Tag Archives: Claim

Trust litigation – Who can institute a claim and which court has jurisdiction?

This article deals with the questions of who can institute litigation on behalf of a trust, as well as with the question of how jurisdiction is determined with regards to trusts.

Who can institute a claim?

A trust is not a legal person and cannot litigate in its own name. The trustees play a vital role in any litigation in which a trust might be involved. There are three overriding principles regarding trust administration:

  1. The trustees are obliged to give effect to the provisions of the trust deed.
  2. The trustees must perform their duties with the necessary “care, diligence and skill which can be expected of a person who manages the affairs of another”.
  3. Any person acting as a trustee must exercise discretion, where allowed, with the necessary objectivity and independence.

Section 6(1) of the Trust Property Control Act (the Act) determines the following: “any person whose appointment as trustee in terms of a trust instrument, section 7 or a court order comes into force after the commencement of the Act, shall act in that capacity only if authorised in writing by the Master”. In Watt v Sea Plant Products Bpk, Judge Conradie interpreted this section to mean that a trustee may not, prior to authorisation, acquire rights for, or contractually incur liabilities on behalf of the trust”. Thus, a trustee can only contract and institute legal proceedings in his/her capacity as trustee once a letter of authority has been issued by the Master of the High Court.

In Nieuwoudt v Vrystaat Mielies (Edms) Bpk), an agreement was held to be invalid and unenforceable because the trustees had not acted jointly nor reached a unanimous decision. The conclusion to be drawn from this is that trustees must act jointly when entering into contracts or when instituting litigation.

A trustee has a duty to vindicate trust property and to collect due debts. This duty goes hand in hand with the duty to conserve trust property and ensures that the trustee is in control of the property which forms part of the trust fund. A trustee further has locus standi to defend actions instituted against the trustee to ensure that the trust property is conserved.

Should all the trustees be joined in an action to enforce a right of the trust?

Judge Cameron held in the Goolam Ally Family Trust case that all the trustees must be joined in suing and all must be sued. Therefore, all the trustees will be joined in their official capacity when instituting legal proceedings.

In Khabola NO v Ralithabo NO, the court quoted the general rule regarding locus standi as follows: Any person who has a direct or substantial interest in the matter has the required locus standi to institute legal proceedings. The learned judge found that the underlying contractual relationship between trustees could be equated to a partnership.

Jurisdiction:

For jurisdictional purposes, a partnership “resides” at the place where its principal place of business is situated, and if the principle set out in abovementioned case is followed – a trust also “resides” where its principal place of business is situated.

In Bonugli v The Standard Bank of South Africa Limited, the court referred to section 5 of the Act which determines that a person whose appointment as trustee comes into effect after the commencement of this act, shall furnish the Master with an address for the service upon him of notices and process and shall, in case of change of address, within 14 days notify the Master by registered post of the new address. The cause of action arose in Johannesburg, and one of the defendants (a trustee in his representative capacity) was resident in Australia. The address which was used in the summons was the address given to the Master in terms of section 5 of the Act. A special plea with regards to lack of jurisdiction was raised, but the Cape Town High Court found that it had the necessary jurisdiction to hear the matter.

There are considerable differences between a partnership and a trust, but with regards to jurisdiction the general principles applicable to a partnership can also be applied to a trust – namely considerations of convenience and common sense for its conclusion to entertain a claim. The Cape Town High Court had jurisdiction to hear the Bonugli matter because the first defendant was resident within its jurisdiction, and because the address listed in terms of section 5 of the Act was within the jurisdiction. Considerations of common sense and convenience also required that the court should adjudicate the issue between the plaintiff and all the defendants. It would have been impractical to institute a claim based on the same set of facts in two different courts, because the trustees were resident in different courts’ jurisdictions.

There remains some uncertainty regarding which court should have jurisdiction to hear a claim instituted by a trust or a claim against a trust. There appears to be three possibilities in this regard: Firstly, if the Bonugli judgment was followed, the residency of one trustee should be sufficient to establish jurisdiction. Secondly, the address provided in terms of Section 5 of the Act could be used to establish jurisdiction. Thirdly, the court where the trust’s principle place of business is situated could have jurisdiction. Hopefully the position regarding which court has jurisdiction to hear claims instituted by a trust or against a trust will be properly aired in the courts soon, to provide more certainty regarding this aspect.

Reference List:

Books:

  • Lexisnexis Trust Law and Practice, P A Olivier, S Strydom, GPJ van den Berg, October 2017
  • Civil Procedure: A Practical Guide, Petè, Hulme, Du Plessis, Palmer, Sibanda, Oxford University Press.

Acts:

  • Trust Property Control Act 57 of 1988

Cases:

  • Watt v Sea Plant Products Bpk (1998) 4 All SA 109 (C)
  • Nieuwoudt v Vrystaat Mielies (Edms) Bpk)
  • Goolam Ally Family Trust t/a Textile, Curtaining and Trimming v Textile, Curtaining and Trimming (Pty) Ltd 1989 (4) SA 985 (C) at 988D-E
  • Khabola NO v Ralithabo NO (5512/2010) (2011) ZAFSHC 62 (24 March 2011)
  • Bonugli v The Standard Bank of South Africa Limited 266/2011) (2012) ZASCA 48 (30 March 2012)

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

How and when to use the Small Claims Court?

The Small Claims Court (SCC) is for anyone who wants to institute a minor civil claim against someone else. You can also claim against companies and associations. However, the claims are limited to amounts that are less than R15 000. This excludes the State, meaning a person cannot make a claim against a local municipality, for example. Claims made in the SCC are done quickly and cheaply without having to use an attorney and anyone, except juristic persons, are allowed to use them.

Read more about the SCC on The Department of Justice and Constitutional Development’s website: justice.gov.za

Where do I start?

If you are going to institute a claim against someone else, be smart about it. Don’t make a claim against someone who you know has no money to pay you back, such as an unemployed person.

Before running to the court to make a claim, first contact the person you intend to claim from and ask them to fulfil your request. Let them know you are planning on going to the court to make a claim against them if they don’t comply.

Perhaps the person is not interested in your claim, then send them a written demand letter. The letter should set out the details of the claim, including the amount. Give them at least 14 days from the day of receiving your letter to settle your claim. Make sure they get an actual physical copy of the letter. This can be posted to them, or you can simply take it to them directly.

So 14 days has passed and they didn’t respond. Now you can go to the clerk of the court with documents to institute your claim. Firstly, you will need proof that you delivered the letter of demand. This can be a post office slip, for example. You will also need a contract or document that gives a bases for your claim. Your claims can’t just be based on thin air. Lastly, provide the court with all the details of the person you’re claiming from, such as name, address and phone number.

The summons

The clerk of the court will help you in drawing up the summons. Once the summons is complete a hearing will also be scheduled. You then have to serve the summons to the opposing party (defendant) in person and get them to sign it. Don’t be surprised if they are visibly upset. Remember to make copies of all the documents and keep them. Also give copies to the defendant. The original documents must be handed over to the clerk of the court before the day of the hearing. This information will be kept in the court file.

After they receive the summons, the defendant may deliver a plea (written statement) to the clerk of the court. They may also issue a counterclaim. Regardless of whether the defended institutes a plea or counterclaim, they still have to attend the hearing. On the other hand, the defendant may decide to fulfil your claim before the hearing, you should then issue a written receipt and let the clerk of the court know that you won’t be continuing with the case.

Going to the hearing

You and the defendant must appear in court in person, attorneys or lawyers are not necessary. Remember to bring along all the documents on which your claim is based, there’s no point in showing up empty-handed. If you have witnesses, make sure they also come with you to the hearing. The SCC proceedings are basic and straight-forward. As mentioned, no attorneys are involved. As the proceedings begin, answer any questions that the commissioner of the court asks you. If you want and the commissioner agrees, then you can direct questions to the defendant.

The final judgment

After the proceedings have been completed, the court will make a judgement, which is final. There may, however, be some grounds for review. If the judgement is against you, then you should settle any order for costs. Since the court judgement is final, you have to abide by it. You can’t change your mind afterwards.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Do’s and don’ts of suretyship

A4_bOn 29 May 2015, in the case of Dormell Properties 282 CC v Bamberger[1], the Supreme Court of Appeal (SCA) set out the importance of, firstly, expressly pleading a suretyship clause in a plaintiff’s particulars of claim and, secondly, ensuring that the contract to which a deed of suretyship is annexed is duly signed by all parties thereto.

In the case of Dormell Properties 282 CC v Bamberger[2] (Dormell case) there were two agreements of importance. The first agreement was a written offer to lease agreement concluded between Dormell and Edulyn, duly represented by Bamberger in his capacity as sole director, in terms of which Bamberger undertook to bind himself as surety for Edulyn’s obligations under a second agreement, being the agreement of lease.[3]

The first agreement was properly signed by the parties; however, the agreement of lease was only signed by Bamberger. Annexed to the agreement of lease was a deed of suretyship which Bamberger signed. The deed of suretyship and agreement of lease were annexed to Dormell’s particulars of claim as if this suretyship was the instrument that bound Bamberger as surety and co-principal debtor for the fulfilment of the obligations of Edulyn.[4]

In the court a quo, Savage AJ found that ‘a contract of suretyship requires a valid principal obligation with someone other than the surety as debtor and the liability of the surety does not arise until this principal obligation has been contracted (Caney [C F Forsyth and J T Pretorius Caney’s The Law of Suretyship in South Africa 6 ed (2010)] at 47)’.[5] In the SCA the appellant conceded that no express reference to the first suretyship clause was made in the particulars of claim, but argued, inter alia, that the omission caused no prejudice to Bamberger.[6]

Dormell’s cause of action was based on the deed of suretyship attached to the agreement of lease and not on the suretyship clause in the first agreement. To seek to change this now would amount to an amendment of the particulars of claim and the advancing of a case which was not initially pleaded. Bamberger therefore contended that he was not given the opportunity to raise any defence which he could have raised to the suretyship clause.[7]

The SCA set out that ‘the purpose of pleadings is to define the issues for the parties and the court. Pleadings must set out the cause of action in clear and unequivocal terms to enable the opponent to know exactly what case to meet. Once a party has pinned its colours to the mast it is impermissible at a later stage to change those colours.’[8] Furthermore the court found that Dormell should have expressly alleged a valid contract of suretyship (i.e. that the terms of the deed of suretyship were embodied in a written document signed by or on behalf of the surety which identified the creditor, the surety and the principal debtor). Dormell had to allege the cause of the debt in respect of which the defendant undertook liability as well as the actual indebtedness of the principal debtor.[9]

In the Dormell case the deed of suretyship was invalid and enforceable because it was annexed to an agreement of lease which wasn’t signed by Dormell, and therefore the suretyship was in respect of a non-existent obligation. Dormell conceded that the suretyship pleaded was invalid, but argued that Bamberger would not suffer any prejudice if Dormell was allowed to rely on the suretyship in the first agreement instead. The court found that although it does have discretion regarding keeping parties strictly to their pleadings, it does not agree that this discretion reaches as far as to place a party in the disadvantageous position of not being permitted to raise any legal defence.[10]

In deciding the above, the court looked at whether Bamberger would have conducted his case materially differently, had Dormell’s case been pleaded properly. The court found that he would have, in that he would have been in the position to raise the defence of non-excussion (i.e. that Dormell should have first claimed the outstanding amounts owed from Edulyn and only if they could not pay this amount, should Dormell have claimed from Bamberger).[11] He had not raised this defence in his plea or at the trial because the deed of suretyship annexed to the agreement of lease in terms of which he had waived the defence of non-excussion (which was not signed by Dormell) was relied upon.[12]

The SCA therefore found that Bamberger would suffer prejudice if it were to allow Dormell to rely on the suretyship clause in the first agreement which was not relied upon in the particulars of claim.[13] It is therefore crucial to, firstly, expressly plead the details of a valid suretyship clause in a plaintiff’s particulars of claim and, secondly, to ensure that the contract to which a deed of suretyship is annexed is duly signed by all parties thereto. If you do not do so you may find yourself in a situation where the courts will not allow you to enforce a valid suretyship.

[1] (20191/14) [2015] ZASCA 89 (29 May 2015)

[2] (20191/14) [2015] ZASCA 89 (29 May 2015)

[3] ibid para 1-3

[4] ibid para 5

[5] Dormell Properties 282 CC v Bamberger (20191/14) [2015] ZASCA 89 (29 May 2015) para 8

[6] ibid para 8

[7] ibid para 10

[8] ibid para 11

[9] ibid para 12

[10] Dormell Properties 282 CC v Bamberger (20191/14) [2015] ZASCA 89 (29 May 2015) para 15

[11] ibid para 19

[12] ibid para 20

[13] ibid para 21

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)