Armstrong v Magid and Another

• Jurisdiction: South Africa
• Judge: Stratford ACJ, De Villiers JA, De Wet JA and Watermeyer AJA
• Judgment Date: 07 April 1937
• Hearing Date: 24 March 1937
• Court: Appellate Division

Stratford, A.C.J.:

The defendants in the court below excepted to the plaintiff's declaration on the ground that it was vague and embarrassing and bad in law. The exception was upheld by: the Provincial.Division and the plaintiff now appeals to this Court. The plaintiff is a spinster of full age, the first defendant is a solicitor and the second defendant is his wife. Para. 4 of the declaration alleges that: "From about the month of February, 1933, and continuously thereafter up to the month of April, 1936, the plaintiff employed the first defendant in his capacity as an attorney, for the purpose, inter alia, of advising and assisting her from time to time in her affairs and in the investment of her money and in the recovery of moneys that were outstanding and due to her." The declaration states that two agreements were entered into by the plaintiff, one with defendant and his wife dated the 16th of January and a subsequent one of the 21st March, 1934, with the company contemplated in the first agreement. These agreements are annexed to the declaration and marked respectively "A" and "B" In agreement "A" the parties agreed to form a company with a capital of £1,200 in which the plaintiff and second defendant were to subscribe for 599 shares each and the first defendant two shares. The first defendant was to be permanent managing director and permanent chairman. The plaintiff undertook to lend the company a sum of not less than £10,000 for the purpose of constructing flats on two stands situated at Hillbrow, Johannesburg. The loan was to carry interest at five per cent., reckoned from the date of completion of the flats and as from that date the loan was to be repaid in stated instalments. The second defendant was given the right to occupy: a four roomed flat free of charge for twenty years. In the second agreement "B" the company (then formed) adopted the first agreement with modifications therein mentioned. It was decided to substitute other stands for the stands referred to in the first agreement and to erect a larger block of flats on the new stands which had been purchased. To finance the larger scheme the plaintiff agreed to advance the company air amount of £15,000. The interest was payable at the rate of five per cent on the completion of the flats, but the capital was repayable in stated instalments only after any sum borrowed by the company from any other source had been repaid. Agreement "A" it is alleged was entered into by the plaintiff with her solicitor without independent advice and further it is alleged that it was induced by false and fraudulent

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representations set out in paras. 6 and 7 of the declaration. The subsequent agreement "B" was., it is averred, made by this plaintiff on the advice of the first defendant and she had no independent advice. The first defendant raised the sum of £25,000, by way of loan secured on the three stands purchased by the company for the erection of the building and also secured on stands 3956 and 3957 (presumably the property of the first and second defendants though the declaration is silent as to this). The plaintiff was advised by the first defendant to cede to the company certain Mortgage bonds to the value of £3,300 to enable the company to cede them to the lender of the £25,000 as further collateral security. This she did. Later in May the first defendant induced the plaintiff to sign a deed of suretyship for a further loan to the company of £2,500. The scheme contemplated in the agreements was duly carried out, the company was formed, the shares subscribed for in the proportions mentioned, the flats were erected, the first defendant was made managing director for life and the second defendant was given her flat. In all the plaintiff advanced to the company approximately £19,000. These are the material allegations in the declaration, but then follows para. 25 which alleges that the second agreement also was induced by fraud. It reads: "In or about the month of October or November, 1933, the defendants with the object of benefiting themselves at the expense and in fraud of the plaintiff conspired with each other that the first defendant should in his, capacity as attorney for plaintiff influence and persuade her to enter into the said agreement 'A' and 'B' and in furtherance of the said conspiracy the first defendant with the knowledge and consent of the second defendant made the false representations referred to in para. 24 hereof. In pursuance of the conspiracy aforesaid the first defendant did by undue influence induce and persuade the plaintiff to enter into the said agreements 'A' and 'B'." Para. 26 sets out the plaintiff's contention thus: "In the premises the plaintiff says that the first defendant by reason of the fiduciary relationship that at all material times subsisted between him and her, was under the duty of acquiring for her all the profits and/or benefits that flowed from the employment of her capital amounting to approximately £19,000 (nineteen thousand pounds) towards the erection of the said block of flats but notwithstanding such duty, and in breach thereof, he acquired for his wife, the second defendant, the right to obtain the said 599 shares in

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her name at par and a flat free from the liability to pay rent therefor to the company for the period of twenty years, and for himself he so acquired the right to subscribe for two shares at par and with that right obtained for himself and the second defendant the control of the said company, and the position of managing director and chairman thereof for life.

"The plaintiff further says that the first defendant induced her to agree that the aforesaid benefits should accrue to himself and to his wife by his exercise in the manner described in detail in paras. 6 and 7 hereof, of improper and undue influence which he had secured over her as her attorney and by the fraudulent representations referred to in para. 24 hereof, and that the second defendant was a party to and knowingly assisted the first defendant throughout in the exercise of improper and undue influence as aforesaid and in the said fraudulent misrepresentations."

On the above stated facts the plaintiff claims:

(1) Transfer of the defendants, two shares to her on payment to him of £2 plus interest.

(2) Transfer by second defendant of her 599 shares against pay ment of £599 and interest.

(3) A declaration that the first defendant is not entitled to the position of managing director and chairman of the company.

(4) A declaration that second defendant is not entitled to the position of a life director or to the flat.

It will be observed that no distinction is made between the first and second agreement and the acts of the first defendant subsequent to the first agreement. As the undue influence must be taken as admitted for the purpose of the exception it would...