BY Aslam Moosajee AND Olonathando Nxumalo
Non-joinders, substantial interest and party liability
In the recent case of Ross v Nedbank Limited, Ian Craig Ross and Annelie Ross concluded an agreement of sale with a third-party seller, in terms of which they purchased an immovable property from the seller. RJ Attorneys were appointed as conveyancers to attend to the transfer of the immovable property matter.
On 8 February 2019, Ian Craig Ross and Annelie Ross received an email that appeared to be from RJ Attorneys, in which they were instructed to make a payment to a Nedbank account reflected in the email. After making the payment, Ian Craig and Annelie Ross discovered on 12 February 2019 that the bank account was in fact, fraudulent and they reported the payment to the bank. The bank then informed them that the fraudulent account would be frozen/suspended, preventing any further transactional activity on the account. Despite this, the account holder managed to withdraw funds that were paid by the Ross’ into the fraudulent account.
Consequently, Mr and Ms Ross instituted a claim for damages in the Gauteng Division of the High Court, against Nedbank due to the bank’s alleged negligent breach of a duty of care. In response, Nedbank raised, amongst others, a special plea of non-joinder that:
- The appointment of RJ Attorneys as conveyancers created a legal duty between the attorneys and the Ross’, in terms of which the attorneys were required to take all reasonable steps to ensure that communication between itself and Mr and Ms Ross was secure and the integrity thereof was not compromised
This legal duty of care results in RJ Attorneys having a legal interest in the damages action, and therefore, they should be joined as a second defendant.
Legal principles of non-joinder
The relevant legal principles applicable to non-joinders are summarised in Myeni v Organisation Undoing Tax Abuse NPC and Others as follows:
"Non-joinder arises where another party has a direct and substantial interest in the matter, which is determined by the relief that is sought. A party can only be said to have a direct and substantial interest in the matter if the relief cannot be sustained and carried into effect without prejudicing their interests.”
The Myeni case also quoted the judgment of Amalgamated Engineering Union v Minister of Labour, where it was held that:
“[t]he question of joinder should … not depend on the nature of the subject matter of the suit … but… on the manner in which, and the extent to which, the Court's order may affect the interests of third parties.”
According to the Myeni case, this means that the question of joinder depends on the relief sought and not on the facts of the case or the issues in dispute. More recently, the Supreme Court of Appeal in South African History Archive Trust v South African Reserve
Bank and another recognised the test for joinder of necessity is as follows:
“The substantial test is whether the party that is alleged to be a necessary party for purposes of joinder has a legal interest in the subject matter of the litigation, which may be affected prejudicially by the judgment of the Court in the proceedings concerned....”
The court further summarised the applicable position as follows:
- “If a party has a direct and substantial interest in any order, the court might make in proceedings, or if such order cannot be sustained or carried into effect without prejudicing that party, he is a necessary party and should be joined in the proceedings unless the court is satisfied that he has waived his right to be joined.
- The mere fact that a party may have an interest in the outcome of the litigation does not warrant a non-joinder objection.
- The term ‘direct and substantial interest’ means an interest in the right, which is the subject-matter of the litigation, and not merely an indirect financial interest in the litigation.
- An academic interest is not sufficient. On the other hand, the joinder of joint wrongdoers as defendants is not necessary, although advisable.
- Likewise, if parties have a liability, which is joint and several, the plaintiff is not obliged to join them as co-defendants in the same action but is entitled to choose his target.
- A mere interest is also insufficient. A litigation funder may be directly liable for costs and may be joined as a co-litigant in the funded litigation. This would be the case where the funder exercises a level of control over the litigation or stands to benefit from the litigation.”
The discussion of these principles in relation to the current matter
The High Court highlighted that the Ross’ claim is based on the bank’s alleged negligent breach of a legal duty it owed to them, which caused them to suffer damages. Although the Ross’ could have also instituted a claim for damages against RJ Attorneys based on a negligent breach of its legal duty that arose because of their appointment as conveyancers, the fact remains that they only instituted a claim against the bank. Put differently, whilst a claim may lie against RJ Attorneys in law, which, if pursued, could render them joint wrongdoers, this does not oblige the Ross’ to have joined the attorneys as a party to the action, especially in light of the abovementioned judgments.
The court also found that any order granted in favour of the Ross’ would be based on a liability finding against the bank. It was, therefore, concluded that RJ Attorneys have no direct and substantial interest in any order the High Court may make in this matter.
The bank also indicated in its special plea that if the High Court finds it to have been negligent, they intend to plead contributory negligence on the part of RJ Attorneys. The High Court, however, held that this is not a basis for claiming that RJ Attorneys are a necessary party. This is because even if the court were to join RJ Attorneys as a defendant in this action, in the absence of a claim against the attorneys, the bank would not be able to pursue a claim for contributory negligence against them by using its special plea.
Furthermore, Nedbank relied on the case of Maritz v Knoesen and another to argue that RJ Attorneys are a necessary party “because they participated in the events that caused the basis and subject matter of the action and litigation’, as ‘they were the contracted agents for the conveyancing of the property [that Craig Ross and Annelie Ross] were purchasing”.
The High Court held that its reliance on the Knoesen matter should also fail because the facts of the case are distinguishable from those of the current action:
- “First, the court’s findings were fact-specific, having been determined on the merits of that specific case.
- Second, the second defendant [in Knoesen] was already a party to the proceedings”. The second defendant claimed that he was mis-joined in the proceedings since there was no claim against him. However, the court dismissed the misjoinder and held that the second defendant had a direct and substantial interest in that he actively partook in the events that caused the basis and subject matter of the action and litigation.
- “Third, serious allegations of collusion, fraudulent transactions and misrepresentations were made against the second defendant in the particulars of the claim, which directly implicated him in acts of wrongdoing.
- Fourth, the second defendant was a direct participant in the acts in question.”
However, the High Court pointed out that in the present action, no direct adverse allegations have been made against RJ Attorneys, nor were the attorneys implicated in wrongdoing.
In light of the above, the High Court concluded that Nedbank’s special plea should be dismissed.
The key principle highlighted in this judgment is that the question of ‘direct and substantial interest’ in a non-joinder application lies in whether the relief sought, if granted, would prejudice the interest of another party that is not joined in the proceedings.
Executive | Dispute Resolution
Candidate Legal Practitioner | Dispute Resolution