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FORM A

FILING SHEET FOR EASTERN CAPE JUDGMENT

ECJ NO : 043/2005

PARTIES:

ANDRIES FRONCOIS MARAIS N.O. vs ZOO NET TRADING CC, t/a DURR ESTATES and REGINALD TOBIAS MARAIS AND 2 OTHERS

REFERENCE NUMBERS -

• Registrar: 616/2004

DATE HEARD: 20/05/2005

DATE DELIVERED: 25/05/2005

JUDGE(S): FRONEMAN J, NORMAN AJ

LEGAL REPRESENTATIVES -

Appearances:

• for the State/Applicant(s)/Appellant(s): A BEYLEVELD

• for the accused/respondent(s): BL BOSWELL

Instructing attorneys:

• Applicant(s)/Appellant(s): DOLD & STONE

• Respondent(s): NN DULLABH

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION

Case No. CA 616/04

In the matter between

ANDRIES FRANCOIS MARAIS N.O. Appellant

and

ZOO NET TRADING CC, t/a DURR ESTATES Respondent

and

REGINALD TOBIAS MARAIS AND TWO OTHERS Joinder Applicants

JUDGMENT

Froneman J.

[1] Recently, in Land and Agricultural Bank of SA v Parker and others, ¹ Cameron JA commented on the possibility of abuse in trusts where there is no functional separation of ownership of the trust assets and enjoyment of the trust income. This probably also explains the conduct of the trustees of the Joumar Business Trust (‘the trust’) in this matter, although here the abuse lay in the attempted manipulation of the identities of the trustees for citation purposes in litigation. One can only hope that the unforeseen exposure of their unscrupulous activities in this appeal will deter the trustees from any further abuse of the trust form.

[2] On 19 December 2003 the respondent (‘Durr Estates’) entered into an agreement with the trust, represented by one A.F.Marais (‘A.F.Marais’), in terms of which Durr Estates obtained the sole mandate to market and sell plots in a property development initiated by the trust. For this privilege it had to pay R100000,00 to the trust as a deposit for the proper compliance of its obligations. If, however, the site plan for the development was not “in place” by 24 December 2003 the trust became obliged to return the money to Durr Estates. According to Durr the site plan was not in place by that date, but despite demand the trust refused to repay the R100000,00. As a result Durr Estates instituted action in the Humansdorp Magistrates’ Court for payment, citing A.F.Marais and two other persons (‘the old trustees’) as defendants, in their capacities as trustees of the trust.

[3]The summons was served towards the end of May 2004 and appearance was entered on behalf of the defendants on 9 June 2004. Durr Estates applied for summary judgment, which was opposed. The opposing affidavit in the summary judgment was deposed to by A.F.Marais. In the affidavit A.F.Marais raised three defences to the claim. The first was an objection in limine, namely that none of the defendants was at the time of service of the summons trustees of the trust, and that the trustees were three other persons, namely Karen Joubert, Dirk Joubert and Reginald Tobias Joubert (‘the new trustees’).² The second defence was one on the merits, namely that the site plan was indeed available on 24 December 2003. The third defence was that the appellants had a counterclaim for damages against Durr Estates in excess of R1m on the basis that employees of Durr Estates, in breach of their fiduciary duties, advised prospective buyers not to invest in the proposed development.

[4] The magistrate did not believe that A.F.Marais had the authority to depose to an affidavit on behalf of the trust, rejected the opposing affidavit in its entirety, and granted summary judgment. This appeal was then launched against the magistrate’s judgment. Strangely, the first and second defendants cited as trustees did not join in the appeal, only A.F.Marais did.³

[5] In a further twist to the tale the new trustees signed the power of attorney to prosecute the appeal and also brought an application to be joined as appellants in the appeal. Durr Estates opposed the application, citing as reasons the new trustees’ failure to provide documentary proof of their appointment as trustees, and the fact that they had the opportunity to join proceedings in the court below but did not do so in order to benefit from the point of non-joinder raised in A.F.Marais’s affidavit. In reply an affidavit by an attorney, Mr.Beyleveld, was filed on behalf of the new trustees and A.F.Marais, in which he set out his efforts to obtain the proper documentation relating to the appointment of the trustees to the trust by the Master of the High Court, Cape Town, and attaching too, the relevant documentation obtained from the Master. Quite ironically, the contents of this affidavit and the documentation attached to it expose the unscrupulous actions of both the old and the new trustees. It also shows that the magistrate was, presciently, justly suspicious of accepting A.F.Marais at his word, even on affidavit.

[6] To his affidavit A.F.Marais attached a so-called ‘letter of executorship’ in support of his allegation that at the time of service of the summons the old trustees were not trustees of the trust, but that the new trustees were.⁴ The letter attached was a document headed “Magtigingsbrief” in the name of the Department of Justice bearing a date stamp (23 July 2003) of the Master of the ‘Supreme Court’ (sic). The document indicated that RT Marais, K Joubert and DC Joubert (the new trustees) had been authorised by the Master to act as trustees of the trust. Mr.Beyleveld’s affidavit proves this document to be a forgery. The master did indeed issue such a document on 23 June 2003, but it in fact authorised the old trustees to act as trustees for the trust, and not the new trustees. The further documents attached to Mr.Beyleveld’s affidavit also show that on 26 October the second defendant and A.F.Marais were authorised to continue as trustees upon the resignation of the first defendant as a trustee. On 24 March 2004 Reginald Tobias Marais and Karin Joubert, two of the new trustees, were authorised to act as trustees together with the second defendant and A.F.Marais. Finally, on 18 June 2004, nine days after the defendants filed their notice of appearance to defend, Dirk Christiaan Joubert, the last of the new trustees, was authorised to act as a trustee upon the resignation of the second defendant and A.F.Marais as trustees. This gives the lie to the assertion in A.F.Marais’s affidavit that neither he nor the second defendant was a trustee of the trust at the time of service of the summons. They were, and only the first defendant was not. It is also not correct, as asserted in his affidavit, that all three of the new trustees were already trustees at the time of service; Dirk Christiaan Joubert was not yet then a trustee.

[7] Mr.Beyleveld’s affidavit not only shows that A.F.Marais in his affidavit perjured himself in the respects already mentioned, but also, prima facie, that the second defendant and the new trustees were knowing participants to the perjury and deceit. Second defendant was still a trustee when the summons was served, as well as two of the new trustees, Reginald Tobias Marais and Karin Joubert. The third new trustee, Dirk Christiaan Joubert, became a trustee on 18 June 2004, some 14 days before A.F.Marais made the false allegations in his affidavit. On the face of his affidavit he was authorised by the trust, represented at that stage by the three new trustees, to make the affidavit in the terms he did.

[8] The new trustees have shown, albeit by shooting themselves in the foot, that they are the present trustees of the trust and that they accordingly have an interest in the appeal. They have applied to be joined as appellants in the appeal and the law not only allows them to be joined but requires their joinder in order for the judgment to be effective against them.⁵ An order for their joinder is incorporated in the final order at the end of this judgment.

[9] Non-joinder of necessary parties is not normally a substantive or determinative defence to a claim, but a dilatory one, and the usual relief is to grant a stay of the proceedings and not simply to dismiss the claim.⁶ The question of what effect the joinder of the new trustees as parties to the appeal should have on the appeal itself and the proceedings in the court below has been facilitated in the present matter by a number of concessions made by counsel appearing for the original appellant (A.F.Marais) and the new trustees. In my view these concessions were properly made and I will deal with each of them in turn.

[10] The magistrate did not have the benefit of the facts set out in paragraphs [5] to [7] above before him when deciding the summary judgment application. He rejected A,F.Marais’s authority to depose to the opposing affidavit and consequently did not deal with any of the defences set out in the affidavit. Whilst his scepticism about the trustworthiness of A.F.Marais was understandable in the light of the discrepancy between the warranty of authority recorded in the written agreement and the allegation in the affidavit that he was not a trustee at that time, he should, in my view, have reminded himself that summary judgment is a drastic remedy and that his suspicions of bad faith could have been addressed in a less drastic way. The magistrate should mero motu have ordered the joinder of the new trustees in view of the fact that if they were indeed the trustees their joinder was necessary for any judgment against the trust assets to be effective, and should have postponed the summary judgment application for that purpose. Had that been done the facts now disclosed on appeal would have been disclosed then.

[11] The first concession counsel made was that, at best, success on appeal (without the benefit of the knowledge gained by the joinder application) would have resulted not in the summary judgment application being dismissed, but only in the matter being referred back to the court below in order for the new trustees to be joined in the summary judgment proceedings. This is in line with the principle that a plea of non-joinder of necessary parties usually results in a postponement to enable their joinder, not in a final determination of the substantive merits of the litigation. This kind of approach is particularly appropriate in disputes about the proper citation of trustees where the trend is away from excessive formalism, to cutting to the quick in ensuring that the trust is properly represented or cited in court proceedings.⁷

[12] The next concession flows from the previous one and is justified by practical reasons of convenience, namely that the substance of the summary judgment application can be dealt with as well now on appeal, as it can be done by referring the matter back to the Magistrates’ Court. The proper parties are before us, will be bound by the judgment, and the substantive defences raised in the opposing affidavit are indeed authorised by the new trustees. Counsel for respondent raised no objection to this procedure.

[13] Having regard to the unedifying attempt by the trustees, past and present, to use the difficulty of finding the true trustees ⁸ for their own advantage, one is sorely tempted to take a short cut similar to the one taken by the magistrate, namely not to believe a word of A.F.Marais’s opposing affidavit, but that would not be justified and proper. The correct approach, I think, is the usual one of enquiring whether the allegations set out in the affidavit in respect of the defences on the merits would, if proved at the trial, constitute a proper defence to the claim, and whether their nature is such to justify an inference of bad faith.

The first defence is a denial that the site plan was not at hand on 24^th December 2004. Marais alleges that some 80 plots were sold on the basis of the site plan to the knowledge of Durr Estates. No documentation is attached in support of this allegation, but from Durr Estates’ letter of demand, forming part of the papers, it does appear that Durr Estates acknowledges that some sales took place, and in fact claims commission in respect of these sales. The letter also seems to rely on the non-approval (“nie goedgekeur nie”) of the site plan and not its mere unavailability. Whether the requirement of the plan being “in place” in terms of the written agreement should necessarily be equated to its proper approval is not an issue that can be determined finally in favour of Durr Estates on the papers. The conclusion can thus not be drawn that the defence raised in the affidavit lacks sufficient detail to constitute a defence to the claim, nor is its admittedly somewhat terse nature sufficient to warrant the inference that it is not advanced in good faith. Much the same can be said of the alleged counterclaim, namely that employees of Durr Estates have advised prospective buyers not to buy plots in the development and that, as a result, the trust has suffered damages in excess of R1m. Better to leave that issue, namely whether the advice, if given, was good, or unlawful, to the trial court as well. Summary judgment should thus in my view be refused and leave should be granted to defend.

[14] Prior to the hearing of the appeal notice was given to the parties to address us on why A.F.Marais, the second defendant, and the new trustees should not, jointly and severally, be ordered to pay the costs of the appeal and the proceedings in the court below de bonis propriis on the attorney and own client scale, irrespective of the outcome of the appeal. Counsel for the new trustees and A.F.Marais conceded the propriety of such an order. His only reservation was that the second defendant was not represented on appeal, has had no notice of the proposed costs order, and that he could make no concession to that effect on the second defendant’s behalf.

Once again the concession, and its qualification, was properly made. The facts set out in paragraphs [5] to [7] clearly warrant such an order, not only as a sign of the court’s disapproval of the conduct of A.F.Marais and the new trustees, but also to ensure that Durr Estates is not out of pocket in respect of proceedings that would have been avoided if some honesty was shown.

[15] Some ancillary matters remain. The facts of this matter show (at least prima facie, if not somewhat more conclusively) that some or all of both the old and new trustees have abused their position as trustees, and may have committed or participated in perjury, forgery or fraud. In the Land and Agricultural Bank of SA v Parker case ⁹ Cameron JA stated the following in the course of his judgment: ¹⁰

“[34] The situation may in due course require legislative attention, but that does not mean that the Master and the courts are powerless to restrict or prevent abuses. The statutory system of trust supervision invests extensive powers in the Master. These include the power to appoint trustees in the absence of provision in the trust instrument, and to appoint any person as co-trustee where he considers it ‘desirable’, notwithstanding the provisions of the trust instrument. In addition, trustees require written authorisation from the Master before they may act in that capacity.

[35] The debasement of the trust form evidenced in this and other cases, and the consequent breach of trust this entails, suggest that the Master should, in carrying out his statutory functions, ensure that an adequate separation of control from enjoyment is maintained in every trust. This can be achieved by insisting on the appointment of an independent outsider as trustee to every trust in which (a) the trustees are all beneficiaries and (b) the beneficiaries are all related to each other”.

This may be one of the cases where the appointment of independent trustees is called for, and a copy of this judgment and record of proceedings will be referred to the Master of the High Court, Cape Town, for consideration of this and other issues dealt with in the judgment.

[16] Similarly a copy will be forwarded to the offices of the Director of Public Prosecutions in Grahamstown and Cape Town in order to take the matter further as far as possible criminal prosecution is concerned.

[17] Order.

It is ordered that:

1. Reginald Tobias Marais, Karin Joubert and Dirk Joubert be joined as parties in case no. 1029/2004 in the Magistrates’ Court, district of Humansdorp, and that they be substituted as first, second and third defendants in the case, in their capacities as trustees of of the Joumaar Besigheidstrust;

2. The order granting summary judgment in the said Magistrates’ Court is set aside and replaced with the following:

“(a) Die aansoek om summiere vonnis word van die hand gewys;

2. Die verweerders word verlof tot verdediging verleen.”;

3. Andries Francois Marais, Reginald Tobias Marais, Karin Joubert and Dirk Joubert are ordered, jointly and severally, and de bonis propriis, to pay the costs of the summary judgment proceedings in the Humansdorp Magistrates’ Court, the costs of appeal, and the costs of the joinder application on appeal, on the scale of attorney and own client;

4. The registrar is directed to forward copies of this judgment and the appeal record to the Master of the High Court, Cape Town, as well as to the offices of the Director of Public Prosecutions in Grahamstown and Cape Town.

J.C.Froneman

Judge of the High Court.

I agree.

T.V.Norman

Acting Judge of the High Court.

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