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REPORTABLE

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

DATE:30/03/2012

CASE NO: 2011/16213

In the matter between-

PICBEL GROEP VOORSORGFONDS (IN LIQUIDATION)...................PLAINTIFF

and

WILLIAM VASS GRAHAM SOMERVILLE..............................................DEFENDANT

==============

CASE NO: 2011/16214

In the matter between-

SABLE INDUSTRIES LIMITED (UNDER CURATORSHIP) ….............PLAINTIFF

and

SIMON JOHN NASH...................................................................................1^ST DEFENDANT

MIDMACOR INDUSTRIES LIMITED........................................................2^ND DEFENDANT

AUBREY WYNNE-JONES..........................................................................3^RD DEFENDANT

WYNNE-JONES & COMPANY EMPLOYEE BENEFITS

CONSULTANTS (PTY) LIMITED...............................................................4^TH DEFENDANT

NEDBANK LIMITED...................................................................................5^TH DEFENDANT

WILLIAM VASS GRAHAM SOMERVILLE..............................................6^TH DEFENDANT

==============

CASE NO: 2011/16215

In the matter between-

MITCHELL COTTS PENSION FUND (UNDER LIQUIDATION) ….......1^ST PLAINTIFF

LUCAS SOUTH AFRICA PENSION FUND (IN LIQUIDATION).............2^ND PLAINTIFF

and

NEDBANK LIMITED.....................................................................................1^ST DEFENDANT

WILLIAM VASS GRAHAM SOMERVILLE................................................2^ND DEFENDANT

==============

CASE NO: 2011/16216

In the matter between-

DATAKOR PENSION FUND (UNDER CURATORSHIP)........................1^ST PLAINTIFF

DATAKOR RETIREMENT FUND (UNDER CURATORSHIP)................2^ND PLAINTIFF

CORTECH PENSION FUND (UNDER CURATORSHIP)........................3^RD PLAINTIFF

and

WYNNE-JONES & COMPANY EMPLOYEE BENEFITS

CONSULTANTS (PTY) LIMITED...............................................................1^ST DEFENDANT

AUBREY WYNNE-JONES...........................................................................2^ND DEFENDANT

JOHANNES ROETS.......................................................................................3^RD DEFENDANT

MICHAEL McEVOY......................................................................................4^TH DEFENDANT

DERRICK JOHN PETTITT............................................................................5^TH DEFENDANT/ EXCIPIENT

WILLIAM VASS GRAHAM SOMERVILLE 6^TH DEFENDANT/ EXCIPIENT

_____________________________________________________________________

JUDGMENT

SUTHERLAND J

Introduction and background history

[1] Peter Ghavalas wrote his name into the history books as the financial wizard who devised a scheme, with others, to redeploy the actuarial surplus from several pension and provident funds to the benefit of persons other than the beneficiaries of those funds. In this case, that scheme has been called the “Ghavalas option” which involved a series of ruses to simulate certain ostensibly innocent transactions to conceal the misappropriation In due course, when these schemes were unmasked, a process to recover the diverted funds began.

[2] Several of such looted Funds became the wards of Attorney AL Mostert, who, either as curator or as liquidator, instituted legal proceedings against the persons allegedly responsible for the losses to the Funds caused by these schemes.

[3] In 2009, Mostert, on behalf of seven Funds, sued Alexander Forbes Financial Services (Pty) Limited (Alexander Forbes), alleging a delictual liability to pay the plaintiff’s damages in these sums:

3.1 Mitchell Cotts Pension Fund (In Liquidation) R148 706 070

3.2 Lucas SA Pension Fund (Under Curatorship) R 82 725 377

3.3 Sable Industries Pension Fund (In Liquidation) R273 589 400

3.4 Picbel-Groepvoorsorgfonds (Under Curatorship) R109 922 113

5. Datakor Pension Fund (Under Curatorship)

Datakor Retirement Fund (Under Curatorship)

and Cortech Pension Fund (Under Curatorship) R321 838 256

The total sum claimed: R936 781 216

[4] Alexander Forbes, upon service of the summons, invoked the provisions of Section 2(2) of the Apportionment of Damages Act 34 of 1956 (the ADA) and gave notice to several persons which had the effect of rendering them, on the mere allegation made by Alexander Forbes, joint wrongdoers within the meaning of the ADA. Having been cited they could elect to intervene in the action. None did so.

[5] The action against Alexander Forbes was settled. A written agreement was concluded on 22 April 2010. Alexander Forbes agreed to pay R325 000 000 with interest at the prime rate from 21 January 2010 for the benefit of all 7 Funds.

[6] Section 2 of the ADA envisages that the joint wrongdoers so cited may be sued by the wrongdoer who has settled with a plaintiff to compel them contribute to the defendant who settled, their fair shares of the damages suffered, relative to such wrongdoers’ culpability, of the amount so paid over to the plaintiffs/ victims by the defendant who settled the claims of the plaintiffs/victims.

[7] This settlement agreement contemplated a cession of Alexander Forbes’ rights to procure those contributions from the joint wrongdoers. The present litigation concerns four actions against several such cited wrongdoers qua defendants for their contributions to a share of the sum agreed to be paid by Alexander Forbes to the plaintiffs/Funds/victims. The claims are identically articulated. The several defendants have taken similar exceptions, which in some respects were supported by different reasoning. They were argued together in a single hearing. This judgment addresses the exceptions. In addressing the several distinct and common arguments, an attempt had been made to preserve coherence and minimise repetition.

[8] For the avoidance of confusion arising from the two sets of actions, the first against Alexander Forbes and the second set of actions against the defendants, as to who is plaintiff or defendant in different contexts, the parties are, where appropriate, distinguished by referring to them as the plaintiffs as ‘victims’ and the plaintiffs as ‘cessionaries’ to distinguish the capacity in which they are plaintiffs vis-à-vis Alexander Forbes, the initially sued joint wrongdoer, and plaintiffs against the present defendants as latterly cited joint wrongdoers.

[9] In addition, the fifth defendant, Pettitt, in Case 2011/16216, had argued an exception separately from his co-defendants. On the eve of the hearing, Victor J gave a judgment dismissing the exception taken by Pettitt. The implications of that judgment on the present exceptions will be addressed in due course.

The two categories of exception.

[10] The several exceptions fall into two categories. The first concerns the terms of the settlement agreement and the proper interpretation and application of the ADA, and the second concerns the application of the Financial Institutions (Investment of Funds) Act, 34 of 1984 (FII) and common-law fiduciary duties to certain of the defendants. These categories are addressed separately.

[11] It is appropriate to deal first with the meaning of s 2 of the ADA, the reliance thereon by the plaintiffs in relation to the rights they invoke on the strength of the settlement agreement with Alexander Forbes, and the critical averments common to all the exceptions. The fate of the multiplicity of differently articulated challenges which, nevertheless, seek to contend for the same result can then be coherently pronounced upon and intelligible orders given. The thrust of the arguments in support of the exceptions is that the plaintiffs’/cessionaries’ particulars do not make out a case upon which the cessionaries can sue the defendants. The arguments are premised on the interpretation of the provisions of s 2 of the ADA. The complaints are that the terms of the settlement agreement do not make provision for an admitted liability by Alexander Forbes; the payment made was not made in full payment of the damage claimed or sustained by the victims; no actual sum of money was paid over to the victims by Alexander Forbes and no valid cession of the rights of Alexander Forbes to recover a contribution, if any, to the cessionaries has yet occurred.

[12] The fiduciary duties arguments which are addressed thereafter are based on two notions. First, there is complaint that there is a vague and inadequate allusion to a breach of common-law fiduciary duties because there is no clear allegation of what acts committed by the defendants constituted the breach and, secondly, the assertion that s 2 of FII is applicable to the two defendants is vague and embarrassing because no facts are alleged to bring the defendants within the scope of the section.

The Relevant provisions of the ADA

[13] The pertinent portions of Section 2 provide:

“Proceedings against and contributions between joint and several wrongdoers

1. Where it is alleged that two or more persons are jointly or severally liable in delict to a third person (hereinafter referred to as the plaintiff) for the same damage, such persons (hereinafter referred to as joint wrongdoers) may be sued in the same action.

(1A) …

(1B) …

2. Notice of any action may at any time before the close of pleadings in that action be given -

(a) by the plaintiff;

(b) …

(3) …

(4) …

(5) …

(6) (a) If judgment is in any action given against any joint wrongdoer for the full amount of the damage suffered by the plaintiff, the said joint wrongdoer may, if the judgment debt has been paid in full, subject to the provisions of paragraph (b) of subsection (4), recover from any other joint wrongdoer a contribution in respect of his responsibility for such damage of such an amount as the court may deem just and equitable having regard to the degree in which that other joint wrongdoer was at fault in relation to the damage suffered by the plaintiff, and to the damages awarded:

Provided further that if the court, in determining the full amount of the damage suffered by the plaintiff referred to in subsection (1B), deducts from the estimated value of the support of which the plaintiff has been deprived by reason of the death of any person, the value of any benefit which the plaintiff has acquired from the estate of such deceased person no contribution which the said joint wrongdoer may so recover from the estate of the said deceased person shall deprive the plaintiff of the said benefit or any portion thereof.

(b) …

(c) …

(7) (a) If judgment is in any action given against one or more joint wrongdoers in respect of the damage suffered by the plaintiff, any joint wrongdoer who in pursuance of such judgment pays to the plaintiff in respect of his responsibility for such damage an amount in excess of the amount (hereinafter referred to as the amount apportioned to the first mentioned joint wrongdoer) which the court deems just and equitable having regard to the degree in which he was at fault in relation to the damage suffered by the plaintiff and to the full amount of the damages awarded to the plaintiff, may, subject to the provisions of paragraph (b) of subsection (4), recover from any other joint wrongdoer a contribution in respect of the latter's responsibility for such damage of an amount not exceeding so much of the amount which the court deems just and equitable having regard to the degree in which such other joint wrongdoer was at fault in relation to the damage suffered by the plaintiff and to the full amount of the damages awarded to the plaintiff, as has not been paid by such other joint wrongdoer to the plaintiff or to any other joint wrongdoer, or so much of the amount paid by the first mentioned joint wrongdoer as exceeds the amount apportioned to him, whichever is less.

(b) The provisions of paragraphs (b) and (c) of subsection (6) shall apply mutatis mutandis to any claim for a contribution under paragraph (a) of this subsection.

(8) …

(9) …

(10) If by reason of the terms of an agreement between a joint wrongdoer and the plaintiff the former is exempt from liability for the damage suffered by the plaintiff or his liability therefor is limited to an agreed amount, so much of that portion of the damages which, but for the said agreement and the provisions of paragraph (c) of subsection (6) or paragraph (b) of subsection (7), could have been recovered from the said joint wrongdoer in terms of subsection (6) or (7) or could have been apportioned to him in terms of subparagraph (ii) or (iii) of paragraph (a) of subsection (8), as exceeds the amount, if any, for which he is liable in terms of the said agreement, shall not be recoverable by the plaintiff from any other joint wrongdoer.

(11) …

(12) If any joint wrongdoer agrees to pay to the plaintiff a sum of money in full settlement of the plaintiff's claim, the provisions of subsection (6) shall apply mutatis mutandis as if judgment had been given by a competent court against such joint wrongdoer for that sum of money, or, if the court is satisfied that the full amount of the damage actually suffered by the plaintiff is less than that sum of money, for such sum of money as the court determines to be equal to the full amount of the damage actually suffered by the plaintiff, and in the application of the provisions of paragraph (b) of the said subsection (6), any reference therein to the date of the judgment shall be construed as a reference to the date of the agreement.

(13) Whenever judgment is in any action given against any joint wrongdoer for the full amount of the damage suffered by the plaintiff, or whenever any joint wrongdoer has agreed to pay to the plaintiff a sum of money in full settlement of the plaintiff's claim, and the judgment debt or the said sum of money has been paid in full, every other joint wrongdoer shall thereby also be discharged from any further liability towards the plaintiff.

(14) …”

The material terms of the settlement Agreement of the Alexander Forbes Action

[14] The terms material to the present controversy are clauses 4 to 8 and 10.

“ 4. The company [Alexander Forbes] shall:

1. without admission of liability pay to AL Mostert & Co, the attorneys for the Funds the sum of R325 million plus interest … …;

2. cede to Mostert on behalf of the Funds [Victims] the claims against all third parties to whom the company has given notice in terms of section 2(2) (b) of the ADA, arising from the terms of the ADA as a result of this settlement or however arising.

5. The payment shall be made in trust with in a period of 28 days from date of signature.

6. The [victims] record that the payment does not reflect the full loss sustained by the [victims] resulting from the Ghavalas option. Consequently, one or more of the [victims] are pursuing other remedies, including the return if assets or their proceeds. The payment serves to discharge only that portion of the loss for which the [victims] regard the company liable.

7. The payment, determination and allocation as aforesaid shall operate in full and final settlement of [Alexander Forbes] share of the amounts claimed in the action and the [victims] shall thereupon have no further claims against [Alexander Forbes] and related entities and shall discharge [Alexander Forbes] and related entities from all present and future liability to each of the [victims] inclusive of all legal costs and costs orders.

8. Mostert shall make such determinations as may be required on behalf of each if the [victims] as to the allocation of the payment at any time but no later than 30 days of the final judgment or settlement of all claims of any of the [victims] arising from the Ghavalas option.

9. …

10. [Alexander Forbes] undertakes to provide all reasonable Assistance to the [victims] for the purpose of enforcing the claims ceded by the company to the Funds and the claims referred to in clause 6 above.”

[Emphasis supplied]

The Pleaded Case

[16] The four actions were drawn by the same legal drafters. As a result the claims all use the same phraseology and structure. It is therefore possible to address the exceptions in respect of one matter and apply without adaptation the findings to all the others.

[17] In Case No 2011/16215, which is used as a model template, the relevant averments are these:

“THE ACTION INSTITUTED BY THE PLAINTIFFS AND THE SETTLEMENT

THEREOF

10. In March 2008 under case number 08/7872 of this Court an action (“the action”) was instituted by the plaintiffs and five others (“the plaintiff funds”) against ALEXANDER FORBES FINANCIAL SERVICES (PTY) LIMITED (previously ALEXANDER FORBES GROUP (PTY) LIMITED (“Alexander Forbes”) … … ….

10. A copy the particulars of claim in the action is attached hereto marked “POC 1” and the contents thereof incorporated herein by reference.

10. The first plaintiff in the action claimed an amount of R23 589 416,00 in damages from Alexander Forbes.

10. The second plaintiff in the action claimed an amount of R14 900 485,00 in damages from Alexander Forbes.

10. Pursuant to the action being instituted, Alexander Forbes gave notice to each of the defendants in accordance with the provisions of section 2(2)(b) of the Apportionment Act 34 of 1956 as joint wrongdoers not having been sued in the action.

10. … .

10. On 22 April 2010 the plaintiffs and Alexander Forbes entered into a written agreement of settlement pursuant to which the claims of each of the plaintiffs in the action were settled.

10. A copy of the settlement agreement is attached hereto marked “POC4” (“the settlement”).

10. In accordance with clause 4.1 of the settlement, Alexander Forbes ceded to the plaintiffs, its rights to contribution against all third parties to whom it gave notice in terms of section 2(2)(b) of the Apportionment Act arising in terms of the Apportionment Act as a result of the settlement.

10. In settlement of the plaintiffs’ claims Alexander Forbes paid to the first plaintiff an amount of R97 121 700,00 and to the second plaintiff an amount of R48 027 200,00.

19.A Accordingly, pursuant to section 2(12) read with section 2(6)(a) of the Apportionment Act the plaintiffs, qua cessionaries of Alexander Forbes’ rights to contribution as aforesaid, are entitled to claim and recover from the defendants such a contribution in respect of their responsibility for the amounts referred to in paragraph 18 as the court may deem just and equitable.” [Emphasis supplied]

The exceptions related to the recovery claim in terms section 2 of the ADA

What are the cessionaries’ causes of action?

[19] The cessionary’s particulars squarely allege a cause of action that can exist only as between joint wrongdoers as defined by the ADA. This cause of action does not exist at common law; it is a creature exclusively of the ADA. The recovery of such contributions can occur if the conditions set out in s 2(13) are met, ie the discharge of any liability of the joint wrongdoers to the victims. Section 2(13) requires two conditions to discharge the joint wrongdoers from any liability to pay damages to the victims. Insofar as this case is concerned, first there must be “an agreement to pay a sum of money in full settlement of the [victims’] claim”; secondly, that “sum of money has been paid in full” to the victim.

[20] Both of these conditions are necessary elements of the cause of action that has to be pleaded by the cessionary. However, no such averments appear expressly in the particulars. Instead, the cessionary asserts simply that it sues under the provisions of s 2(12) and annexes the settlement agreement. The particulars allege that the cessionary is entitled to a contribution from each of the defendants because it, the cessionary, has, in an agreement, settled with the victims and is entitled to a contribution towards that settlement from each of the defendants.

[21] If the allegations need to be made because they are absent from the particulars, they must appear from the annexed agreement. Do they?

[22] Clause 6 of the settlement agreement states:

“The [victims] record that the payment does not reflect the full loss sustained by the [victims] resulting from the Ghavalas option. Consequently, one or more of the [victims] are pursuing other remedies, including the return if assets or their proceeds. The payment serves to discharge only that portion of the loss for which the [victims] regard the company liable.”

[23] What is the effect of this paragraph? It reads like a reservation of rights put on record. It expresses a unilateral view. It does not seem that it is a provision that creates any specific rights or obligations as between the parties. However, it serves to clarify the meaning of other parts of the text of the agreement because it plainly stipulates what was not agreed; ie the liability for the full damages claimed has not been satisfied by the settlement with Alexander Forbes.

[24] Clause 7 states:

“ The payment, determination and allocation as aforesaid shall operate in full and final settlement of [Alexander Forbes] share of the amounts claimed in the action and the [victims] shall thereupon have no further claims against [Alexander Forbes] and related entities and shall discharge [Alexander Forbes] and related entities from all present and future liability to each of the [victims] inclusive of all legal costs and costs orders.” [Emphasis supplied]

[25] Can this text mean anything other than Alexander Forbes’ payment to the victims let it off the hook but no-one else? If otherwise, why is there no reference to the several joint wrongdoers cited by Alexander Forbes? Can this text be read to tacitly discharge joint wrongdoers too?

[26] Earlier in the settlement agreement, in clause 4.2, it is stated:

“[Alexander Forbes] shall … cede to Mostert on behalf of the [victims] the claims against all parties to whom [Alexander Forbes] has given notice in terms of section 2(2)(b) of the [ADA] arising in terms of the [ADA] as a result of this settlement or howsoever arising.”

[27] This clause 4.2 implies that Alexander Forbes has indeed a recovery right against the joint wrongdoers. That must have been the intention of the contracting parties, otherwise the clause makes no business sense. If, however, as a fact, they were wrong in thinking that the effect of their agreement achieved such a right, although it would remain true that they thought such right existed, that mere belief could not itself create the right. Could clauses 6 and 7 bear a meaning that such a right of recovery was conceived?

Interpreting an agreement at exception stage

[28] The cessionaries do not advance an argument that an interpretation exists to support that conclusion; it simply relies on the contention that it is impermissible to interpret an agreement at exception stage.

[29] The contention that an agreement may not be interpreted at exception stage is incorrect; the contention exaggerates what the case law has laid down. The correct proposition is stated in Sun Packaging (Pty) Ltd v Vreulink [1996] ZASCA 73; 1996 (4) SA 176 (A) at 186J–187B:

“As a rule, Courts are reluctant to decide, upon exception, questions concerning the interpretation of a contract. But this is where its meaning is uncertain (Dettmann v Goldfain and Another 1975 (3) SA 385 (A) at 400A). In casu, the position is different. Difficulty in interpreting a document does not necessarily imply that it is ambiguous (Standard Building Society v Cartoulis 1939 AD 510 at 516). Contracts are not rendered uncertain because parties disagree as to their meaning (Williston on Contracts 3rd ed vol 4, para 601 (supplement)). Counsel was probably right in saying that the letter is not a lawyer's contract. But this is no reason for interpreting it differently. For the reasons given, I do not find the meaning of clause 3 doubtful. Properly interpreted, it has only one meaning. It affords the appellant the right to terminate.” [Emphasis supplied]

[30] The dictum in Dettmann v Goldfain states:

“It is true that, generally speaking, the Court is reluctant to decide upon exception questions concerning the interpretation of a contract where the whole contract is not before the Court or where it appears from the contract itself or from the pleadings that there may be admissible evidence which, if placed before the Court, could influence the Court's decision as to the meaning of the contract (see Delmas Milling Co. Ltd. v Du Plessis, 1955 (3) SA 447 (AD) at p. 455; Davenport Corner Tea Room (Pty.) Ltd. v Joubert, 1962 (2) SA 709 (D)). In the latter case MILLER, J., emphasised (at p. 716) that before the possibility of evidence of surrounding circumstances influencing the Court's decision should be allowed to debar the Court from deciding the issue on exception that possibility should be something more than a notional or remote one. In the present case the complete contracts, i.e. the lease and the "Toestemming", are before the Court. As regards surrounding circumstances, nothing concrete was suggested in argument. What is more important, however, is that in the pleadings (see the further particulars furnished to para. 1 (b) of the replication, quoted above), the plaintiffs have confined themselves, on the issue of cedability, solely to the terms of the contracts: no extraneous circumstances are relied upon. Consequently, leaving aside - and without deciding - questions of admissibility, it is clear that on the pleadings, as presently framed, plaintiffs cannot resist the first exception on the ground that recourse to evidence of surrounding circumstances may lead the Court to a different conclusion as to the cedability of the option. For these reasons I have come to the conclusion that the first ground of exception was well-founded and ought to have been upheld by the Court a quo.” [Emphasis supplied]

[31] The injunction not to resolve the tussle between rival interpretations of an agreement at exception stage only arises when plausible interpretational rivals square up. In this case there are no rivals. In my view, the necessary elements of the cause of action do not reveal themselves from a reading of the text. This finding is not the product of choosing one of two competing interpretations; the text plainly cannot bear such a meaning.

[32] The failure of the text of the annexed settlement agreement to support the cause of action is excused by the cessionary by the argument that the provisions of s 2(12) were mentioned in the particulars and hence the particulars say enough to put the defendants on guard to admit or deny a claim invoking that section. I disagree. After all, what is the consequence of annexing the agreement as part of the particulars of claim? It is peremptory requirement in terms of Rule 18(6) of the Uniform Rules to annex a document relied upon if it is material to establish the cause of action. The annexed document relied upon for the cause of action is an integral part of the pleading (Amod Jeewa’s Estate v Kharwa 32 NLR 371). The plaintiff concedes as much. Self-evidently, the averments in the text of the particulars ought not to contradict the text of the document. A contradiction will result, at best, in the pleadings being embarrassing and, at worst, excipiable. Similarly, if an absence of an averment in the text of the particulars can be cured by a reference to the annexed document to render a plausible meaning to the pleading as a whole, then the reverse predicament must be also faced by the pleader; if the agreement does not evidence the averment, the pleadings are defective.

Full settlement of what?

[33] As alluded to above, the points were taken that a reading of the agreement shows no admission of liability towards the victims and that the “full damage suffered” (to use the words in s 2(6)(a)) was not paid, and the settlement effected only a settlement of the liability of Alexander Forbes and no-one else.

[34] The debate about the meaning of the phrase in s 2(12) “if the joint wrongdoer agrees to pay to the [victim] a sum of money in full settlement of the [victim’s] claim” has been distorted by succumbing to the temptation to break up the phrase into segments and attribute meaning to those components. Context is everything in attributing meaning to written words. The question was whether this phrase means simply the extinction of any further liability by the wrongdoer by the payment of any lesser sum than the loss initially claimed, or this phrase means that the wrongdoer must satisfy the whole initial claim in full. The participles must be regarded as having been placed where they are. The word “full” qualifies the word “settlement”, not the word “claim”. There is no warrant to suppose that s 2(12) addresses the notion of the “Full Claim” in the sense of the “Full Quantum”. The words “full settlement” mean no more than an extinction of liability, and says nothing about the terms upon which the liability is extinguished. The word “claim” is qualified by the word “plaintiff” in the text of the statute, rendered “victim” in this analysis. The word “claim” is also bereft of an objective universal meaning.

[35] However, in the context of the complex legal mechanism created in s 2(12) which incorporates mutatis mutandis the text of s (6)(a), the function of which is to prevent unjustified enrichment of some wrongdoers at the expense of one, the phrase in s 2(12) must bear the meaning that the initial alleged claim that is compromised by the agreement is compromised for the benefit of all wrongdoers. The agreement must have the effect of an extinction of the victims’ claims against everyone; if the agreement does not say that, directly or indirectly, the claims against the other wrongdoers are not extinguished and a “full settlement of the [victims’] claims” has not been achieved.

[36] To attribute to this agreement a meaning that all wrongdoers’ liabilities are extinguished is a difficult task. The cessionaries argue that clause 7 does provide for a “Full Settlement” of the victims claim. This is incorrect. The language could hardly be clearer that only the share of Alexander Forbes has been settled. This is not what s 2(12) requires.

[37] Added to this is the somewhat tangential point about a disavowal of liability. The cessionaries are correct to argue that the ADA imposes no such requirement. Conceptually, I suppose that it could happen that a wholly innocent party is sued, joins others as joint wrongdoers, and settles with the victim, whereafter that innocent defendant recovers 100% of its disbursement from the joint wrongdoers who are genuinely culpable. However, the disavowal is relevant to another aspect, ie the impact of clause 7 in which the extinction of liability is deliberately spelt out to apply to Alexander Forbes and its affiliates only (see: Prinsloo v Du Preez 1965 (4) SA 400 (W) at 303).

No money actually paid

[38] The argument that the agreement does not make provision for a payment of money to the victims or that the victims have not received any money is not sound. It is premised on the text of clauses 4.1, 4.2 and 8 of the Agreement, which provides for Mostert to receive the money in trust and disburse it at a future date when all future contemplated litigation is over. Thus, so it is argued, the precondition of having actually parted with money which is received by the victims is not fulfilled. The contentions lose sight of the fact that Alexander Forbes has paid the victims’ agent, Mostert, and that discharges its liability to the victims in full, even if they must wait upon him to disburse the money at some uncertain future date.

The argument about an invalid cession

[39] The challenge to the validity of the cession is also unsound. The cessionaries allege in paragraph 18 of their particulars of claim that:

“ in accordance with clause 4.1 of the settlement agreement, Alexander Forbes ceded to the [victims], its rights to contribution ...”

and, in paragraph 19A allege that pursuant to s 2(12) and s 2(6)(a) the cessionaries are entitled to claim and recover from the defendants the sums of such contributions mentioned in paragraph 18. Clause 4 of the settlement agreement expresses itself thus:

“[Alexander Forbes] shall:

1. …

2. cede to Mostert on behalf of the [victims] the claims against all [joint wrongdoers] arising in terms of the [ADA] as a result of this settlement or howsoever arising.”

[40] The argument is advanced that the wording of clause 4.2 points to an obligation to effect a cession in the future and does not itself constitute the cession. Thus, on this approach, the plaintiff’s claim, because it relies on a document that does not evidence an existing cession, is flawed.

[41] In my view, the text of the settlement could bear either meaning. Accordingly, because rival interpretations exist, one of which supports the claim, an exception must be refused.

Summary

[42] The upshot of these several considerations are, in logical order, that –

42.1 no case to except on the grounds of an invalid cession is made out;

42.2 no case to except on the grounds of an absence of a sum of money having been paid to the victims is made out;

42.3 a case to except on the grounds that Alexander Forbes has no cause of action to recover from joint wrongdoers is made out; more particularly because the settlement to the victims by Alexander Forbes was not such that it extinguished the liability of the joint wrongdoers and effected only a settlement of the liability of Alexander Forbes itself.

The exceptions about the breach of statutory and common law fiduciary duties

[43] These claims about the breach of fiduciary duties are asserted by the plaintiffs in their own right, not as cessionaries of Alexander Forbes. Only Nedbank and Somerville raised exceptions on this topic.

[44] The particulars of claim allege a liability premised on breaches of fiduciary duties. Reliance is made both upon the common-law duty of a person who is in a fiduciary relationship with another person, and upon s 2 of the Institutions (Investments of Funds) Act 39 of 1984 (FII) which relates to persons who on behalf of funds such as the plaintiffs invest or secure funds and who are similarly subject to a fiduciary duty in respect thereof. Section 2 of the since repealed FII provides:

“ A director, official, employee or agent of a financial institution or of a nominee company controlled by a financial institution who invests, keeps in safe custody or otherwise controls or administers any funds of the institution or any trust property held by or on behalf of the institution for any beneficiary or principal –

1. shall, in the making of an investment or in the safe custody, control, administration of these funds, observe the utmost good faith and exercise proper care and diligence;

2. shall, in the making of an investment or in the safe custody, control, administration or alienation of the trust property, observe the utmost good faith and, subject to the terms of the instrument or agreement by which the trust or agency concerned has been created, exercise the usual care and diligence required of a trustee in the performance or discharge of his powers and duties; and

3. shall not alienate, invest, pledge, hypothecate or otherwise encumber or make use of the funds or trust property or furnish any guarantee (whether or not, in the case of an insurer, such guarantee is incorporated in a policy) in a manner calculated to gain directly or indirectly any improper advantage for himself or any other person, at the expense of the institution, trust, beneficiary or principal concerned.(emphasis added). (In this context “Trust property” is defined in section 1 of the FII Act as ‘any asset held or administered by or on behalf of a financial institution in its capacity as an administrator, trustee or curator by virtue of a will, deed of settlement or order of court or as an agent for any such administrator, trustee or curator or other principal’.”

Section 2 of the Financial Institutions (Protection of Funds) Act 28 of 2001 provides:

“ A director, member, partner, official, employee or agent of a financial institution or of a nominee company who invests, holds, keeps in safe custody, controls, administers or alienates any funds of the financial institution or any trust property –

1. must, with regard to such funds, observe the utmost good faith and exercise proper care and diligence;

2. must, with regard to the trust property and the terms of the instrument or agreement by which the trust or agency in question has been created, observe the utmost good faith and exercise the care and diligence required of a trustee in the exercise or discharge of his or her powers and duties; and

3. may not alienate, invest, pledge, hypothecate or otherwise encumber or make use of the funds or trust property or furnish any guarantee in a manner calculated to gain directly or indirectly any improper advantage for himself or herself or for any other person to the prejudice of the financial institution or principal concerned.”

[45] Several allegations are made about the conduct of Ghavalas and Somerville. They are alleged to have been either directors or trustees of Nedbank’s predecessor in title, Finansbank, and of Lifecare Company. These individuals, acting for their employers or principals, misappropriated some R23.5 million. Details of the scheme are set out. The essence was to simulate a transaction of a sale of a subsidiary company in order to disguise the theft of the pension fund surplus. Their conduct is attributed to Nedbank vicariously and to Somerville directly. The course of conduct is alleged to be in breach of their fiduciary duties.

[46] The two exceptions overlap to raise the same basic point. The complaint is that the particulars do not allege that Nedbank or Somerville performed the functions set out in section 2 of FII Act, and thus there is no foundation to allege a liability for a breach of any duty in relation thereto. The point is well taken. The invocation of a statutory provision and an assertion that a litigant is affected by its provisions is not enough; the facts alleged to bring the litigant within the scope of the section must be alleged. In this case, that has not been done.

[47] The further complaint is that there is no exposition of what acts were committed that constitute the breaches of the common law fiduciary duty. This complaint is unsound. The particulars mention in paragraph 31 several acts or omissions attributed to Nedbank in addition to the details of the dishonest scheme hatched by Ghavalas and Somerville in paragraph 26. Among the averments are references to a failure to preserve the assets so dealt with under the control of their owners, the Funds; the removal of assets without authorisation or proper cause, the failure to prevent improper disadvantage or prejudice to the Funds, the failure to be impartial, and the failure to act prudently and put the best interests of the Funds first in the dealings undertaken. In my view, the factual foundation for the averments of a breach of a common-law fiduciary duty is amply asserted.

[48] Accordingly, in summary:

1. The exceptions, on the grounds that the particulars lack averments to bring Nedbank or Somverville within the scope of Section 2 of the FII Act, are well taken.

2. The exceptions, on the grounds that there is an inadequacy in the averments to found a cause of action for the breach of the common law fiduciary duty, are unsound.

The Judgment by Victor J on Pettitt’s exception (Case No 2011/16216)

[49] Pettitt was the 5^th defendant in Case 2011/16216 . The exception raised by him had three legs.

1. The cession had not yet taken place.

2. The full amount of the damage of the victims was not paid.

3. Alexander Forbes only settled its own liability and as a result, the 5^th defendant was not absolved of liability to the victim.

[50] Victor J dismissed the exception. Regrettably, I am unable to agree with the decision.

[51] I understand the principal rationale in the judgment to be that it was inappropriate to interpret an agreement at exception stage. This view was based on that the dictum in Francis v Sharp 2004 (3) SA 230 at 237F-G, itself citing Sun Packaging (supra) as authority. The dictum relied upon in Francis v Sharp exaggerates what Nedstadt JA held in Sun Packaging. As addressed above in paragraph [31] of this judgment, the reluctance to interpret an agreement at exception stage is limited to the situation presented by arguable rival interpretations, not a blanket ban. I prefer to follow the SCA’s dictum in Sun Packaging cited above.

[52] Moreover, the interpretation of a statute at exception stage is unavoidable. The view that I have taken is dictated by what I understand the statute to command and the patent failure of the text of the agreement to provide for the elements of the cause of action relied upon.

[53] I am also not able to grasp the notion that the agreement distinguished between a cause of action based on the ‘Ghavalas option’ and other ‘non-delictual’ claims. I do not read the pleadings or the agreement to make such a distinction or to contemplate that a cause of action exists outside of the damages caused by the schemes described as the “Ghavalas Option” and no such distinction was advanced in argument before me.

[54] The result is an unhappy one. Pettitt’s exception is not distinguishable from the exceptions argued before me. Nevertheless, as indicated, I am of the respectful view that Victor J was, in relying on Francis v Sharp led into error on the approach to dealing with the agreement, and for that reason I do not follow the judgment.

Summary of the Several exceptions and their fates

[55] A summary of the findings made on each of exceptions is set out, labelling for convenience of reading, each by reference to its main point.

[56] Mr Van Tonder SC, with Mr G Smit, appeared for the plaintiff in all the matters.

Case 2011/16215: Mitchell Cotts & Lucas SA v Nedbank & Somerville

[57] Mr Rood SC, with Mr Girdwood, appeared for the first defendant/excipient, Nedbank.

Ist defendant; Nedbank’s five Exceptions

Exception no 1: “not in full settlement’

[58] Upheld.

Exception no 2: “No admission of liability by Alexander Forbes”

[59] [Abandoned at hearing]

Exception no 3: “ Alleged breach of obligations of defendants, under the common law, too vaguely described”

[60] Dismissed.

Exception no 4: “No sum of money paid by Alexander Forbes to any Fund”

[61] Dismissed.

Exception No 5 “No facts alleged to bring Nedbank within scope of FII act duties relied upon”

[62] Upheld.

Somerville’s Five Exceptions

[63] Mr Barry Roux SC who appeared for Somerville confined his argument to the first exception.

Exception no 1: “ Not in full settlement”

[64] Upheld.

Exception No 2: “ No admitted liability”

[65] Dismissed.

Exception no 3: “Allegations of breach of common law duties too vague”

[66] Dismissed.

Exception no 4: “No agreement to pay a sum of money to funds”

[67] Dismissed.

Exception no 5: “No facts alleged that bring Somerville within scope of FII duties relied upon.

[68] Upheld.

Case No 16213: Picbel v Somerville

[69] Mr Barry Roux SC appeared for the defendant/excipient.

[70] The exceptions were founded on the following contentions; the points are addressed separately:

1. No sum of money was paid to victims: Dismissed.

2. Alexander Forbes only settled its own share of liability and therefore there was no cause of action for a recovery contribution: Upheld.

3. There was no cause of action to cede: Upheld.

Case No 2011/16214: Sable Industries Pension Fund v Nash, Midmacor Industries Wynne- Jones ;Wynne Jones & Co, Nedbank, Somerville

1 & 2 Defendants’ exception (Nash & Midmacor Industries Ltd)

[71] Mr De Bruyn prepared heads of argument for the first and second defendants/excipients, Nash and Midmacor Industries Ltd, but did not appear.

[72] The exception addressed these points which are addressed separately:

1. The settlement did not extinguish the victims claim: Upheld

2. The victims were not paid a sum of money: Dismissed.

3. There was no cause of action to cede: Upheld.

3^rd & 4^th Defendants’ Exception: (A Wynne-Jones and Wynne-Jones & Co Employee Benefits Consultants (Pty) Ltd)

[73] Ms J Cane SC appeared for the defendants/excipients.

[74] The exception addressed the failure of the settlement agreement to settle the victims’ claims and extinguish the defendants’ liability: Upheld.

5^th Defendant’s exception: (Nedbank)

[75] The case for Nedbank was the same as addressed above under Case No 2011/16213. The outcome is identical.

6^th Defendant’s exception: (Somerville)

[76] The case for Somerville was the same as addressed above under Case No 2011/16213. The outcome is identical.

CASE No 2011/16216: Datakor et al v Wynne-Jones & Co; Roets; McAvoy

Pettitt & Somerville.

1^st & 2^nd defendants’ exception: (Wynne Jones & Co Employee Benefits Consultants (Pty) Ltd and A Wynne-Jones)

[77] The case for these defendants/excipients is the same as addressed above under Case No 2011/16214. The outcome is identical.

4^th Defendants exception: (McAvoy)

[78] Mr HB Marais, with Mr S Strydom, appeared for this defendant/excipient.

[79] The exception addressed these points:

1. There was no full discharge of the victims’ losses and there was therefore no cause of action to cede: Upheld.

2. No allegation was made that the cession relied upon had yet been effected: Dismissed.

6^th defendant’s exception: (Somerville)

[80] The case for Somerville was the same as addressed above under Case No 2011/16213. The outcome is identical.

The Orders on the several exceptions

[81] I make orders as follows:

[82] Case No 2011/16215:

1. The first defendant’s exceptions 2, 3, 4 are dismissed.

2. The first defendant’s exceptions 1 and 5 are upheld.

3. The second defendant’s exceptions 2, 3 and 4 are dismissed.

4. The second defendant’s exceptions 1 and 5 are upheld.

[83] Case No 2011/16213:

1. The defendant’s exception is upheld.

[84] Case No 2011/16214:

84.1 The first and second defendants’ exception is upheld.

84.2 The third and fourth defendants’ exception is upheld.

84.3 The fifth defendant’s exception is upheld.

84.4 The sixth defendant’s exception is upheld.

[85] Case No 2011/16216:

85.1 The first and second defendants’ exception is upheld.

85.2 The fourth defendant’s exception is upheld.

85.3 The sixth defendant’s exception is upheld.

[86] The plaintiff may, if it chooses, cause amendments to be effected to the claims, and if so, it shall serve the notices of amendment within 90 days of the date of this judgment.

[87] In each case, the plaintiff will bear the costs, including the costs of two counsel, where two were employed.

___________________________________

SUTHERLAND J

Hearing: 16 February 2012

Judgment: 30 March 2012.

Handed down: 5 April 2012

CASE N0 2011/16213

COUNSEL FOR PLAINTIFF :

Adv LJ VAN TONDER (082 458 8888) with Adv JG SMIT (083 333 8270)

ATTORNEYS FOR PLAINTIFF:

AL MOSTERT & COMPANY INC

MR AL MOSTERT / MR J POLSON 011 463 0941)

COUNSEL FOR DEFENDANT

ADVOCATE B ROUX SC

ATTORNEYS FOR

TUGENDHAFT WAPNICK BANCHETTI

DEFENDANTAND PARTNERS

S WAPNICK/Pippa/S174)

011 291 5609

CASE NO 2011/16214

COUNSEL FOR PLAINTIFF :

Adv LJ VAN TONDER with Adv JG SMIT

ATTORNEYS FOR PLAINTIFF:

AL MOSTERT & COMPANY INC

MR AL MOSTERT / MR J POLSON 011 463 0941)

COUNSEL FOR FIRST AND SECOND DEFENDANTS:

W DU BRUYN SC

ATTORNEYS FOR FIRST AND SECOND DEFENDANTS

COWAN –HARPER

L COWAN 011 783 8711

COUNSEL FOR THIRD AND FOURTH DEFENDANTS

J CANE SC

ATTORNEYS FOR THIRD AND FOURTH DEFENDANTS

RUDOLPH BERNSTEIN AND ASSOCIATES

011 669 7600

COUNSEL FOR FIFTH DEFENDANT

PT ROOD SC WITH GW GIRDWOOD

ATTORNEYS FOR FIFTH DEFENDANT

CLIFFE DEKKER HOFMEYR

011 562 1000

COUNSEL FOR SIXTH DEFENDANT

B. BOUX SC

ATTORNEYS FOR SIXTH DEFENDANT

TUGENDHAFT WAPNICK BANCHETTI AND PARTNERS

(Ms S WAPNICK/Pippa/S174)

CASE NO 2011/ 1625

COUNSEL FOR PLAINTIFF

Adv LJ VAN TONDER with Adv JG SMIT

ATTORNEYS FOR PLAINTIFF:

AL MOSTERT & COMPANY INC

MR AL MOSTERT / MR J POLSON

COUNSEL FOR FIRST DEFENDANT

P T ROOD SC WITH GW GIRDWOOD

ATTORNEYS FOR FIRST DEFENDANT

CLIFFE DEKKER HOFMEYR

011 562 1000

COUNSEL FOR SECOND DEFENDANT

B. BOUX SC

ATTORNEYS FOR SECOND DEFENDANT

TUGENDHAFT WAPNICK BANCHETTI AND PARTNERS

(Ms S WAPNICK/Pippa/S174)

CASE NO 2011/16216

COUNSEL FOR PLAINTIFF

Adv LJ VAN TONDER AND JG SMIT

ATTORNEYS FOR PLAINTIFF:

AL MOSTERT & COMPANY INC

MR AL MOSTERT / MR J POLSON

COUNSEL FOR THIRD AND FOURTH DEFENDANTS

J CANE SC

ATTORNEYS FOR FIRST AND SECOND DEFENDANTS

RUDOLPH BERNSTEIN AND ASSOCIATES

011 669 7600

COUNSEL FOR FOURTH DEFENDANT

HB MARAIS SC AND S.STRYDOM

ATTORNEYS FOR FOURTH DEFENDANT

KEVIN CROSS ATTORNEYS

L CIRONE 011 440 1282

COUNSEL FOR SIXTH DEFENDANT

B. BOUX SC

ATTORNEYS FOR SIXTH DEFENDANT

TUGENDHAFT WAPNICK BANCHETTI AND PARTNERS

(Ms S WAPNICK/Pippa/S174)

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