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Court case on fiduciary duty

Breetzke and Others NNO v Alexander NO and Others [2020] ZASCA 97   

The trustees of the SH Trust (the Trust) decided in September 2012 to sell immovable properties held by the Trust. Two other trusts, the SF Trust and the JA Trust, were the beneficiaries of the Trust. In February 2013 the first respondent (A), one of the trustees, indicated that he wanted to buy the properties from the Trust. Agreement was reached on a purchase price of R179.5m.  Of this, R90m related to a property referred to as the SARS property as SARS was the tenant.  A chose to have the properties transferred to a company Z, which he owned and controlled.  In November 2013 Z sold the SARS property to another company, D, for R110m.  The first appellant (B) (the first plaintiff in the court a quo), brought an action for breach of fiduciary duty against A and alleged that, at the time A offered to purchase the properties through Z, he knew that D was eager to buy the SARS property. B therefore alleged that A acted contrary to his fiduciary duty towards the Trust and its beneficiaries by making a secret profit on the subsequent sale of the property. B claimed, on behalf of the SF Trust, half the profit made on the SARS property back from Z.  A attacked the claim by way of exception that Z owed no fiduciary duty to the Trust and that its actions in buying and selling the SARS property was therefore not wrongful, which is a requirement to prove an action in delict. The exception was upheld by the Kwa-Zulu Natal High Court (Vahed J). The appellants appealed against this judgement.

The Supreme Court of Appeals (Wallis JA (Mbha, Mocumie, Molemela and Dlodlo JJA concurring)) upheld the appeal.  The court referred, amongst others, to its judgement in Gross and Others v Pentz and ruled that where another party is aware of the breach of fiduciary duty by a trustee and participates and benefits from it, such party’s conduct is wrongful and therefore subject to delictual action if the other requirements are met.  The exception was therefore struck down.

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