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Successful party represented in the SCA by Goërtz Attorneys Inc.
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 37/2016
In the matter between:
CHRISTIAAN JOHANNES BASSON FIRST APPELLANT
PAUL DREYER SECOND APPELLANT
PLOT 31 VAALBANK CC THIRD APPELLANT
and
TYRONE PAUL HANNA RESPONDENT
Neutral Citation: Basson v Hanna (37/2016) [2016] ZASCA 198 (6 December 2016)
Coram: Shongwe, Willis, Zondi, Dambuza and Mathopo JJA
Heard: 18 November 2016
Delivered: 6 December 2016
Summary: Contract: parties’ failure to agree on interest rate in a contract does not render the contract invalid: claim for damages in lieu of specific performance where subject matter of the contract has been alienated, is competent in law.
ORDER
On appeal from Gauteng Local Division of the High Court, Johannesburg (P G Cilliers AJ sitting as court of first instance):
1 The appeal is dismissed with costs.
2 Paragraphs 1 and 2 of the court below’s order are set aside and replaced with the following:
‘1 The first defendant is ordered to pay to the plaintiff the amount of R1 212 994.80.
2 The first defendant is ordered to pay to the plaintiff interest on the amount of R1 212 994.80 at the rate of 9,5 per cent per annum, calculated from 14 September 2014 to date of final payment.’
JUDGMENT
Zondi JA (Shongwe, Willis, Dambuza and Mathopo JJA concurring):
[1] This is an appeal against the judgment of the Gauteng Local Division of the High Court, Johannesburg (P G Cilliers AJ) awarding damages in lieu of specific performance in favour of the respondent and ordering the first appellant to pay the respondent the amount of R1 762 626.46 and interest on that amount at the rate of 15,5 per cent per annum from 20 May 2008 to date of final payment. The appeal against the judgment, which has since been reported sub nom Hanna v Basson & others [2016] 1 All SA 201 (GJ), is with the leave of that court.
[2] One of the issues that were before the court below and which still remains an issue in this Court, is whether the parties’ failure to reach consensus on the applicable rate of interest, rendered the agreement null and void. The second issue that was raised by the court a quo at the hearing of the application for leave to appeal, was whether a claim for damages as a surrogate for specific performance is competent in law. This point was raised because of the remarks by Smallberger ADCJ in Mostert NO v Old Mutual Life Assurance Co (SA) Ltd 2001 (4) SA 159 (SCA) at 186B-H regarding the correctness of the majority decision in ISEP Structural Engineering and Plating (Pty) Ltd v Inland Exploration Co (Pty) Ltd 1981 (4) SA 1 (A) holding that a claim for damages in lieu of specific performance is not competent in law.
[3] At the hearing the parties informed the court, firstly, that the amount of R1 762 626.46 granted by the court below as damages is incorrect. It is not what the respondent had sought; secondly, that the court below in calculating the amount of R1 762 626.46 ignored the calculations of the appellants’ actuary, on which both parties had relied at the trial; and thirdly, that the mora interest rate determined by the court below is incorrect. The mora interest should have been granted at a rate of 9,5 per cent from the date of service of the amended particulars of claim not summons.
[4] Flowing from this, the appellants informed the court that in the alternative to dismissal of the respondent’s claim or absolution from the instance, it would request that it be ordered to pay R1 212 994.80, together with interest on that amount at the rate of 9,5 per cent per annum from 14 September 2014 to date of payment and costs. On the other hand the respondent indicated that it would request that the judgment be maintained except that the capital amount granted by the court below should be replaced with the amount of R1 212 994.80, together with interest at the rate of 9,5 per cent per annum calculated from 14 September 2014 to date of payment.
[5] The respondent, Mr Tyrone Paul Hanna, instituted an action against the appellants seeking an order compelling the first appellant (Basson) to transfer one third of the member’s interest in the third appellant (the CC) to the respondent against payment of the outstanding balance, alternatively payment of the sum of R2 650 824.72 as damages in lieu of specific performance. Mr Paul Dreyer (Dreyer), the second appellant was the second defendant in the court below and he plays no role in this appeal.
[6] The basis of the respondent’s claim is that he, Basson and Dreyer concluded an agreement during 2002 in terms of which Basson agreed to sell to each of them one third of his member’s interest in the CC for R624 953 payable in monthly instalments of R8 229.32 over a period of 20 years. According to the respondent the agreed rate of interest was prime plus 1 per cent per annum, fluctuating. In addition thereto the respondent agreed to pay a third of the CC’s monthly maintenance and operating costs. Basson conducted his banking activities with ABSA Bank, which at the time of the conclusion of the agreement had a prevailing prime interest rate of 17 per cent.
[7] Basson and the CC defended the action and denied that the respondent was entitled to an order for specific performance or damages as a surrogate for performance. They contended among others, that the respondent, by failing to pay all amounts due by him in terms of the agreement timeously and in full, repudiated the agreement as a result of which Basson cancelled the agreement; alternatively that no agreement came into being as there was no consensus between the parties regarding the rate of interest which would apply in respect of the agreement. Basson and the CC though admitting that the interest rate was prime plus 1 per cent denied that it was a variable one. They contended that the rate was fixed.
Factual background
[8] It is common cause that during 2002 the respondent, Basson and Dreyer concluded an oral agreement relating to the development of the Farm Vaalbank IR, Farm No 476, Unit 31, situated on the banks of the Vaal River (the property) and a sale by Basson to the respondent and Dreyer of one third of his member’s interest in the CC. At the time of the agreement Basson was the sole member of the CC which owned the property concerned. Basson undertook to develop the property by building three separate houses each with a cottage on the property. He financed the development.
[9] Building operations on the property commenced in August 2002 and were finalised at the end of November 2002. The parties took occupation of each of the three residential units on the property on 1 December 2002. During January 2003 Basson issued to the respondent a tax invoice dated 11 December 2002 confirming the purchase price of R624 953 (the capital amount) for the sale of a 33 and a third per cent share of the member’s interest in the CC, payable in monthly instalments of R8229.32. In addition to paying the monthly instalments the respondent also had to pay a third of the CC’s monthly operating expenses and maintenance costs. The respondent’s evidence was that in compliance with his contractual obligations, he regularly paid the monthly instalment of R8 229.32, together with his portion of the CC’s expenses. That went on until 2007 when the relationship between the respondent, on the one hand, and Basson and Dreyer on the other, turned sour.
[10] It is important to mention that during the trial Basson alienated a third of his member’s interest in the CC, the subject matter of the contract, to his brothers. Hence the respondent amended his claim so as to introduce an alternative claim for damages as a surrogate for specific performance.
Agreement on the interest rate
[11] The terms of the agreement regarding the interest rate are in dispute. Basson’s evidence was that the fixed interest rate was agreed upon. Basson’s words were:
‘Die rentekoers kon enige kant toe gegaan het. Dit was ‘n vaste betaling, daar was nie, in my tyd was daar nooit gepraat oor ‘n wisselende rentekoers nie.
Wat was die, kan u onthou, Mnr Basson, wat gebeur het met die rentekoerse op daardie stadium? Was die rentekoers oppad op, of wat die rentekoers oppad af? — Jy weet ek is nie ‘n bankier nie, so ek hou nie rentekoerse dop nie, of ek het nie… Nee, ek het nie geweet wat die rentekoerse doen, of dit op of af gaan nie.’
[12] Dreyer’s evidence was that the purchase price for his one third of the member’s interest in the CC, similar to that of the respondent, was R624 995 from which he deducted R130 000 which he spent on the property. His evidence was that the interest rate was 18 per cent per annum and was fixed. He stated that he was aware that in 2003 the respondent had expressed a concern to him that he was paying the interest at a fixed rate when the trend was that the interest rates were on the decline. Dreyer explained to the respondent that there was nothing he could do about it, because this was what they had agreed to pay.
[13] The court below found that although the parties agreed that the interest rate would be prime plus 1 per cent they did not reach an agreement on whether the interest rate would be fixed or variable. It found it unnecessary to make a definite finding on the disputed issue. This was so, the court below reasoned, because it was not necessary to make a finding on whether the respondent was in arrears with his repayments when Basson purported to cancel the agreement on 20 February 2008 or 27 February 2008. Basson had already taken the position before 7 June 2007 that the agreement was invalid and unenforceable and persisted in that position until 25 February 2009.
[14] The appellants attack this finding. They contend that its implication is that the parties did not have consensus on a material term of the agreement, that no agreement came into being between the parties and that the respondent could therefore not claim specific performance or damages in lieu of specific performance on a non-existing agreement. The appellants maintain that the onus was on the respondent to prove the terms of the agreement, which he failed to do.
[15] Without a finding, contend the appellants, on what the parties agreed upon as far as the interest rate is concerned, it was impossible to determine the quantum, which was crucial as the determination of the balance outstanding was dependent on the nature of the interest; that is to say whether fixed or fluctuating, which is an element which the respondent had to allege and prove in order to succeed in his claim. The appellants accordingly submit that absolution should have been granted.
[16] I disagree. In general, the parties’ failure to agree on the rate at which the amount payable under the agreement is to be calculated, does not render the agreement invalid. If no rate has been agreed on, expressly or impliedly, and the rate is not governed by any other law, the rate of interest is that prescribed from time to time by notice in the gazette by the relevant Minister in terms of the Prescribed Rate of Interest Act 55 of 1975.
Repudiation
[17] In the particulars of claim the respondent alleged that Basson repudiated the agreement and that, at his election he was entitled to claim performance in forma specifica entailing an order compelling Basson to transfer a third of the member’s interest in the CC to him, against payment of the outstanding amount to Basson alternatively damages as a surrogate for performance. The respondent led evidence, both oral and documentary to demonstrate that Basson had repudiated the agreement.
[18] The court below accepted the respondent’s version that Basson repudiated the agreement on or before 7 June 2007 and that he did not repent his repudiation of the agreement before the attempted cancellation of the agreement on 27 February 2008. I agree with the court below’s conclusion and reasoning underlying it. There is no appeal against this finding and it must therefore stand.
[19] Objectively viewed, Basson’s actions after 7 June 2007 constituted conduct from which the only reasonable inference that could be drawn was that he did not regard himself bound by the agreement and that he was not prepared to perform its terms.[1] This is apparent from the correspondence which exchanged between the parties. In a letter dated 6 August 2007 Basson’s attorneys informed the respondent’s attorneys that there was no valid agreement between the parties. In a further letter dated 20 February 2008 the respondent’s attorneys were informed by Basson’s attorneys that the agreement was null and void, because of its non-compliance with the Property Time-Sharing Act and the Share Blocks Control Act.
[20] The respondent himself viewed Basson’s conduct as a repudiation of the agreement. Hence the respondent issued summons against Basson originally seeking an order for specific performance.
[21] Subsequent to the repudiation of the agreement by Basson in April 2007, the respondent elected to hold Basson to the terms of the agreement. The respondent repeatedly asked Basson to furnish him with the total outstanding amount so as to settle his indebtedness to Basson. When Basson threatened to cancel the agreement because the respondent was allegedly in arrears with his monthly instalments and contributions towards the expenses of the CC, the respondent made payment of the amount that was alleged to be owing. The court below’s conclusion that Basson repudiated the agreement, was therefore, correct.
Specific performance as remedy for breach
[22] Christie’s Law of Contract in South Africa 7 ed[2] at 616 states:
‘The remedies available for a breach or, in some cases, a threatened breach of contract are five in number. Specific performance, interdict, declaration of rights, cancellation, damages. The first three may be regarded as methods of enforcement and the last two as recompenses for non-performance. The choice among these remedies rests primarily with the injured party, the plaintiff, who may choose more than one of them, either in the alternative or together, subject to the overriding principles that the plaintiff must not claim inconsistent remedies and must not be overcompensated.’ (Footnote omitted.)
[23] There are many cases in which it was held that if one party to the agreement repudiates the agreement, the other party at his election, may claim specific performance of the agreement or damages in lieu of specific performance and that his claim will in general be granted, subject to the court’s discretion.[3]
[24] Farmers’ Co-operative Society[4] concerned a claim for the delivery of certain movables, alternatively for damages. The question was whether specific performance should be decreed.[5] Innes JA answered that question as follows at 350:
‘Prima facie every party to a binding agreement who is ready to carry out his own obligation under it has a right to demand from the other party, so far as it is possible, a performance of his undertaking in terms of the contract. As remarked by KOTZE, C.J., in Thompson vs. Pullinger (1 O. R., at p. 301), “the right of a plaintiff to the specific performance of a contract where the defendant is in a position to do so is beyond all doubt.” It is true that Courts will exercise a discretion in determining whether or not decrees of specific performance should be made. They will not, of course, be issued where it is impossible for the defendant to comply with them. And there are many cases in which justice between the parties can be fully and conveniently done by an award of damages. . .’
[25] In Woods[6] the court was concerned with the action to enforce the execution and performance of a contract for the lease of certain land with a furnished house and other buildings thereon. The question related to the basis of assessment of damages when an alternative prayer for damages is granted. Innes CJ stated at 310:
‘It is a common practice, in South Africa to add to a prayer for specific performance, an alternative prayer for damages. That course has been followed in the present case. Damages so claimed must, of course, be proved and ascertained in the ordinary way. The authorities do not warrant a punitive assessment.’
[26] Victoria Falls & Transvaal Power Co Ltd[7] also concerned the question of an assessment of compensation. Innes CJ stated at 22:
‘The sufferer by such a breach should be placed in the position he would have occupied had the contract been performed, so far as that can be done by the payment of money, and without undue hardship to the defaulting party. The reinstatement cannot invariably be complete, for it would be inequitable and unfair to make the defaulter liable for special consequences which could not have been in his contemplation when he entered into the contract. The laws of Holland and England are in substantial agreement on this point. Such damages only are awarded as flow naturally from the breach, or as may reasonably be supposed to have been in the contemplation of the contracting parties as likely to result therefrom (see Voet 45, 1, 9, Pothier, Oblig sec. 160; Hadly v Baxendale, 9 Exch. p. 341; Elmslie v African Merchants Ltd., 1908, E.D.C., p. 8-9, etc.).’
[27] From the above analysis it seems that the principle, that a party who is, prima facie entitled to specific performance may claim in the alternative damages as surrogate for specific performance, has been consistently followed by the courts until the majority in ISEP Structural Engineering & Plating Ltd v Inland Exploration brought doubt as to the correct position.
Competency of respondent’s claim
[28] It was submitted by the appellants that the respondent’s claim for damages as a surrogate for specific performance should fail because that claim is not competent in law. ISEP was cited as authority in support of that proposition. In response the respondent submitted that his claim for damages in lieu of specific performance is competent in law and that the principle stated in ISEP should not be followed as it is against weighty authority and besides criticism, its correctness was doubted by this Court in Mostert NO v Old Mutual Life Assurance Co (SA) Ltd referred to above.
[29] In ISEP Structural Engineering & Plating (Pty) Ltd the city council sold certain property ‘voetstoots, absolutely as it stands’ to the respondent, Inland Exploration Company. The purchase price was agreed upon after some negotiations which involved the refusal by the seller to warrant that the property would be reinstated to its original condition. The lessee of the property, ISEP, had constructed certain concrete ramps on the property. In terms of a lease between the seller and ISEP, it was obliged, on termination of the lease to reinstate the premises to their original condition. The lease terminated before the sale to the respondent. Subsequent to the sale the seller ceded to the respondent its right against ISEP to have the property restored. The respondent instituted an action against ISEP claiming the sum of R15 000 alleged to be the costs of restoring the leased premises to the same condition in which it was received by ISEP in terms of the lease between the city council and ISEP. The respondent’s claim was a claim for damages in lieu of specific performance.
[30] The three main judgments that were delivered were those of Jansen JA, Van Winsen AJA and Hoexter AJA. Kotze JA concurred in the judgment of Van Winsen AJA and Viljoen JA concurred in the judgment of Hoexter AJA. Hoexter AJA agreed with Jansen JA’s conclusion that our law does not recognise a claim for the objective value of the performance as an alternative remedy to specific performance.
[31] Jansen JA stated at 6G-H:
‘That a plaintiff may claim either specific performance or damages for the breach (in the sense of id quod interest, ascertained in the ordinary way) is, on the authorities cited, beyond question. And it would seem that fundamentally these are the only alternatives recognized in our practice (leaving aside the possibility of a combination of the two), particularly in respect of an obligation ad factum praestandum. Certainly no cogent authority has been cited to us to show that there is any other. However, it has been suggested that there is the possibility of a plaintiff claiming “damages” in the sense of the objective value of the performance in lieu of the performance itself. This would not be damages in the ordinary sense at all, but amount to specific performance in another form.’
[32] He went on to say at 7E:
‘A case which seems more in point is National Butchery Co v African Merchants Ltd 1907 EDC 57 where damages were granted “in lieu of specific performance”, but this seems but slender authority for this Court, in effect, to recognize a remedy akin to specific performance in the shape of a claim for the objective value of the performance.
It may be pointed out, if there were justification for recognizing such a remedy, it would entail the introduction of a number of ancillary rules. Has the plaintiff an election of claiming either performance or its objective value? If he claims the latter, may the debtor tender actual performance? (Cf D Joubert “Skadevergoeding as Surrogaat van Prestasie” 1975 De Jure 32; “Some Alternative Remedies in Contract” 1973 SALJ 37 at 44 – 47.) If specific performance were to be refused because it would operate “unreasonably hardly” on the defendant, would the plaintiff still be entitled to the objective value of the performance itself? It would seem not – otherwise the very hardship leading to refusal of the specific performance could still be inflicted upon the debtor by granting the objective value of the performance, as would be illustrated by the case of an obligation to reinstate in respect of a building destined for immediate demolition. In a case such as the present, the award of the objective value (reasonable costs of reinstatement) would be as unreasonable as an order for specific performance.’
[33] There has been severe criticism of the majority decision in ISEP[8] and Smallberger ADCJ in Mostert NO v Old Mutual Life Assurance Co (SA) Ltd 2001 (4) SA 159 (SCA) para 74 doubted its correctness and said that a reconsideration of the majority decision is called for.
[34] In Mostert NO, Mostert, a curator of a certain pension fund, instituted action against Old Mutual for damages. Mostert’s claim arose from two payments made by Old Mutual to a third party. The payments were made pursuant to an insurance policy in terms of which Old Mutual held the pension fund’s investment. Mostert’s main claim was based on an alleged breach by Old Mutual, when making the payments, of its contractual obligations to the pension fund under the policy.
[35] In his particulars of claim Mostert had alleged that the pension fund had suffered damages as a result of such breach. Mostert did not seek to claim damages as a surrogate for performance. He disavowed reliance on that claim.
[36] Smallberger ADCJ remarked that Mostert’s claim for damages as a surrogate for performance was competent unless the majority decision in ISEP precluded that claim, which he doubted it did. He stated, however at para 75 that:
‘From a practical point of view, it would have made no difference in the present matter had Mostert claimed damages as a surrogate for performance, and the claim had been recognised on the basis that Isep’s case was wrongly decided . . . The approach to the quantification of the fund’s loss would therefore have basically been the same had the claim been one for damages as a surrogate for performance rather than damages for breach.’
[37] The question is whether this is an appropriate matter in which to reconsider the correctness of the majority decision in ISEP. In my view, this is not. ISEP is distinguishable from the facts of the present matter. There, the court dealt with a lease and the case concerned the obligation of reinstatement under a lease. What was said there is no more than a ratio in regard to the limited class of contracts of reinstatement under a lease and does not constitute a ratio of general application in the law of contract.
[38] Furthermore, the practical difficulties expressed by Jansen JA in ISEP at 7F of the judgment as justification for not recognising a claim for damages in lieu of specific performance, do not arise in the present matter. For instance, Jansen JA pointed out that recognising such a remedy would entail the introduction of a number of ancillary rules to deal with the possibility of a contest between the specific performance and the economic value for specific performance. There is no such contest in this matter and the award of the objective value of performance would not cause Basson any hardship. The respondent does not have to choose between the two remedies. He is restricted to a claim for the economic value for specific performance following alienation by Basson of the property forming the subject matter of the contract. Thus specific performance has become impossible. Where specific performance is not possible, the parties have no choice.[9]
[39] To the extent that what was said by Jansen JA in ISEP at 6G-H and 7E may be construed as constituting the ratio of general application in the law of contract, I have a difficulty with it. Justice cries out aloud for damages in lieu of specific performance in this particular case, precisely because specific performance by the appellants is not possible. This is the case in which ‘justice between the parties can be fully and conveniently done by an award of damages’. (Farmers’ Co-operative Society at 350)
[40] The respondent is ready to carry out his own obligation under the agreement and has a right to demand either literal performance, or monetary value of the performance, from Basson. The respondent’s claim for damages, to the extent that he seeks the monetary value of the performance, is akin to a claim for the replacement value of the lost property.
[41] A creditor’s right to demand performance from the debtor cannot be at the debtor’s mercy. The exercise of that right cannot depend on what the debtor chooses to do with the asset to which the creditor’s right relates. To say that a claim for damages as a surrogate for specific performance is not recognised in law, would deprive the creditor of the right, where it has elected to enforce the contract, to be put as much as possible, in the position that it would have been in if the performance was made in forma specifica.
[42] The respondent is entitled to the relief that he seeks. He has established that he concluded a valid agreement with Basson; that Basson repudiated the agreement; that he was willing to carry out his obligation under the agreement; and that he had elected to hold Basson to the terms of the agreement. Because of Basson’s conduct, which rendered specific performance impossible the respondent amended his particulars of claim so as to introduce a claim for damages in lieu of specific performance. The parties have agreed on the quantum and the mora interest rate to be awarded should the appeal fail. This means that the judgment of the court below should be corrected to the extent proposed by the parties. As regards the question of costs, there is no reason to deprive the respondent of his costs.
The Order
[43] In the result the following order is made:
1 The appeal is dismissed with costs.
2 Paragraphs 1 and 2 of the court below’s order are set aside and replaced with the following:
‘1 The first defendant is ordered to pay to the plaintiff the amount of R1 212 994.80.
2 The first defendant is ordered to pay to the plaintiff interest on the amount of R1 212 994.80 at the rate of 9,5 per cent per annum, calculated from 14 September 2014 to date of final payment.’
________________
D H Zondi
Judge of Appeal
Willis JA (partially dissenting):
[44] I agree with the order proposed by Zondi JA. I have, however, two qualifications to his reasoning, which I think need to be mentioned. The first is that, to the extent that Isep Structural Engineering and Plating (Pty) Ltd v Inland Exploration Co (Pty) Ltd 1981 (4) SA 1 (A) does not allow any exceptions to the principle that, in the law of contract, there are only two alternative remedies for an aggrieved party: specific performance or damages for breach, this case illustrates that such a principle cannot be sustained – at least not without qualification. There has been clear authority, in this court previously, that a claim for damages in lieu of specific performance could, in certain circumstances, succeed. See, for example Farmers’ Co-op Society (Reg) v Berry 1912 AD 343 at 350 and Victoria Falls and Transvaal Power Company Limited v Consolidated Langlaagte Mines Limited 1915 AD 1 at 22. Mostert No v Mutual Life Assurance Co (SA) Ltd 2001 (4) SA 159 (SCA), to which Zondi JA has referred, also seems to be consonant with this line of reasoning on the matter.
[45] My second qualification relates to the question of the rate of interest. In my opinion, the probabilities in this case make it much more likely that a rate of interest had been agreed upon than not. Furthermore, it is more probable, in the circumstances, that the interest rate would have been calculated by reference to the prime rate than the appellants’ contention is that there was a flat rate (18%), especially as this was a long term venture. The question of the rate of interest to be applied in this case is largely irrelevant because, if I understood counsel for both sides correctly during the course of argument, they agreed that, if damages were to be awarded, the most practical and efficacious way of dealing with the issue would be to apply the prescribed rate of interest, as gazetted by the Minister in terms of the Prescribed Rate of Interest Act 55 of 1975. For this reason, I have no difficulty with Zondi JA’s proposed order.
______________
NP Willis
Judge of Appeal
APPEARANCES:
For appellants: D T v R Du Plessis SC
Instructed by: Olivier & Malan Attorneys, Randburg
c/o Phatsoane Henney Inc, Bloemfontein
For respondent: G M Young
Instructed by: Goërtz Attorneys Inc,
c/o DM Bakker Attorneys,
c/o Craig Baillie Attorneys, Johannesburg
c/o Symington and de Kok, Bloemfontein
[1] Nash v Golden Dumps (Pty) Ltd 1985 (3) SA 1 (A) at 22D-F. This dictum was referred to with approval by this Court in Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) para 16.
[2] G B Bradfield Christie’s Law of Contract in South Africa 7 ed (2016) at 616.
[3] Farmers’ Co-operative Society (Reg) v Berry 1912 AD 343; Victoria Falls & Transvaal Power Co Ltd v Consolidated Langlaagte Mines Ltd 1915 AD 1; Woods v Walters 1921 AD 303; Shill v Milner 1937 AD 101; Haynes v Kingwilliamstown Municipality 1951 (2) SA 371 (A); Rens v Coltman 1996 (1) SA 452 (A).
[4] Ibid.
[5] At 349.
[6] Supra fn 3.
[7] Supra fn 3.
[8] See for instance Oelofse (1982) TSAR at 63 et seq and those that are cited in para 74 of Mostert NO v Old Mutual.
[9] ‘Some Alternative Remedies in Contract’ 1973 SALJ 37 at 46.
_____________________________________________________________________________________________________________________
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case No: 1350/2019
In the matter between:
WARREN JOHN FLETCHER APPELLANT
and
GILLIAN CLAIRE MCNAIR RESPONDENT
Neutral citation: Fletcher v McNair (1350/2019) [2020] ZASCA 135 (23 October 2020)
Coram: CACHALIA, MAKGOKA AND PLASKET JJA AND EKSTEEN AND SUTHERLAND AJJA
Heard: 7 September 2020
Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email, and by publication on the Supreme Court of Appeal website and release to SAFLII. The time and date for hand down is deemed to be 10h00 on the 23rd day of October 2020.
Summary: Trust — trustee — removal of — breakdown in relationship between co-trustees originating from outside the Trust – on its own not sufficient for removal of co-trustee — determinative test always whether Trust property and affairs imperilled.
ORDER
On appeal from: Gauteng Division of the High Court, Pretoria (Vally J with Wepener and Mahalelo JJ concurring, sitting as court of appeal): judgment reported sub nom McNair v Crossman 2020 (1) SA 192 (GJ).
1 The appeal is upheld with costs, which includes the costs in the application to adduce further evidence.
2 The order of the Full Court is set aside and substituted with the following:
‘The appeal is dismissed with costs.’
JUDGMENT
Makgoka JA (Cachalia and Plasket JJA and Eksteen and Sutherland AJJA concurring):
[1] This appeal concerns the removal of the appellant, Mr Warren Fletcher, as a trustee of the McNair Family Trust (the Trust) at the instance of the respondent, Mrs Gillian McNair. Sitting as the court of first instance in the Gauteng Division of the High Court, Johannesburg (the high court), Mudau J dismissed the respondent’s application with costs. On appeal, the Full Court reversed the decision and removed the appellant as a trustee and replaced him with the respondent’s sister. With the special leave of this court, the appellant appeals against the order of the Full Court.
[2] The Trust is an inter vivos one, created by a deed of trust in 2006 in terms of which Mrs Morag Crossman was the founder and first donor. The first trustees were her husband, Mr Gerald Crossman (Mr Crossman), her son, the late Mr Steven McNair (the deceased) and his wife, the respondent. Mr Crossman was the deceased’s stepfather. The respondent and her two adult children are the beneficiaries of the Trust. In terms of the deceased’s Will the appellant replaced the deceased as a trustee upon the latter’s death. The respondent and Mr Crossman are the co-executors of the deceased’s estate.
[3] The Trust assets comprise a share portfolio worth approximately R2.8 million and a 75 percent shareholding in a property-owning company, Top Spin
Investments 101 (Pty) Ltd (Top Spin). Mr Crossman owns the remaining 25 percent of the shares in Top Spin. The respondent and Mr Crossman are co-directors of Top Spin, which purchases, sells and lets property. It relies on rental income to meet its financial obligations.
[4] During his lifetime, the deceased was a businessman. As of March 2008 and until shortly before his death in August 2010, he was a 75 percent shareholder and director of Applied Pneumatics SA (Pty) Ltd (Applied), which sold pneumatic products, but is now in liquidation.1 Mr Crossman was also a 25 percent shareholder and director of Applied. The deceased was involved in the day to day management of Applied that leased several properties from Top Spin in Port Elizabeth, Johannesburg, and Richards Bay.
[5] The deceased was diagnosed with a terminal cancer in February 2010. When his demise became inevitable, he invited his brother, Mr David McNair (Mr McNair), to become involved in the management of Applied. He also transferred 24 percent of his shareholding in Applied to Mr McNair, and thus retained 51 per cent of the shares. Four days before his death, Mr McNair and the respondent were appointed as directors of Applied. Thus, when the deceased died, the shareholding in Applied was as follows: the deceased (51 percent); Mr Crossman (25 percent) and Mr McNair (24 per cent). As a result, upon his death, the deceased’s estate held his 51 per cent shareholding.
[6] After the deceased’s death, Mr McNair continued his managerial duties in Applied, until June 2015, when the relationship between him and the respondent soured, and the respondent took over as a manager. The reasons for the fall-out
1 The final order of liquidation was granted on 2 June 2017.
between the respondent and Mr McNair are not germane to the dispute in this appeal. Suffice it to say that it created much tension between them and affected the smooth running of Applied. They did not agree on how Applied had to be managed. They accused each other of misappropriation of funds, and they laid criminal charges against each other in this regard.
[7] Meanwhile, the relationship between the respondent, on the one hand, and the appellant and Mr Crossman, on the other, also deteriorated, both in their capacities as shareholders of Top Spin and as trustees. The respondent accused the appellant and Mr Crossman of excluding her from the affairs of Top Spin, and of siding with Mr McNair in respect of her conflicts with him, or at the very least, of being supine in the face of what she considered oppressive conduct on the part of Mr McNair against her. The respondent further accused the appellant and Mr Crossman of not acting in the best interests of the Trust and of having conflicts of interest.
[8] In this regard, it has to be pointed out that apart from being a trustee, the appellant is an accountant, and a director of Alchemy Financial Services Incorporated (Alchemy Finance). That entity was responsible for the monthly bookkeeping for Top Spin and the secretarial administration of Top Spin, Applied and the Trust. As a representative of Alchemy Finance, the appellant operated the bank account of Top Spin. The appellant was also a representative of Alchemy Audit Services Incorporated (Alchemy Audit), which was the auditor of Top Spin and was appointed to administer the deceased’s estate.
[9] The complaints by the respondent against the appellant and Mr Crossman, as set out above, gave rise to three issues. The first concerned Applied’s debt to Top Spin, for which she became personally liable. The second was about the sale of a Top Spin property in Port Elizabeth. The third related to a distribution agreement involving Applied. Below is a summary of each.
[10] Regarding the first, Applied owed rental money to Top Spin in respect of the properties it leased from Top Spin. On 12 November 2015 during a shareholders’ meeting of Top Spin the respondent assumed personal liability for the debt, should Applied not pay it within three months, and it was resolved as such. As of February 2016, Applied had still not settled its debt to Top Spin. On 8 February 2016, the respondent requested Mr McNair’s cooperation to release certain of Applied’s funds to enable it to meet its obligations. Mr McNair refused. The respondent complained that the appellant and Mr Crossman, knowing that Applied had funds to settle its debt to Top Spin, stood by and did nothing about Mr McNair’s refusal to release the funds.
[11] A shareholders’ meeting of Top Spin was held on 24 March 2016. Only the appellant and Mr Crossman attended. The respondent had earlier indicated her unavailability to attend due to short notice and had requested the meeting to be rescheduled to a later date. Her request was not acceded to, and the meeting went ahead in her absence. Two relevant resolution were taken in that meeting: first, to take legal action against the respondent for Applied’s debt, pursuant to her undertaking in the meeting of 12 November 2015. Second, to sell one of Top Spin’s properties in Port Elizabeth.
[12] Pursuant to the first resolution, on 12 April 2016, Top Spin’s attorneys sent a letter of demand to the respondent, after which she paid Applied’s debt. The respondent complained that the decision to pursue legal action against her only, and not jointly with Applied, was a vendetta against her by the appellant and Mr Crossman aimed at ruining her financially. The respondent suggested that the decision to sell the Port Elizabeth property, taken in her absence, served as proof that the appellant and Mr Crossman were intent on excluding her from the decision-making in Top Spin and indirectly, in the Trust.
[13] The respondent’s complaint about the distribution agreement was this: In July 2006, Applied’s international supplier requested a letter confirming Applied’s shareholding. The respondent requested the appellant, in his capacity as a representative of Alchemy Finance, to write the requested letter. The appellant obliged, but also mentioned in the letter that Applied’s shareholders and directors were engaged in both criminal and legal proceedings against each other.
[14] The respondent objected to the reference to her regarding the criminal charges, and pointed out that, at that stage, the only charges were those laid by her against Mr McNair, and there were none against her. The appellant refused to amend the letter, and the respondent elected not to send it. As a result, the international distributor cancelled the agreement, and later transferred it to Mr McNair’s newly formed company. The respondent held this out as an example of the appellant’s collusion with Mr McNair and Mr Crossman to harm the business of Applied.
[15] Against this factual background, the respondent launched an application in the high court for the removal of the appellant and Mr Crossman as trustees of the Trust. The application came before Mudau J, who dismissed it with costs in the light of this court’s decision in Gowar.2 He subsequently granted leave to appeal to the Full Court. Before the appeal was heard by the Full Court, Mr Crossman resigned as a trustee, and thus took no part in the appeal. That was still the position in this court.
[16] The respondent’s appeal was upheld by the Full Court, which granted an order removing the appellant as a trustee and replaced him with the respondent’s sister. The appellant is aggrieved with that order, hence the appeal to this court.
[17] Before I consider the Full Court’s reasoning and conclusion, it is necessary to restate the law on the removal of trustees in the light of certain remarks by the Full Court on this subject.
[18] The court has inherent power to remove a trustee from office at common law. This power is also sourced in s 20(1) of the Trust Property Control Act 57 of 1988 (the Act) which provides that:
‘20. Removal of trustee ─
‘A trustee may on application of the Master or any person having an interest in the Trust property, at any time be removed from his office by the court if the court is satisfied that his removal will be in the interests of the Trust and its beneficiaries.’
2 Gowar and Another v Gowar and Others [2016] ZASCA 101; [2016] 3 All SA 382; 2016 (5) SA 225 (SCA).
[19] Our jurisprudence on the removal of trustees is neatly collated in Gowar at paras 31-32. There, Petse JA undertook a useful examination of authorities, from which the following principles can be distilled:
(a) the court may order the removal of a trustee only if such removal will, as required by s 20(1) of the Act, be in the interests of the Trust and its beneficiaries;
(b) the power of the court to remove a trustee must be exercised with circumspection;
(c) the sufficiency of the cause for removal is to be tested by a consideration of the interests of the estate;
(d) the deliberate wishes of the deceased person to select persons in reliance upon their ability and character to manage the estate, should be respected, and not be lightly interfered with;
(e) where there is disharmony, the essential test is whether it imperils the Trust estate or its proper administration;
(f) mere friction or enmity between the trustee and the beneficiaries will not in itself be an adequate reason for the removal of the trustee from office;
(g) mere conflict amongst trustees themselves is not a sufficient reason for the removal of a trustee at the suit of another;
(h) neither mala fides nor even misconduct are required for the removal of a trustee;
(i) incorrect decisions and non-observance of the strict requirements of the law, do not of themselves, warrant the removal of a trustee;
(j) the decisive consideration is the welfare of the beneficiaries and the proper administration of the Trust and the Trust property.
[20] With these principles in mind, I consider three specific passages in the judgment of the Full Court, which need clarification. The first two appear in para 29. In the first passage, the court mentioned that:
‘The court’s power to remove a trustee though is not restricted to the statutory grounds. Its power to remove a trustee is derived from its inherent power which has been recognised in our law for over a century and has now been entrenched in the law by s 173 of the Constitution of the Republic of SA, Act 1083 of 1996 (the Constitution).’
3 The Constitution was previously also numbered as if it were an Act of Parliament – Act No.108 of 1996 – but, since the passage of the Citation of Constitutional Laws Act of 2005 neither it nor the Acts amending it are allocated Act numbers. The Constitution now is referred to and cited as ‘The Constitution of the Republic of South Africa, 1996.’
[21] Section 173 of the Constitution reads:
‘173. Inherent power – The Constitutional Court, Supreme Court of Appeal and High Courts have the inherent power to protect and regulate their own processes, and to develop the common law, taking into account the interests of justice.’
[22] There are two distinct parts of s 173. The first relates to the court’s inherent power to regulate its own processes. This relates to matters of procedure. The second concerns the court’s power to develop the common law, which relates to substantive issues of law. It is the latter power that the court must have had in mind when it made that reference. This is because the removal of trustees is an issue of substantive law, and not of procedure. The Full Court’s reference to the court’s inherent power in relation to the removal of trustees should therefore not be conflated with the court’s inherent power to regulate its own process. The court’s remarks should thus be understood to mean that in terms of s 173 of the Constitution, the court has inherent power to develop the common law on the removal of trustees, where the interests of justice dictate.
[23] In the second passage in para 29, the court discussed a possible further ground on which a trustee may be removed at common law. After pointing out that courts have traditionally removed a trustee for misconduct, incapacity or incompetence, the court said the following:
‘Though it must be said that each of these three grounds may also be a basis for an application for removal in terms of s 20(1) of the Act if it can be proved that the alleged misconduct, incapacity or incompetence imperils the Trust property or the administration of the Trust and courts have often found this to be the case. However, there is a further ground, which I elaborate upon below. It is that the relationship between co-trustees has broken down to the extent that they no longer have any mutual respect and trust for each other. This too, can be brought under s 20(1) of the Act, for it could imperil the property or administration of the Trust. But it does not always have to be so.’
[24] Later, at para 35 the court elaborated on this ground:
‘[E]ach [of the Trustees] should accept that despite their differences the other is acting in the best interest of the Trust and its beneficiaries. Once that mutual respect and trust is lost then their position as co-trustees is imperiled. At that point the dial has moved and the administration of the Trust as well as the management of its property is placed at risk. Put differently, their incompatibility places the Trust property and its affairs at risk. It is a risk that the Trust should not be exposed to for the obvious reason that should it eventuate the detrimental effect on the Trust could be devastating and irreversible.’
[25] The suggestion that ‘once mutual respect and trust is lost’ then ‘the administration of the Trust as well as the management of its property is placed at risk’ should be qualified. I assume that what the court meant to convey was that if the loss of mutual respect and trust among trustees results in the Trust property being imperiled, that could form a basis for removal of one or more of the Trustees. This seems to tie in with the court’s earlier remarks when introducing this topic.
[26] It has to be so, because loss of mutual trust and respect does not, without more, translate to a ground for the removal of a trustee, or to a conclusion that the Trust property has been imperiled. It must further be established that, as a result, the Trust property has been imperiled or the administration of the Trust and the management of its property are at risk. That is a factual enquiry. In other words, it cannot be assumed a priori that because there is lack of trust, respect or compatibility among trustees, the Trust property is imperiled, and therefore, the removal of a trustee is justified. The determinative test is always whether any state of affairs – be it incompetence, misconduct, incapacity, or lack of trust and respect among trustees or beneficiaries – has resulted in the Trust property or its proper administration being placed at risk.
[27] The other remarks appear in para 33, where the court sought to distinguish Gowar as follows:
‘It is important to note that while the appellant and her children as beneficiaries seek the removal of the second respondent as trustee the appellant also does so as a co-trustee. To that extent the learning in Gowar …is of limited value to our facts for it focusses only on the conflict or enmity between a beneficiary and a trustee, and not between co-trustees.’ 10
[28] With respect, there is no basis in our law for this distinction. The grounds on which a trustee may be removed do not depend on who the applicant is, be it a trustee, a beneficiary or any other interested person. This purported distinction led the Full Court to an erroneous belief that it was not bound by Gowar, whereas it was, and obliged to follow it. Its misdirection led it astray, as demonstrated below.
[29] I turn to the reasoning of the Full Court. It upheld the appeal on two bases. First, it found that the counter-accusations between the respondent and the appellant showed that they had lost respect and trust for each other. This, it said, was sufficient for the removal of both as trustees. However, as there was no counter-application by the appellant, he was the one to be removed. The court said:
‘The contentions of the second respondent [the appellant] notwithstanding, in my judgment the allegations made by him against the appellant together with the allegations made by the appellant [the respondent] against him reveal an indisputable fact: the enmity between them is very deep. Aligned to this fact is more than a reasonable probability that neither of them will recover from such deep enmity in the near future. They clearly have no trust and respect for each other and this state of affairs will not abate anytime soon.’
[30] After noting that the removal of both parties as trustees was alluded to during the hearing, and that it could not entertain that, the court proceeded as follows:
‘All that was before the Court was that she and the second respondent had no respect for each other, had lost all trust and confidence in each other and that the continuation in office by the second respondent would make it impossible for the Trust’s affairs to be diligently conducted by the Trustees. Hence, the application for his removal. The Court should, therefore, restrict itself to the issue of his removal only. Had either of the respondents brought an application for the simultaneous removal of the appellant the outcome may have been different. It is not necessary though for us to speculate on the issue. The only issue before us is the removal of the second respondent. On that issue I hold that the appeal should succeed.’
[31] I assume, for present purposes, that the Full Court was correct in its observation that the counter-accusations between the respondent and the appellant had created enmity between them and had eroded mutual trust and respect. But it is instructive that nowhere in its reasoning, did the court attribute that solely to the appellant. On the contrary, it appears that the court considered both the respondent and the appellant to be equally responsible. This is apparent from the remarks that ‘had either of the respondents brought an application for the simultaneous removal of the appellant the outcome may have been different.’
[32] If, in the view of the Full Court, both were responsible for the state of enmity, lack of trust and respect, it is inexplicable why the appellant was removed. It appears on the court’s reasoning that he was removed because he did not bring a counter-application for the removal of the respondent. This is clearly wrong. What is more, these were motion proceedings. There is no suggestion that the appellant’s averments were far-fetched or clearly untenable. If the scale was evenly poised, as the court’s reasoning suggests, then a real, genuine and bona fide dispute of fact arose – the type envisaged in Wightman.4 A final order should not have been granted unless the court was satisfied that the conduct of the appellant imperiled the Trust property or its proper administration or that his removal would otherwise be in the interests of the Trust and its beneficiaries.
[33] I turn now to the second basis. The Full Court found that the appellant had damaged Applied’s business by stating in the letter to the international distributor that the shareholders of Applied had laid criminal charges against each other. I have discussed this in paras 13 and 14 above. Of this issue, the court said (at para 37):
4 Wightman t/a JW Construction v Headfour (Pty) Ltd [2008] ZASCA 6; [2008] 2 All SA 512; 2008 (3) SA 371 (SCA) para 13.
‘There is another reason why the appeal should succeed. The court a quo did not consider the fact that the second respondent [the appellant] falsely represented to a third party that the appellant [the respondent] was subjected to a criminal charge with regard to her conduct at Applied; refused to withdraw the representation when the true facts were brought to his attention and that his action significantly damaged the business of Applied. While this significant failure of judgment on his part concerned Applied and not the Trust, it must be remembered that his roles in both Applied and the Trust were very closely connected. This is manifested in, inter alia, the allegations he made against the appellant in his answering affidavit … and in the meetings of the shareholders of Top Spin (in which the Trust is the majority shareholder) where the issue with regard to Applied took central stage. In other words, the misrepresentation of the true facts with regard to the affairs of Applied contaminated the business affairs of the Trust. It, I hold, justifies his removal as a trustee of the Trust.’
[34] The Full Court misconstrued the facts. As explained already, the letter was never sent to the intended recipient. When the appellant refused to amend the letter as requested, the respondent decided not to transmit it to the international distributor. Thus, the reason the distribution agreement was cancelled was not because of the letter, as the Full Court incorrectly assumed. On the respondent’s version, the agreement was cancelled and later transferred to Mr McNair’s company, as a result of Mr McNair’s false representations about Applied to the international distributor. Accordingly, there was no false representation by the appellant to a third party, as found by the Full Court. Its conclusion was based on an incorrect understanding of the facts. Consequently, it erred in relying on this as a basis for the removal of the appellant.
[35] The Full Court seemingly drew a negative inference against the appellant for inviting Mr McNair to the meeting of Top Spin shareholders on 12 November 2015. According to the respondent, Mr McNair was not a shareholder of Top Spin. The appellant’s explanation was that the information at his disposal then, was that Mr Crossman had sold his 25 percent shareholding in both Top Spin and Applied to Mr McNair and resigned as director of both companies. On that understanding, Mr Crossman could be present as a trustee. The respondent fully participated in that meeting, without objection to either Mr Crossman or Mr McNair’s presence. Her legal representative was present in that meeting. Despite the Full Court making much of this aspect and devoting a great deal of attention to it, there is simply nothing to it.
[36] The Full Court did not deal with the other complaints by the respondent, namely the decision to pursue her for Applied’s debt to Top Spin and the sale of the Port Elizabeth property. The first one was a major issue on the papers and in the court of first instance. As I have already mentioned, both decisions were taken in a Top Spin shareholders’ meeting on 24 March 2016. I consider each briefly. As stated earlier, the first decision stemmed from the respondent’s undertaking in a meeting of 12 November 2015 to personally assume Applied’s debt to Top Spin, should Applied fail to settle the debt within three months.
[37] The respondent sought to suggest that she made the undertaking under duress, and that the appellant had failed to advise her that she had no legal obligation to make the undertaking. There is no merit in this suggestion for the simple reason that the respondent’s legal representative was present in that meeting. The respondent’s attempt to infer a sinister motive in the decision by the appellant and Mr Crossman in the meeting of 24 March 2016 similarly lacks merit. They were entitled to pursue legal action based on an undertaking, voluntarily and validly made, by the respondent. That they elected to pursue her and not Applied is irrelevant. The fact is that the respondent had not complied with her undertaking to settle Applied’s debt. This caused financial pressure on the Trust investment where time was of the essence.
[38] This also contextualises the decision to sell the property in Port Elizabeth. The decision was necessitated by the respondent’s failure to honour her undertaking, which added pressure on Top Spin’s finances. The appellant and Mr Crossman explained that the property was vacant, and they considered it a good commercial decision to sell it, based on the financial implications for Top Spin and ultimately, the Trust. According to the respondent, the appellant and Mr Crossman had conspired to sell the property without consulting her, by taking that decision in her absence on 24 March 2016. She said that when she found out about the sale, she initially sought to scuttle it but later ‘reluctantly’ agreed to the sale.
[39] In the light of the above, the respondent’s attempt to show this decision as proof of collusion between the appellant and Mr Crossman to exclude her from the decision-making in Top Spin is unsustainable. It is disingenuous and lacks candour, especially in the light of the fact that she later agreed to it.
[40] I turn now to the appellant’s alleged non-action when Mr McNair declined the respondent’s request to release some of Applied’s funds. The respondent complained that both the appellant and Mr Crossman stood by and did nothing about Mr McNair’s conduct. The Full Court agreed with her and said that the appellant did nothing despite being ‘intimately involved in the affairs of Applied and Top Spin and therefore was fully apprised of her efforts.’
[41] To my mind, the criticism was unwarranted. The appellant was not a shareholder or director of Applied, and as such had no leverage to force or prevail upon Mr McNair to release the funds. Neither the respondent nor the Full Court made any suggestion as to what the appellant could possibly have done about this. I am unable to think of any. The fact that he was ‘intimately involved in the affairs of Applied and Top Spin and therefore was fully apprised of her efforts’ took the issue no further.
[42] In the final analysis, given the nature of the shareholding in both Applied and Top Spin, the conflict between the respondent and Mr McNair in Applied, on the one hand, and that in Top Spin between the respondent, Mr Crossman and the appellant, on the other, indirectly, spilled over to the Trust. But there is no evidence that those frictions had any significant impact on the administration of the Trust. It seems the Trust is functioning relatively well in the circumstances. Meetings are held where effective decisions are taken for the benefit of the Trust.
[43] For example, in the meeting of the Trustees on 25 May 2016 a wide range of issues were discussed, and resolutions taken, despite the acrimony between the respondent and her co-trustees – the appellant and Mr Crossman. This meeting is especially significant in this regard because this is where the respondent formally demanded the resignation of the appellant. Despite that, the meeting proceeded with its business. Another meeting was held on 22 March 2017. A resolution was taken there authorising the respondent to transfer R50 000 from an investment account into the Trust’s current account to pay for various costs of the Trust. What is more, the respondent and her children, as the beneficiaries of the Trust, have received distributions and loan repayments of nearly R5 million. The Full Court did not take into account any of these considerations.
[44] I therefore conclude that the state of the relationship of the appellant and the respondent has not imperiled the Trust property or its proper administration. I find no other basis on which it would be in the interests of the Trust and its beneficiaries to remove the appellant.
[45] This brings me to counsel for the respondent’s invitation to this court to consider English law, having referred us to several authorities. I am not persuaded that we need to resort to English law. Our law on the removal of trustees is well-settled after nine decades, starting with Sackville West v Nourse & another 1925 AD 156 and many others, right through to Gowar. In any event, I find no discernable differences between English law and ours. In both systems, the overriding consideration seems to be whether the Trust property is imperiled by any conduct of a trustee, and whether the interests of the beneficiaries would be served by their removal. In exercising that power, the courts do so with circumspection.
[46] There remains the issue of costs. The respondent made an application to adduce further evidence on appeal. This related to the resignation of Mr Crossman and whether the Full Court was aware of this when it heard the appeal and the impact thereof. This was irrelevant for the purposes of this appeal. After a brief debate during the hearing of the appeal, counsel for the respondent did not persist with the application. The respondent has to bear the costs of that application.
[47] In all circumstances, Mudau J was correct in dismissing the respondent’s application in the first instance and, as the Full Court erred, as I have demonstrated, the appeal has to succeed. The following order is made:
1 The appeal is upheld with costs, which includes the costs in the application to adduce further evidence.
2 The order of the Full Court is set aside and substituted with the following:
‘The appeal is dismissed with costs.’
____________________
T M Makgoka
Judge of Appeal 16
APPEARANCES
For Appellant: GM Young
Instructed by:
Goërtz Attorneys Inc., Randburg, Johannesburg
Symington & De Kok, Bloemfontein
For Respondent: HP Van Nieuwenhuizen
Instructed by:
Salant Attorneys, Bedfordview, Johannesburg
Matsepes Attorneys, Bloemfontein