Transvaal Provincial Division – 28 October 2003

Before Botha J

Plaintiff was the Commissioner for the South African Revenue Service and who was requesting a declaratory order that certain assets were owned by Fourth Defendant, Mr King, and that they were subject to attachment and to be sold in execution in satisfaction of his tax liability.

First Defendant was Metlika Trading Ltd, a company which, it was alleged, purportedly owned certain assets in respect of which it was alleged that Fourth Defendant was the beneficial owner.

Second Defendant was Ben Nevis in regard to whom it was alleged that Second Defendant had transferred certain assets to First Defendant.

Third Defendant was Talacar Holdings (Pty) Ltd and it was alleged that some assets in respect of which relief was claimed were purportedly owned by Third Defendant.

Two exceptions were raised to Plaintiff’s particulars of claim and it was averred by the defendants that Plaintiff was essentially seeking a piercing of the corporate veil and had to plead facts to support its conclusions of law.

The defendants averred further that Plaintiff’s particulars of claim as against Second and Fourth Defendants were intended to bring about an order piercing the corporate veil

between Fourth Defendant, a natural person, and First and/or Second Defendants, in relation to the alleged true ownership of the assets set out in para 5 of the particulars of claim, alternatively, the assets set out in para 7 of the particulars of claim.

Paragraph 5 of the particulars of claim lists seven assets, all alleged to be held purportedly by First Defendant and in respect of those assets the following allegations are made against Mr King, Fourth Defendant in para 6 of the particulars of claim:

• notwithstanding the fact that the assets referred to in para 5 above are purportedly owned by the parties referred to above, Mr King is the beneficial owner thereof;

• it has been and is being falsely held out and contended by Metlika and/or Ben Nevis and/or Mr King that the assets referred to in para 5 above are owned by Metlika;

• in the premises Plaintiff is entitled to an order declaring that the assets referred to in para 5 above are owned by Mr King, and that in so far as Mr King’s liability for income tax is recoverable, or, as it becomes recoverable, the said assets may be attached and sold in execution to satisfy in whole, or in part, Mr King’s liability to the Plaintiff.

Second and Fourth Defendants contended that Plaintiff had to plead the facts on which he based his conclusions of law and in respect of assets belonging to companies, it was not competent in law to disregard the separate legal personality of a company unless there were circumstances like fraud, dishonesty or other improper conduct which warranted a so-called lifting of the corporate veil but it was accepted that a court could disregard the form of a transaction if there was evidence of fraud or dishonesty, referring to Zandberg v Van Zyl 1910 AD 302 at 389.

They also contended that it was unclear what was meant by ‘beneficial owner’ and that a conclusion of beneficial ownership could only be drawn if the corporate veil is lifted or if it could be found that there had been simulated transactions that could be set aside and the facts establishing fraud, dishonesty or subterfuge had to be properly and fully pleaded.

Plaintiff contended that a plaintiff had to allege all the material facts necessary to sustain his cause of action, but not the facta probantia and the material facts on which Plaintiff relied were that it was falsely held out that First Respondent or Third Respondent were the owners of assets purportedly held by them whilst in truth Fourth Defendant was the beneficial owner.

It contended further that it was not obliged to plead the evidence required to sustain these allegations.

(i) That the claim set out in paras 6, 7 and 10 of the particulars of claim were not aimed at a piercing of the corporate veil and the use of the word purportedly with relation to the ownership of First Defendant or Third Defendant was in itself an indication of an allegation that a false picture of ownership was being portrayed; in para 6.2 it was explicitly stated that it was being falsely held out that the assets in question were owned by First Defendant and then it was alleged that the beneficial owner was the Fourth Defendant and although the words ‘beneficial owner’ do not constitute a clearly defined juristic concept nevertheless they are appropriate in the context of a situation where it was alleged that someone who is the ostensible owner of property is in fact not its real owner.

(ii) That, if the allegations are proved, a court would be entitled to declare that Fourth Defendant was the owner of the assets concerned as Plaintiff’s case is not based upon the setting aside of any transaction as a sham, but on the existence of a fact, namely alleged ownership.

(iii) That it cannot be seen how the court’s power to examine the true ownership of property can be made dependent on whether there had been preceding transactions of a deceptive nature or not as prior transactions of a deceptive nature

may, or may not, be part of the evidentiary matter with which the true ownership can be proved.

(iv) That ownership in property can be proved in many ways, ie it can be proved by means of preceding transactions, registers, admissions and generally by means of inference and how Plaintiff will prove ownership will be a matter of evidence; moreover, the evidence that it will produce will be the facta probantia and those facts need not be pleaded.

(v) That Plaintiff’s allegation that Fourth Defendant was the owner is a factum probandum and it is an essential allegation that has to be proved and the fact that it may also happen to coincide with a conclusion of law does not detract from the fact that it is a factum probandum.

(vi) That, accordingly, in regard to the exceptions of Second and Fourth Defendants, the claim set out by Plaintiff in para 6 of the particulars of claim was not excipiable and the same would apply to para 10 which was a mirror of para 6, and the same reasoning would apply to paras 7.2, 7.3 and 7.4; furthermore, in regard to the exceptions of First and Third Defendants, it was clear that Plaintiff’s case was not aimed at a lifting of the corporate veil and the allegation of beneficial ownership, with its counterpart, the allegation of purported ownership, was a factum probandum capable of proof in many ways, none of which had to be pleaded.

Exceptions raised by First and Third Defendants and by Second and Fourth Defendants were dismissed with costs.

Botha J:  This matter concerns two exceptions, one raised by the first and third defendants and one raised by the second and fourth defendants.

The plaintiff is the Commissioner for the South African Revenue Service who in essence asks for a declaratory order that certain assets are owned by the fourth defendant, Mr King, and that they are subject to attachment and to be sold in execution in satisfaction of his tax liability.

The first defendant is Metlika Trading Limited (Metlika) a company, which, it is alleged, purportedly owns certain assets in respect of which it is alleged that the fourth defendant is the beneficial owner.

The second defendant is Ben Nevis. it is alleged that second defendant transferred certain assets to first defendant. There is an alternative claim, alternative to the claim against fourth defendant, that second defendant is the owner of those assets and that those assets are subject to attachment and to be sold in execution in satisfaction of its tax liability to the plaintiff.

The third defendant is Talacar Holdings (Pty) Ltd (Talacar). It is alleged that some assets in respect of which relief is claimed are purportedly owned by the third defendant.

A great deal of the arguments advanced to me on behalf of the defendants related to matter not raised in the notices of exception. Various inconsistencies in the particulars of claim were pointed out and it was alleged that they rendered the particulars of claim vague and embarrassing. It was argued that where the plaintiff did not content himself with an allegation that the fourth defendant was the owner of the assets in respect of which relief was claimed, but also gave particulars to the effect that those selfsame assets had been owned by other defendants, he had to clarify the apparent incongruity. It was also argued in respect of one asset, an immovable property registered in the name of third defendant, that the plaintiff had not laid a basis for relief that would be at variance with the registration of the property in the name of the third defendant, Mr Solomon SC,

who with Mr Snyman appeared for the plaintiff, objected to an enlargement of the scope of the notices of exception on this basis. In my view the objection is valid. Rule 23(3) requires an excipient to state the grounds of his exception clearly and concisely. The inevitable corollary of that requirement is that a party will be bound to the grounds contained in his exception (see Jowell v Bramwell-Jones and Others 1998 (1) SA 836 (W) at 898F-899B). I shall therefore confine myself to the grounds of exception stated in the exceptions.

I shall deal with the exceptions in the order that they were presented in argument, that is starting with the exception raised by the second and fourth defendants.

The exception of the second and fourth defendants reads as follows:

‘1. . . .

1.1 The Plaintiff’s Particulars of Claim as against the Second and Fourth Defendants are intended to bring about an order piercing the corporate veil between the Fourth Defendant (a natural person) and the First and/or Second Defendants, in relation to the alleged true ownership of the assets set out in paragraph 5 of the Particulars of Claim, alternatively, the assets set out in paragraph 7 of the Particulars of Claim;

1.2 The Particulars of Claim allege merely that the said assets are in truth and in fact beneficially owned by the Fourth Defendant, alternatively, the Second Defendant notwithstanding their ostensible ownership by the First and/or Third Defendants.

1.3 The Plaintiff has failed to aver and rely upon any facts and/or circumstances which, in law, would entitle a court of law to disregard the corporate ownership fo the said assets.

2. . . .

2.1 In paragraph 6.1, 10.1 and 11.1 of the Particulars of Claim the conclusion is drawn that the Second and/or the Fourth Defendant, as the case may be, are the "beneficial owners" of certain assets "purportedly owned" by incorporated entities, without alleging any facts from which, if such facts were to be established, such conclusion could properly be drawn.’

Paragraph 5 of the particulars lists seven assets, all alleged to be held purportedly by the first defendant.

In respect of those assets the following allegations are made against Mr King, the fourth defendant in para 6 of the particulars of claim:

‘6.1 Notwithstanding the fact that the assets referred to in paragraph 5 above are purportedly owned by the parties referred to above, Mr King is the beneficial owner thereof.

6.2 It has been and is being falsely held out and contended by Metlika and/or Ben Nevis and/or Mr King that the assets referred to in paragraph 5 above are owned by Metlika.

6.3 In the premises, the Plaintiff is entitled to an order declaring that the assets referred to in paragraph 5 above are the [sic] owned by Mr King, and that in so far as Mr King’s liability for income tax is recoverable, or, as it becomes recoverable, the said assets may be attached and sold in execution to satisfy in whole, or in part, Mr King’s liability to the Plaintiff.’

Paragraph 7 of the particulars of claim sets out an alternative to para 6. In para 7.1 certain assets are listed. They are different from the units listed in para 5. They include four assets of which it is alleged that they are purportedly owned by third defendant and two of which it is alleged that they are purportedly owned by first defendant. In respect of those assets the following allegations are made in paras 7.2, 7.3 and 7.4:

‘7.2 It has been and is being falsely held out and contended by Metlika and/or Ben Nevis and/or Mr King and/or Talacar that the Mercedes Benz S 500 motor vehicle, the Ferrari Maranello motor vehicle, Portion 2 of Erf 21 Sandhurst and the loan account in Gary Player Stud Farm are owned by Talacar.

7.3 It has been and is being falsely held out and contended by Metlika and/or Ben Nevis and/or Mr King that the loan account and shareholding in Bothmasburg Farming (Pty) Ltd and the loan account is SJ Bothma Boerdery (Pty) Ltd, are owned by Metlika.

7.4 In the premises, the Plaintiff is entitled to an order that the assets referred to in paragraph 7.1 above are owned by Mr King and that, insofar as Mr King’s liability for income tax is recoverable, or, as it becomes recoverable, the said assets may be attached and sold in execution to satisfy in whole, or in part, Mr King’s liability to the Plaintiff.’

In para 10, which is a main alternative claim based on the liability of second defendant to the plaintiff, the following allegations are made:

‘10.1 Notwithstanding the fact that the assets referred to in paragraph 5 above are now purportedly owned by Metlika, Ben Nevis is the beneficial owner thereof.

10.2 It has been and is being falsely held out and contended by Metlika and/or Ben Nevis and/or Mr King that the assets referred to in paragraph 5 above are owned by Metlika.

10.3 In the premises, the Plaintiff is entitled to an order that the assets referred to in paragraph 5 above are owned by Ben Nevis and that, insofar as the liability of Ben Nevis for income tax is recoverable or as it becomes recoverable, the said assets may be attached and sold in execution to satisfy in whole, or in part, the liability of Ben Nevis to the Plaintiff.’

In para 11,1 which is a first alternative claim based on the liability of second defendant to the plaintiff, the following allegations are made:

‘11.1 Ben Nevis was the beneficial owner of the assets referred to in paragraph 5 above.

11.2 On a date or dates unknown to the Plaintiff the assets referred to in paragraph 5 above were transferred to, or put into the name of Metlika.

11.3 The transfers of the said assets, to, and/or placing them into the name of Metlika were carried out in order to pevent the Plaintiff from ascertaining that Ben Nevis was the owner of such assets, alternatively in order to prevent the said assets from being attached and sold in execution to satisfy in whole, or in part, the liability of Ben Nevis to the Plaintiff and thereby to enable Ben Nevis to evade the payment of income tax for which is was or would become liable.

11.4 In the premises, Metlika and Ben Nevis were misused in order to achieve the improper purpose referred to in paragraph 11.3 above.

11.5 In the premises, the Plaintiff is entitled to an order that the separate corporate personalities of Ben Nevis and Metlika should be disregarded to the extent of the transfers referred to in paragraph 5 above and an order declaring that insofar as the liability of Ben Nevis for income tax is recoverable, or as it becomes recoverable, the assets referred to in paragraph 5 above are to be regarded as assets owned by Ben Nevis and that they may be attached and sold in execution to satisfy in whole, or in part, the liability of Ben Nevis to the Plaintiff.’

Mr Levin SC, who with Ms Cane appeared for the second and fourth defendants, argued that the plaintiff had to plead the facts on which he based his conclusions of law. In respect of assets belonging to companies, he pointed out that it was

not competent in law to disregard the separate legal personality of a company unless there were circumstances like fraud, dishonesty or other improper conduct which warranted a so-called lifting of the corporate veil.

In respect of simulated transactions he referred to Zandberg v Van Zyl 1910 AD 302 at 389.

He accepted that a court could disregard the form of a transaction if there was evidence of fraud or dishonesty.

With regard to the particulars of claim he submitted that bald allegations were made that fourth defendant (or alternatively second defendant) were the beneficial owners of property and that bald allegations of fraud were made in paras 7.2, 7.3 and 10.2 (an echo, in the alternative of para 6.2). He argued that it was unclear what was meant by ‘beneficial owner’ and that a conclusion of beneficial ownership could only be drawn if the corporate veil is lifted or if it could be found that there had been simulated transactions that could be set aside. He submitted that the facts establishing fraud, dishonesty or subterfuge had to be properly and fully pleaded. In this regard he referred to Standard Bank of South Africa Limited v Coetsee 1981 (1) SA 1131 (AD) at 1145 and Courtney-Clarke v Bassingthwaighte 1991 (1) SA 684 (Nm) at 689G-690C. He argued in effect that the plaintiff’s allegation consisted of mere conclusions.

Mr Solomon referred to several cases like Jowell v Bramwell-Jones, supra, and Nasionale Aartappel Ko-operasie Bpk v Price Waterhouse Coopers Ing en Andere 2001 (2) SA 790 (T) and submitted that a plaintiff has to allege all the material facts necessary to sustain his cause of action, but not the facta probantia. The material facts on which the plaintiff relies are that it is falsely held out that first respondent or third respondent are the owners of assets purportedly held by them whilst in truth fourth defendant is the beneficial owner.

He contended that the plaintiff is not obliged to plead the evidence required to sustain these allegations. He cited the example of a rei vindicatio where an owner need only allege ownership and referred to Graham v Ridley 1931 TPD 476.

He denied that the claims set out in paras 6, 7 and 10 of the particulars are aimed at a lifting of the corporate veil. They are aimed at establishing that, not the purported owners, but the fourth defendant, is the true owner of those assets.

I agree with the contention of Mr Solomon that the claim set out in paras 6, 7 and 10 are not aimed at a piercing of the corporate veil. The use of the word purportedly with relation to the ownership of the first defendant or the third defendant is in itself an indication of an allegation that a false picture of ownership is being portrayed. In para 6.2 it is explicitly stated that it is being falsely held out that the assets in question are owned by the first defendant. Then it is alleged that the beneficial owner is the fourth defendant. The word ‘beneficial owner’ do not constitute a clearly defined juristic concept (see Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd 1976 (1) SA 441 (AD) at 453A-B), but they are appropriate in the context of a situation where it is alleged that someone who is the ostensible owner of property is in fact not its real owner.

The plaintiff alleges that the fourth defendant is the actual owner in spite of the fact that it appears that the first defendant is the owner. He alleges that the defendants concerned falsely maintain the appearance that first defendant is the owner.

In such circumstances, if the allegations are proved, I am of the view that a court would be entitled to declare that the fourth defendant is the owner, Mr Levin

argued, with reference to Zandberg v Van Zyl, supra, if I understand him correctly, that to rely on ownership on the part of the fourth defendant, the plaintiff must plead an antecedent transaction between the fourth defendant and first defendant and ask that it be disregarded. The argument loses sight of the fact that the plaintiff’s case is not based upon the setting aside of any transaction as a sham, but on the existence of a fact, namely alleged ownership.

I cannot see how the court’s power to examine the true ownership of property can be made dependent on whether there had been preceding transactions of a deceptive nature or not. Prior transactions of a deceptive nature may, or may not, be part of the evidentiary matter with which the true ownership can be proved.

The ownership in property can be proved in many ways. It can be proved by means of preceding transactions, registers, admissions and generally by means of inference.

How the plaintiff will prove ownership will be a matter of evidence. The evidence that it will produce, will be the facta probantia. Mr Solomon is quite correct when he says that those facts need not be pleaded.

In my view the allegation of the plaintiff that the fourth defendant is the owner is a factum probandum.

It is an essential allegation that has to be proved. The fact that it may also happen to coincide with a conclusion of law does not detract from the fact that it is a factum probandum.

In his argument Mr Van der Nest SC, who with Mr Harris appeared for the first and third defendants, contended that if Graham v Ridley, supra, on which the plaintiff relied was applied properly, the plaintiff, having alleged purported ownership by other defendants, must now plead facts that negate such ownership. I cannot agree with the submission. The plaintiff does not allege actual ownership by those defendants, only purported ownership.

For all these reasons I am of the view that the claim set out in para 6 is not excipiable.

The same would apply to para 10, which is a mirror of para 6, only based on the liability of the second defendant.

The same reasoning would apply to paras 7.2, 7.3 and 7.4.

As far as para 11 is concerned, it is specifically alleged that the assets concerned were transferred into the name of the first respondent in order to prevent the plaintiff from ascertaining that the second respondent was their owner and to prevent their attachment and sale in execution in satisfaction of second defendant’s debt to the plaintiff. These allegations would be sufficient to found an actio pauliana (see Fenhalls v Ebrahim and Others 1956 (4) SA 723 (D) at 727D-G). The remaining allegations in paras 11.4 and 11.5, to the effect that the corporate personalities of the first and second defendants had been abused to achieve an improper purpose, would be sufficient to found an order for the lifting of the corporate veil.

For all these reasons I am of the view that the exception of the second and fourth defendants should be dismissed.

The exception of the first and third defendants can be summarised as follows:

1. In respect of para 6 it is alleged that no facts are alleged from which the inference can be drawn that the fourth defendant is the beneficial owner of

certain assets and that they are purportedly owned by other entities. Then it is alleged that there is a lack of allegations justifying the lifting of the corporate veil.

2. In respect of para 7 similar allegations are made.

3. Similar allegations are made in respect of the allegation in para 10 that the second defendant is the beneficial owner of certain assets and that they are purportedly owned by the first defendant.

As far as paras 6, 7 and 10 are concerned, it is clear that the plaintiff’s case is not aimed at a lifting of the corporate veil.

What remains is the allegation that no facts are alleged from which the conclusions of beneficial ownership and purported ownership relied upon by the plaintiff, can be based.

As I have stated above in connection with the exception of the second and fourth defendants, the allegation of beneficial ownership, with its counterpart, the allegation of purported ownership, wherever it appears, is a factum probandum capable of proof in many ways, none of which has to be pleaded.

For these reasons the exception also cannot be sustained.

In the result the following order is made:

The exceptions raised by the first and third defendants and by the second and fourth defendants are dismissed with costs which costs shall include the costs attendant upon the employment of two counsel.