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[2011] ZAKZDHC 81
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Jicama 194 (Pty) Ltd v Lotter NO and Another, Allan NO and Others v Lotter NO and Another (6094/2007, 6095/2007) [2011] ZAKZDHC 81 (6 December 2011)
IN THE KWAZULU-NATAL HIGH COURT,
DURBAN
REPUBLIC OF SOUTH AFRICA
Case No: 6094/2007
In
the matter between:
JICAMA
194 (PTY) LTD
….............................................................................
Plaintiff
and
KAREN
LOTTER N.O.
…...................................................................
First
Defendant
SIEGFRIED
HEIRISS
…................................................................
Second
Defendant
AND
Case No: 6095/2007
In
the matter between:
KEVIN
RAYMOND ALLAN N.O.
…........................................................
First
Plaintiff
BARBARA
CONSTANCE ALLAN N.O.
…........................................
Second
Plaintiff
MARC
KEVIN ALLAN N.O.
…...............................................................
Third
Plaintiff
BRETT
RAY ALLAN N.O.
…...............................................................
Fourth
Plaintiff
and
KAREN
LOTTER N.O.
…...................................................................
First
Defendant
SIEGFRIED
HEIRISS
…................................................................
Second
Defendant
JUDGMENT
Delivered on: 6 December 2011
VAHED
J
:
GERHARD WILHELM HILSE (“the
deceased") took ill during June 2003 and, on 27 June 2003, at
the age of 78, died a lonely
death in hospital. At the time of his
death he had been living alone in Pinetown on one of two adjacent
immovable properties
owned by him. His closest living relative was a
sister, Mrs Gade, who at the time was living in Hamburg in Germany.
The first defendant is the
representative of the executor testamentary in the deceased's
estate. Prior to her appointment as executor
testamentary it was
thought that the deceased had died intestate and at that stage the
second defendant had been appointed as
executor dative. They are
both sued for failing to honour agreements in terms of which the
deceased's immovable properties (“the
properties”) were
sold to the respective plaintiffs in these matters. The one property
was sold to a company, the plaintiff
in case number 6094/2007 and
the other was sold to a Trust represented by the plaintiffs in case
number 6095/2007. In fairly
loose terms the
alter ego
of both
the company and the Trust is Mr Kevin Raymond Allan who, at the time
of the deceased’s death, was his neighbour.
In terms of an
Order made on 17 August 2010 both actions were consolidated.
The brief facts giving rise to both
actions are as follows. When the deceased suddenly took ill Mr Allan
arranged for his admission
to hospital, and thereafter, upon his
death arranged for his funeral and cremation. He also paid the
hospital bill and the costs
relating to his funeral and cremation.
He arranged for contact to be made with an associate in Germany in
an effort to trace
the deceased's sister. As a result of that he was
put in contact with a German attorney, Ms Ursula Schuebel
(“Schuebel"),
who was based in Munich and who traced and
made contact with Mrs Gade in Hamburg.
At the time the second defendant was
an attorney practising as such in Pinetown. Mr Allan secured his
services and ultimately,
on 19 December 2003, he was appointed
executor dative to the estate of the deceased.
Prior thereto both Mr Allan and the
second defendant had been in contact with Schuebel and with Mrs
Gade. Mr Allan's contact with
Mrs Gade concerned amongst others his
interest in acquiring the deceased's 2 properties. The second
defendant's contact with
Ursula related to his appointment as
executor and securing Mrs Gade's support in that regard. He also
explained in some detail
the process of winding up a deceased estate
in South African law.
After the second defendant's
appointment Mr Allan took his interest in the properties further. He
made an initial offer, which
was thereafter increased. At some point
in time it was explained to him by the second defendant that the
properties had to be
valued by a sworn appraiser or valuator so that
a price and process acceptable to the Master of the High Court could
be achieved.
In the interim the second defendant
and Mr Allan were in the process of sifting through the deceased's
substantial (although eventually
largely irrelevant) collection of
documents in order to properly establish the state and extent of his
estate and to establish
the whereabouts of his assets, particularly
the title deeds relating to the two properties. While that was
unfolding and on 21
January 2004 the second defendant received a
telephone call from a representative of Syfrets who indicated that
they were in
possession of a document purporting to be the
deceased's Will. The second defendant waited for further
communication in that
regard. When he testified the second defendant
said that he “put the matter on hold" until very nearly
the end of
that year. He did not want to incur further costs only to
discover that he was going to be replaced as executor.
During December 2004 sworn appraisals
of the two properties were obtained. Shortly thereafter Mr Allan
began negotiating directly
with Schuebel regarding his acquisition
of the properties. At the same time he was dealing with the second
respondent with regard
to the incorporation of a close corporation,
intending that to be the vehicle by which one of the properties was
going to be
acquired. He later changed his mind, indicating that a
company was preferable and this led to the acquisition by him of a
“shelf-company"
which turned out to be the plaintiff in
case number 6094/2007. At the same time he informed the second
defendant that he was
going through the process of forming a family
trust, intending that to be the vehicle for the acquisition of the
other property.
While all of this was unfolding, a
competing interest in the properties was expressed by another
potential purchaser. When it
appeared that Mrs Gade and Schuebel
were not forthcoming with a decision the second defendant wrote to
them in Germany explaining
his position as executor and advising
that the offer that had by then been made by Mr Allan was to be
preferred.
During June 2005 the second defendant
prepared separate written agreements for the sale of the one
property to the company, the
plaintiff in case number 6094/2007 and
the sale of the other property to the trust, the plaintiffs in case
number 6095/2007.
These agreements were both signed on 29 June 2005
or shortly thereafter. The properties were sold for a total purchase
price
of R520 000,00.
Both agreements contain, as clause 22
in each of them, the following provision:
“
This
agreement shall be subject to the Master the High Court of South
Africa, Pietermaritzburg, and the sole heiress, Alice Maria
Gade,
consenting to the sale. Should such consent not to be obtained, this
agreement shall lapse and be of no further force or
effect."
I pause to mention that shortly
before the agreements were concluded and signed, and after he had
pressed for further instructions,
the second defendant received an
e-mail communication from Mrs Gade's daughter to the effect that her
“… mother
[had] reached a decision. Mr Kevin A. must
receive the buying right (
sic
)." Prior thereto it
appeared from other interactions amongst the relevant role players,
that Mrs Gade was willing to consent
to the estate's properties
being sold to Mr Allan.
Shortly after the agreements were
signed the second defendant was incapacitated firstly as a result of
a surgical procedure that
he had to undergo and thereafter as a
result of illness. However, according to him, although the pace with
which he attended
to matters slowed somewhat, with assistance the
estate file continued to receive attention. He did not immediately
prepare the
envisaged consent for signature by Mrs Gade because,
according to him, he wanted all the other preliminary steps to be
completed
before forwarding the documents of consent to Germany. His
explanation was that, given his experience of dealing with Schuebel
and Mrs Gade, he would be faced with a series of questions as to the
future conduct of the matter had he sent up the documents
of consent
at an earlier time. He wanted to be in a position to say that
everything possible had been done, that the loan agreements
and
mortgage bond documents of the two plaintiffs had been done,
prepared and signed and that the only outstanding issue was
the
question of lodgement and the subsequent processes in the Deeds
Office. Given that view that he took of the matter, the documents
of
consent, which had been prepared earlier, presumably at the time the
transfer documents had been prepared, were only sent
to Germany
under cover of a letter from the second defendant dated 12 November
2005.
On or shortly before 16th of December
2005 the second defendant was removed from office by the Master of
the High Court, the Master
indicating in his letter of removal that
the reason therefor was the second defendant's failure to lodge the
estate's liquidation
and distribution accounts with him.
It seems however that in the interim,
or coinciding with that removal, the deceased's Will had been lodged
with the Master of
the High Court by BoE Trust KZN, that process
culminating in the appointment of the first defendant’s
principal as executor
of the estate on 15 March 2006.
It appears that the first defendant
is BoE Trust KZN’s nominated official representing it as the
executor of the estate.
They, in turn, appointed Sentinel
International Trust Company (“Sentinel”), as agent, to
attend to the winding up
of the deceased’s estate. Mr Dirk van
Ryneveld (“van Ryneveld”), Sentinel’s regional
director based in
Durban, dealt with the matter.
After finding his bearings, which
included preliminary communications with the second defendant, Mr
Allan and Ursula, van Ryneveld
wrote to Schuebel via email enquiring
whether the consents had been signed. That was on 10 May 2006. When
she responded in the
negative, and after consulting the second
defendant, van Ryneveld took the view that the sales to the
plaintiffs had either lapsed
or that the envisaged consents would no
longer be forthcoming and put the properties up for auction. On 17
August 2006 the properties
were sold on auction to a third party for
R2,725 million.
Against that background the
plaintiffs in both actions sued the first defendant in contract for
damages resulting from the executor’s
breach of the agreements
in failing to obtain the consents in a form acceptable to the Master
of the High Court. In the alternative
they sued the second defendant
in delict for negligently failing to obtain the consents.
When the trial commenced I was
informed that the matter would be proceeding on the issue of
liability only and I assumed that
an Order to that effect had
already been made. I was not asked to make an Order in terms of Rule
33(4) of the Uniform Rules of
Court. After judgment had been
reserved and on going through the Court files I ascertained that no
such Order had been previously
sought or made. I note from the
minutes of the conference held in terms of Rule 37 on 24 August 2010
that the parties were agreed
that the issues be so separated and
assume that the failure to secure such an Order from me when the
matter commenced was an
oversight. I record my intention to grant
such Order.
Mr
Schumann
, who appeared for
the plaintiffs in both actions, outlined the issues on liability in
his opening address. These were crisply
stated by him to be as
follows:
On the contractual issue:
Whether the second defendant, in his
capacity as executor, timeously failed to obtain the written
consent of the heir;
Whether, if such consent had been
sought, it would have been forthcoming;
Whether the Master of the High Court
would have consented to the sales.
On the delictual issue:
Whether the second defendant was
negligent in failing to obtain the consents;
Whether the second defendant owed
the plaintiffs in both actions a duty of care.
And on a further issue added by Mr
Crots
who appeared for the first defendant:
Whether the first plaintiff in case
number 6095/2007 had authority to represent the other trustees when
he signed the sale agreement.
In what follows it must be remembered
that from the end of June 2005 until 17 August 2006, a period just
short of 14 months, the
properties increased in value from R520
000,00 to R2,725 million, an increase of the order of 400%.
On the contractual question the
crucial issue is Mrs Gade’s written consent. Absent that there
can be no question of the
Master of the High Court’s consent.
That much was common cause. It was also common cause that had Mrs
Gade’s written
consent been obtained, the Master of the High
Court’s consent would, all else being equal, have been a
formality. Issue
“c” therefore falls away.
It seems to me that the contractual
issue and the delictual issue are the face and reverse of the same
coin. Insofar as the second
defendant is concerned, it is the same
conduct that is examined to establish or reject either proposition.
Insofar as the delictual
issue is concerned it was common cause that
the spotlight of negligence must be focussed on the period August to
November 2005,
conduct outside that period being irrelevant.
Although there was some initial sparring to the effect that for the
contractual
issue that period ought to commence sometime earlier
than August 2005, I am of the view that for both issues the relevant
period
is identical.
It is common cause that there had
been no direct communication, written or otherwise, from Mrs Gade to
the second defendant indicating
her consent to the sale of the
estate’s properties to the plaintiffs. On that score, the
closest that the plaintiffs could
reach that goal was a letter
written by Mrs Gade to Mr Allan personally on 09 August 2003 in
which she said (loosely translated
from the original German):
“
I
am sorry to say that I cannot guarantee you the first option on the
land as I do not have the necessary rights to this at present.
If
after having found other possible heirs and they being agreed, I am
willing to support your case so that you get first option
at best
offer for this land.”
The authorities are clear that if,
after all the valid heirs’ consents have been obtained, a
subsequent higher offer is
not sufficient to upset a sale. See
Meyerowitz:
On Administration of Estates and Estate Duty
(2004 Ed) paragraph 13.8. But what is the position, such like we
have here, where in anticipation of written consent from the
heirs
the executor sells property in the estate and thereafter, because
property has increased in value, the heir declines written
consent
to that sale? Logic dictates that there ought to be nothing wrong
with that stance. A purchaser in those circumstances
was always at
risk until the consent document was in fact signed by the heirs.
So then the crucial question is: Did
the second defendant commit an actionable breach (by negligently not
obtaining Mrs Gade’s
signature timeously) during the crucial
period? Put differently: Did the second defendant breach the
agreements when he waited
until November to send the documents of
consent to Ursula for signature by Mrs Gade?
Mr
Thatcher
, who appeared for
the second defendant, attacked the plaintiff’s case against
the second defendant on two levels.
Firstly, he argued, that the law
imposed no special obligation or duty on the second defendant
vis-à-vis
the plaintiffs. That argument unfolded as
follows:
The duties of an executor are
summarised in
Meyerowitz
(
supra
). At para 12.24,
relying upon the authority of
Lockhat’s Estate v North
British & Mercantile Insurance
1959 (3) SA 295
(AD) at 302
E-G, the following appears:
“
[T]he
executor’s duty [is] … to obtain possession of the
assets of the deceased …, to realise such of them as
may be
necessary for payment of the debts of the deceased, taxes and the
costs of administration and winding-up, to make the payments
and to
distribute the assets and money that remain after debts and expenses
have been paid among the legatees under the will or
among the
intestate heirs on intestacy.”
In
Ex Parte Misselbrook, N.O.: In
Re Estate Misselbrook
1961 (4) SA 382
(D) CANEY J held at 384
A-B that:
“
[a]s
a matter of general principle, executors have not the right and are
not under the duty (unless the will directs them to do
so)of
realising more of the assets of the estate than is necessary to pay
debts, administration expenses, death duties, cash legacies
and other
outgoings. That is the ordinary rule.”
Dealing with the executor’s
duty to heirs, and relying on the authority of
Clarkson NO v Gelb
& Ors
1981 (1) SA 288
(W), Mr
Thatcher
submitted that
that duty trumped any contractual duty that the executor may have in
respect of a third party such as the plaintiffs.
The imposition of a
legal duty
vis-à-vis
the plaintiffs, so the argument
went, would result in a breach of the executor’s fiduciary
duty to the heirs. This, Mr
Thatcher
argued, flowed from the
finding in
Clarkson
at 295 C-E that:
“…
in
our common law an action exists against an executor at the suit of
the heirs to recover the loss which they have suffered as
a result of
his maladministration of the estate. This is not the Aquilian action
but is an incident of the special fiduciary position
which the
executor holds, having “taken charge of the affairs of others”.
These “others” are the heirs
in whom the right to obtain
ownership of their inheritances vested at the time of the deceased’s
death. This type of action
is one for the rendering of accounts,
debatement thereof, payment of balances found to be due and payment
of damages for maladministration.
In view of the statutory provisions
which relate to the administration of a deceased’s estate, it
is probably now limited
in modern times to simply an action for
damages.”
Thus, it was argued, the second
defendant owed no legal duty to the plaintiffs as this position was
a logical and natural consequence
of the principles established in
Lockhat’s Estate, Misselbrook and Clarkson
reconciled
with the principles of liability discussed in
Broderick
Properties (Pty) Ltd v Rood
1964 (2) SA 310
(T) at 314 H –
315 B and
Jowell v Bramwell-Jones & Ors
1998 (1) SA 836
(W).
Secondly, and dealing with the delay,
Mr
Thatcher
contended that the period under review, ie.
August until 9 December 2005 revealed nothing remarkable about the
second defendant’s
conduct such that it warrants a finding
that he was negligent. In addition to the facts I have set out
earlier in this judgment
Mr
Thatcher
also argues as being
relevant the fact that during his frequent interaction with the
second defendant (which included frequent
email exchanges) during
this period not once did Mr Allan seek to complain about delay.
There was certainly nothing in writing
that was introduced or
referred to in evidence.
Mr
Schumann
contended that the
second defendant did indeed owe the plaintiffs a duty of care and
that the duty was breached by him when he
failed to obtain the
necessary consents from Mrs Gade. In this regard he contended that
the facts spoke for themselves and, in
support of those facts,
relied on paragraph 13.9 in
Meyerowitz
(
supra
):
“
When
selling property the executor should take care to see that the sale
is made subject to the issue of the Master’s certificate…
. But whether this is done or not, transfer to the purchaser pursuant
to the sale is subject to the issue of the Master’s
certificate
and if such certificate is not obtained, whether through nonfeasance
or misfeasance of the executor, the purchaser
will have no claim for
specific performance or damages against the estate, even should he
have been notified by the executor that
the sale could be regarded as
final and conclusive. If the executor acted
mala
fide
or recklessly in advising the purchaser that the sale was final, or
in not obtaining the Master’s certificate, an action
for
damages will probably lie against him in his personal capacity.”
Although that passage speaks only of
the consent of the Master, the consent of the heir is a necessary
preliminary step and so
that passage applies equally to the facts of
cases under consideration.
No allegations of
mala fides
on the part of the second defendant have been made and accordingly
nothing need be said in that regard.
I am not persuaded that the second
defendant was negligent during his tenure as executor and more
particularly during the focussed
period between July and December
2005.
In my view, his actions during that
period were perfectly reasonable and it cannot be said that during
that period that time was
of the essence such that it compelled him
to act with more speed. In addition there was no harm that he could
reasonably anticipate
befalling the plaintiffs.
The simple fact of the matter is that
Mrs Gade had not signed the required documents of consent and there
was nothing anyone could
do to compel her to do so. Her apparent
willingness to do so at some point is irrelevant.
What is relevant however is this. The
properties had, during the crucial period, clearly increased
significantly in value. In
the exercise of his fiduciary duty to the
heir the second defendant would, to my mind, have been acting
perfectly lawfully if,
before demanding signature by Mrs Gade, he
investigated the position and advised her of that increase in value
so that when she
came to finally consider signing the documents of
consent she was making an informed decision in that regard. It is
true that
the discovery of an increase in value after the consents
had been signed would not vitiate the consent, everything else being
equal; but there is nothing in law to suggest that such an enquiry
before the documents of consent are signed is improper. In
my view,
given the lapse of time between the determining of the purchase
price of the properties and the date signature to the
documents of
consent was being sought, the second defendant’s fiduciary
duty to the heir demanded of him that he conduct
such investigation
and put Mrs Gade in the position where she would have been making an
informed decision.
It is obvious that had Schuebel or
Mrs Gade made those enquiries and independently declined to sign the
documents of consent the
plaintiffs would have been in the same
position. They would have had no remedy.
Given what I say in paragraph 40 it
follows that the first defendant acted appropriately in the
discharge of the executor’s
fiduciary duty to Mrs Gade.
Arriving at those conclusions it
becomes unnecessary to decide the question as to authority, although
I would have been inclined
to decide that issue in the first
defendant’s favour. The point is a simple one. The agreement
involving the Trust is signed
by Mr Allan alone and his signature is
unqualified. In evidence Mr Allan said that he was certain that he
had been authorised
in writing to represent the other trustees but,
when challenged, he could not produce the relevant minute. In the
result there
was insufficient before me for the Trust to discharge
the onus it bore to establish that Mr Allan was duly authorised to
conclude
the agreement. See
Thorpe & Ors v Trittenwein &
Ano
2007 (2) SA 172
(SCA) at 178. In the absence of that
authorisation there was nothing to suggest that the plaintiffs in
Case No 6095/2007, as
trustees, had acted jointly, as they were in
law required to act, in concluding the agreement. In my view the
challenge in this
regard had been raised sufficiently on the
pleadings notwithstanding Mr
Schumann’s
submissions to
the contrary.
Mr
Crots
submitted that,
whatever happened with the outcome of this matter, I ought to award
the first defendant the trial costs of 1
September 2010. On that
date the matter had been set down for trial but proceed before
GORVEN J on a limited basis, dealing only
with an opposed
application by the second defendant to amend his plea. Ultimately
GORVEN J dismissed that application, ordering
the second defendant
to pay the plaintiffs’ costs. No mention was made of the first
defendant’s costs.
It seems to me that the first
defendant was fortunate in not being made to share those costs with
the second defendant. At a pre-trial
conference held on 24 August
2010 the first defendant indicated that she supported the second
defendant’s proposed application
for an amendment to her plea.
At the hearing before GORVEN J it is not clear whether Mr
Crots
made any submissions in furtherance of such support and GORVEN
J’s written judgment is silent on that aspect. It therefore
seems fair, now, that I make no Order as to those costs.
In the result I make the following
Orders in both matters:
To the extent necessary, and in
terms of Rule 33(4), the issues shall be separated with the
question of the defendants’
liability being determined first
before all others.
The separated issue is resolved in
the defendants’ favour.
The action is accordingly dismissed
with costs.
DATE OF HEARING: 25 October 2011
DATE OF JUDGMENT: 6 December 2011
FOR THE PLAINTIFFS: P Schumann
INSTRUCTED BY: Stirling Attorneys
FOR THE FIRST DEFENDANT: E Crots
INSTRUCTED BY: Tomlinson Mnguni James
FOR THE SECOND DEFENDANT: G R Thatcher
INSTRUCTED BY: Norton Rose