REPUBLIC OF NAMIBIA

HIGH COURT OF NAMIBIA MAIN DIVISION, WINDHOEK

RULING: COSTS AT A HIGHER SCALE AND EXCEPTION

CASE NO: HC-MD-CIV-ACT-CON-2018/02683

In the matter between:

SAFLAND PROPERTY SERVICES NAMIBIA (PTY) LTD PLAINTIFF

and

CHRISTIAAN LILONGENI RANGA HAIKALI FIRST DEFENDANTHAROLD SCHMIDT SECOND DEFENDANTPRINCE SHIIMI THIRD DEFEDANTSIMEON NEGUMBO FOURTH DEFENDANTFREDRICK GANASEB FIFTH DEFENDANTRICHARD FRANKLE SIXTH DEFENDANTANDREW KAMWI MWAZI N.O. SEVENTH DEFENDANT

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AUGOSTINHO FERREIRA N.O. EIGHTH DEFENDANTKAREL PETRUS VAN DER MERWE N.O. NINETH DEFENDANTJEREMY CHARLES ROSSOUW N.O. TENTH DEFENDANTGOVERNMENT INSTITUTIONS PENSION FUND ELEVENTH DEFENDANTNGUNI PROPERTY LIMITED TWELFTH DEFENDANT

Neutral citation: Safland Property Services Namibia (Pty) Ltd v Haikali (HC-MD-CIV-

ACT-CON-2018/02683) [2019] NAHCMD 302 (19 August 2019)

Coram: PRINSLOO JHeard: 27 July 2019

Delivered: 19 August 2019

Reasons: 23 August 2019

Flynote: Civil Practice – Practice Directive 21 – Exceptions are interlocutory

proceedings – Rule 32(11) – Onus rest on the party to convince court that limitation in

terms of rule 32(11) should not apply.

Civil Practice – Rule 57 – Exception raised that particulars of claim do not disclose a

cause of action – Pleading only excipiable if no possible evidence led on pleadings

could disclose a cause of action

ORDER____________________________________________________________________________

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1. Application by first defendant for cost at a higher scale :

(a) Application dismissed. Cost to remain capped in terms of Rule 32(11).

2. Exception raised by second to sixth defendants :

(b) Exception(s) is dismissed with costs.

(c) Costs to include the cost of one instructing and one instructed counsel.

(d) Costs not to be limited in terms of Rule 32 (11).

3. Further conduct of the matter:

(e) The case is postponed to 12/09/2019 at 15:00 for Case Planning Conference

hearing (Reason: Parties to file joint case plan).

(f) Further joint case plan must be filed on or before 09/09/2019.

______________________________________________________________________

RULING____________________________________________________________________________

PRINSLOO J

Introduction and Background

[1] The plaintiff is the appointed fund manager of Frontier Property Trust (the ‘FPT’)

which is a bewind trust registered in terms of the laws of Namibia which, through the

trustees, manages, administers and controls the fund, being the aggregate of all

portfolio investments and other assets held for and on behalf of the investor

participants.

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[2] The 11th defendant is the founder of the FPT. The plaintiff together with the 11 th

defendant are the investor participants of the trust as a consequence of which they hold

ownership in and to the assets and investments of the trust.

[3] The governing board of the trust comprises the trustees so appointed in terms of

the trust deed and in accordance with the terms and conditions embodied therein.

[4] The plaintiff, as appointed fund manager on behalf of the investor participants, is

obliged to provide and render management services as determined in the Management

Agreement in lieu of payment of management fees determined by the mentioned

agreement.

[5] All investments of the trust must be done in accordance with the investment

policy guidelines of the Investment Charter.

[6] Since March 2017 the investment committee of the FPT met from time to time in

order to discuss the proposed listing on the Namibian Stock Exchange (NSX). On 15

June 2017 during a meeting the investment committee resolved to recommend to the

governing board of trustee to proceed with the proposed listing of the FPT. Pursuant to

such recommendation, the governing board during June 2017 discussed the option of

listing, and resolved that in the event of the listing proceeding, it would be done under

the name of the 12th defendant, being Nguni Property Limited and not the Fund. It was

contemplated to transfer the shareholding and ownership in property holding entities

owned by the FPT to Nguni and to rename Nguni as ‘Frontier Property Fund (Pty) Ltd’.

[7] During 11 to 13 October 2017 the governing board resolved inter alia that certain

of the trust’s assets be transferred to Nguni for purposes of such possible listing but that

such transfer of assets would be subject to a further resolution of the board to approve

the final listing of Nguni, as well as subject to other conditions set out in the resolutions,

which will not be repeated in detail for purposes of this ruling.

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[8] A meeting of the governing board was held on 21 November 2017 and it was

apparently recorded that in order to continue with the proposed listing procedure a

resolution needs to be signed to authorize the continuation of the listing. It was agreed

that the resolution will be signed through ‘round robin’ by each of the trustees, amongst

whom, the defendants.

[9] On 22 November 2017 the first defendant sent an email stating in essence that

the trustees won’t sign the proposed resolution1. Then on 27 November 2017 a

purported resolution of the governing board, signed by the third defendant, in his

capacity as chairperson of the FPT, with the acquiescence of the first, second, fourth,

fifth and sixth defendants, was sent to the 12th defendant, with reference to the trustees

meeting held on 21 November 2017, stating that the trustees unanimously decided not

to be part of the listing2.

[10] As a result of the aforementioned incident the plaintiff instituted action against the

defendants with the aim of removing the first to the sixth trustees from office and as

trustees of the FPT in terms of section 7 of the Trust Monies Protection Act 34 of 1934

(‘the Act’), alternatively the common law, alternatively clause 11 of the Trust Deed3.

[11] The plaintiff claims in its amended particulars of claim that the first and third

defendants in an email and a subsequent resolution deliberately and intentionally

communicated a factually incorrect position regarding the FPT (ie that the trustees

resolved not to participate in the listing whilst they had in fact decided to proceed with

the listing), which resulted in the listing not proceeding. This conduct, the plaintiff

alleges, was contrary to the provisions of the trust deed and in breach of the trustees’

fiduciary duty, constitute a false, alternatively grossly negligent misrepresentation and a

failure to administer settled monies diligently and/or honestly. This, the plaintiff asserts,

justifies the removal of the trustees. The plaintiff furthermore alleges in respect of the

1 Annexure I to the Particulars of Claim.2 Annexure J to the Particulars of Claim.3 Para 57 of plaintiff’s amended particulars of claim.

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other trustees4, that they allowed this conduct or were accessories to it which renders

them equally liable.

Issues for determination

[12] In this application brought before me there are more than one issue for

determination. Firstly, and in respect of the first defendant, it is the issue regarding the

scale of cost pursuant to the raising of an exception against the original particulars of

claim of the plaintiff and the subsequent amendment of the particulars of claim.

Secondly, the exception raised by the second to sixth defendant (the ‘defendants) to

plaintiff’s amended particulars of claim5 on the basis that: (1) it lacks the averments

necessary to sustain an action; and (2) same not disclosing a cause of action.

The issue on costs

[13] The plaintiff instituted action against the defendants on the 10 th of July 2018. On

28 September 2018 the second to sixth defendants filed their plea which contained

several special pleas against the plaintiff’s claims. The first defendant in answer to the

plaintiff’s claim raised an exception in terms whereof the first defendant alleged that the

plaintiff’s particulars of claim failed to disclose a proper cause of action in terms whereof

the plaintiff could successfully proceed with its suit against inter alia the first defendant.

It is the first defendant’s argument that the first defendant fully complied with rule 32(9)

and (10) however, in spite of the first defendant’s attempts to settle the exception

amicably the plaintiff was apparently not open to be convinced. Yet, subsequent to the

filing of the exception, the plaintiff filed an extensive amendment of its particulars of

claim.

[14] It is common cause that the plaintiff tendered the costs as contemplated in rule

32(11) in respect of both the exception raised and the subsequent amendment of the

particulars of claim. The first defendant was however not satisfied with the tender made 4 Specifically the first, second, fourth, fifth and sixth defendants.5 Dated 27th of February 2019.

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and argued that this court should make a determination in terms of the scale of costs

and, specifically, whether the capping of costs contemplated in Rule 32(11)6 should

apply in this instance.

[15] This argument is substantiated by first defendant through the following

reasoning:

(a) First defendant’s exception was the first interlocutory in the life of this case;

(b) Despite due compliance with rule 32(9) proceedings and due (and ample)

warning being given to plaintiff through correspondence regarding first

defendant’s intention to raise an exception, plaintiff persisted with its claim of

damages;

(c) Plaintiff subsequently amended its particulars of claim to exclude the said

damages claim which brought finality to major claims of damages which the

plaintiff initially pursued against the first defendant. In this context the exception

went beyond the scope of an interlocutory, and the first defendant scored a clear

victory as such in his opposition to the two claims in question.

(d) Senior counsel was appointed on plaintiff’s behalf in pursuit of its claim against

the first defendant;

(e) Plaintiff’s case is built around complex issues of law and fact and therefore

merited first defendant’s employment of one instructing and two instructed

counsel;

(f) The amendments introduced were not in accordance with the provisions of rule

52 in that plaintiff failed to identify those parts it wanted to amend;

(g) Rule 52(8) of the rules of the High Court dictates that the party amending its

pleadings should pay the other party, noting that costs in the said rule is not

capped; and

(h) Plaintiff has failed to set out any reasons why the normal costs result as

contemplated in rule 52(8) should not be followed.

6 Rule 32(11) states that ‘despite anything to the contrary in these rules, whether or not instructing and instructed legal practitioners are engaged in a cause or matter, the costs that may be awarded to a successful party in any interlocutory proceeding may not exceed N$ 20 000’.

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[16] Counsel for the plaintiff argued that the first defendant is not entitled to costs of

his exception and that it is entitled to costs in terms of rule 32(11) only, given that the

first exception filed by him was never argued. Same was resolved by plaintiff through

amending its particulars of claim, which in effect eliminated the need for the exception to

be heard.

[17] Despite the aforementioned, Ms Bassingthwaighte conceded on behalf of the

plaintiff that the defendants are entitled to cost emanating from the plaintiff’s amended

particulars of claim and again tendered costs to first defendant in terms of Rule 32(11)

for the first unargued, settled exception raised.

Legal principles relating to costs

[18] It is common cause that in terms of Practice Directive 21 exceptions are to be

dealt with as if they are interlocutory proceedings despite it being trite that an exception

is regarded a pleading. The taking of an exception is procedural in nature and is

interposed before the filing of a plea. It is therefore understandable why it is treated as

interlocutory.

[19] To this end cost in respect of interlocutory proceedings are regulated by rule

32(11) of the Rules of Court which stipulates that:

‘Despite anything to the contrary in these rules, whether or not instructing and instructed

legal practitioners are engaged in a cause or matter, the costs that may be awarded to a

successful party in any interlocutory proceeding may not exceed N$ 20 000.00.’

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[20] However, notwithstanding the aforementioned, this court’s discretion remains

and can be exercised should circumstances dictate.

[21] In South African Poultry Association v The Ministry of Trade and Industry,7 this

court observed the following factors to be determinative in the exercise of the court’s

discretion with respect to rule 32(11):

‘[67] …. this court has discretion to grant costs on a higher scale and that given the

importance and complexity of the matter and the fact that the parties are litigating at full stretch,

the court should in exercise of its discretion grant costs on a higher scale. … The rationale of

the rule is clear: to discourage a multiplicity of interlocutory motions which often increase costs

and hamper the court from speedily getting to the real disputes in the case. A clear case must

be made out if the court is to allow a scale of costs above the upper limit allowed in the rules…

The onus rests on the party who seeks a higher scale. To add to the factors…: the parties must

be litigating with equality of arms and it will be a weighty consideration whether both crave a

scale above the upper limit allowed by the rules. Another critical consideration will be the

reasonableness or otherwise of a party during the discussions contemplated in rule 32(9).

Another important consideration is the dispositive nature of the interlocutory motion and the

number of interlocutory applications moved in the life of the case; the more they become the

less likely it is that the court will countenance exceeding the limit of the rules.’

[22] It is quite clear from the above passage that in order for a party to be allowed

cost on a higher scale it is not just for the asking, which is the case in the current matter.

The fact that counsel were engaged in the matter does not automatically mean that the

limitation should not apply. There is an onus that rest on the party to convince the court

that the limitation should not apply.

[23] The following issues are common cause:

(a) Plaintiff’s particulars of claim were subject to exceptions raised by the first

defendant;

7 (A 94/2014) [2014] NAHCMD 331 (07 November 2014), para 67.

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(b) The exception filed by first defendant was not argued however the plaintiff

proceeded to amend its particulars of claim; and

(c) Plaintiff subsequently amended its particulars of claim after complying with the

rule 32 proceedings8.

[24] Upon perusal of the court record and specifically all the rule 32(10) reports and

status reports filed the following was clear: (a) neither the first defendant nor the other

defendants raised any objection to the plaintiff’s notice of its intention to amend its

particulars of claim; and b) no issues were raised in respect of the costs pertaining to

the interlocutory matters. I therefore find it peculiar that first defendant raises various

issues in his heads of argument regarding plaintiff’s non-compliance to Rule 52

pertaining to amendments at this stage of the proceedings and even more so

subsequent to him filing his plea.

[25] I accept that the particulars of claim appears to be voluminous as the particulars

of claim and all the annexures thereto consists of 175 folios. These documents include

the trust deed and management agreement, which are bulky documents. I also accept

that this matter has a higher degree of complexity and that the preparation for the

exception would be time consuming, however this matter does not distinguish itself from

other similar matters.

[26] I fully associate myself with the sentiments of Masuku J when he said in the

Brink & Another v Erongo All Sure Insurance & Others9 matter that there must be a

measure of flexibility allowed as matters, even at the interlocutory stage, differ in terms

of complexity and time expended, both in preparation and argument. Some matter may

be straightforward whereas in others, there may be a need to chart new territories, thus

requiring a lot of research and application.

[27] In spite of the higher degree of complexity in the matter in casu I do not believe

that it falls within the latter category. 8 First defendant’s heads of argument at 6 para 6. Plaintiff’s heads of argument at 15 para 44.9 (I 3249/2015) [2016] NAHCMD 200 (8 July 2016).

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[28] Ultimately the exception was never argued and the amendment of the particulars

of claim was not opposed nor argued. Therefore, having considered the arguments

advanced for and against cost at a higher scale, I am not convinced that the first

defendant is entitled to cost on a higher scale. The costs will therefore remain capped

in terms of Rule 32(11).

The issue on the exceptions raised

[29] As indicated earlier the defendants attack the plaintiff’s amended particulars of

claim on two different fronts, namely that (a) the plaintiff’s amended particulars of claim

lacks the averments necessary to sustain an action; and (b) that it does not disclose a

cause of action.

[30] I must however point out that although there is reference to a second exception,

ie no cause of action, the defendants only appears to rely on one ground for their

exception and assert in their exception that the plaintiff’s reliance on the defendants’

alleged misconduct is not a sound basis for a cause of action for the following reasons:

(a) The FPT is a bewind trust that does not own the assets purported to sell to the

12th defendant and thus could never transfer assets to the 12th defendant;

(b) The FPT is prohibited by its investment charter from investing in listed equities,

therefore the entire scheme is ultra vires and in breach of the trust deed;

(c) The purported sale of the assets also breaches clause 5.1 of the trust deed and

is ultra vires the governing body, especially clause 12.10.1 of the trust deed;

(d) The purported sale of the assets held by the FPT, had it been concluded, would

have the effect of terminating FPT because it would remove its reason for

existence and its entire sub-stratum;

(e) The listing of the 12th defendant is within the discretion of the Namibian Stock

Exchange, which did not happen and could be refused. (A potential novus actus

interveniens);

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(f) The purported resolution of 27 November 2017 on which reliance is placed does

not manifest a breach of any duty or obligation by the defendants nor does it

constitute a delict;

(g) It does not constitute a failure to administer the settled money diligently or

honestly, but in fact preserved the assets of the FPT and prevents a breach of its

investment charter and trust deed;

(h) The allegation that advise furnished by the first and third defendants is a failure

to administer settled money diligently and/or honestly as per sub-para 48.9 of the

particulars of claim is a conclusion devoid of primary facts;

(i) As a consequence the jurisdictional requirements for the court to consider

removing the trustees have not been met and no case has been made out for the

court to exercise its power under s 7 of the Act.

Defendants’ submissions

[31] Mr Coleman, on behalf of the defendants’, contended that plaintiff pleads

conclusions and not primary facts when it stipulated the following in its particulars of

claim (with emphasis on paras 47 to 50 of the particulars of claim):

‘47. The advice furnished by first and third defendants to the twelfth defendant and

recorded in annexures I and J was, to the knowledge of first to sixth defendants, deliberately

inaccurate, factually incorrect and intended to, and did mislead the recipients thereof, one of

which was Nguni.

48. The advice furnished by the first and third defendants as recorded in annexures I and J, to

the knowledge of the first to sixth defendants –

48.1 Was inconsistent with the discussion of the meeting held on 21 November 2017,

and

48.2 Was factually inaccurate;

48.3 Was not one authorized by the trust deed, and

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48.4 Was not preceded by or reached at a meeting of trustees,

48.5 Did not result from the consultation, consent or participation of all the trustees, in

particular, at least, the seventh to tenth defendants; and

48.6 In the premises is ultra vires the trust deed and void ab initio;

48.7 Was reckless and in breach of the fiduciary duty owed by the defendants to the

trust;

48.8 Constituted a false, alternatively grossly negligent, misrepresentation, and

48.9 Constituted a failure to administer settled monies diligently and / or honestly.

49. In the premises, the conduct of the first to sixth defendants was, to their knowledge,

willful, in bad faith and dishonest, constituted a deliberate false misrepresentation and was thus

reckless, alternatively grossly negligent, constituted misconduct and a breach of the fiduciary

duties which they owe to the FPT.

50. As a consequence of the misconduct of the first to sixth defendants as aforesaid the

bookbuild contemplated by annexure g did not and could not proceed, which rendered any

prospects of the listing remote.

. . .

52. The conduct of the first to sixth defendant described in paragraphs 42 to 50 above

constituted misconduct, manifests a failure to act honestly and diligently and /or to administer

settled monies diligently and/or honestly, and was prejudicial to the interests of the FPT and to

the investor participants.

53. But for such conduct, the bookbuild would have taken place.

54. The plaintiff and the eleventh defendant are beneficiaries of the FPT and have an

interest in the trust property and / or settled monies by reason of their ownership of the

investment funds and thus “interested parties” and, thus have locus standi to seek the removal

of the first to sixth defendant as trustees of the FTP in terms of section 7 of the Act, and,

moreover, in terms of the common law and the Trust Deed.

55. In this latter regard, clause 11.1.2 of the trust Deed properly construed, alternatively as

tacit term thereof, contemplates the disqualification and therefore the removal in terms of clause

11.2 of the Trust Deed (if currently in office) of a trustee “from an office of trust on an account of

misconduct.”

56. The conduct of the first to sixth defendants more fully described in paragraph 42-50

above constitutes willful misconduct and / or misconduct as contemplated by clauses 13, 11.1.2

read with clause 11.2 of the Trust Deed respectively and / or misconduct in terms of the

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common law, alternatively a breach of their fiduciary duties as trustees as they are not fit and

proper to hold office, and justifies their disqualification and removal as trustees.’10

[32] Mr Coleman further argued that the alleged misconduct of the first to the sixth

defendants, as pleaded by the plaintiff is a legal conclusion, while in fact the listing was

suspended because the trustees refused to sign the proposed resolution.

[33] He further argued that in an attempt to sustain a case for the removal of the

trustees under s 7 of the Act the plaintiff pleaded a series of further conclusions as set

out in paras 52 to 56 above. Counsel submitted that the essence of the plaintiff’s case is

contained in para 52 wherein the plaintiff alleges the following:

‘52. The conduct of the first to sixth defendant described in paragraphs 42 to 50

above constituted misconduct, manifests a failure to act honestly and diligently and/or to administer settled monies diligently and/or honestly, and was prejudicial to the interests of

the FPT and to the investor participants.’(emphasis added)

[34] Mr Coleman therefore maintains that significantly para 52 does not contain facts

on which possible evidence can be led. It therefore constitutes conclusions to be

reached on the facts set out in paras 42 to 50 supra.

[35] Mr Coleman further argued that the facts pleaded do not sustain these

conclusions as there is no single fact pleaded that suggests that the trustees are guilty

of misconduct, or that they ‘failed to administer settled monies diligently and/or

honestly’. He argued that it is clear from the plaintiff’s case that there is no settled

monies involved in this matter and no allegations of criminal convictions in respect of

the trustees are alleged in the amended particulars of claim, which remotely can have

the court form an opinion in this context.

10 As per defendants’ heads of argument. Noting specifically that the issue of primary facts not being pleaded and rather conclusions, was only raised in defendants’ exception in terms of paragraphs 48.9 of the plaintiff’s particulars of claim.

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[36] Mr Coleman further argued that ultimately the plaintiff’s cause of action, based on

the facts pleaded, is that the trustees refused to sign a resolution that would authorize

all the assets held in trust to be sold to another company and would then be listed on

the NSX and posed the question on whether this constitutes wrongdoing in any way or

form by the trustees to justify their removal in terms of s 7 of the Act.

[37] In conclusion Mr Coleman submitted that the plaintiff’s facts pleaded do not

sustain the conclusion reached in its particulars of claim, and in some instances the said

facts contradict the conclusions reached by plaintiff.

Plaintiff’s submissions

[38] In response to defendants averments that the FTP is not the owner of the assets

it purported to sell to the 12th defendant and the resultant thereof that it cannot transfer

ownership of the said assets, Ms Bassingthwaighte argued on behalf of the plaintiff that

it is incorrect to state that the FTP could never transfer ownership in assets/investments

as it is authorized by the trust deed.11 With regard to the aforementioned, counsel goes

on to argue that the investor participant is excluded from administrating, controlling and

managing the assets in the fund and these powers are specifically vested in the FPT

through the fund manager. Counsel pointed out that the trust deed regulates the

making of sales, disposals and realization of those investments where after the

proceeds are paid to the investor participants in accordance with clause 26 of the trust

deed.

[39] Regarding the FTP’s investment charter, which prohibits it from investing in

listed equities, Ms Bassingthwaighte referred this court to clause 7.3 of the said charter

which stipulates that:

‘7.3 Investments in listed equities is prohibited, provided that for the sake of clarity

investments in listed companies which are to be delisted as part of investment in question, are

11 Same is contemplated in clauses 5.1, 6.1, 6.2, 6.3, 6.4, 6.5, 12.10, 15.1, 15.2, 22.1, 24.1, 26.1.1 and 31 of annexure b and clause 7 of annexure c to the trust deed.

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permitted, as well as where, as part of the exit strategy from investment, the listing of a Portfolio

Company is contemplated.’

[40] Given the aforementioned, Ms Bassingthwaighte argued that the scheme is not

ultra vires or in breach of the trust deed and she highlighted that the governing board

contemplated, evidently by round robin resolution dated 11 to 12 October 2017, the sale

in respect of particular assets to 12th defendant as contemplated in clause 7.3 of the

investment charter.

[41] The defendant alleged that the purported sale of assets breaches clauses 5.112

and 12.10.113 of the trust deed and is therefore regarded being ultra vires. In response

to this averment, Ms Bassingthwaighte argued that the aforementioned clauses should

not be considered in isolation and the alleged breaches is not evident from the

pleadings and therefore evidence should be led.

[42] In the exception application it is claimed that the entire substratum and/or reason

for the existence of FTP would have been terminated by the purported sale of the said

assets. In response thereto Ms Bassingthwaighte clarified the plaintiff’s position by

arguing that ‘the termination would have happened without compliance with clause 31 of

the trust deed which provides that the assets should be released and distributed to the

investment participants which would not have happened had the intended resolution

been implemented’. Ms Bassingthwaighte furthermore argued that this statement is

factually incorrect and despite the incorrectness thereof argued that this issue should

similarly be introduced in defendants’ plea. It is further the plaintiff’s argument that the

FPT was not intended to exist indefinitely. The term of the trust (in terms of clause 7

read with clauses 1.2.33 and 1.2.61 and annexure A – Details Schedule) is 1 June 2011

to 1 June 2021 unless the FPT resolves otherwise. Clause 31.1.2 also makes provision 12 Record 39: ‘5. OBJECT OF THE TRUST AND ITS INVESTMENT OBJECTIVES 5.1. The main object of the Trust is to make investments for the benefit of the Investor participants in accordance with investment policies and criteria set out in the investment charter and to carry on any activities which may be necessary for and/or ancillary thereto.’13 Record 45: ‘PART III – REGULATORY MATTERS AND MANAGEMENT 12. PROCEEDINGS OF GOVERNING BOARD…12.10. The resolutions, contemplated in clause 12.9.1, shall be those which relate to any of the undermentioned matters – 12.10.1 the making of investments, including follow-on investments by the Fund and the making of binding commitments relating to such investments.’

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for other events which could trigger the termination of the trust, one of which is the

expiry of the commitment period, when all portfolio investments have been disposed of

and a special resolution is passed in terms of which it is resolved to terminate the fund.

Thus, all investment can be disposed of and the trust can resolve to terminate the fund.

[43] With regard to the listing of the 12 th defendant, which is in the discretion of the

NSX, counsel argued that this is not a proper ground for an exception and therefore

defendants would have to plead it as a defense and prove that their conduct was not the

cause for the failed listing and that the listing would have failed due to the refusal by the

NSX.

[44] Ms Bassingthwaighte similarly argued the question on whether any conduct

alleged on the part of the defendants constitutes a breach of a duty or obligation or

whether such conduct constitutes a delict and indicated that that should be pleaded as a

defense. In amplification of this argument Ms Bassingthwaighte submitted that whether

the actions or the conduct of the defendants constitutes a failure to administer the

settled money diligently or honestly or whether it was in fact a preservation of the assets

of the FPT, is to be decided by the court after evidence has been led.

[45] Regarding the allegation that the advice furnished by first and third defendants

as recorded in annexures “I” and “J” is a failure to administer settled money diligently

and/or honestly is a conclusion devoid of primary facts as no settled monies are

involved; is countered by plaintiff with reference to the treatment of the difficulties within

the South African context and with referencing to case law.

The applicable legal principles

[46] The remedy of exception is only available where it goes to the root of the claim or

defence, and that the main purpose of an exception that a claim or defence does not

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disclose a course of action is to avoid leading unnecessary evidence at the trial, that is,

evidence that cannot establish the claim or defence14.

[47] The law applicable to exceptions was set out authoritatively by the Supreme

Court in the case of Alwyn Petrus Van Straten N. O. and Another v Namibia Financial

Institutions Supervisory Authority.15 The court said the following regarding exceptions:

‘Where an exception is taken on the grounds that no cause of action is disclosed or is

sustainable on the particulars of claim, two aspects are to be emphasized. Firstly, for the

purpose of deciding the exception, the facts as alleged in the plaintiff’s pleadings are taken as

correct. In the second place, it is incumbent upon an excipient to persuade this court that upon

every interpretation which the pleading can reasonably bear, no cause of action is disclosed.

Stated otherwise, only if no possible evidence led on the pleadings can disclose a cause of

action, will the particulars of claim be found to be excipiable.’

[48] The approached followed in the Van Straten matter was again confirmed in the

matter of Claud Bosch Architects CC v Auas Business Enterprises Number 123 (Pty)

Ltd16.

[49] An exception is regarded a matter of substance which – in essence – affects a

right of action brought and where an exception does not destroy the whole cause of

action it is considered bad in law.

[50] Evidently, a complete chain of relevant material and primary facts relied upon by

a plaintiff in its action must be set out. Failure to link material facts will break the

sequence and will render any conclusion false and an exception will be sustained.

[51] It is important for purposes of deciding an exception to also have regard to rule

45(5) of the Rules of Court which stipulates that every pleading must contain a clear

14 Caterplus Namibia (Pty) Ltd t/a Blue Marine Interfish v Hallie Invesments 142 CC t/a Wimpy Maerua and Another 2014 (4) NR 1182 (HC).15 Case No. SA 19/2014 para 18.16 2018 (1) NR 155 (SC).

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and concise statement of the material facts on which the pleader relies for his/her claim,

with specific particularity to enable the opposite party to reply and in particular set out

the nature of the claim and such particulars of any claim as are necessary to enable the

opposing party to identify a case.17 The purpose of pleadings is to clearly define the

issues for all the parties involved, including the trial court.

[52] As indicated above the defendants argued that the alleged misconduct of the first

to the sixth defendants, as pleaded by the plaintiff is a legal conclusion.

[53] In Trope v SA Reserve Bank18 the court found the following in this regard:

‘It is trite that a party has to plead with sufficient clarity and particularity the material facts

upon which he relied for the conclusion of law he wishes the Court to draw from those facts

(Mabaso v Felix 1981 (3) SA 865 (A) at 875 H). It is not sufficient, therefore, to plead a

conclusion of law without pleading the material facts giving material facts giving rise to it.’

[54] Further to this in Cilliers v Steenkamp19 para 23 the court held that:

“A pleader is required to allege the primary facts upon which he or she relies as well as

the conclusion sought to be drawn from those facts. A pleading will be defective if a conclusion

is asserted without pleading the primary facts to support it: see Trope and Others v South

African Reserve Bank 1993(3) SA 264 (AD) at 273 A – B.”

[55] And lastly in Buchner v Johannesburg Consolidated Co Ltd20 the court held with

reference to the South African rule 18(4)21, which is somewhat similar to our rule 45(5),

that:

17 Noting, specifically, that it is not necessary in a pleading to state the circumstances from which an alleged tacit term can be inferred.18 1993 (3) SA 264 (AD) at 273 A – B.19 2015 JDR 2564 (WCC).20 1995 (1) SA at 216.21 Rule 18(4) Every pleading shall contain a clear and concise statement of the material facts upon which the pleader relies for his claim, defence or answer to any pleading, as the case may be, with sufficient particularity to enable the opposite party to reply thereto.'

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‘The necessity to plead material facts does not have its origin in this rule. It is

fundamental to the judicial process that the facts have to be established. The court, on the

established facts, then applies the rules of law and draws conclusions as regards the rights and

the obligations of the parties and gives judgment. A summons which propounds the plaintiff’s

own conclusion and opinion instead of the material facts is defective.’

[56] Considering the fact that I am to accept the facts of the plaintiff’s pleadings as

correct and the defendants are to persuade me that upon every interpretation which the

pleading can reasonably bear no cause of action is disclosed, I will keep the principles

as set out above at the back of my mind as I proceed to consider the paragraphs in the

particulars of claim that are the target of the exception.

Application of the law to the facts

[57] When due regard is had to the aforementioned arguments presented by and on

behalf of plaintiff and defendants in the above paragraphs 31 to 45 of this judgment, it is

evident that these arguments pertains to the interpretation of the trust deed and not so

much as presentable arguments for rebutting or upholding an exception for none

disclosure of a cause of action.

[58] Defendants take issue with plaintiff’s particulars of claim not disclosing a cause of

action in that it pleads conclusions and not primary facts. It is argued on behalf of the

defendants that legal conclusion(s) is the courts prerogative and mandate, whilst it is

the pleaders duty to present the material facts clearly and concisely.

[59] Not only is this argument supported by Rule 45(5), but also by the Cilliers and

Trope matters expounded on supra. Defendants indicated in its heads of argument that

conclusions and/or secondary facts were pleaded in paragraphs 47 to 50 of the

plaintiff’s amended particulars of claim. I mention this specifically as I have noticed

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upon closer inspection of the defendants’ exception that this exception was only taken

in terms of paragraph 48.9 of the plaintiff’s particulars of claim.22

[60] The question which therefore begs an answer is – if I do find that paragraph 48.9

is a conclusion pleaded and not primary facts – whether the said exception goes to the

heart of the plaintiff’s claim? Noting that material facts are regarded primary facts 23 and

are therefore facts which enables the drawing of inferences about the existence or non-

existence of secondary facts. The distinction between primary and secondary facts is

important and more so the principal that facts must be pleaded and not evidence.

[61] Another important principal is that a conclusion must be supported by facts to

justify it, therefore should it be that there are no primary facts established, secondary

facts becomes conclusions which do not constitute evidential material capable of

supporting a cause of action.

[62] I have expressed my stance regarding the issues on the interpretation of the trust

deed in para 57 supra. I regard interpretational issues of this deed, issues to be

addressed in a plea, given the fact that the removal of trustees is not only in terms of

(‘the Act’) but alternatively in terms of the trust deed, and alternatively in terms of the

common law.

[63] I interpose at this juncture to highlight the fact that all the parties involved in this

special purpose vehicle (FTP) are highly regulated with respect to what is expected of

trustees and investment managers. The inference to be drawn is that duties can be

implied regardless of whether the trust deed, fund management agreement or

legislation provides for it or not. In short, some duties can be implied or derived ex

lege.

22 Paragraph 1.12 of defendant’s exception stipulates that plaintiff reached a conclusion not supported by primary facts in its particulars of claim ad paragraph 48.9 thereof. Similarly, ad paragraph 2.1.8 defendant refers to paragraph 48.9 of plaintiff’s particulars of claim which is devoid of primary facts.23 Brink No and Another v Erongo All Sure Insurance CC and Others 2018 (3) NR 641 (SC).

22

[64] In Phillips v Fieldstone Africa (Pty) Ltd24 it was stated that:

‘There is no magic in the term ‘fiduciary duty’. The existence of such a duty and its

nature and extent are questions of fact to be adduced from a thorough consideration of the

substance of the relationship and any relevant circumstances which affect the operation of that

relationships.’

[65] In thoroughly considering the relationship and relevant circumstances which

affect the operation of the relationship between the plaintiff and the defendants and,

ultimately, in establishing a breach of fiduciary duty and more so whether para 48.9 are

conclusions pleaded, plaintiff must allege facts from which the existence of the duty can

be deduced; make the necessary allegations about the duties imposed by the

relationship; plead facts concerning the breach of the duty from which accountability

arises; and identify the scope of the duty.

[66] Plaintiff is not required to label the claim as one based on breach of fiduciary duty

provided that the pleadings construed, represent a claim of breach of fiduciary duties.

Therefore, for purposes of determining whether the plaintiff’s para 48.9 constitutes a

conclusion pleaded, I have disregarded (and effectively deleted and not considered) the

said para (the perceived obstacle) in its totality in order to establish whether on the face

the said document, plaintiff has established a cause of action against the defendants.

[67] Plaintiff alleged the following facts for which the existence of fiduciary duties can

be inferred:

(a) FTP is a registered “bewind” trust;

(b) The defendants are appointed trustees of FTP;

(c) The trust is regulated by the Act;

(d) FTP’s trust deed sets out the objects of the trust, establishing the possession and

ownership of the fund’s assets, the terms, capital commitments of the initial

investor participants, regulating the appointment of trustees, proceedings of the 24 [2004] 1 All SA 150 (SCA), 2004 (3) SA 465 (SCA) para 477 H – I.

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governing board, discretions and exemptions of trustees, setting out the powers

of the governing board, management and control of the funds etc.;

(e) The said deed of trust establishes that the plaintiff and the Government

Institutions Pension Fund (GIPF) (Registered Pension Fund) is regarded the

investment participants and that the trust was established for their benefit; and

(f) FTP entered into a management agreement with the plaintiff in terms of which

plaintiff is appointed as fund manager of the fund on behalf of the investor

participants.

[68] The following allegations were made about the duties imposed through the

relationship established between governing board, being the governing board of the

trust, comprising of the trustees and the trust regulated through the Trust Deed;

alternatively, made these allegations about the scope and ambit of the duties imposed

on the defendants:

(a) Proceedings of FTP’s governing board and specifically governances regarding

the board is regulated by para 12 of the trust deed25 with specific reference to the

manner in which meetings are to be convened and held, the election of

members, voting powers of trustees, quorums and resolutions, delegation of

powers and the establishment of committees and the keeping of minutes;

(b) In terms of the trust deed ownership of the investments are vested in the plaintiff

and the GIPF participation ratios and the investments of FTP constitutes ‘settled

monies’ as envisaged by the Act; and

(c) Plaintiff as the fund manager is exclusively authorized to manage, administer and

control the fund on behalf of the investor participant under the terms of a

management agreement.

[69] With regard to the aforementioned, Rule 45(8) dictates that it is not necessary to

state the circumstances from which an alleged tacit term can be inferred. This I mention

in relation to the trust deed and on the back of the fact that the environment in which the

25 Para 22 of the particulars of claim.

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parties operate is highly regulated by legislation, the Namibia Financial Institutions

Supervisory Authority (NAMFISA) and as such the Master of the High Court and the

Financial Intelligence Centre (FIC) and because fiduciary duties of trustees are primarily

contained in common law; it can be inferred tacitly that trustees have a duty to act with

due care and diligence and to act in the best interest of the trust fund.

[70] Plaintiff pleaded the following facts concerning the breach of the duty from which

accountability arises – noting:

(a) FTP’s governing board recorded a decision taken on 21 November 2017 to

proceed with the listing of Frontier Property Fund Ltd and subsequent thereto on

or about 22 November 2017 first defendant authored and sent an e-mail letter

referring to the said resolution which according to the e-mail incorrectly and

dishonestly stated that: ‘The trustees have read the resolution and it was decided

that none of the trustees will sign such a resolution.’

(b) Plaintiff furthermore alleges that on or about 27 November 2017 a purported

resolution of the FPT signed by the third defendant, in his capacity as the

chairperson of the FTP, was, with the acquiescence of the first, second, fourth,

fifth and sixth defendants sent to the 12th defendant in which it was stated, by

reference, inter alia, to the trustees meeting held on 21 November 201726 that:

‘The trustees having consulted widely have unanimously decided not to be party of

the listing.’

(c) Plaintiff alleges that the advice by first and third defendant to the other

defendants was deliberately inaccurate, factually incorrect and intended to, and

did mislead the recipients thereof. In addition to the aforementioned it is alleged

that this decision was not authorized by the trust deed, was not preceded by or

reached at a meeting of the trustees, did not result from the consultation, was

reckless and in breach of the fiduciary duty owed by those defendants to the trust

and constituted a failure to administer settled monies diligently.

26 The minutes of which are attached and marked ‘H’.

25

[71] Plaintiff identified the scope of the duty of the trustees pertaining to the duty to

act honestly and diligently and or to administer settled monies diligently and or honestly.

[72] In having regard to the assessment above it is clear that plaintiff established in its

particulars of claim a breach of fiduciary duty without considering the alleged conclusion

pleaded by plaintiff as highlighted in paras 1.12 and 2.1.8 of the defendant’s exception.

[73] Lastly, in the defendants’ heads of argument it is asserted that no settled monies

are in involved in this matter. In considering the issue of ‘settled monies’ and the

application thereof in the current matter due consideration was given to the case law27

presented in argument by the plaintiff and the common cause issue being that currently

trusts are regulated by the Act. Specifically noting that courts have found that settled

monies include trust assets consisting of shares and that the word money is capable of

various meanings including that of purchasing power hence possessions or property. I

am therefore in agreement with Ms Bassingthwaighte that settled monies are capable of

various meanings and same is of application in the matter in casu.

[74] The argument advanced by the defendants that the plaintiff failed to administer

settled monies diligently and/or honestly and that it is clear from the plaintiff’s case that

there is no settled monies involved would therefore in my considered opinion not be

correct and cannot sustain the exception raised.

[75] Having considered the arguments advanced by the parties and the relevant

principles and case law, I am not convinced that on every interpretation which the

particulars of claim can bear, no cause of action is disclosed.

[76] The last issue to address in respect of the exception is the issue of costs. The

parties were in agreement that the costs in respect of the exception raised by the

second to the sixth defendant should not capped.

27 Ex Parte Mackenzie NO and Hemp 1950 (2) SA 47 (O); and Ex Parte Holmes 1949 (2) SA 327 (N).

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[77] I therefore make the following order:

Application by first defendant for cost at a higher scale:

(a) Application dismissed. Cost to remain capped in terms of Rule 32(11).

Exception raised by second to sixth defendants:

(b) Exception(s) is dismissed with costs.

(c) Costs to include the cost of one instructing and one instructed counsel.

(d) Costs not to be limited in terms of Rule 32 (11).

Further conduct of the matter:

(e) The case is postponed to 12/09/2019 at 15:00 for Case Planning Conference

hearing (Reason: Parties to file joint case plan).

(f) Further joint case plan must be filed on or before 09/09/2019.

___________________________

JS Prinsloo

Judge

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APPEARANCES

Costs

APPLICANT: J Strydom

On the instructions of De Klerk Horn and

Coetzee Inc.

RESPONDENT: N Bassingthwaighte

On the instructions of Koep &

Partners

Exception

EXCIPIENT: G Coleman

On the instructions of ENSAFRICA NAMIBIA (LorentzAngula

Inc.)

RESPONDENT: N Bassingthwaighte

On the instructions of Koep & Partners