Brief Summary

Locus Standi — Beningfield exception — Beneficiaries of a deceased estate may claim assets from a person in possession when the executor has died and unlawfully sold the assets prior to death — The respondents sought to reclaim immovable property transferred from the deceased estate to the first respondent, asserting locus standi based on the Beningfield exception — The court held that the beneficiaries had standing to make the claims despite not being executors, as the executor was deceased and unable to act.

Comprehensive Summary

Summary of Judgment

1. Introduction

This was an appeal to the Supreme Court of Appeal from the Eastern Cape Division of the High Court, Mthatha. The appeal concerned a point in limine only, namely whether certain applicants in the high court had locus standi in judicio to seek the setting aside of the transfer of immovable property that had allegedly been unlawfully alienated from a deceased estate.

The appellant was The Standard Bank of South Africa Limited, cited in the high court because it held two registered mortgage bonds over the immovable property that the applicants sought to reclaim for the deceased estate. The respondents in the appeal were Mlungisi Ratsi July (in his personal capacity and as executor of another estate), another cited July respondent, and two grandchildren (Lumko Luke Mbuqe and Luvuyo Wongile Batandwa July). Although other parties featured in the high court litigation (including the widow and children of the late executor implicated in the alleged wrongdoing), they did not participate in the appeal; the judgment records that there was no appearance for the respondents and that the other respondents in the high court abided.

The proceedings originated as an application in the high court relating to a wider family dispute about a deceased estate and its immovable property. The high court decided only the standing issue and held that the applicants had locus standi under the Beningfield exception to the general rule that only an executor may sue in respect of estate property. Because factual disputes existed on the papers, the matter in the high court was referred to oral evidence, but that referral was pending the outcome of the appeal on locus standi. The bank appealed with the leave of the high court.

The general subject-matter of the dispute was the alleged maladministration and fraudulent alienation of immovable property from the deceased estate of Mrs Eunice Mbuqe, including a sale by the (now deceased) executor of estate property to his spouse, allegedly without the Master’s consent required by the Administration of Estates Act 66 of 1965.

2. Material Facts

Mrs Eunice Mbuqe died intestate on 19 March 2003. She was the widow of Zachariah Mbuqe, and she had two children, Ray Mbuqe and Mrs Linda July. Linda July died intestate on 13 June 2004, and Ray Mbuqe died on 5 November 2008. Mr Mlungisi Ratsi July (the first respondent) was Linda’s husband, and he was appointed the executor of Linda’s estate on 3 September 2004. Linda and Mr July had two children, who are among the respondents.

The appeal proceeded on the footing that, although the allegations were contested in the high court (hence the referral to oral evidence), the Supreme Court of Appeal would assume the correctness of Mr July’s factual contentions for purposes of deciding locus standi.

On Mr July’s version, two transfers of immovable property were implicated, but only one was relevant to the appeal. The key property for purposes of the bank’s involvement was a property in Mthatha (described as the first immovable property) which had formed part of Eunice’s estate. Mr July alleged that Ray Mbuqe had been appointed as executor of Eunice’s estate (the judgment records the appointment date as 4 November 2005) and that Ray thereafter sold the first immovable property to his wife, Mrs Tembisa Mbuqe. The sale was alleged to be unlawful because section 49(1) of the Administration of Estates Act required the Master’s consent where an executor sold estate property to the executor’s spouse, and Mr July alleged that Ray did not obtain such consent. Mr July further characterised the transaction and transfer as involving fraud, including misrepresentations in dealings with official processes.

The judgment records as a further feature of Mr July’s account that Tembisa Mbuqe had purportedly applied in terms of section 18(3) of the Act to be appointed executrix despite Ray’s earlier appointment as executor, and that there were alleged misstatements to the Master concerning the number of Eunice’s children. These allegations were part of the asserted irregularities relied upon by Mr July to attack the transfer of the first immovable property.

After the transfer to Tembisa Mbuqe, she registered mortgage bonds over the first immovable property in favour of the bank. The judgment records that she obtained a loan secured by a bond on 25 April 2006 and a further loan secured by a second bond on 20 June 2010, with total indebtedness stated as R1.785 million.

By the time the application was brought in the high court, the original executor (Ray) had died, and it was common cause for purposes of the standing enquiry that there was no executor in Eunice’s estate and that the estate had not yet been wound up. The applicants had not, by then, taken steps to procure the appointment of a new executor. A prayer initially sought to set aside Ray’s appointment as executor, but this relief was abandoned because Ray had already died before the application was instituted.

The bank’s interest arose from the fact that, if the transfer to Tembisa were set aside, the bank’s security position under the bonds would potentially be affected. The bank raised the point that, because the applicants were not executors of Eunice’s estate, they lacked standing to seek relief directed at reclaiming property for that estate.

3. Legal Issues

The central legal question was whether the applicants in the high court, being beneficiaries or persons claiming through a beneficiary (including an executor of a beneficiary’s estate), had locus standi to institute proceedings to set aside the transfer of immovable property allegedly unlawfully alienated from a deceased estate, in circumstances where the estate had no current executor because the executor implicated in the alleged wrongdoing had died and no replacement had been appointed.

This was primarily a question of law (the scope and application of the general rule regarding executors’ standing and the recognised exception), coupled with an application of legal principle to an assumed factual position (the asserted maladministration and unlawful sale; the death of the executor; the absence of a successor executor). The Supreme Court of Appeal did not decide the underlying factual dispute about fraud or statutory non-compliance; it confined itself to the standing issue.

A subsidiary issue raised by the bank was whether the respondents were too remote to qualify as persons with a sufficient interest in Eunice’s estate, because (so the bank argued) they were heirs of Linda’s estate rather than direct heirs of Eunice. The court treated this as part of the standing enquiry, turning on the nature of the respondents’ interest in proper administration of Eunice’s estate.

4. Court’s Reasoning

The court began from the accepted general rule that only an executor may sue to recover assets for, or vindicate rights of, a deceased estate. It then considered the exception recognised in South African law, commonly termed the Beningfield exception, derived from the Privy Council decision in Beningfield v Baxter (1886) 12 AC 167 (PC) and adopted by the Appellate Division in Gross & others v Pentz [1996] ZASCA 78; 1996 (4) SA 617 (A).

The court understood the Beningfield exception to address the practical and legal difficulty that arises where the executor (or trustee in analogous trust contexts) cannot be expected to sue because the executor’s own acts and conduct are impeached. In such circumstances, the law permits a person beneficially interested in due administration to seek relief that would ordinarily have been sought by the executor. The court emphasised that Gross recognised that requiring beneficiaries first to secure the removal of the delinquent fiduciary and the appointment of a replacement as a precursor to recovery proceedings could impose an unduly cumbersome and inefficient process.

The bank’s principal contention was that the Beningfield exception was inapplicable because there was no delinquent executor still in office: Ray had died, so there was no incumbent executor whose conduct could be “impeached” in the sense contemplated by the exception. On this view, the respondents should have proceeded under section 18(1) of the Administration of Estates Act to procure the appointment of a new executor in Eunice’s estate, and the newly appointed executor would then have brought the appropriate rei vindicatio or other proceedings to set aside the transfer and recover the property.

The court rejected the bank’s attempt to confine the exception to cases where a delinquent executor remains in office. It relied on the reasoning in the Cape Provincial Division judgment in Pentz v Gross & others 1996 (2) SA 518 (C), approved in Gross, where it had been held that a plaintiff’s standing to sue a trustee for maladministration could not be defeated by the trustee’s resignation. That analysis also noted that death or insolvency does not deprive a plaintiff of locus standi, even if it may affect procedure (for example, by staying an action). The Supreme Court of Appeal applied this reasoning by analogy to the present setting: the death of the executor who allegedly perpetrated the wrongdoing was not treated as extinguishing the ability of beneficiaries to pursue relief that would otherwise have been available against him.

The court framed the practical question as whether, where the executor has allegedly committed the impugned acts and then died (or resigned) without a replacement being appointed, the heirs and beneficiaries must nonetheless first approach the Master to appoint a successor executor, who would then have to familiarise themself with the matter and decide whether to litigate. The court considered that this interposed step could be not only cumbersome but also potentially ineffective, since a newly appointed executor might decide not to pursue the claim, leaving beneficiaries with uncertainty as to what remedies would then be available.

On the respondents’ interest in Eunice’s estate, the court rejected the bank’s suggestion that they were too remote. It accepted that Linda was an heir of Eunice and that, upon Linda’s death intestate, her interest was transmissible to her estate, with consequences for Mr July (as executor of Linda’s estate) and the grandchildren as persons interested in that estate. The court treated this as sufficient to establish that they had an interest in ensuring Eunice’s estate was properly administered, consistent with the approach in Gross that even contingent beneficiaries have enforceable interests in due administration.

The court also addressed the bank’s point that Eunice’s estate should not be “rudderless” and that an executor is needed, particularly if the respondents succeed and the estate must be wound up by means of a liquidation and distribution account. The court accepted that an executor would ultimately be necessary for winding up and distribution. However, it considered it premature to insist that the appointment of an executor was the proper first step, because unless and until a court set aside the transfer, it would be unclear what assets were available for distribution. The court further noted that it was open to the bank itself, if concerned to protect its security interest, to approach the Master for an appointment, given that the bank’s only interest in the litigation lay in its bonds.

On these considerations, the court concluded that the Beningfield exception, as adopted and developed in Gross, extended to the situation where the executor whose conduct is impugned has died and no replacement has been appointed. Accordingly, it held that the respondents had locus standi to bring the claim against the executrix of Ray’s estate and his heirs.

5. Outcome and Relief

The Supreme Court of Appeal dismissed the appeal.

The effect of the dismissal was to uphold the high court’s determination that the applicants (the present respondents) had locus standi to pursue the application seeking, inter alia, the setting aside of the transfer of the first immovable property from Eunice’s estate to Tembisa Mbuqe.

The court ordered that the appeal was dismissed with costs.

Cases Cited

Beningfield v Baxter (1886) 12 AC 167 (PC)

Gross & others v Pentz [1996] ZASCA 78; 1996 (4) SA 617 (A)

Pentz v Gross & others 1996 (2) SA 518 (C)

Legislation Cited

Administration of Estates Act 66 of 1965 (sections 18(1), 18(3), 49(1))

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that, although the general rule is that only an executor may sue in relation to deceased estate assets, the Beningfield exception permits persons beneficially interested in proper administration to bring proceedings where the executor will not or cannot act because the executor’s own conduct is impugned.

The court further held that the exception is not defeated merely because the delinquent executor has died (and no replacement executor has yet been appointed). In those circumstances, beneficiaries (including persons claiming through a deceased heir and the executor of that heir’s estate) may have locus standi to seek relief aimed at setting aside an allegedly unlawful transfer of estate property.

LEGAL PRINCIPLES

The general principle applied was that an executor is the proper representative of a deceased estate and ordinarily has exclusive standing to sue for the recovery of estate assets or to challenge transactions affecting the estate.

The key exception applied was the Beningfield principle, as recognised in South African law in Gross & others v Pentz [1996] ZASCA 78; 1996 (4) SA 617 (A), which permits a party beneficially interested in the proper administration of an estate or trust to bring a representative action where the executor or trustee cannot be expected to institute proceedings because the fiduciary’s own acts are impeached.

A further principle applied, drawn from Pentz v Gross & others 1996 (2) SA 518 (C) and approved in Gross, was that a plaintiff’s standing to sue a fiduciary for maladministration is not negated by a change in the fiduciary’s status such as resignation, and that analogous reasoning supports the proposition that the death of the delinquent fiduciary does not, in itself, deprive the interested party of locus standi, even if it may have procedural consequences in other contexts.

Finally, the judgment reflects a practical principle of remedial design: the law does not require beneficiaries to follow an unnecessarily cumbersome preliminary process (such as insisting on the prior appointment of a new executor) where the purpose of the intended litigation is to determine whether the estate has recoverable assets in the first place, and where insisting on that process would not materially advance the resolution of the underlying dispute about recovery of the asset.

Standard Bank of South Africa Limited v July and Others (525/2017) [2018] ZASCA 85 (31 May 2018)