ZAKZDHC 63 (1 November 2013)
In the High Court of
South Africa
KwaZulu-Natal Local
Division, Durban
Case
No : 6440/2010
In
the matter between :
Garth
Middleton
.....................................................................................................
Plaintiff
and
Kim
Middleton
.
..........................................................................................
First
Defendant
Wendy-Anne
Middleton
.......................................................................
Second
Defendant
Bodyology
Institute of Health CC
.........................................................................
Third
Defendant
Registrar
of Deeds for the Pietermaritzburg Deeds Office
....................
Fourth Defendant
Registrar
of Deeds for the Pretoria and Mpumalanga
Deeds
Office
.............................................................................................
Fifth
Defendant
Registrar
of Close Corporations
...........................................................................
Sixth
Defendant
Kenneth
Gilbert Sullivan
.....................................................................
Seventh
Defendant
Judgment
Lopes J
[1] The plaintiff in this
action seeks the following relief :
(a) that he and the
second defendant are declared to be the lawful owners of certain
immovable property;
(b) that the first
defendant is interdicted and restrained from disposing of that
property, unless authorised to do so in writing
by the plaintiff and
the second defendant;
(c) declaring that the
plaintiff and the second defendant are each 50 % shareholders in the
third defendant;
(d) interdicting and
restraining the third defendant from in any way disposing of the
membership or property or assets of the third
defendant;
(e) costs of suit.
[2] As this case concerns
a dispute between family members, I shall refer to them by their
first names for the sake of convenience.
The fourth, fifth and sixth
defendants are cited in their capacities as registrars and no relief
per se is sought against them.
[3] Garth Middleton is
the plaintiff and Wendy-AnneMiddleton is the second defendant. They
were married to each other prior to 1978.
They have one child, a
daughter, Kim Middleton, the first defendant. Garth and Wendy-Anne
worked together and pooled their resources
from the time they got
together in 1975. Garth has always been an entrepreneur and
Wendy-Anne was a science graduate from the University
of
KwaZulu-Natal. Prior to their current situation they ran various
businesses together including :
(a) a fibreglass factory
making moulds which were used as public telephone booths
(b) a very successful
gift shop which was franchised to two other sites; and
(c) a business importing
and distributing what are referred to as ‘Tuk-Tuk’
vehicles which were used as a form of taxi
service to the community.
[4] As is so often
the case with entrepreneurial ventures, the finances of Garth and
Wendy-Anne had its ups and downs. During the
1970s Garth’s
estate was sequestrated and he was rehabilitated in 1980. They
thereafter lived in their matrimonial home at
156 Station Ridge Road,
Durban North, and in 1990 they moved to 51 Quarry Road, Assagay.
[5] As a result of the
fact that they were found to have underpaid the duty on the ‘Tuk-Tuk’
taxis imported by them,
and a long and protracted legal battle
against the South African Revenue Services (‘SARS’) in
this regard, which they
lost, the Middletons lost their home, their
motor vehicle was repossessed, and they were seriously indebted to
creditors whose
claims they could not meet. This was during the
period between 1991 and 1994. At that stage they were being hounded
by creditors
and both Garth and Wendy-Anne were required from time to
time to attend on the Magistrates’ Court at Camperdown to
answer
s 65 proceedings. Kim attended at the Court on occasions with
cash-in-hand to placate certain creditors.
[6] In 1995 Kim was in
her matric year and was elected for a Rotary exchange programme for
1996. However, due to the financial plight
of the family, she was
unable to use the opportunity afforded to her. During 1995 Kim met
Kenneth Gilbert Sullivan (‘Ken’),
with whom she has
entered into a life partnership. They remain together.
[7] The financial outlook
for the family was so bleak, that in 1994 Garth wrote to Nedbank
basically declaring himself to be insolvent.
Notwithstanding this,
during the period between 1995 and 1997 Garth and Wendy-Anne
purchased an immovable property at 9 Williams
Road, Assagay on which
they built a new matrimonial home. This was done via the vehicle of
the Blueberry Hill Trust which was registered
by them in 1997.
[8] Around this time
Garth visited America and came across what was referred to in
evidence as the ‘BEST’ machine. This
was a machine which
purported to be able to detect adverse medical conditions in people,
and was claimed to be able to be used
for diagnostic purposes. As
Garth knew that Wendy-Anne was interested in this form of medical
treatment, they imported a machine
into South Africa and set up a
practitioners’ conference which attracted some interest.
Wendy-Anne underwent extensive training
to be able to operate the
machine and train others to do so. At some stage Kim was also trained
in the use of the equipment. As
the technology was both new and
different it was not easily received, and Wendy-Anne started off
practising from their matrimonial
home but later moved into the
premises of Standard Bank in Hillcrest. This business became known as
‘Bodyology’ and
was eventually conducted via the vehicle
of the third defendant.
[9] During 1999 Kim and
Ken left for England. Their initial intention was to move there for
two years on a working visa. However,
once there, the laws of the
United Kingdom were changed and Kim was able to obtain permanent
residence because of the fact that
Wendy-Anne was born in the United
Kingdom. As a result Kim and Ken spent approximately seven years in
England.
[10] During this time
Bodyology expanded and increased. The business moved into premises at
16 Old Main Road, Hillcrest and the
Middletons eventually acquired
the premises in stages. During the time Kim and Ken were overseas,
more properties were acquired
by the Middletons including two plots
of land in Marloth Park Holiday Township, a further vacant plot of
land in Marloth Park and
two consolidated plots of undeveloped land
in Inchanga.
[11] When the property at
16 Old Main Road was initially purchased, it was purchased by the
Middletons and Gordon Gavin Leach and
his wife. They ran a business
similar to that of Bodyology. Garth and Wendy-Anne, and the Leaches
operated from the same premises
for a few years until the Leaches
eventually sold their share of the property to the Middletons.
[12] When Kim and Ken
were overseas, they kept in constant contact with Garth and
Wendy-Anne, and indeed they enjoyed family holidays
together almost
every year. These holidays were in places such as Thailand, Italy and
Morocco. Garth and Wendy-Anne dreamed of
retiring and encouraged Kim
and Ken to return to South Africa in order that they could, together,
run the business of Bodyology.
Garth and Wendy-Anne envisaged that
once Kim and Ken had returned and were successfully able to run the
business on their own,
they would take it over, and Garth and
Wendy-Anne would retire to Marloth Park.
[13] In 2005 Kim and Ken
returned to South Africa and together with Garth and Wendy-Anne ran
the business of Bodyology. For two
years after their return the
business was a success. However, the worldwide economic downturn of
2008 impacted severely on the
business. Matters deteriorated to the
point where Ken had to go out and seek other employment as the
business could simply not
support four of them. During 2009 Kim also
had to find other employment. In addition, the matrimonial
relationship between Garth
and Wendy-Anne had deteriorated. Viewing
the prospects of the business as becoming somewhat dismal, Garth
opted out, notifying
the others that he no longer wished to be
involved in Bodyology. In terms of the agreement which the parties
concluded in order
to terminate that relationship, he was given a
sauna business which included certain stock, and which had formerly
been part of
Bodyology. That business was then Garth’s to run
as he pleased.
[14] Garth and Wendy-Anne
were subsequently divorced (the order was eventually granted on the
19
th
June 2013). The business of Bodyology has
deteriorated steadily and it remains heavily in debt to creditors,
the most significant
of which is SARS. The debt owed to SARS is for
unpaid VAT and other taxes. SARS have been kept at bay, apparently by
promises of
payment and the eventual sale of some of the immovable
properties referred to above, and the payment of the proceeds to
SARS, which
is owed approximately R650 000 with interest and
penalties continuing to accumulate..
[15] In order to overcome
their financial problems and to avoid the ability of their creditors
to recover from Garth and Wendy-Anne
what was rightfully due to them,
Garth and Wendy-Anne adopted various strategies including :
(a) forming the Blueberry
Hill Trust in 1997 as a vehicle for being able to run their finances
and acquire assets;
(b) running the finances
and rentals of 16 Old Main Road via an account named ‘Garvin’
which was an amalgamation of
the name of Garth and Gavin Leach;
(c) after purchasing the
remainder of the property from the Leaches, the finances of 16 Old
Main Road were dealt with via a bank
account using the name ‘Midas
Property Services’ the proprietor of which was Kim;
(d) conducting the
business of Bodyology using various trading names such as ‘Best
System’ or ‘Listen System’;
(e) eventually, and after
the registration of the third defendant, the business bank account
was operated in the name of the close
corporation;
(f) changing the terms of
the Blueberry Hill Trust in order to enable Garth and Wendy-Anne to
use it as a trading entity from which
to operate Bodyology;
(g) registering the
immovable properties, and the membership of Bodyology in the name of
Kim; and
(h) using the identity of
Kim as a vehicle for various transactions which Garth and Wendy-Anne
could not have concluded –
mainly by using Powers of Attorney
granted by Kim to Garth and Wendy-Anne.
[16] The very clear
picture which emerged at the trial was that :
(a) Garth and Wendy-Anne
worked hard to create wealth for themselves including the purchase of
the immovable properties and the
building of the Bodyology business;
(b) because of their past
financial difficulties they enlisted the various mechanisms set out
above to enable themselves to operate
without hindrance from their
creditors;
(c) in building up their
wealth and the business of Bodyology they studiously avoided repaying
their past debts and enjoyed a relatively
luxurious lifestyle with
frequent overseas holidays for the whole family; and
(d) matters came to a
head with the failure of the Bodyology business and the divorce of
Garth and Wendy-Anne.
[17] What is also clear
from the evidence is that, prior to the return of Kim and Ken from
the United Kingdom, all the business
decisions were made by Garth and
Wendy-Anne, and Kim simply went along with them. Garth and Wendy-Anne
did all the negotiations
and paid all the amounts due. The
involvement of Kim was, however, necessary from time to time, for
example, when her salary and
finances were used as the basis for
persuading a bank to finance the purchase of 16 Old Main Road. The
Marloth Park properties
appear to have been paid principally from the
Blueberry Hill Trust monies.
[18] The problems giving
rise to this action then arose with the alienation of Garth from the
family. Kim adopted the attitude that
Bodyology and the properties
were registered in her name, and that Garth was not entitled to deal
with them. Garth maintains that
the registration of the immovable
properties and the shares in Bodyology in the name of Kim were on the
basis that she was merely
a ‘nominee’ and that in the
event of their needing to do so, he and Wendy-Anne could reverse that
process or deal with
the immovable properties because they were the
de facto owners thereof.
[19] In his evidence
Garth sought to advance the reason for their registration of the
membership interest in Bodyology and the properties
in the name of
Kim, as being to secure the position of Kim as their eventual heir
and he said that the registration of the properties
in the name of
Kim was for ‘estate planning purposes’. In my view this
explanation is simply untrue. It became abundantly
clear from the
evidence of all the witnesses that the reason why the membership
interest and the properties were put into the name
of Kim was to
avoid the creditors of Garth and Wendy-Anne and to enable them to
conduct business and live a comfortable lifestyle
without the legal
constraints which would have followed upon their poor financial
history. In this regard Kim originally assisted
her parents by
allowing the properties to be registered in her name and allowing her
finances to be used as the basis for the purchase
of 16 Old Main
Road. This was evident from the fact that Garth and Wendy-Anne
conducted negotiations for the properties, and paid
for them. In
addition, and to facilitate the various devices they employed, they
obtained two Powers of Attorney from Kim, who
was in the United
Kingdom.
[20] Whilst they were in
the United Kingdom, the financial circumstances of Kim and Ken were
on a somewhat different footing. They
were gainfully employed, and
accumulating funds, to the extent that by 2005 they were able to
purchase an immovable property at
7 Bracken Ridge Estate in
Hillcrest. This was done with the purpose of providing them with a
home when they re-located to South
Africa.
[21] What is also clear
from the evidence is that it was the intention of Garth and
Wendy-Anne, that when Ken and Kim returned from
the United Kingdom,
they would become partners in the Bodyology business and they would
eventually take over the running of the
business. This intention was
evidenced by the conduct of Garth and Wendy-Anne, and the fact that
Kim largely took over responsibility
for the running of the Bodyology
business after their return to South Africa.
[22] With regard to the
claims of Garth, the evidence of Kim was significant. She confirmed
that the Bracken Ridge property had
been purchased from funds
belonging to her and Ken. She maintained that she, Ken, Garth and
Wendy-Anne were equal partners in Bodyology,
and with regard to the
treatment of the remaining assets, she said it would be fair if the
assets were sold, and all four of them
would have to be involved in
the distribution of the proceeds of those sales. She maintained that
this was fair because the assets
had been bought from the proceeds
principally of the Bodyology business. She conceded that this would
not have been the case back
in 2002. She also accepted that had her
parents experienced financial problems and whilst she and Ken were in
the United Kingdom,
the properties could have been sold. She was
certain that her parents would not have been able to have obtained a
bond in their
own names for the property situated at 16 Old Main
Road, and that is the reason why her finances had to be used to
justify the
purchase of the property.
[23] The claims of Kim
with regard to the ownership of the membership of Bodyology is
supported by the agreement signed by the four
family members giving
Garth ownership of the sauna business when he left Bodyology.
[24] Wendy-Anne conceded
that Garth was the owner of a one-quarter share in the 16 Old Main
Road property, but regarded the Marloth
Park properties as being in a
somewhat different category because the residence there constituted
the family holiday home which
had no part of the business. That
property had been partly funded by monies coming from the Blueberry
Hill Trust and partly by
the business bank account at the time. This
was not the bank account of the close corporation.
[25] The registration of
land in the name of a ‘nominee’ has been dealt with in
several cases.
[26] In
Dadabhay
v Dadabhay and Another
1981 (3) SA 1039
(A)
at 1047 F – H and 1050 A – C the concept of nominee
ownership was dealt with, including the origin of the concept
of a
‘nominee’ in our law.
[27] In
Hadebe
v Hadebe and Another
[2000] 3 All SA 518
(LCC)
the plaintiff claimed transfer of certain immovable property
allegedly owned by the first defendant as her nominee. The right
to
claim title to the property in this case was found in the provisions
of
s 3
of the
Restitution of Land Rights Act, 1994
. However, in
dealing with the relationship between the parties Gildenhuys J stated
at paragraph 17 :
‘
The
legal relationship between the plaintiff and the first defendant
which emanated from the facts set out above, is that of an
informal
trust whereunder the first defendant (as “nominee”,
which
could also mean trustee) would hold the property for the plaintiff.
The defendant has no more than the bare
dominium
of
the property. The beneficial ownership (
genotsregte
)
vests in the plaintiff. Until the
dominium
in
the property is transferred to the plaintiff, the plaintiff has the
right
to
,
not the right
of
ownership.
The terms of the oral agreement between the plaintiff and the first
defendant, as set out by the plaintiff, do not include
a right for
the plaintiff to claim transfer of the property. Such right may be a
tacit or essential term of the nominee agreement.’
[28] On all the evidence
I find that Kim acted as a nominee on behalf of Garth and Wendy-Anne
in the purchase of the various properties.
Garth and Wendy-Anne
accordingly had the right to ownership, and Kim had no more than
dominium
of the membership interest and the properties.
[29] That finding does
not, of itself, entitle Garth to the shares he claims in the
membership of Bodyology and the immovable properties.
I say that
because :
(a) after their return
from England, Kim and Ken together with Garth and Wendy-Anne were
equal owners of that membership, each with
an undivided 25% share;
(b) Garth decided that he
no longer wished to have a member’s interest in Bodyology, and
he was given the sauna business when
he left. On his own version
then, he no longer has a claim to a member’s interest in
Bodyology;
(c) with regard to the
immovable properties situated at Marloth Park Holiday Township, being
Erf 2547, Erf 3470 and Erf 3471, those
properties are registered in
the name of Kim. It is clear from the evidence that it was intended
that they be put into Kim’s
name for convenience because of the
financial difficulties of Garth and Wendy-Anne. They are the de facto
owners of the property,
and entitled to ownership thereof; and
(d) with regard to the
property situated at 16 Old Main Road, although that property is
registered in the name of Kim, it formed
part and parcel of the
business of Bodyology, and as that business was to be owned by Garth,
Wendy-Anne, Kim and Ken in equal shares,
so should the property. It
existed prior to Garth leaving Bodyology and was not considered in
the distribution of assets at that
stage.The problem with registering
the ownership of the 16 Old Main Road property in the names of Garth,
Wendy-Anne and Kim and
Ken is that there is a bond holder over the
property in respect of a debt for which Kim is the sole debtor. The
only equitable
way in dealing with this problem is to make a
declaration that upon the sale of the property, the nettproceeds,
after settlement
of the bond debt and selling expenses, is to be
distributed equally to Garth, Wendy-Anne, Kim and Ken.
[30] The only remaining
property is the consolidated plots in Inchanga. Although in the name
of Kim, it was clear that these properties
belonged to Garth and
Wendy-Anne
[31] The final matter to
be dealt with is costs. In that regard I am required to make a
decision regarding the reserved costs of
an interdict application
brought by Garth to prevent the sale of 16 Old Main Road and the
alienation of the member’s interest
in, and the assets of,
Bodyology pending the outcome of this action. As I understand the
position, the orders in that application
were taken by consent.
Whether that was so or not does not affect my thinking on the
question of costs.
[32] This action sadly
concerned a family dispute. Making orders for costs would only
further alienate the relationship between
the parties. They were all
responsible in some way for the unfortunate circumstance that a court
of law should be required to settle
their differences. None of them
was entirely successful. They should each pay their own costs.
[33] In relation to any
order which I make (save costs) it was agreed betweenthe Middletons
and Ken that he be joined in the action
as seventh defendant, and he
agreed to be bound by any order which I may make with regard to the
relief sought by the parties.
This was done with the express purpose
that the disputes which involve him could be resolved without further
litigation.
[34] I make the following
order :
It is declared that the
first, second and seventh defendants are each owners of an equal and
undivided share in the membership
interest of the third defendant.
The sixth defendant is
directed forthwith to amend his/her records to accord with paragraph
(1) above.
It is declared that the
plaintiff and the second defendant are the lawful owners of the
following immovable properties:
(a) Erf 2547 Marloth Park
Holiday Township;
(b) Erf 3470 Marloth Park
Holiday Township;
(c) Erf 3471 Marloth Park
Holiday Township;
heldin the name of the
first defendant under Deeds of Transfer numbered T 71745/1987, T
167/1986 and T 31159/1984 respectively.
The fifth defendant is
directed forthwith to amend his/her records to record that the
ownership of the properties set out in 3
above, are owned by the
plaintiff and the second defendant in equal and undivided shares.
It is declared that the
plaintiff, and the first, second and seventh defendants are each
entitled to be paid a one quarter share
of the nett proceeds of the
sale of the sectional title units described as :
(a)
SS 16
Old Main Road,
Unit 1;
(b)
SS 16
Old Main
Road,EUA 61;
(c)
SS 16
Old Main Road,
Unit 2;
(d)
SS 16
Old Main Road,
EUA 62
held in the name of the
first defendant under Deeds of Transfer numbered 033840/07 and
033841/07, and the Notarial Cessions of the
Exclusive Use Areas
notarially numbered 07/3250 and 07/3251, after the sale and transfer
of the sectional title units to any person
by the first defendant,
such amounts to be paid to them after payment to the bond holder of
all amounts owed to it and payment
of the expenses of the sale of the
sectional title units.
It is declared that the
plaintiff and the second defendant are the lawful owners, in equal
and undivided shares, of the immovable
property described as portion
357 of Farm ‘Drift’, registration division FT,
Pietermaritzburg held in the name of
the first defendant under Deed
of Transfer No T58656/2005 and situated at 6 Kingfisher Road,
Inchanga.
The fourth defendant is
directed forthwith to amend its records so that they accord with
paragraph 6 above.
Each party is to pay
his/her own costs of the action and the costs of the interdict
application under case number 3284/10.
Date
of hearing : 9
th
October 2013
Date of judgment : 1
st
November 2013
Counsel for the Plaintiff
:W N Shapiro and attorney R A Crockart (instructed by CalitzCrockart&
Associates)
Counsel for the
Defendants : R A Suhr (instructed byMacrae Bath &Batchelor
(second defendant’s attorneys) and McGlashanMcKeownInc
(first
and third defendant’s attorneys)