Gainsford NO and Others v Jawmend Rossi Capital (Pty) Ltd (27543/2010) [2013] ZAGPJHC 42 (12 February 2013)

REPUBLIC OF SOUTH AFRICA

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO: 27543/2010

In the matter between:

GAINSFORD NO. GAVIN CECIL First Plaintiff KALIANJEE NO. SHIRKISHKUMAR JIVAN Second Plaintiff MATSEPE NO VINCENT Third Plaintiff And JAWMEND ROSSI CAPITAL (PTY) LTD Defendant

J U D G M E N T

MATHOPO J:

[1] This is an application to amend the particulars of claim and the reply to the further particulars. The first, second and third plaintiffs (The plaintiffs) in their capacity as duly appointed trustees of the insolvent estate of Barry Deon Tannenbaum, instituted action against the defendant in terms of the Insolvency Act 24 of 1936 for the setting aside of certain dispositions and payment in the amount of approximately R139 million.

[2] This application is opposed by the defendant on number of grounds which I will deal with later.

[3] The pleadings have closed and the matter has been specially set down for hearing by the office of the Deputy Judge President on the 8th April 2012. The trial is estimated to run for a period of 3 to 4 weeks.

[4] The notice of the proposed amendment was delivered on the 7th December 2012. The defendant delivered a notice to object on the 20th December 2012. The Plaintiffs as they were entitled to do so, then set a matter down during the first week of the term on the opposed roll.

[5] The plaintiffs proposed notice of amendment was not supported by an

affidavit. Relying on the judgment of Claassen J in Swartz v Van der Walt t/a Sentraten 1998(1) SA 53 (W), plaintiffs contend that the affidavit would only be necessary in a more substantial amendment such as the withdrawal of admissions. The defendant adopted a stance, that in the absence of an affidavit supporting the application, there is nothing factually in terms of answer and further that in the particular circumstances of this case, the founding affidavit was necessary and should have been furnished.

5.1 The proposed principles which I intend applying in dealing with the proposed amendment are the following. An application under this subrule 28(4) is an interlocutory application as contemplated in rule 6(11) and need not be brought on notice of motion supported by an affidavit. See: Sentraten supra. However it is trite an application for an amendment seeking to withdraw an admission must be supported by an affidavit.

5.2 The primary object of allowing an amendment is to obtain a proper ventilation of the dispute between the parties to determine the real issues between them so that justice may be done. The general approach is that amendments should be allowed unless the application is made in bad faith and would cause an injustice which cannot be compensated by an order for costs and where appropriate a postponement See: Moolman v Estate Moolman 1927 CPD 27 at 29. A court hearing an application for an amendment has a discretion whether or not to grant it. Such discretion must be exercised judicially.

[6] I now turn to consider the defendant’s grounds of objection.

Grounds 1 to 3

[7] The Defendant object on the basis that the plaintiffs proposed amendments are sought at a late stage without any explanation and further that the proposed amendments would occasion prejudice to the defendant in the preparation for trial set down on the 8th April 2013 and would thus prejudice the hearing and occasion delay.

[8] In essence, the case advanced for the defendant is that the proposed amendment was brought at the 11th hour and should not be allowed because plaintiffs failed to file an affidavit to explain why they are now seeking to resuscitate a claim which they have abandoned in 2011. The defendant further submit that in the absence of any explanation by way of an affidavit regarding the new facts which caused the plaintiffs to seek the amendment, the necessary indulgence in terms of the rule should not be granted. My understanding of this argument is that since it was a substantial amendment, it should

have been supported by on affidavit. Failure by the plaintiffs to file on affidavit in the face of a serious objection by the defendant should be construed against the plaintiffs particularly since the plaintiffs bear the onus of convincing the court that the discretion should be exercised in their favour.

[9] The gravamen of the defendant’s objection is that in the absence of any founding affidavit to explain (what it perceived to be) the delay, the amendment should not be allowed. Counsel for the defendant contended that granting the amendment would necessitate an amendment to the plea as well as further particulars and entail a reconsideration of the discovery issues, and the prejudice that the defendant would suffer cannot be satisfied by an appropriate costs order because the trial date is imminent. The plaintiffs on the contrary submitted that there is no merit in the objection and contended that lateness of an amendment is not a good ground for its refusal. To buttress its case, the plaintiffs contended that the defendant’s objection is a ruse because the notice of the intended amendment was delivered on the defendant on the 7th December 2012 and this was after having filed the reply to the further particulars for trial on the 29th November 2012. In a nutshell, according to the plaintiffs the defendant had a period of four (4) months prior to that to prepare its case and was accordingly not taken by surprise.

[10] Another argument advanced by the plaintiffs is that the proposed amendment seeks to bring the particulars of claim in line with the reply to further particulars for trial which were furnished or delivered to the defendant on the 29th November 2012. In other words the contention is that the amendment was foreshadowed as early as November 2012 and the prejudice raised by the defendant is unsustainable. The case advanced for the plaintiffs is that if the amendment was not sought, the summons would be excipiable on the ground that it is vague and embarrassing and not in line with the further particulars. The delay in bringing forward an amendment is in itself in the absence of prejudice, no ground for refusing an amendment. In the absence of prejudice to the other party leave to amend must be granted. I agree with the plaintiffs counsel that no prejudice has been demonstrated by the defendant to disallow the amendments. The defendant has a period of 4 months within which to rearrange its pleadings in accordance with the proposed amendment. The suggestion that it was brought at the eleventh hour is unsustainable.

Ground 2

[11] The objection by the defendant is that the proposed amendment lack bona fides in that there are no factual basis supporting the allegations proposed to be introduced by the amendment. This objection can be disposed-off quickly. The requisite facta probanda in support of the proposed amendment are pleaded. I agree with counsel for the plaintiff that the facta probantia need to be pleaded in the particulars of claim. During argument the defendant could not draw my attention to any fact indicative of the plaintiffs lack of bona fides and I could not find any in the pleadings. The objection is misconceived and falls to be dismissed.

Ground 4

[12] This objection is premised on the basis that the proposed amendment seeks to introduce a fundamentally different right to action in Claim 1 which has been extinguished by the prescription. The submission made in support of this objection is that by not filling an affidavit, the plaintiff failed to explain when they acquired the knowledge of this action to defeat the defence of prescription. Counsel for the defendant argued that since the plaintiffs carry the onus of establishing its entitlement to amend, plaintiffs should have filed an affidavit placing the court in proper and better picture to decide whether to exercise the discretion in their favour or not. He submitted that on the face of the claim it became prescribed on the 12th May 2009, being the date when the alleged scheme was concluded. The plaintiffs contended otherwise and argued that since the trustees were appointed formally by the Master on the 3rd February 2010 any period of prescription (if any) should start to run from that date. The contention by the plaintiffs is that the trustees could not have commenced the proceedings until they were formally appointed by the Master.

[13] The case advanced by the plaintiffs is that if prescription is an issue it should be raised by way of a special plea and not by way of an objection to the amendment. As authority for their proposition the plaintiffs relied on Park Finance v Van Niekerk 1956 (1) SA 669 (T), where it was held that prescription is not an issue until specially raised.

[14] It is trite that the court would not normally grant an amendment or permit an allegation which has no prospect of advancing the case of a litigant, thus it would make no sense at all to permit a claim which is doomed to fail on account of prescription. In the present matter, the issue relating to prescription is seriously disputed and not common cause.

[15] It would seem to me that following the judgment of the court in Cordier v Cordier 1984 (4) SA 524 (C) the application for an amendment is not the right forum to attempt to have the issue of prescription decided at this stage. The question here is whether the defendant would suffer any prejudice if the proposed amendment is allowed. I do not think so. The defendant’s right to file a special plea on prescription is still available and can be adjudicated at trial stage. On the other hand the prejudice that the plaintiffs will suffer if the plea of prescription is upheld at this stage is far greater and cannot be ameliorated by an appropriate costs order. In the circumstances absent any prejudice on the part of the defendant, the objection has no merit and falls to be dismissed. Accordingly I will allow the amendment.

[16] The fifth ground of objection is founded on the basis that the proposed amendment in relation to claim 1 is excipiable in that it lacks particularity necessary to avoid vagueness and embarrassment in pleading thereto. Properly set out the defendant contends that it is unclear whether the grounds of illegality are confined to those referred to in the proposed paragraph 7A1, 7A2 and 7A3. The averments that the agreement is a sham is not particularised nor any basis established thereof. In relation to the alleged sham transaction, the objection is that there is no averment as to what the true/genuine transaction and or intention was. The conclusion in paragraph 7(a) does not flow and is not supported by the preceding averments.

[17] The plaintiffs contention is that ex facie the objection the defendant’s complaint of vagueness and embarrassment goes to the formulation of particular paragraphs in the proposed amendment and not to the root of the action and thus defendant cannot succeed if it directed at a particular paragraph in the cause of action. It must go to the whole cause of action. A mere allegation or averment that it lacks particularity is not sufficient. It is trite that an exception on the grounds of vagueness and embarrassment will only succeed when it strikes at the root of the action pleaded or if the defendant will be prejudiced by the allegations made. See: Jowell v Bramwell-Jones & Others 1998 (1) SA 836.

[18] In response to the objection, the plaintiffs contend that the original claim 3 dated 7th July 2010 was an enrichment claim based on the allegation that as a result of payments made out of the bank account, the defendant was unjustifiably enriched at the expense of the estate which was impoverished in the amount of R733 497 000.00, the allegation being that the defendant acted with turpitude. During March 2011, the plaintiffs by way of an amendment which was unopposed excised claim 3 from the original summons by alleging that the defendant was in cahoots with Tannenbaum and was part of a Ponzi Scheme from which it generated in ex turpis causa situation an amount of R13 million which agreement according to the plaintiff is void.

[19] As regards the new application to amend dated 6th December 2012, the plaintiffs contend that the fundamental cause of action is different and not same claim which was abandoned and now sought to be revived. The commonality in the claims is the illegality of the contravention of the Banks Act, Harmful Business Act and the Ponzi Scheme.

[20] Turning to the complaint raised with regards to paragraph 7A1, 7A2 and 7A3, the contention advanced by the plaintiffs is that it is not vague and embarrassing because the conduct complained of was illegal because it contravened all the things set out in the Banks Act and Harmful Business Act and it is a Ponzi scheme.

[21] In respect of averment of sham transactions, pleaded in paragraph 7C, the case advanced by the plaintiff is that 7C is part of the sequence of events and must be read in conjunction with paragraphs 7A to 7B4 because looking at the schedule of payments, the inescapable conclusion is that an investor was putting money into a scheme which is a sham transaction and thus an explanation is needed for the transaction because of the defendant’s contention that it was an ordinary loan transaction. The plaintiffs contend that it cannot be so because the interest rate is in the region of 100% and quiet clearly it cannot be said to be a genuine loan transaction but part of the illegal scheme. In the light thereof, the plaintiffs submit that the defendant misconceived its position with the objection by reading the pleading in part instead as a whole. A reading of the pleadings as a whole and in particular the objected paragraphs does not indicate any vagueness or embarrassment. I agree with the plaintiffs that the objection is flawed and falls to be dismissed.

[22] The objection that paragraph 7G does not flow from and is not supported by the preceding averments is equally misplaced. The transaction refers to 124 and 129 payments and these transactions were payments made fraudum creditorum. Evidently this is a classical case of robbing Peter to pay Paul. I am not convinced that the proposed amendments as amplified by the reply to the request for further particulars are excipiable.

[23] The last objection relating to whether the further particulars do not constitute a pleadings or not, was rightly not pursued by the defendant because rule 28(1) provides for the amendment not only of pleadings but also of documents (including further particulars).

Costs

[24] Generally a party applying for an amendment seeks an indulgence from the court and is usually ordered to pay the costs. Again a party who objects unmeritoriously will be ordered to pay the costs especially if the objection is frivolous or is in the form of an exception. Considering all the defendant’s objection it was essentially in the form of an exception or prescription. A considerable amount of time was spent by counsel for the defendant seeking to persuade me that the proposed amendment was brought at the eleventh hour. In support of his argument, counsel relied on the judgment in Tengwa v Metrorail 2002 (1) SA 739 C. Reliance on this case is misplaced. In the Tengwa judgment, an amendment was sought when the trial was at a advanced stage. In the present matter four months prior to the trial cannot be legitimately categorised as eleventh hour.

[25] Counsel for the plaintiffs submitted quiet persuasively that in the light of the complexity and importance of the matter the costs of two counsel were justified and should be allowed. The defendant in reply submitted that the objection is not frivolous and was necessitated by the paucity facts, due to the lack of the founding affidavit. He then urged upon me not to make a costs order. Alternatively to allow the costs of one counsel if I am inclined to allow the amendment. I am persuaded the plaintiffs were justified to retain and employ two counsels in the matter, owing to its complexity and importance. This is aptly demonstrated by the fact that the matter has been specially allocated for a period of 3 to 4 weeks by the Deputy Judge President, commencing on the 8th April 2013. The issues to be traversed by the parties at the trial are complex and require a great deal of preparation warranting the employment of two counsel owing to complexity and importance of the matter to the parties. In my view the services of two counsel are warranted in this stage and I would allow such costs.

[26] I therefore make the following order:

1. The plaintiffs are given leave to amend the particulars of claim in accordance with the notice of the proposed amendment dated the 6th December 2012.

2. The Defendant is ordered to pay the costs, such costs to include the costs of two counsel.

MATHOPO J

Appearances:

For the plaintiff : Adv CHJ Baden horst SC Adv GD Wilkins

Instructed by : Brooks & Brand Incorporated

For the defendant : Adv S Simon SC

Instructed by : (TWB) Tugendhaft, Wapnick

Banchetti & Partners

Date of hearing : 31 January 2013

Date of judgment : 12 February 2013