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2024
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[2024] ZAFSHC 374
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Kramer Weihmann Incorporated v Joubert and Others (3645/2022) [2024] ZAFSHC 374 (25 November 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Not reportable
Case no:3645/2022
In
the matter between
KRAMER
WEIHMANN INCORPORATED
PLAINTIFF
and
PETRUS
JOHANNES JOUBERT
FIRST
DEFENDANT
CW
AUDITORS
SECOND
DEFENDANT / FIRST EXCIPIENT
CHRISTIAAN
WAGENAAR
THIRD
DEFENDANT / SECOND EXCIPIENT
THE
HOLLARD INSURANCE COMPANY LIMITED
FOURT
DEFENDANT / THIRD EXCIPIENT
JACQUELINE
SYNTHIA FREDERICKS
FIFTH
DEFENDANT
Neutral citation: XXX
Coram: NG Gusha AJ
Heard: 23 August 2024
Delivered:
25 November 2024
Summary:
Exception – claim for damages upon breach of
contract – whether the plaintiff’s amended particulars of
claim sustain
a cause of action.
ORDER
The exceptions are
dismissed with costs on scale C, of which costs shall include the
costs of two counsel where so employed.
JUDGMENT
Gusha AJ
Introduction
[1]
This
is an interlocutory application by the second to fourth defendants
who raise an exception against the plaintiff’s amended
particulars of claim
dated
18 October 2023 (the 18 October 2023 amendments)
[1]
,
on the ground that same does not disclose sufficient grounds to
sustain a cause of action against the second and third defendant
jointly and the fourth defendant on the other side.
[2]
The second and third defendants
(first excipients) jointly excepted to the amended particulars of
claim. The fourth defendant (second
excipient) excepted apart.
The parties
[3]
The plaintiff is duly registered as
a personal liability company with its registered place of business
situated at 24 Barnes Street,
Westdene, Bloemfontein, Free State. The
plaintiff was previously registered and known as Kramer Weihmann
Joubert Incorporated (KWJ).
It conducts business as a professional
company of attorneys, notaries and conveyancers as provided for by
the Legal Practice Act
28 0f 2014.
[4]
The first defendant is a male and
duly admitted legal practitioner with principal place of business
alternatively at employed at
Peyper Attorneys 101 Olympus Drive,
Helicon Heights, Bloemfontein, Free State. He is a founding member of
KWJ. For purposes of
the action as instituted, the first defendant
was at all relevant times a director of the plaintiff and is
therefore together with
the plaintiff jointly and severally liable
for the debts and liabilities of the plaintiff as are or were
contracted during his
period of office which subsisted from 1998
until his resignation on 1 April 2020.
[5]
The second defendant is a personal
liability company duly registered as a firm of auditors in terms of
the
Auditing Profession Act 26 of 2005
. It has its place of business
at 50 Reid Street, Westdene, Bloemfontein, Free State. At all times
relevant to the action, the second
defendant rendered auditing
services to the plaintiff.
[6]
The third defendant is a registered
chartered accountant and auditor, and a director of the second
defendant.
[7]
The fourth defendant is an insurance
company and financial services provider duly registered as such with
its principal place of
business at Hollard Villa, Arcadia, 22 Oxford
Road, Parktown, Gauteng. At all times relevant to the action, the
fourth defendant
was the registered insurer of the plaintiff as per
the written agreement of insurance entered into between the two
entities in
2018.
[8]
The fifth defendant is a female and
is employed at Pillay Jampies Attorney’s Inc. At all times
relevant to the action, the
fifth defendant was employed by the
plaintiff as a senior conveyancing secretary and reported to the
first defendant who was the
principal of the plaintiff’s
conveyancing department.
[9]
The first and the fifth defendants
are not part of the present proceedings.
Background facts
[10]
It
is apposite to first set out the background to the present
proceedings. The plaintiff instituted a claim against the defendants,
jointly and severally, for damages suffered by the plaintiff as a
result of misappropriation of trust funds by the first and fifth
defendants. The respective claims are more fully set out in the
erstwhile particulars of claim (the original particulars of
claim).
[2]
[11]
It appears on the papers that some
amendments, which were also excepted to, were effected on the
original particulars of claim.
The series of amendments and
exceptions culminated in the 18 October 2023 amendments which are the
subject of these proceedings.
Upon receipt of these amended
particulars of claim, the second and third defendants jointly
excepted and the fourth defendant on
the other side also excepted.
Both exceptions were taken on the basis that the 18 October 2023
amendments lacked averments necessary
to sustain a course of action,
more on this later.
The exceptions
The exception by the
first excipients
[12]
In amplification of the exception
that the 18 October 2023 amendments lack the necessary averments to
sustain a course of action,
the first excipients aver that
ex
facie
the amended particulars of claim,
the claimed amount is made up of monies fraudulently or otherwise
misappropriated from trust depositors
and not from monies to which
the plaintiff itself was entitled. The first excipients aver that
consequently the amended particulars
of claim lack the necessary
averments to support the claim that the plaintiff suffered damages in
the claimed amount and accordingly
lacks the necessary averments in
respect of the material
facta probanda
to support its claim for damages based upon breach of contract.
The exception by the
second excipient
[13]
The second excipient’s
exception is based on the ground that in so far as the plaintiff
seeks as specific performance of an
indemnity insurance contract
payment from it, the plaintiff enjoys indemnity insurance cover for
legal liability for damages arising
out of the conduct of the
profession, legal liability incurred in the reimbursement of
entrusted money and finally for direct financial
loss due to
dishonest acts. It avers further that in terms of the provisions of
the insurance contract in respect of which plaintiff
seeks specific
performance, the plaintiff has an obligation to take all practicable
steps to recover the lost or stolen property.
[14]
It further avers that the amended 18
October 2023 particulars of claim lack averments that the plaintiff
was legally liable for
the damages arising out of the conduct listed
above and that the plaintiff complied with its legal obligation to
take all practical
steps to recover the loss.
[15]
Both
exceptions were enrolled and set down for hearing on 23 August
2024.
[3]
Subsequent to this, the
plaintiff substituted its attorneys of record. On 25 June 2024,
whilst the exceptions were already enrolled
for hearing, the
plaintiff once more gave notice of its intention to amend its 18
October 2023 particulars of claim. The notice
to amend was delivered
on 25 June 2024 and the amendments delivered on 17 July 2024 (the 17
July 2024 amendments).
[4]
[16]
The
excipients asserted that this step by the plaintiff constitute an
irregular step as envisaged by
rule 30
and accordingly served a
notice in terms of
rule 30(2)
(b)
in response to the plaintiff’s notice to amend its 18 October
2023 particulars of claim.
[5]
They assert that the plaintiff was not entitled to amend its
particulars of claim whilst the exceptions thereto were still extant.
They assert further that as an exception is a pleading it cannot in
law be nullified or ignored. Once an exception has been enrolled
for
adjudication, the particulars of claim excepted to can only be
effected with the leave of the court or by agreement between
the
parties, none of which, according to the excipients has occurred.
[17]
The plaintiff asserts that the 17
July 2024 amendment was directed exclusively to the plaintiff’s
claim as against the fourth
respondent. It further asserts that the
aforesaid amendment was duly effected in terms of
Rule 28
in that the
defendants did not deliver an objection as contemplated in the Rules.
As a result, so they assert, the defendants are
deemed to have
consented to the amendment.
[18]
In addition to
the plaintiff submitting that the 17 July 2024 amendment was effected
in terms of the rules, it submits that the
excipients are not
entitled to raise their objection to the latest amendments in their
heads of argument. To buttress this assertion,
the plaintiff submits
that the excipients are bound by the pleaded grounds of the exception
and that the exceptions as taken and
pleaded cannot he upheld on
grounds not specifically pleaded. Accordingly, the plaintiff submits,
that the excipients are not entitled
to broaden and supplement the
grounds of exception in the heads of argument.
[19]
With regards
to further submissions made, I am indebted to counsel for their
extensive heads of argument traversing their submissions
as well as
the authorities they referred me to. For that reason and in order to
avoid prolixity I shall not repeat same here save
to refer thereto,
where appropriate, during the course of this judgment.
The applicable legal
principles
[20]
It is a basic rule that pleadings
must set out the facts which briefly and concisely identify the
issues relied upon. In the case
of particulars of claim, the
plaintiff is required to set out a complete cause of action therein.
In this regard
rule 18(4)
provides that
‘
Every
pleading shall contain a clear and concise statement of the material
facts upon which the pleader relies for his claim, defence
or answer
to any pleading, as the case may be, with sufficient particularity to
enable the opposite party to reply thereto.’
[21]
It
is trite that an exception is a legal objection to a pleading. It
complains of a defect inherent in a pleading,
[6]
admitting for the moment that all allegations contained in the
particulars of claim are true. An exception asserts that, even with
that admission, the pleading does not disclose a cause of action. It
presupposes that the case is without legal merit on the basis
of the
defects identified. Where an exception is taken a court looks only to
the pleading excepted to as it stands not to facts
outside those
stated in it.
[7]
[22]
It
is furthermore trite that the excipient bears the onus to prove that
an exception is excipiable upon every interpretation which
the
pleading in question can reasonably bear. In
First
National Bank of Southern Africa Ltd v Perry N.O
.
[8]
the court held where a matter is decided as on exception, this has
two relevant consequences. The excipients have to show that
the
pleading is excipiable on every interpretation that can reasonably be
attached to it: Then, the plaintiff, is confined to the
facts alleged
in the particulars of claim, apart from any further facts which the
parties agreed at the trial might be considered.
[23]
It
needs no restating that an exception to a pleading on the ground that
it is vague and embarrassing involves a two-fold consideration.
The
first is whether the pleading lacks particularity to the extent that
it is vague. The second is whether the vagueness causes
embarrassment
of such a nature that the excipient is prejudiced.
[9]
It is not directed at a particular paragraph within the cause of
action but goes to the entire cause of action.
In
addition,
it
is trite that when a court adjudicates an exception it should do so
sensibly and avoid an over-technical approach.
[10]
[24]
In
Luke
M Tembani and Others v President of the Republic of South Africa
and
Another
[11]
the court held that whilst exceptions provide a useful mechanism ‘to
weed out cases without legal merit’, it is nonetheless
necessary that they be dealt with sensibly. It is where pleadings are
so vague that it is impossible to determine the nature of
the claim
or where pleadings are bad in law in that their contents do not
support a discernible and legally recognised cause of
action, that an
exception is competent. The burden rests on an excipient, who must
establish that on every interpretation that
can reasonably be
attached to it, the pleading is excipiable. The test is whether on
all possible readings of the facts no cause
of action may be made
out, it being for the excipient to satisfy the court that the
conclusion of law for which the plaintiff contends
cannot be
supported on every interpretation that can be put upon the facts.
[25]
In
Cronje
and Others v Firstrand Bank Ltd t/a First National Bank
[12]
my brother Daffue J restated the law as follows:
‘
It
is trite that a charitable test is applied in adjudicating an
exception, especially in deciding whether a cause of action has
been
established. The excipient must prove that the pleading is excipiable
on every interpretation that can reasonably be attached
to it.
In order to consider an
exception, the court should accept the allegations pleaded by the
plaintiff as true and correct to assess
whether they disclose a cause
of action. An over-technical approach must be avoided. As stated in
Delmas Milling Co Ltd v Du Plessis
, confirmed in M
urray &
Roberts Construction Ltd v Finat Properties (Pty) Ltd
, the
validity of an agreement and the question whether a purported
contract may be void for vagueness do not regularly fall to
be
decided by way of an exception.’ (Footnotes omitted.)
Application of the
Legal principles
The 17 July 2024
amendment
[26]
Rule
28
deals with amendments to pleadings.
[13]
The
rule is intended to regulate
the
amendment of pleadings and documents in respect of which the parties'
procedural rights in proceedings may be affected. The
rule is an
enabling rule and amendments should generally be allowed unless there
is good cause for not allowing an amendment.
[14]
The notification requirement in
rule 28(1)
grants the other party to
the proceedings an opportunity to object to the intended amendment
under the provisions of
rule 28(4).
[15]
Objections customarily arise if a party may be prejudiced in the
conduct or outcome of the proceedings because of the amendment
or its
timing. The defendants in the present matter did not so object as
provided for in the rules, therefore in terms of
rule 28(5)
they are
deemed to have consented to the amendment. It is also illuminating
that this objection was only raised in the heads of
argument and not
specifically pleaded, the defendants re bound by their pleaded case
in their exception, they cannot broaden the
grounds in their heads of
argument.
[27]
The
principles governing the granting or refusal of an amendment have
been expounded in several cases.
[16]
The key principles evident in these cases were also echoed by the
Constitutional Court in
Affordable
Medicines Trust and Others v Minister of Health and Others.
[17]
.
Referring with approval to
Moolman
v Estate Moolman and Another
1927 CPD 27
at 29, the court, in para 9, indicated that:
'The
practical rule that emerges . . . is that amendments will always be
allowed unless the amendment is
mala
fide
(made in bad faith) or unless
the amendment will cause an injustice to the other side which cannot
be cured by an appropriate order
for costs, or "unless the
parties cannot be put back for the purposes of justice in the same
position as they were when the
pleading which it is sought to amend
was filed".'
The pleaded cause of
action in both the 18 October 2023 and 17 July 2024 amended
particulars of claim
[28]
In both these amended particulars of
claim, the plaintiff’s cause of action as against the first
excipients is based on damages
suffered resulting from breach of
contract.
The
expression cause of action’ has been held to mean;
‘
[E]very
fact which it would be necessary for the Plaintiff to prove, if
traversed, in order to support his right to judgment of
the court. It
does not comprise of every piece of evidence which is necessary to
prove each fact, but every fact which is necessary
to be proved.’
[18]
[29]
This
definition postulates that facts should be pleaded, not evidence, and
only the material facts should be pleaded with clarity
and
conciseness. This requires of a party to formulate its case according
to the basic rules of pleadings.
A
general rule is that pleadings must be lucid, logical and
intelligible.
[19]
Pleadings serve the purpose of bringing clarity, to the notice of the
court and to the parties in an action, the issues upon which
reliance
is to be placed. This objective can only be attained when parties
state their cases with precision, the degree of which
depends on the
circumstances of each case.
[20]
In
Jowell
v Bramwell-Jones and Others
[21]
the
court remarked that
‘
[T]he
plaintiff is required to furnish an outline of its case. That does
not mean that the defendant is entitled to a framework
like a
crossword puzzle in which every gap can be filled by logical
deduction. The outline may be asymmetrical and possess rough
edges
not obvious until actually explored by evidence. Provided the
defendant is given a clear idea of the material facts which
are
necessary to make the cause of action intelligible, the plaintiff
will have satisfied the requirements [of the rule].’
[22]
[30]
It
is trite that pleadings are about primary factual allegations
,
the
facta
probanda
,
from which conclusions may be drawn. The
facta
probanda
has to be distinguished from the
facta
probantia
,
which are secondary allegations or evidence upon which the pleader
will rely to prove the primary allegations.
[23]
It is accepted law that it is not necessary to plead
facta
probantia,
[24]
a pleading should not be read pedantically nor should a court
overemphasise precise formalistic requirements – it is the
substance of the allegations that should properly be considered.
[25]
[31]
In the present matter the plaintiff
alleged in its particulars of claim that it suffered damages as a
result of the misappropriation
of trust funds by the first and fifth
defendants. the claim as against the defendants is couched in
sufficient detail to allow
the defendants to respond thereon. The
plaintiff has set out in its particulars of claim the contractual and
trust relationship,
the breach of that relationship, how it came
about, as well as the relief it seeks. It is accordingly not
necessary under these
circumstances for the plaintiff to set out the
defendants’’ liability as the facts the defendants rely
upon to negate
their liability are facts falling outside the realm of
the plaintiff’s cause of action.
[32]
The fact that the amount
misappropriated was that of third parties is really of no moment in
the determination of whether the plaintiff
has suffered damages, for
it is a trite principle of our law that where trust moneys are
deposited in the trust account of an attorney,
the trust creditors
have no control over the trust account: ownership of the money in the
account vests in the bank in which it
is deposited. It is only the
attorney who is entitled to operate on the account and to make
withdrawals from it. The only right
that the trust creditors have is
the right to payment by the attorney of whatever is due to them, and
to that extent they are creditors
of the attorney. The right to
payment plainly arises from the relationship between the parties and
has nothing to do with the way
in which the attorney handles the
trust funds. A trust creditor’s claim is not limited to what
the attorney has unlawfully
withdrawn or whatever is left in the
trust account. When an attorney receives money from a client to be
held in trust, a debt immediately
arises for payment (subject to
whatever agreement the parties may have) of that amount to the
client. The client becomes entitled
to payment on demand.
[33]
When
trust money is handed to an attorney or a firm of attorney’s it
is the duty of that attorney or firm to keep the funds
in its
possession and to use it for no other purpose but that of the trust.
The firm fulfills its duty if it accounts for or returns
an
equivalent amount. It is inherent in such a trust that that the firm
should at all times have available liquid funds in an equivalent
amount. If a deficit exists in respect of trust money for which a
practitioner is liable, the practitioner has no right to use
moneys
entrusted to her for a particular purpose, to satisfy trust creditors
in respect of whose moneys the deficit exists.
[26]
The second exception
relating to the indemnity insurance contract
[34]
It is trite that a claim for
indemnification insurance under an insurance contract can only arise
when liability to the third party
in a certain amount has been
established. The debt, for purposes of prescription, therefore,
becomes due when the insured is under
a legal liability to pay a
fixed and determinate sum of money. Until then a ‘claim’
for indemnification under the policy
does not exist, it is only a
contingent claim. In the present matter the plaintiff had suffered a
trust deficit as a result of
the misappropriation and has already
made good on some R4 million to the trust depositors, the fact that
the entire deficit was
not made good is of no moment, the moment a
trust deficit ensued, in my view the obligation to pay arose, the
plaintiff suffered
patrimonial loss; the element of damages suffered
is established.
Conclusion
[35]
Accordingly, the exceptions as
raised should fail.
Costs
[36]
The parties are agreed that an
appropriate costs order to make is that of party and party costs at
scale C, I see no reason to depart
therefrom.
Order
[37]
Resultantly, I make the following
order:
The
exceptions are dismissed with costs on scale C, of which costs shall
include the costs of two counsel
where so
employed.
NG GUSHA, AJ
Appearances
For
the Plaintiff:
Adv.
D.J Van der Walt SC et Adv. H Benade
Instructed
by:
Clyde
& Co Inc
Sandton
c/o
Honey Attorneys
Bloemfontein
For
the Excipients:
Adv.
G.F Heyns SC
Instructed
by:
Peyper
Attorneys
Sandton
c/o
Peyper Attorneys
Bloemfontein
[1]
Pleadings
bundle p.104 to 210.
[2]
Ibid
at p.7 to 46.
[3]
Notice
of set down, p. 62 to 65 Exception Bundle.
[4]
Pleadings
bundle p. 211 to 218.
[5]
‘
30.
Irregular proceedings
(1) A party to a cause
in which an irregular step has been taken by any other party may
apply to court to set it aside.
2) An application in
terms of subrule (1) shall be on notice to all parties specifying
particulars of the irregularity or impropriety
alleged, and may be
made only if— (a) the applicant has not himself taken a
further step in the cause with knowledge of
the irregularity; (b)
the applicant has, within 10 days of becoming aware of the step, by
written notice afforded his opponent
an opportunity of removing the
cause of complaint within 10 days; (c) the application is delivered
within 15 days after the expiry
of the second period mentioned in
paragraph (b) of subrule (2).’
[6]
‘
23
Exceptions and applications to strike out
(1)
Where any pleading is vague and
embarrassing or lacks averments which are necessary to sustain an
action or defence, as the case
may be, the opposing party may,
within the period allowed for filing any subsequent pleading,
deliver an exception thereto and
may apply to the registrar to set
it down for hearing within 15 days after the delivery of such
exception.’
[7]
Baliso
v Firstrand Bank Limited t/a Wesbank
[2016] ZACC 23
;
2016 (10) BCLR 1253
para 33.
[8]
First
National Bank of Southern Africa Ltd v Perry N.O
[2001] ZASCA 37
;
2001 (3) SA 960
(SCA) para 6.
[9]
Trope
v South African Reserve Bank
1992 (3) SA 208 (T).
[10]
Telematrix
(Pty) Limited v Advertising Standards Authiority SA
2006 (1) SA 461
SCA.
[11]
In
Luke
M Tembani and Others v President of the Republic of South Africa
and
Another
[2022] ZASCA 70
para 14.
[12]
Cronje
and Others v Firstrand Bank Ltd t/a First National Bank
[2023] ZAFSHC 441
paras 11-12.
[13]
‘
28.
Amendment of pleadings and documents
(1) Any party desiring
to amend a pleading or document other than a sworn statement, filed
in connection with any proceedings,
shall notify all other parties
of his intention to amend and shall furnish particulars of the
amendment.
(2) The notice referred
to in subrule (1) shall state that unless written objection to the
proposed amendment is delivered within
10 days of delivery of the
notice, the amendment will be effected.
(3) An objection to a
proposed amendment shall clearly and concisely state the grounds
upon which the objection is founded
(4) If an objection
which complies with subrule (3) is delivered within the period
referred to in subrule (2), the party wishing
to amend may, within
10 days, lodge an application for leave to amend.
(5) If no objection is
delivered as contemplated in subrule (4), every party who received
notice of the proposed amendment shall
be deemed to have consented
to the amendment and the party who gave notice of the proposed
amendment may, within 10 days after
the expiration of the period
mentioned in subrule (2), effect the amendment as contemplated in
subrule (7).
. . .’
[14]
Ascendis
Animal Health (Pty) Ltd v Merck Sharp Dohme Corporation and Others
[2019] ZACC 41
;
2020 (1) SA 327
(CC) para 89.
[15]
Ibid.
[16]
See
for instance
Commercial
Union Assurance Co Ltd v Waymark NO
1995 (2) SA 73
(TK) at 76D-76I. See also
Caxton
Ltd and Others v Reeva Forman (Pty) Ltd and Another
[1990] ZASCA 47
;
1990 (3) SA 547
(A) at 565G-566A.
[17]
Affordable
Medicines Trust and Others v Minister of Health and Others
[2005]
ZACC 3; 2006 (3) SA 247 (CC)
[18]
Evins
v Shield Insurance Co Ltd
1980 (2) SA 814
(A) at 838D-H.
[19]
Trope
v South African Reserve Bank and Another
1992
(3) SA 208
(T) at 210H.
[20]
Imprefed
(Pty) Ltd v National Transport Commission
1993
(3) SA 94
(AD) at 107C-E.
[21]
Jowell
v Bramwell-Jones and Others
1998 (1) SA 836
(W) (
Jowell
).
[22]
Ibid
at 913F-G.
[23]
Nasionale
Aartappel Korporasie Beperk v Price Waterhouse Coopers Ing en andere
2001 (2) SA 790
(T) at 797G-I and 798C-E;
Jowell
at
903A-B; and
Makgae
v Sentraboer (Koöperatief) Bpk
1981 (4) SA 239
(T) at 245D-E.
[24]
Harms:
Amler’s
Precedents of Pleadings
9 ed at 1.
[25]
MN
v AJ
[2011]
ZAWCHC 5
;
2013 (3) SA 26
(WCC) para 24; and
Suid
Afrikaans Onderlinge Brand en Algemene Versekerings Maatskappy Bpk v
Van der Berg en Andere
1976 (1) SA 602
(AD) at 607E.
[26]
Incorporated
Law Society, Transvaal v Visser and Others; Incorporated Law
Society, Transvaal v Viljoen
1958
(4) SA 115
(T) at 118F-H.