De Beer NO and Others v Old Mutual Life Assurance Company (South Africa) Limited and Another (3794/08) [2011] ZAWCHC 131 (7 February 2011)

IN

THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case Number: 3794/08

In the matter between:

Bosman De Beer N.O. …........................................................................First Plaintiff

Hugo Anton Rudolf van Veen N.O. …..............................................Second Plaintiff

Isak Hendrik Johannes Visagie N.O. …...............................................Third Plaintiff

(In their capacities as trustees for the time

being of the Guaranteed Policies Investment Trust)

and

Old Mutual Life Assurance Company

(South Africa) Limited …...................................................................First Defendant

ABSA Brokers (Pty) Ltd

(now known as ABSA Insurance &

Financial Advisers (Pty) Ltd) …...................................................Second Defendant

(South Africa) Limited …..........................................................................Third Party

JUDGMENT DELIVERED ON 7 FEBRUARY 2011

Baartman J [1] This is an application in terms of Rule 13(3) (b) of the Uniform Rules of Court for leave to serve a Third Party Notice after the close of pleading in the main action. [2] ABSA Insurance & Financial Advisers (Pty) Ltd (ABSA), the second defendant in the main action applied for leave to serve a Third Party Notice on Old Mutual Life Assurance Company (South

Africa) Limited (Old Mutual), who was the first defendant in the main action but against whom the plaintiff, the Guaranteed Policies Investment Trust (the Trust) in the main action had withdrawn after successful settlement negotiations between those two parties. [3] Although a court has wide discretion in applications brought under Rule 13, the granting of leave is not a mere formality. A party seeking leave to serve a notice in terms of Rule 13(3)(b) has to: (a) furnish a satisfactory explanation for the failure to have issued the notice before the close of pleadings; and (b) make out a prima facie case on the merits against the third party. (See Wapnick and Another v D Durban City Garage and Others 1984 (2) SA 414(D))

BACKGROUND [4] It is convenient to first set out a brief history of the matter before determining whether ABSA has met the requirements referred to above. [5] In March/April and August 2006, ABSA concluded two agreements with Old Mutual in terms of which ABSA purchased second-hand policies from Old Mutual for a combined purchase price of R320 million (the Old Mutual agreement). In terms of the Old Mutual agreement, Old Mutual had to transfer policies worth R100 million to ABSA or its nominee by the end of 2006 and the balance worth R220 million by the end of the first quarter of 2007.

Baartman J

[1] This is an application in terms of Rule 13(3) (b) of the Uniform Rules of Court for leave to serve a Third Party Notice after the close of pleading in the main action.

[2] ABSA Insurance & Financial Advisers (Pty) Ltd (ABSA), the second defendant in the main action applied for leave to serve a Third Party Notice on Old Mutual Life Assurance Company (South

Africa) Limited (Old Mutual), who was the first defendant in the main action but against whom the plaintiff, the Guaranteed Policies Investment Trust (the Trust) in the main action had withdrawn after successful settlement negotiations between those two parties.

[3] Although a court has wide discretion in applications brought under Rule 13, the granting of leave is not a mere formality. A party seeking leave to serve a notice in terms of Rule 13(3)(b) has to:

(a) furnish a satisfactory explanation for the failure to have issued the notice before the close of pleadings; and

(b) make out a prima facie case on the merits against the third party. (See Wapnick and Another v D Durban City Garage and Others 1984 (2) SA 414(D))

BACKGROUND

[4] It is convenient to first set out a brief history of the matter before determining whether ABSA has met the requirements referred to above.

[5] In March/April and August 2006, ABSA concluded two agreements with Old Mutual in terms of which ABSA purchased second-hand policies from Old Mutual for a combined purchase price of R320 million (the Old Mutual agreement). In terms of the Old Mutual agreement, Old Mutual had to transfer policies worth R100 million to ABSA or its nominee by the end of 2006 and the balance worth R220 million by the end of the first quarter of 2007.

[6] ABSA alleged that it had, on 12 May and 24 November 2006, on the strength of the Old Mutual agreement(s) concluded two agreements

with the Trust in terms of which the Trust purchased second-hand. Old Mutual policies from ABSA. Initially, the transfer process

progressed as envisaged. Later, the parties encountered difficulty with the transfer process, which led to the collapse of the process. On 29 February 2008, the Trust instituted action against Old Mutual and ABSA. Old Mutual settled its claims with the Trust, which led to the withdrawal of the action against Old Mutual. Similarly, ABSA entered into settlement negotiations with the Trust and managed to settle all but a R3 147 564 claim for contractual damages. That claim is all that remains of the action instituted by the Trust. [7] The basis for the remaining claim is an allegation by the Trust that it had to procure bridging finance because ABSA failed to transfer to it policies, to the value of R45 663.92, as envisaged in their agreement. Thus, the remaining claim is for the damages suffered in procuring the bridging finance. [8] In turn. ABSA alleged that its failure to transfer the policies was because of Old Mutual's failure to transfer the policies to ABSA for on-transfer to the Trust. In those circumstances, ABSA alleged that its claim against Old Mutual was conditional on a court finding in favour of the Trust. Explanation for ABSA's failure [9] It is common cause that ABSA could have served the Notice without the leave of the court prior to the close of pleadings. [10] Willem Schalk Burger Van der Colff (Colff), who attested to the founding affidavit said that: "11. Pleading closed in and during 2008.

12. Given the cause of action underlying the original claim, it has always been ABSA's intention to institute third party proceedings

against Old Mutual. 13 However, as a result of all but one of GPITs (the Trust) claims being settled during 2008 and 2009, the remaining relief currently sought by GPIT is only against ABSA, and is for payment of R3 147 564.00, in terms of prayer (h) of the particulars of claim, together with interest and costs, in terms of prayers (j) and (k) ("the remaining claim").

14. In spite of attempts being made in 2009 to also settle the remaining claim, such attempts were not fruitful. No further attempts have been made since then to settle the matter, it now appears that it will simply be set down for trial in due cause.

15. In the circumstances, with pleadings having closed in 2008, settlement negotiations having intervened in 2009, and with the

remaining claim now having to proceed to trial ABSA seeks; 15.1. To pursue Old Mutual by way of third party proceedings..." [11] In reply. Colff said the following: "...10.2 as indicated in paragraphs 13 and 14 of the founding affidavit, most of GPITs (the Trust) claims have been settled as between itself and each of the Defendants.... Because it was envisaged at the time that ABSA's plea was delivered that such settlement negotiations would take place, and because ABSA was optimistic about the outcome of such settlement negotiations, it did not at the time deliver a third party notice as against the Old Mutual. ABSA considered that doing so would not only be counter-productive in the context of the settlement negotiations

which would take place, but that it might involve an unnecessary use of time and money. As it turns out ABSA was correct in its

assessments of the prospects of the settlement negotiations been successfully concluded, save in respect of the remaining claim which is the subject of the proposed third party notice." [12] In argument, Advocate Janisch, who appeared for Old Mutual submitted that ABSA had failed to explain the lengthy delay between the close of pleadings, August 2008, and the launch of this application, being 25 November 2010. Advocate Fagan SC, who appeared for ABSA submitted that ABSA had made several unsuccessful attempts to settle the remaining claim. The last such attempt was 5 November 2010. [13] Advocate Janisch said the following: “. ..44. The trial would clearly be more lengthy than one involving only ABSA and Old Mutual, since it will traverse various aspects in which Old Mutual is not directly involved, including the contractual relationship between ABSA and GPU, GPIT's conduct in financing the transactions, and the quantification ofGPITs loss, if any. If ABSA warded off the claim, and even if Old Mutual was warded its costs, this would never be a full indemnity and would not compensate for the time dedicated to the matter. 45. on the other hand, if the joinder is not permitted ABSA can (subject to prescription, which would be an issue in any event); 451. immediately institute proceedings against Old Mutual for a declaratory order; and 45.2. hold such proceedings in abeyance until the outcome of the main if known... [14] I am persuaded that the ABSA has satisfactorily explained its failure to have issued the notice before the close of pleadings. Prima facie case [15] As indicated above, the Trust's claim against ABSA is for contractual damages due to ABSA's alleged breach of their agreement.

ABSA denies the claim and only if the trial court should find in favour of the Trust will ABSA be in a position to look to Old Mutual for payment of the amount owing to the Trust. ABSA based its conditional claim against Old Mutual on the allegation that: (a) it was Old Mutual's breach of the Old Mutual agreement that precluded ABSA from transferring the converted policies to the

Trust. [16] On the papers before me, I am satisfied that there is evidence of a transfer process that required Old Mutual, either as agent for its existing clients or on some other basis, to transfer policies to ABSA. It further appears that the purpose of such transfer to ABSA was to enable ABSA to on-transfer to a third party. [17] In my view, ABSA has made out a prima facie case as that term is understood in Rule 13 applications.

COSTS [18] In the circumstances of this application, I consider that costs should be costs in the cause and intend to make such an order.

ORDER [19] I. for the reasons stated above, make the following order: (a) The Second Defendant, ABSA, is granted leave to serve a Third Party Notice on Old Mutual Life Assurance Company (SA) Limited (b) Costs to be costs in the cause. BAARTMAN, J

[6] ABSA alleged that it had, on 12 May and 24 November 2006, on the strength of the Old Mutual agreement(s) concluded two agreements

with the Trust in terms of which the Trust purchased second-hand. Old Mutual policies from ABSA. Initially, the transfer process

progressed as envisaged. Later, the parties encountered difficulty with the transfer process, which led to the collapse of the process. On 29 February 2008, the Trust instituted action against Old Mutual and ABSA. Old Mutual settled its claims with the Trust, which led to the withdrawal of the action against Old Mutual. Similarly, ABSA entered into settlement negotiations with the Trust and managed to settle all but a R3 147 564 claim for contractual damages. That claim is all that remains of the action instituted by the Trust.

[7] The basis for the remaining claim is an allegation by the Trust that it had to procure bridging finance because ABSA failed to transfer to it policies, to the value of R45 663.92, as envisaged in their agreement. Thus, the remaining claim is for the damages suffered in procuring the bridging finance.

[8] In turn. ABSA alleged that its failure to transfer the policies was because of Old Mutual's failure to transfer the policies to ABSA for on-transfer to the Trust. In those circumstances, ABSA alleged that its claim against Old Mutual was conditional on a court finding in favour of the Trust.

Explanation for ABSA's failure

[9] It is common cause that ABSA could have served the Notice without the leave of the court prior to the close of pleadings.

[10] Willem Schalk Burger Van der Colff (Colff), who attested to the founding affidavit said that:

"11. Pleading closed in and during 2008.

12. Given the cause of action underlying the original claim, it has always been ABSA's intention to institute third party proceedings

against Old Mutual.

13 However, as a result of all but one of GPITs (the Trust) claims being settled during 2008 and 2009, the remaining relief currently sought by GPIT is only against ABSA, and is for payment of R3 147 564.00, in terms of prayer (h) of the particulars of claim, together with interest and costs, in terms of prayers (j) and (k) ("the remaining claim").

14. In spite of attempts being made in 2009 to also settle the remaining claim, such attempts were not fruitful. No further attempts have been made since then to settle the matter, it now appears that it will simply be set down for trial in due cause.

15. In the circumstances, with pleadings having closed in 2008, settlement negotiations having intervened in 2009, and with the

remaining claim now having to proceed to trial ABSA seeks;

15.1. To pursue Old Mutual by way of third party proceedings..."

[11] In reply. Colff said the following:

"...10.2 as indicated in paragraphs 13 and 14 of the founding affidavit, most of GPITs (the Trust) claims have been settled as between itself and each of the Defendants....

Because it was envisaged at the time that ABSA's plea was delivered that such settlement negotiations would take place, and because ABSA was optimistic about the outcome of such settlement negotiations, it did not at the time deliver a third party notice as against the Old Mutual. ABSA considered that doing so would not only be counter-productive in the context of the settlement negotiations

which would take place, but that it might involve an unnecessary use of time and money. As it turns out ABSA was correct in its

assessments of the prospects of the settlement negotiations been successfully concluded, save in respect of the remaining claim which is the subject of the proposed third party notice."

[12] In argument, Advocate Janisch, who appeared for Old Mutual submitted that ABSA had failed to explain the lengthy delay between the close of pleadings, August 2008, and the launch of this application, being 25 November 2010. Advocate Fagan SC, who appeared for ABSA submitted that ABSA had made several unsuccessful attempts to settle the remaining claim. The last such attempt was 5 November 2010.

[13] Advocate Janisch said the following:

“. ..44. The trial would clearly be more lengthy than one involving only ABSA and Old Mutual, since it will traverse various aspects in which Old Mutual is not directly involved, including the contractual relationship between ABSA and GPU, GPIT's conduct in financing the transactions, and the quantification ofGPITs loss, if any. If ABSA warded off the claim, and even if Old Mutual was warded its costs, this would never be a full indemnity and would not compensate for the time dedicated to the matter.

45. on the other hand, if the joinder is not permitted ABSA can (subject to prescription, which would be an issue in any event);

451. immediately institute proceedings against Old Mutual for a declaratory order; and

45.2. hold such proceedings in abeyance until the outcome of the main if known...

[14] I am persuaded that the ABSA has satisfactorily explained its failure to have issued the notice before the close of pleadings.

Prima facie case

[15] As indicated above, the Trust's claim against ABSA is for contractual damages due to ABSA's alleged breach of their agreement.

ABSA denies the claim and only if the trial court should find in favour of the Trust will ABSA be in a position to look to Old Mutual for payment of the amount owing to the Trust. ABSA based its conditional claim against Old Mutual on the allegation that:

(a) it was Old Mutual's breach of the Old Mutual agreement that precluded ABSA from transferring the converted policies to the

Trust.

[16] On the papers before me, I am satisfied that there is evidence of a transfer process that required Old Mutual, either as agent for its existing clients or on some other basis, to transfer policies to ABSA. It further appears that the purpose of such transfer to ABSA was to enable ABSA to on-transfer to a third party.

[17] In my view, ABSA has made out a prima facie case as that term is understood in Rule 13 applications.

COSTS

[18] In the circumstances of this application, I consider that costs should be costs in the cause and intend to make such an order.

ORDER

[19] I. for the reasons stated above, make the following order:

(a) The Second Defendant, ABSA, is granted leave to serve a Third Party Notice on Old Mutual Life Assurance Company (SA) Limited

(b) Costs to be costs in the cause.

BAARTMAN, J

3