Bush and Others v Kruger INC and Another (2009/36699) [2013] ZAGPJHC 386 (8 February 2013)

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[2013] ZAGPJHC 386
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Bush and Others v Kruger INC and Another (2009/36699) [2013] ZAGPJHC 386 (8 February 2013)

REPUBLIC OF SOUTH
AFRICA
SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
CASE
NO: 2009/36699
DATE:
08 FEBRUARY 2013
In the matter
between:
BUSH, ANDREW
JAMES
...........................................................
First
Plaintiff
BEEVERS, GAVIN
ANTHONY
..............................................
Second
Plaintiff
PASSMORE,
BRIAN
.................................................................
Third
Plaintiff
ASTRUP, GARY
LARS
............................................................
Fourth
Plaintiff
And
B J KRUGER
INC
................................................................
First
Defendant
KRUGER, BAREND
JOHANNES
…..............................
Second
Defendant
J U
D G M E N T
Summary: Attorney
receiving money in to trust account– factual dispute as to
purpose for which the money was so received.
Attorney’s
version highly improbable having regard to the objective facts and
rejected. Attorney ordered to repay the amounts
lent to him.
WEPENER, J:
[1] Four golfing
friends are claiming the return of monies advanced by them to the
first defendant, a firm of attorneys, at the
instance of the second
defendant, the only member of the first defendant. The second
defendant is also joined in the proceedings
by virtue of the
provisions of section 53(b) of the Companies Act No. 61 of 1973 (the
Act), he having been a director of the first
defendant at all
relevant times. The memorandum of association of the first defendant
provides that all directors of the first
defendant shall be jointly
and severally liable with the first defendant for the debts and
liabilities of the first defendant,
contracted during their periods
of office. There is no dispute that the second defendant, qua
director, would be liable for the
debts of the first defendant,
should the first defendant be liable to compensate the plaintiffs.
[2] I refer to the
four plaintiffs by their surnames as Bush, Beevers, Passmore and
Astrup. The four claims of the plaintiffs arose
when one John Rogers
(Rogers) advised them during November 2007 that he was aware of a
scheme in terms of which the plaintiffs
could invest money with an
attorney, which turned out to be the second defendant practising
under the name and style of the first
defendant. The plaintiffs also
discussed the possible investment amongst themselves, in particular
after Bush had received information
regarding a bridging finance
scheme offered by the defendants, from Rogers.
[3] The plaintiffs
all testified that the understanding was that they would invest money
with the first defendant for a short-term
period of approximately
four months and receive a return of 3% interest compounded monthly.
Although Astrup testified that he
was investing with B J Kruger,
using the name of the second defendant, it is clear that the parties
referred to the first and second
defendants as BJ Kruger Inc, BJ
Kruger and Kruger interchangeably in evidence. There was no
suggestion that any investment or
loan was made with or to the second
defendant in his personal capacity and the evidence established that
money was paid to the
first defendant’s trust account as was
the requirement of the defendants. In order to obtain more
information about the
bridging finance scheme, the plaintiffs
(excluding Astrup) had occasion to visit the defendants at the first
defendant’s
office in Pretoria. Each of the three plaintiffs
testified that they thought that they were at the office of the first
defendant.
Bush testified that he first went to the office of the
second defendant and then to the boardroom which he thought was a
shared
boardroom. This was not challenged in cross-examination. The
significance of this is that the cross-examination was directed to

show that the plaintiffs did not meet at the offices of the first and
second defendants but elsewhere in the offices of Rogers
or Real
Africa Estate and Travel (RAET). Nothing much turns on this and the
impression of the plaintiffs that they visited the
defendants at
their office is strengthened by the fact that the second defendant
gave them what was referred to as a power point
presentation during
their visit to the defendants in Pretoria. The power point
presentation contained the logo of the first defendant.
Bush
testified to this effect and so did Beevers and Passmore, who
attended the power point presentation at a different time than
Bush.
[4] Beevers
testified that the investment opportunity appealed to him – it
was a good return. The investment would be with
an attorney and
consequently be quite secure. The period of the investment also
suited him as he had provisional tax bills to
pay in August 2008.
Had it not been for the short-term investment he would not have
considered to invest in the scheme. Bush
gave similar evidence. He
had not yet acquired a business which he intended to acquire and a
short term investment would have been
suitable to him so that the
funds could be available when he acquired a business. This evidence
of both Beevers and Bush remains
unchallenged and there is no reason
to doubt that they intended to invest for a short term only for the
reasons supplied by them.
The evidence of Beevers was that the
investment would be for a period of four months with a possibility of
a short extension –
but that a period of longer than six months
was never contemplated. Beevers was also the person who advised
Passmore and Astrup
of the scheme and it is not surprising therefore
that they also formed the impression that the investments would be
for a relatively
short period of time. Prior to attending the power
point presentation during late November 2007, Beevers and Passmore
were required
to sign a confidentiality agreement. Bush and Astrup
testified that they too were required to sign confidentiality
agreements.
[5] Two of these
agreements were signed by the respective plaintiffs and by the second
defendant on behalf of the first defendant.
It is a document which
covers a relationship between the plaintiffs and the first defendant.
Astrup testified that his confidentiality
agreement was signed by
Rogers as a representative of the first defendant. The document
proves so and this evidence was not challenged.
The relevance of the
role of Rogers is the following: did Rogers act as a representative
of the defendants or did he act as representative
of the plaintiffs?
– the latter allegation which was made by the defendants in
further particulars and in an affidavit resisting
summary judgment.
[6] Beevers
testified that Rogers had been canvassing persons who could
potentially become involved in the scheme. Rogers was the
person who
asked him to sign the confidentiality agreement between himself and
the first defendant. Rogers was present at the
power point
presentation to which Beevers was invited but it was the second
defendant who gave the presentation. The reaction
of Beevers that it
was pleaded that Rogers represented him in any matter was ‘rubbish’.
This evidence of Beevers that
Rogers did not represent him (despite
the allegations to the contrary in the further particulars and
affidavit) remained unchallenged
throughout the evidence. Under
cross-examination Beevers added that Rogers was the first contact, he
solicited people, he organised
a meeting and copied letters to the
second defendant. Beevers testified that Rogers and the second
defendant were together in
the scheme ‘in one way or another’
in that they were parties in a business venture. There was also
evidence that Rogers
received a commission from the first defendant,
supporting the notion that he was in one or another way involved with
the defendants.
The contention that Rogers represented any of the
plaintiffs can be rejected and there exists no reason not to accept
the plaintiffs’
evidence in this regard. Indeed, despite the
attempt to make out that Rogers represented the plaintiffs in further
particulars
and an affidavit, the second defendant never testified in
examination in chief that he indeed represented the plaintiffs. This
is significant and puts paid to such suggestion, in my view, made
falsely in the further particulars and the affidavit.
[7] Despite Rogers
being available at the trial and still being on a good footing with
the second defendant, the defendants failed
to call Rogers to attempt
to support or establish, what I find to be a false version of the
defendants. This failure strengthens
the inference that Rogers was
associated with the defendants and never represented the plaintiffs.
Insofar as any inference is
to be drawn, he represented the
defendants and his conduct or activities can be ascribed to the
defendants. Also, there is no
evidence before me to show that Rogers
indeed represented any of the plaintiffs. The irresistible inference
is that he was indeed
the first line of contact for the defendants,
solicited the plaintiffs’ interest by outlining the scheme,
being present at
the power point presentations, signing at least one
document on behalf of the first defendant, taking part in numerous
emails between
the plaintiffs and the defendants and generally acting
on behalf of the defendants. An analysis of the documents written by
Rogers
and copied to the second defendant bears this out. I give
examples. The documents styled ‘Investment Account’ which

were sent to each plaintiff by Rogers, were sent on a letterhead of
the first defendant. Although it was put to one of the plaintiffs

that Rogers sent these accounts unauthorisedly, Rogers states in an
email to all the plaintiffs, and copied to the second defendant,
the
following:
‘Barend (the
second defendant) has noticed that there is a difference between
calculating the interest on a daily versus monthly
compound basis.
The statements we sent you earlier actually use a daily compounding
formula which unfortunately gives the wrong
amount as the investments
are based on a monthly capital basis.
…
I will re-send the
statements tomorrow after he has re-calculated the interest amounts
using this formula rather than as was used
in error which was
compounded daily.’
[8] It is clear that
the second defendant knew that Rogers alleged that they both (‘we’)
had sent the statements. After
re-calculating the interest, new
investment accounts were forwarded to the plaintiffs. These accounts
are similar in format to
the first accounts and are all on the
letterhead of the first defendant. It becomes increasingly clear that
Rogers acted on behalf
of the first defendant with the full knowledge
and consent of the second defendant regarding the investment scheme.
The second
defendant’s evidence that the document was sent
without authority does not impress. The document contains correct
information
as well as the first defendant’s logo. The second
defendant did nothing or could show nothing to support that he
advised
the recipient that the document was sent without
authorisation. I reject the allegation regarding the lack of the
authority of
Rogers who was indeed a full participant from the point
of view of RAET and the defendants.
[9] The four
plaintiffs all understood that they would be advancing money to the
first defendant for a short period of approximately
four months and
earn 3% interest compounded monthly on these advances. The view was
based on what Rogers had told them and as
far as the first three
plaintiffs were concerned, what the second defendant told them during
the power point presentation where
Rogers was present. Bush, Beevers
and Passmore, who attended a meeting with the second defendant in
Pretoria where he gave a power
point presentation, testified that the
presentation contained the first defendant’s logo as is evident
from the documents
in the bundle pages 1-12 handed in during the
hearing. It was, however, put to them that the logo on the
presentation was that
of RAET of which Rogers was the CEO (and the
second defendant the principal). Beevers was adamant that it was not
so as he knew
Rogers as a ‘wheeler and dealer’ and if the
presentation showed an involvement of Rogers, he would never have
parted
with money. The power point presentation on a RAET letterhead
could not possibly be the presentation given to him.
[10] There is no
explanation before me why the second defendant would give a power
point presentation on the letterhead of RAET
– all other
documents emanating from the first and second defendants are on the
letterheads of the first defendant. The document
in the bundle
displaying the power point presentation on the RAET letterhead is in
stark contrast to every other document contained
in the bundle in
this matter. It is highly improbable that the second defendant
presented the scheme, which he and his companies
had an interest in,
on the letterhead of RAET. RAET could not offer the services
contained in the power point presentation. In
particular the
complete conveyancing solution, general legal assistance and advice,
bond registration and the entire conveyancing
process – all of
which only the first and second defendants could offer – would
be out of place on a RAET letterhead.
The contact details are those
of the first and second defendants and it include the second
defendant’s email address. The
entire document has nothing to
do with RAET. During the presentation it was explained to Beevers
(and Passmore) that the first
defendant would receive the money, and
it would then be utilised as bridging finance. All legal matters were
to be handled by the
first defendant and the first defendant would
effectively be the administrator of the investment. During
cross-examination it
was put to Beevers that the investment would
either be through the B J Kruger Property Group (Pty) Ltd (the
Company) or SA Home
Savers. His response was that he did not recall
that these entities were mentioned at all. Indeed, during evidence in
chief the
second defendant never mentioned SA Home Savers at all.
During the evidence of the second defendant, it became common cause
that
he never mentioned SA Home Savers to the plaintiffs at all.
[11] Much of the
cross-examination of the plaintiffs concentrated on the fact that the
particulars of claim refer to a loan and
that they did not use the
word ‘loan’ in the evidence or in documents which
emanated from them. I am of the view that
the use of the word ‘loan’
is irrelevant. To summarise the evidence of Beevers: He at no time
invested in property;
he was soon going to need the money for tax
purposes; he was quite happy for a lawyer to take his money for four
months; he
did not care who the defendants would finance; he gave
his money to the first defendant – it had to give it back; his
deal
was with the first defendant. However, the word ‘lent’
was indeed also used by Beevers as indicated below. The
cross-examination
of Beevers turned around the manner in which the
first defendant applied the funds and the witness was unable to
comment thereon,
because he testified that it was none of his concern
how the first defendant supplied the bridging finance to his clients.
During
the power point presentation the second defendant explained
that he would advance the money to third parties as bridging finance;

that he would earn 5% interest – the second defendant would
take 2% and all other fees and charges which a conveyancer can
make
on these deals. Despite cross-examination on other issues, this
aspect of Beevers’ evidence was not challenged.
[12] The one thing
that Bush, Beevers and Passmore agreed on was that the second
defendant explained the manner in which he would
supply bridging
finance and secure the money advanced to third parties. Effectively
he would only advance 40% to 50% of the nett
equity the borrower had
in property. Thus he was secure in receiving his capital back. This,
the plaintiffs testified, together
with the fact that it was an
attorney who received their money into his trust account, gave them
comfort in advancing the money
to the first defendant. The
plaintiffs, in particular Bush, Beevers and Passmore, were clear in
their evidence that they would
advance money to the first defendant
by paying it into its trust account and that the funds would be
repaid by the first defendant
together with interest to them. In my
view that is nothing other than a loan to the first defendant. All
the plaintiffs testified
that they advanced money so that the first
defendant could supply bridging finance to third parties. Indeed,
neither Bush nor
Beevers could have afforded to tie money up in
properties as the funds had been earmarked for other purposes. Yet,
the cross-examination
of the witnesses centered around the fact that
they had agreed to invest in properties and even acquire those
properties in the
event of the third parties not being able to repay
the bridging finance to the first defendant. Needless to say all of
the plaintiffs
denied this and such a course of conduct by Bush and
Beevers would be improbable having regard to the evidence regarding
the need
of their funds for identified purposes i.e. acquiring a
business and paying income tax. Beevers stated on a number of
occasions
that the money was solicited from him to pay to the first
defendant and in exchange for that, in the short term, he would be
receiving
the capital with interest back from the first defendant.
He stated that he was happy for a lawyer to take his money for four
months,
that the lawyer would then give bridging finance to third
parties and he would get his money back in that short period of time.

He was not interested or did not care who the lawyer gave the
finance to. He gave his money to the first defendant who was the

entity to give the money plus 3% interest back to him.
[13] The three
plaintiffs, who attended the power point presentation, were adamant
that the second defendant explained the bridging
finance scheme to
them – as that is the reason that they went to him, and denied
that they were told that the funds would
be invested in property.
Beevers testified that the second defendant explained that he came
across clients with property-related
matters. Because of this, he
lent money to people and he was looking for people who could lend him
money to lend to third parties.
Each of the plaintiffs indicated to
the second defendant what amount they had to invest, except Astrup
who advised Rogers of the
amount that he had available for investment
purposes. Shortly after the power point presentation Bush, Passmore
and Beevers received
a document on the first defendant’s
letterhead from Rogers. The document indicated a deposit of some R2,5
million was required.
As the plaintiffs all knew what they would
commit to the loan, Beevers telephoned the second defendant to
confirm that the loan
would be secured as was stated at the power
point presentation to which he received a positive answer. This
evidence was not challenged.
Beevers paid his share of the amount
required i.e. R1 million. The payment document generated by him is
marked ‘Loan/Prop’.
What is important is to note that
the document received from Rogers contained a reference at the top
stating ‘Investment:
The BJK Property Group (Pty) Ltd’.
This, according to the pleadings and affidavit filed by the
defendants, was the party
with whom the plaintiffs contracted and not
with the first defendant. Each plaintiff expressed surprise at the
suggestion that
they contracted with this company and stated that the
reference in the letter meant nothing to them as they were reacting
to what
was said by the second defendant at the power point
presentation. They all denied knowing such a company, least of all
contracting
with it. Beevers testified that he received additional
documents which were attached to the letter requesting the deposit of
R2,5
million. One such document was a valuation of a property in
Waterkloof. Significantly, the valuation was done on the instruction

of the first defendant and not the instruction of the Company.
Beevers said that he was not concerned with the attachments as these

documents had a bearing on how the defendants were going to secure
the loan made by the first defendant to the borrowers. During
the
telephone call to the second defendant, after receiving the
documents, Beevers was comforted by the second defendant’s

explanation that the security would be as was explained at the power
point presentation. This evidence was not contradicted.
[14] Beevers
received a second opportunity to make a loan to the first defendant
on 1 March 2008. He knew of the additional loan
as a result of a
communication from Rogers. When he received the document requiring
the deposit he accepted it and paid the amount
of R400 000.00 into
the first defendant’s trust account. Again, on paying over the
money, the reference on the payment document
generated by Beevers is
‘Br Loan’, for bridging loan. A note appended by Beevers
reads:
‘Herewith
proof of transfer into your account of R400 000.,00 for the bridging
finance investment in Erf 991 Wonderboorm.’
(The details
regarding the erf are contained in a letter forwarded to Beevers,
setting out the particulars of the amount required.)
Beevers also
asked for a breakdown of his participation to date as per the email
of Rogers. The note was addressed to the second
defendant but a
response was received from Rogers, who gave a summary of the
investment and stated that: ‘The original investment
was
extended by a couple of months.’ The only entity who could so
extend it was the first defendant. Beevers had no knowledge
of such
an extension prior to receiving the notification from Rogers. He was
irritated by the one-sided action and would not have
invested a
further R400 000.00, had he known that the first loan had been
extended. Beevers further testified that he paid the
amounts loaned
from his account in Eastgate and expected payment back into his
account. He said that there was never a debate that
he had to be paid
elsewhere.
[15] On 8 May 2008
Beevers notified Rogers to ensure that ‘neither loan should be
extended going forward though as the money
is earmarked for an
upcoming tax bill’. The email confirms the fact that Beevers
saw his investment as a short term loan
and that he required the
money shortly and would not have invested in property.
[16] During July
2008, when Beevers realised that he was not going to receive his
money in the short term, he was horrified. The
second defendant wrote
to him that there was a delay and offered for him to take over
certain properties. Beevers never intended
to invest in properties
and he, from then on, phoned the second defendant regularly to
enquire as to when he could expect payment.
He was continually
promised that his just had to wait two weeks or a month and the money
would be paid. He advised the second defendant
that it was money that
he lent and that it was not to be invested in property. Once again
the telephone call and contents of the
conversation was not
challenged. The correspondence received from the first defendant
written by the second defendant in the second
half of 2008 all gave
him no hope of receiving his money soon.
[17] Finally,
Beevers reacted to the allegations contained in the plea and an
affidavit resisting summary judgment. In the plea
the defendants
aver that payments made to the first defendant were made on behalf of
the Company. It further pleaded:
‘20.3 The
defendants plead that the second plaintiff made the payments alleged
pursuant to an oral agreement concluded between
the second plaintiff
personally and the B J K Property Group (Pty) Ltd (‘the B J K
Property Group’) represented by
the second defendant at
Pretoria during December 2007. In terms of such agreement:
20.3.1 the second
plaintiff invested monies with the B J K Property Group from time to
time;
20.3.2 the second
plaintiff would pay amounts payable in terms of the agreement into
the first defendant’s trust account from
time to time;
20.3.3 the first
defendant would hold such monies in trust until the B J K Property
Group called for the funds or a portion thereof
due to an investment
becoming available and the first defendant would pay out such funds
or a portion thereof to the B J K Property
Group;
20.3.4 the full
amount received by the first defendant from the second plaintiff was
paid out to the B J K Property Group in terms
of the agreement.’
Beevers was quite
adamant that he had no dealings with the Company, never heard of it
during the power point presentation and was
never made aware by the
second defendant of this alleged arrangement. His idea was to invest
for the short term and not become
involved in property investment.
Most importantly, the second defendant was at a loss during evidence
to explain when and where
each agreement between the plaintiffs and
the Company was entered in to. He also conceded that some of the
terms of the agreements
pleaded by the defendants did not exist at
all. Beevers also denied the version supplied by the second defendant
in an affidavit
resisting summary judgment. This version reads as
follows:
‘11. The
plaintiffs and I came to be introduced to each other during November
2007 when John Rogers (‘Rogers’)
introduced me to the
first plaintiff. Rogers and the first plaintiff explained to me that
they represented the plaintiffs who were
all looking to make
property-related investments.
12. The introduction
came about due to my involvement with BJK Property Group (Pty) Ltd
(“the BJK Property Group”).
13. The BJK Property
Group is primarily property related company and deals in immovable
property. For this purpose inter alia, the
BJK Property Group is duly
registered as an estate agency by the Estate Agency Affairs Board.
In its business the B J K Property
Group had come across various
third parties that were either:
13.1 looking to sell
their properties outright but were unable to find purchasers because
potential purchasers were not able to
qualify for a loan in respect
of the property; or
13.2 required funds
for one reason or another and were prepared to sell their property in
order to receive same.
14. In either
instance the BJK Property Group would be in a position to acquire the
property at a value less than the going market
rate if it had the
requisite finance. The BJK Property Group did not have the requisite
finance to buy properties itself and accordingly
needed to bring in
third parties such as the plaintiffs to provide the necessary
funding.
15. In addition to
the above, by the use of instalment sale agreements, the BJK Property
Group was able to stagger payment of the
purchase price which was
preferential to paying one large lump sum for the acquisition of the
property in question. As the BJK
Property Group was only interested
in properties insofar as they could in turn generate an income, it
was preferable to pay monthly
instalments in terms of the instalment
sale agreement whilst considering whether to rent the property or
on-sell it again for a
profit instead of having to come up with the
entire purchase price at the outset.
16. Investments such
as the ones aforesaid also had a number of safety aspects that
protected the investment itself:
16.1 the Alienation
of Land Act would protect the BJK Property Group insofar as it could
compel registration of the sale agreement
against the title deed of
the property so that the property could not be sold under the BJK
Property Group’s nose to a third
party; and
16.2 the BJK
Property Group could achieve transfer into its name if it paid more
than half of the purchase consideration.
17. In the premises
the BJK Property Group could acquire properties cheaply in terms of
instalment sale agreements that permitted
payment of the purchase
price over a period of time, which made it easier to on-sell the
property as there was no time pressure
to sell same because monthly
instalments were usually quite easily manageable.
18. Practically, the
BJK Property Group realised that certain third party potential
sellers only sold their properties to generate
sufficient funds to
overcome some other short term hurdle. In order to accommodate them,
most of the instalment sale agreements
provided for a four month
waiting period during which time the seller could negotiate the
cancellation of the instalment sale
agreement provided both the
seller and the BJK Property Group could agree to the terms of such
cancellation.
19. The four-month
waiting period was agreed to as the sellers who wanted to negotiate
the cancellation of the sale did not find
themselves in a situation
where the BJK Property Group had already proceeded to deal with the
property in an irreversible manner.
20. In order to
provide all parties with as much certainty as possible the BJK
Property Group indicated to sellers at the outset
that it would
charge an amount in respect of a cancellation so as to make a profit
off the cancellation if one happened. As the
costs to the BJK
Property Group was really the amount of the deposit paid in each
instance, the BJK Property Group would look to
earn a profit of about
20% of the amount of the deposit in each instance where an instalment
agreement was cancelled. In each
instance it was for the parties to
agree a cancellation amount and if that could not be done the sale
would simply proceed.
21. I informed the
plaintiffs of the BJK Property Group’s business and how it
dealt with investments and they all became interested
in making
investments with the BJK Property Group as a result. It is precisely
because the plaintiffs knew how the BJK Property
Group’s
business functioned that made them interested in investing.
22. I explained to
them also that the BJK Property Group filled a particular niche in
the market-place and employed a business concept
that was working
well at that stage.
23. All the
plaintiff’s were interested in making investments with the BJK
Property Group and this led to investment agreements
being concluded
between the plaintiffs and the BJK Property Group. Such agreements
were concluded orally between me on behalf
of the BJK Property Group
and the plaintiffs personally alternatively the plaintiffs being
represented by Rogers and Bush in Pretoria
during the latter part of
2007.
24. Although
separate investment agreements were concluded with all the plaintiffs
and the BJK Property Group, the terms of the
investment agreements
were all the same.
25. The material
terms of the investment agreements were, inter alia, as follows:
25.1 the BJK
Property Group would be presented with investment opportunities from
time to time;
25.2 the BJK
Property Group would present such opportunities to the respective
plaintiffs as it, the BJK Property Group, in its
sole discretion
being fit;
25.3 if the
respective plaintiff was interested in involving himself in a
particular investment he would inform the BJK Property
Group of same
and pay an amount equal to the deposit required to be paid in terms
of the property that was available for purchase;
25.4 the BJK
Property Group would thereafter conclude an instalment sale agreement
with the seller concerned and proceed to pay
the deposit in terms
thereof;
25.5 from that point
onwards the investment would be operated and managed jointly between
the BJK Property Group and the respective
plaintiff using the BJK
Property Group as a vehicle;
25.6 if the seller
concerned wished at any time to cancel the instalment sale agreement,
the terms of such cancellation would have
to be accepted by both BJK
Property Group and the respective plaintiff, once again with BJK
Property Group being the vehicle;
25.7 any income
generated from the investment would normally be shared between the
BJK Property Group and the respective plaintiff
in the ratio of
20%-80% respectively with the respective plaintiff to receive the
greater portion due to his financial contribution;
25.8 once the
four-month waiting period was over the BJK Property Group and the
respective plaintiff acting together would jointly
make decisions as
how to deal with the property, in other words they would decide,
inter alia, whether it should be on sold, rented
and the terms
thereof;
25.9 furthermore,
insofar as there were any expenses to be incurred in respect of the
investment such as, inter alia, protecting
the property from further
on-sale or proceeding with legal steps against recalcitrant sellers,
the BJK Property Group and the respective
plaintiff would contribute
to such expenses in the same ratio as they would benefit;
25.10 in general the
investment would be managed by the BJK Property Group and the
respective plaintiff jointly; and
25.11 where the
respective plaintiff was an investor in respect of the particular
property together with other investors then they
would hold their
respective rights pro rata contributions to the investment in each
case.
26. At no stage was
there any agreement between any of the plaintiffs and the first or
second defendant. The first defendant’s
involvement in the
investments happened on two levels:
26.1 firstly,
because investors such as the plaintiff had to wait for the requisite
opportunity to come along, they would pay their
determined investment
amount into the first defendant’s trust account for allocation
to an investment as and when one arose
and as when the BJK Property
Group called upon such funds – as such the first defendant only
ever held monies invested either
on behalf of the investor, such as
the plaintiffs, and/or on behalf of the BJK Property Group, it never
held monies for its own
sake; and
26.2 secondly, the
first defendant would attend to all the conveyancing they was
required as a result of each particular investment.
27. In short there
was never a contractual nexus between first and second defendants and
any one of the plaintiffs.’
Curiously, the
versions contained in the defendants’ plea and affidavit
resisting summary judgment were not put to the plaintiffs
during
cross-examination at all but was commented on by the respective
plaintiffs during their evidence-in-chief. They all rejected
the
aforesaid versions.
[18] I have thus
far dealt with the evidence of the second plaintiff, Beevers, with
some references to the evidence of the other
three plaintiffs and the
second defendant. I now turn to deal with the third plaintiff,
Passmore’s evidence. Passmore corroborated
the evidence of
Beevers in every material respect. He testified that he attended the
power point presentation with Beevers and
confirmed that the document
in the bundle of documents at pages 1 to 12 was indeed the power
point presentation which he had seen
– that is the document
with the logo of the first defendant. He confirms that they were
addressed by the second defendant
who explained that they would be
able to make deposits with, or loans to, the first defendant for a
period of four months, which
period could be shorter or occasionally
longer. Their return would be 3% interest compounded monthly. The
second defendant explained
that the money would be on-lent to sellers
who needed bridging finance i.e. temporary finance until they
received the proceeds
from the sales of their properties. Passmore
explained that a loan to the seller would be secured by the sellers
giving to the
first defendant a special power of attorney and the
first defendant would not make a loan of more than 50% of the equity
in the
property. Passmore also testified that the deal looked good
as money was being paid into a reputable attorney’s trust
account
overseen by auditors and the Law Society. He said that the
name of the Company was never mentioned to him and he had no dealings

with it. Passmore, upon receipt of the letter requiring the deposit
of R2,5 million, paid over R350 000.00, the amount which he
indicated
at the power point presentation that he would have available.
[19] Passmore went
through the same experience as Beevers regarding the non-repayment of
money and I need not detail all the occurrences
testified to by him.
By September 2008, he too was extremely worried that the first
defendant had not repaid the money and he
too found the second
defendant evasive regarding answers to his inquiries. Passmore
attended a meeting to which the second defendant
eventually came at
the Wimpy Restaurant in Fourways. Bush also attended the meeting.
At this meeting the second defendant showed
them a cheque of R1,5
million, the proceeds from which he claimed Bush was going to be paid
R1 million i.e. his first investment.
[20] Despite all the
evidence showing that Rogers arranged for the plaintiffs to visit the
second defendant for the power point
presentation, it was strangely
put to Passmore (but not to Beevers) that Passmore was expecting to
go to the office of RAET and
not to the office of the first
defendant. Passmore was adamant that he expected to go to the second
defendant at the first defendant’s
office. I refer to this
issue as strange as nothing (save the document which the defendant
says was the power point presentation)
emanated from RAET. RAET had
nothing to do with the matter and does not feature in the defences
raised by the defendants. The defendants’
version that Passmore
was expecting to visit RAET and not the first defendant is without
merit and opportunistic and indicative
of the serious lack of
credibility of the defendants’ version as put to the witnesses.
However, Passmore confirmed that the
money would be repaid into the
plaintiffs’ accounts electronically. This was not challenged.
[21] The next
plaintiff who testified was Astrup who is currently residing in the
United States of America. Astrup was in South
Africa for a visit
when he heard from Bush of the scheme of lending money to an attorney
in Pretoria, but it was Rogers who explained
the scheme to him in
more detail i.e. that monies would be deposited with an attorney in a
trust account as a loan for a short
term period of three to four
months. Astrup had an amount of R500 000.00 available and was also
required to sign the confidentiality
agreement between himself and
the first defendant. This document at pages 62 and 65 of the bundle
of documents was signed by Rogers
as a representative of the first
defendant. This evidence of Astrup was never in dispute and
reinforces the fact that Rogers represented
the two defendants in the
lending scheme from time to time. After the payment of the amount of
R500 000.00 into the account of
the first defendant Astrup received a
letter dated 9 January 2008 from the first defendant acknowledging
receipt of the funds.
(I may mention that a letter acknowledging
receipt of the funds was sent to all the plaintiffs). The letter
continues to state
that the funds have been allocated and that the
plaintiff will be kept posted and it ends off with the words ‘We
thank you
for your assistance’. The context of the letter is
clear. It is the first defendant thanking the plaintiff for his
assistance
to it. Astrup testified that he expected to receive his
capital and interest back into his South African Standard Bank
account
held at Boksburg, the latter which is within the area of
jurisdiction of this Court. He too was not happy with the unilateral
extension of the maturity date by a period of two months. He too was
shocked when he received a communication suggesting that the

plaintiffs should take transfer of property as that was something
that was never entertained by him or Rogers. Astrup stated that
he
was promised that the loan would be settled after a relatively short
period of time of three to four months whilst 3% interest
compounded
monthly would be paid on the investment. He never consented to his
funds being invested into property. He testified
that there was no
logic in what was being presented to him at that stage and he had no
intention of taking transfer of properties
as that was not the reason
why he loaned monies. The only thing about property that he knew is
that the properties were secured
by the defendants to protect the
investments which he made with the first defendant. Astrup too,
rejected the contentions of the
defendants as contained in the plea
and affidavit resisting summary judgment. The witness repeated
during cross-examination that
Rogers was acting as representative or
agent for the defendants.
[22] After most of
the evidence of the plaintiffs had been led, Astrup applied to amend
his particulars of claim. I granted the
amendment and indicated that
I would give my reasons later. These are the reasons. Astrup sought
to amend its particulars of
claim in order to insert the fact that
the agreement was entered into in Johannesburg alternatively Pretoria
and further that the
first defendant was represented by John B Rogers
rather than the second defendant in entering into the agreement. The
defendants
object to the introduction of the reference to Mr Rogers
but not to the amendment of the place where the agreement was entered
into. Regarding amendments it is said that:
‘In the event
of an objection, an application to the court may also be made at any
stage before judgment and can accordingly
be granted at different
stages of the proceedings.’
See generally the
cases cited at page 675 of Volume 1 of Herbstein and Van Winsen, The
Civil Practice of the High Courts and the
Supreme Court of Appeal of
South Africa (5th edition). Amendments may even be allowed on
appeal.
[23] Mr Du Toit (on
behalf of Astrup) submitted that the purpose of the amendment is to
allow the pleadings to be in line with
the evidence of Astrup. Mr
Roos objected and stated that Astrup gave no such evidence. I
disagree. Astrup clearly testified that
in his mind Rogers was
acting as representative or agent for the second defendant. Again
the name of the second defendant and
his company was used
interchangeably. Indeed his evidence is supported by one of the
documents which the defendants required Astrup
to sign i.e. the
confidentiality agreement, which Rogers signed in his capacity as
representative for the first defendant in the
lending scheme. Having
regard to the fact that Rogers had represented, the first defendant
has been sufficiently dealt with in
the evidence of Astrup so that it
can indeed be said that the amendment is introduced to be in line
with the evidence. Astrup is
supported by the other plaintiffs as I
have demonstrated with the analysis of the evidence of Beevers.
[24] Mr Roos also
criticised the contents of the affidavit in support of the
application for amendment as containing insufficient
information to
justify a reasonable cause – but there is nothing before me to
gainsay that which is contained in the affidavit
i.e. that Astrup
made an error as a result of communications between him and his legal
team being by telephonic and electronic
means since he was residing
in the United States of America. He met his counsel the day before
the trial and had no proper opportunity
to carefully consult. That,
to my mind, is reasonable cause sufficient to allow an amendment
particularly by virtue of the fact
that Rogers had featured
prominently in the case and was referred to extensively by both
parties. The defendants referred to a
large number of documents
emanating from the said Rogers and his role must have been clear to
both the plaintiffs and the defendants.
The defendants
cross-examined extensively on the emails that emanated from Rogers
and which the defendants had knowledge of.
[25] In
Trans-Drakensberg Bank Ltd (Under Judicial Management) v Combined
Engineering (Pty) Ltd and Another
1967 (3) SA 632
(D) at 638 Caney J
said that the primary object of allowing an amendment is to ‘obtain
a proper ventilation of the dispute
between the parties’. It
is well-known that the pleadings are made for the court and not the
court for the pleadings. The
present approach by courts to
amendments has been stated by Flemming DJP in Bankorp Ltd v
Anderson-Morshead
1997 (1) SA 251
(W) at 253 as follows:
‘… the
increased realisation that Court Rules, procedural principles and
pleadings are not there for their own sake
or for any other reason
than to advance the good order and the administration of justice.
Accordingly the stream has turned away
from regarding a document or
procedural step as a 'nullity' and has come to manage that which
previously was thought to be unworkable
or even unthinkable. I
mention a few examples. Many cases of a summons being a 'nullity'
have been discarded. Conditional claims
and conditional counterclaims
are managed. Conflicting alternative claims are often tolerated.
Arguments that amendments are to
be refused only because of delay in
seeking amendment repeatedly fail. The overall pattern is ever firmer
that, also in provisional
sentence cases, an amendment is granted if
a party deems it necessary to bring his real case before the Court.
The exceptions are
really limited once the party is bona fide and is
not attempting to gain time. An amendment is refused when it is
certain that
the new view is untenable and will not assist the party
or because of prejudice to another party or to the administration of
justice
which cannot be adequately averted by, for example, standing
a case down, postponing it, reimbursing wasted costs.’
[26] In Four Tower
Investments (Pty) Ltd v André’s Motors
2005 (3) SA 39
(N) at 44 it was stated as follows:
‘…
decisions in the reported cases tend to show that there has been a
gradual move away from an overly formal approach.
It is a development
which is to be welcomed if proper ventilation of the issues in a case
is to be achieved, and if justice is
to be done. In line with this
approach courts should therefore be careful not to find prejudice
where none really exists.’
The aforegoing are,
therefore, the reasons why I allowed the amendment applied for by
Astrup.
[25] The first
plaintiff, Bush, who testified last on behalf of the plaintiffs also
corroborated the evidence of Beevers and Passmore
in every material
respect. He was the person who first heard of the scheme from Rogers
who advised that monies could be paid to
an attorney who would
on-lend it and get 5% interest – 3% to the lender, 1% to the
attorney and 1% to Rogers. The attorney
would also get conveyancing
fees of properties transferred by him. Rodgers arranged a meeting
with the second defendant who gave
a power point presentation. There
he was told by the second defendant, an attorney, that the latter
would be handling the money
– he would be lending it out on the
short term for purposes of bridging finance. The security for the
loans made by the
first defendant was also explained and Bush was
assured that he would receive 3% interest compounded monthly on the
monies advanced
by him. He testified that Rogers was the agent or
broker for the defendants. During the power point presentation the
only matter
that was discussed was bridging finance. Bush was
induced to get involved because he knew that the trust account of an
attorney
is, as he stated, sacrosanct and that the money could not be
misused. Upon receipt of the first letter from the first defendant

regarding funds he noted that it set out that the money was required
for bridging finance and there was no reference to the Company
at
all. The letter states:
‘Bridging
Finance: Transfer Piek/Louw
Lynwood Park’
‘We confirm
that we will keep you covered for you interest in the amount of 3%
per month and hereby undertake to pay the capital
and interest to you
on the date of registration of the property into the name of the
purchaser.’
The first defendant,
and not the Company as the defendants would have it, is consequently
bound to repay the capital and the interest
to Bush. As the letter
accorded with what Bush had been told the previous day at the power
point presentation, he paid the amount
of R1,5 million into the first
defendant’s trust account.
[28] When the second
opportunity to invest arose in January 2008 Bush, together with the
other plaintiffs, paid amounts over into
the first defendant’s
trust account as per the advices given at the power point
presentation and in the letter requesting
the funds. After paying the
portion of the amount that he could invest, Bush received a letter
from the first defendant which,
after acknowledging receipt of the
funds, added: ‘We thank you for your assistance.’ The
impression is clear i.e. that
Bush loaned the money to the first
defendant and so assisted it. Although the reference at the top of
the letter changed from the
previous letterhead to refer to
‘Investment: B J K Property Group (Pty) Ltd’, Bush
testified that it made no impression
on him and he conducted the
business on the basis of loans to the first defendant who, in turn,
supplied bridging finance to clients.
[29] He also
testified and showed that the first defendant, on at least one
occasion, paid 1% of the 5% interest to Rogers. On
28 July 2008 the
second defendant on behalf of the first defendant wrote to Bush:
‘Your interest will keep running until
transfer of the property
takes place’. The defendants thus assured Bush that he would
earn his 3% interest regardless of
the manner in which they invested
the money. This assurance was not given on behalf of the Company but
in the first defendant’s
own name.
[30] A telling part
of the second defendants conduct was his scarceness when the
plaintiffs started seeking him out in order to
enquire about the
failure to repay their investments. He failed to take their calls and
failed to respond to enquiries, whilst
fobbing them off.
[31] Bush testified
that when the payments were not forthcoming he asked the second
defendant for a meeting at the latter’s
office, which request
the second defendant refused although the second defendant then
agreed to meet at a restaurant in Fourways.
After this meeting the
first defendant repaid R50 000,00 to Bush into his bank account.
Bush too was unimpressed, or as he said,
he was horrified when he was
offered properties instead of repayment of his capital and the full
interest. He said that the allegations
made by the second defendant
that he had paid a deposit ‘on the purchase of a property’
was a complete and utter fabrication
by the second defendant. At
some stage the first defendant also advanced money to Rogers and it
was taking steps against Rogers.
Rogers approached Bush with an
acknowledgement of debt in favour of Bush and a draft letter to sign.
The letter requested the second
defendant to cease taking steps
against Rogers. Bush obtained legal advice and accepted the
acknowledgement of debt and signed
the letter as he was desperate for
income and this would give him an additional income of R3 500.00 per
month.
[32] During March
2008 the first defendant paid an amount of R117 172.60 to Bush. This
was exactly a 3% return on his investment
for the period December to
June. It is to be noted that this amount which was paid to Bush was
indeed paid into his account at
Fourways, within this Court’s
area of jurisdiction. Bush further testified that Rogers was earning
a commission from the
second defendant and was acting as agent for
the second defendant. The payment of a 1% commission to Rogers was
also shown to have
been made by the first defendant.
[33] Bush also
stated that the version of the defendants, as contained in the plea
and affidavit resisting summary judgment, was
completely untrue and a
fabrication. During the cross-examination of Bush it was stated that
the second defendant explained two
ways of making investments. One
was a scheme of investing in property and the other was by supplying
bridging finance. The witness
denied this and reiterated that only
bridging finance was discussed. Significantly, this version was never
put to Beevers or Passmore,
which leads to an inevitable conclusion
that the defendants fabricated this version as the trial proceeded
whilst they realised
that the first investment by Bush was
categorised by the defendants themselves as a bridging finance deal.
In addition, the second
scheme was not an investment in property but
an alleged investment in the Company.
[34] Eventually,
after the plaintiffs formed the view that second defendant was
avoiding them, they visited their attorney to obtain
legal
assistance. From the outset the attorney wrote to the second
defendant and required information regarding the bridging finance

deals of the plaintiffs. The second defendant replied to the inquiry
but now inserted the subject-matter as ‘investment
in immovable
property’ instead of the ‘bridging finance deal’
which Mr Warrener, the attorney of the plaintiffs,
had commenced the
correspondence with. This was clearly an attempt to stay away from
bridging finance and to lure the plaintiffs
into a situation where
the discussion was about investment in immovable property, the
defence which the defendants have now raised.
Once the attorney for
the plaintiffs did not receive the documents requested from the
defendants, a demand was sent out on 26
January 2009. The demand is
clear in its terms: according to the plaintiffs it was recorded
that:
‘Our
abovementioned four clients were introduced by you to an investment
scheme. You assured our clients that their money
would be deposited
into your trust account and thereafter, and at all times material
thereto, sufficiently secured to the extent
that it would be
repayable upon demand or at fixed and predetermined dates, but not
exceeding a maximum period of four months at
a time.’
This means nothing
more than an advance that must be repaid. In a letter dated 6
February 2009 the second defendant said as follows:
‘The
relationship between your clients, the BJK Property Group and me does
not accommodate these notions. The agreement in
place between the
parties is, inter alia, that your clients would advance monies to the
B J K Property Group by paying same in
B J Kruger Inc’s trust
account …’
[35] Having regard
also to the plea and affidavit referred to above it is clear that
there is no real dispute that the plaintiffs
advanced monies. The
only dispute raised by the defendants is to whom the advances were
made. On the evidence of the plaintiffs,
which I accept, the
advances were made to the first defendant. See the definition of the
word ‘advance’ in the Concise
Oxford Dictionary: ‘hand
over (payment) to (someone) as a loan before it is due’ and
also ‘amount of money advanced’.
Not even the defendants
contend that these advances were not repayable. The defendants’
stance is that the plaintiffs invested
in property – a
contention which I reject having regard to the totality of the
evidence. I deal further with this aspect
when I deal with the
evidence of the second defendant.
[36] I have
carefully observed each of the plaintiffs while testifying and
although there may have been some answers to questions
that they did
not always directly and precisely supply, Beevers, Passmore and Bush
appeared more advanced in years and were subjected
to fairly lengthy
cross-examination.
[37] Having regard
to the fact that the plaintiffs testified about occurrences three
years prior to the trial, there can be no
criticism levelled against
them for not remembering a number of smaller details precisely.
There is no reason why I should not
accept the evidence given by the
plaintiffs. S v Film Fun Holdings (Pty) Ltd and Others1977 (2) SA
377 (E) at 382H. The demeanour
of the plaintiffs in the witness
stand fully complied with the remarks of Krause J in R v Momokela and
Another
1936 OPD 23
at 24 where he said:
‘After all it
is a common experience that the ‘demeanour’ alone of a
witness is but an unsafe guide in ascertaining
the truth, because the
nervousness of an honest witness may create a bad impression, whereas
the brazen and bold liar may easily
deceive the observer into
believing that the witness was telling the truth. In addition to the
demeanour of the witness one should
be guided by the probability of
his story, the reasonableness of his conduct, the manner in which he
emerges from the test of his
memory, the consistency of his
statements and the interest he may have in the matter under inquiry.’
[38] Three of the
plaintiffs thus corroborated each other regarding the agreement which
they had entered into with the first defendant
as represented by the
second defendant i.e. that they would lend money to it for
utilisation in lending transactions on the short
term whilst the
first defendant would secure the repayment of the their funds plus
interest. There was no suggestion that the witnesses
colluded to
place the same version before the court or to falsely incriminate the
defendants. Indeed, Mr Cohen, who argued the
matter on behalf of the
defendants, did not level any negative criticism against the evidence
of any of the plaintiffs.
[39] The only
suggestion of possible impropriety was made against Bush at the first
hearing in that it was suggested that the document
which he produced
as being a hard copy of the power presentation given to him by the
second defendant, had been tampered with and
that it was not a true
copy of the document which he received from the second defendant. The
insinuation of any untoward conduct
regarding the document was
unreservedly withdrawn by Mr. Cohen, who appeared for the defendants
at the resumed hearing. The evidence
of Bush that the document which
he received was the one testified to by him and contained on his
computer, can thus not be disputed,
nor did the second defendant
explain where that document could have come from. Its only source, of
course, was the second defendant.
The significance of the document is
that it contains the logo of the first defendant and there is no
reference to the Company at
all. It is a further indication that
there was no reference made to the Company or any investments into
properties envisaged as
the second defendant wished us to believe.
[40] The plaintiffs
called a Mr Du Preez, the auditor of both the first defendant and the
Company, as a witness. He testified
that none of the so-called
property investment transactions by the plaintiffs with the Company
as alleged by the defendants appeared
in the books of the Company and
that there were no transactions recorded in the trust account of the
Company. This evidence supports
the improbability of the defendants’
version that the plaintiffs invested in properties through the
Company or that the defendant
paid over money to the Company for
investment purposes. It is, in my view, a fabrication by the second
defendant.
[41] In addition, Mr
Roos extracted the following evidence from Du Preez: he advised the
second defendant that the Company could
not receive the deposits
invested by persons like the plaintiffs as it would be in
contravention of FSB Act (Financial Services
Board Act 97 of 1990);
that deposits could be received in the first defendant’s trust
account and then paid to the Company.
Since the case of R v Perkins
1920 AD 307
at 310 it has been trite that, in civil proceedings, a
party cannot object to hearsay answers which it has elicited under
cross-examination.
[42] Firstly, this
is a very good reason why the second defendant would not have
disclosed the receipt by the Company of the deposits
for investment
purposes. It would be illegal to receive deposits or at least, he was
advised that to do so would be a contravention
of the Financial
Advisory and Intermediary Services Act 37 of 2002 (FAIS). Secondly,
and not surprisingly, the second defendant
contradicted this evidence
of Mr Du Preez without his version being put to Du Preez. This
telling piece of evidence which explains
why a reference to the
Company would have been avoided rather than disclosed, was, as was
argued by Mr Cloete on behalf of the
plaintiffs, dropped like a hot
potato when it was elicited. It is another probability showing why
the second defendant would not
have advised the plaintiffs of the
involvement of the Company as a contracting party. On the face of it,
the second defendant was
acting in contravention of FAIS and, as an
attorney, should have known so by just glancing at FAIS. He would
hardly have advertised
this contravention.
[43] The version of
the defendants has been referred to throughout this judgment and I
need not repeat it in detail. It essentially
was that the plaintiffs
contracted with the Company and not with the first defendant. The
second defendant testified that this
was made clear to the plaintiffs
at the power point presentation.
[44] During the
first portion of the trial it was put to the plaintiffs that the
document used at the power point presentation was
not the document
which was identified by them and which contained the first
defendant’s logo only, but that a different document,
contained
in the bundle of documents, was used. The latter document (the second
document) contained the logo of RAET. When the
trial resumed,
however, it became apparent that the defendants made further
discovery of an email to which it was alleged that
an attachment, now
produced a few days before the resumed hearing (more than two years
later), was indeed the correct version of
the power point
presentation. No explanation was offered of what is to be made of the
second document which was now abandoned but
remained a document which
was put to the plaintiffs as being the correct version of the power
point presentation.
[45] The second
defendant conveniently changed his version regarding the power point
presentation to a third document, failing to
explain how this came
about and ignoring the fact that much emphasis was placed on the
second document when the evidence of the
plaintiffs was challenged
during cross-examination. The second defendant will have me believe
that he can produce documents as
if it is a deck of cards, pick any
document or card that suits him and I am to believe that that is the
correct document or card.
The wish of the second defendant is rather
fanciful and strengthens my view that he is a wholly unreliable and
untrustworthy witness
who fabricated evidence to suit his proposes as
the trial progressed.
[46] It was put to
Beevers that the first document was not a true copy of the power
point presentation. The reason is obvious, the
document contains the
logo of the first defendant only. The second document which it was
said is the correct version, contains
the logo of RAET only. Despite
the clear assertion to Beevers that the second document was the only
document ever to exist, a new
version containing both the logo of the
first defendant and RAET, was suddenly produced at the resumed
hearing. The evidence of
Beevers was also that he would never have
put money into a scheme if RAET had an interest in it as he has a
very negative perception
of Rogers as a businessman.
[47] It is also
significant that not one of the three documents refer to the Company
as an interested party. Having found the second
defendant to be
inventive in his evidence, it leaves me no doubt that the document
produced by Bush as being the hard copy of the
power point
presentation supplied to him, is indeed the correct version. It, like
the other documents, supports the evidence of
the plaintiffs; it
refers to an investment opportunity; it refers to the involvement of
the first defendant and there is no reference
whatsoever to the
Company. It records as follows on page 3:
‘What you
ear, when and how
All investments are
based on specific opportunities
• You receive
3% per month compound on your investment
• In order to
participate in each opportunity you will be given a summary of the
deal which encompasses all the documents described
in the previous
slide
• Basically we
only advance to the borrower up to 50% of the equity in the property
in question
• Your
investment is protected because the borrower actually completes a
formal agreement of sale but is given the opportunity
to cancel the
sale upon payment of the loan amount plus a cancellation fee from
which you receive your initial investment back
plus interest
• Each
opportunity has a specific duration which is typically 4 months but
may vary’
The important issue
is that the first power point document contains only the logo of the
first defendant.
[48] This does not
in anyway suggest that the plaintiffs would have the opportunity to
rather take transfer of property as the second
defendant testified,
which I found to be highly improbable for persons who were seeking
short term investment opportunities. During
his evidence the second
defendant (albeit with some initial reluctance) agreed that the idea
behind the scheme was indeed a short
term investment for investors to
earn a high return and receive their money back plus interest (this
is quite opposite to the extensive
plea regarding investment in
property). The other strategies, such as the acknowledgment of debts
obtained from the persons who
were in need of funds and the signing
of agreements of sale of their properties, were purely back-up
procedures which, should the
borrowers fail to repay the monies lent
to them, would be utilised to secure repayment. Although these
procedures were partially
set in place by the defendants, I find as a
fact, that it was not disclosed to the plaintiffs as being the nature
of their investments.
In addition, the second defendant’s
evidence could not show how these alleged agreements between the
plaintiffs and the Company
came into existence. He was at a loss to
explain the terms of the agreements and continuously relied on the
power point presentation
which was held prior to any agreements being
entered into. The second defendant had to admit that some of the
so-called terms of
the agreement, as alleged by him, were not correct
but were also never implemented. The non-implementation of these
terms, in my
view, supports the plaintiffs that these terms were
never discussed, negotiated or agreed upon. It appeared that the
second defendant
and the first defendant pleaded terms which, on the
evidence of the second defendant, were not terms between the parties
at all.
Such terms, as pleaded would accordingly be false.
[49] The care which
Mr Roos took when cross examining the plaintiffs appear from the
following paragraph as put to Mr Beevers in
cross examination:
‘What is
envisaged in this first paragraph Mr Beevers is an investment into a
scheme which in turn will invest in certain
deals and repay after
four months or in four months and the money could then be reinvested
through the scheme into other deals
if you chose to do so. That is
all I am putting to you. That is what the words say.’
Nothing is mentioned
of the Company.
[50] The
probabilities are further strengthened in the plaintiffs favour by
the confidentiality agreement which the second defendant
required
them to sign. He required of each of the plaintiffs to sign a
document called an ‘Agreement of Confidentiality’
between
the plaintiffs and the first defendant. The document contains the
first defendant’s logo. There is no reference to
the Company in
it and one would have thought that it, as the investing entity, would
require protection and not the first defendant
who only acted as
conduit for the funds and as an attorney. The document belies the
defendant’s version that the Company
was the party who
contracted with the plaintiffs. Although counsel for the defendants
cross-examined Beevers extensively in an
attempt to show that the
confidentiality agreement also applied to other entities within the
BJK Group (as opposed to the Company),
the second defendant did not
testify that the confidentiality agreement is anything another than
what is purports to be i.e. an
agreement between the first defendant
and each of the respective plaintiffs. One is at a loss why time was
spent in cross-examination
regarding this issue.
[51] After the
plaintiffs advanced funds, a summary of investments was sent to each
plaintiff. It is a summary supplied by the first
defendant on its
letterhead, containing the first defendant’s particulars,
reflecting the advances and interest to be earned
as described by
each plaintiff. It refers to the different plaintiffs as ‘Investor’
and sets out particulars of an
‘Investment Account’.
There is no reference to the Company at all and it is clear that the
investment was made with
the first defendant. Although it was put to
Beevers that the second defendant would testify that Rogers generated
the document
without authority, he never testified. Despite this,
Rogers advised Beevers that the second defendant had found some
calculation
error in the document and that the second defendant would
send a new corrected document. Such new document was indeed sent to
Beevers
some time later. The dishonest attempt by the defendants when
cross-examining Beevers by suggesting that the documents were sent

without authority, becomes clear. I was to the avoid the clear
impression created by the documents that it emanated from the first

defendant and set out the investors position vis-a-vis the first
defendant with no reference to a Company. They forgot that a second,

corrected document was sent. The evidence that such a second document
was sent is undisputed. The attempt to avoid the document
must fail.
[52] In a letter
(email) dated 28 July 2008 signed by the second defendant on behalf
of the first defendant, it is said:
‘The
instruction from John indeed came through not to reinvest the moneys
and we will immediately pay the money over to you
as soon as the
client pays over the monies into our trust account. This
unfortunately has not happened yet and we are in the process
of
selling the properties to recover our money. Your interest will keep
on running until transfer of the properties takes place.
I will
immediately advise as soon as the properties in question has been
successfully sold and thereafter transferred.’
It is clear that the
party (‘we’) who will pay over the money is the first
defendant. The entity receiving money from
the borrower was the first
defendant, not the Company. The entity (‘we’) who was
selling the property was the first
defendant in order to recover the
money of the first defendant (’our money’). Again the
alleged investment by or of
the Company is a fiction. I have referred
to a few documents, but there are a large number of them that support
the involvement
of the first defendant as the receiver of the funds
from the plaintiff in order to on-lend it to third parties.
[53] A blatant
untruth contained in the defendant’s pleadings and affidavit
resisting summary judgment is the following: the
defendants pleaded
and alleged that all monies were paid to the first defendant as
conduit; that the first defendant held the monies
until the Company
called for it when the first defendant would pay out such sums to the
company for it to invest. It was pleaded
that ‘…the full
amount received by the first defendant from the first plaintiff was
paid out to the BJK Property Group
in terms of the agreement’
and ‘The defendants plead that the first defendant paid the
amounts received from the first
plaintiff to the BJK Property Group
in terms of the agreement pleaded above…’ Similar
allegations were made regarding
each plaintiff. It is common cause
that no funds were ever paid out to the Company. The pleading is
untrue and casts doubt as to
the existence of the agreement as
alleged by the defendants. The version that the Company was the
contracting party is a fabrication
by the defendants.
[54] The second
defendant testified that he advised the plaintiffs that they would
not be involved in ‘normal bridging finance’
but that
they will be investing in immovable property. I have already stated
that persons looking for short term investments would
have taken
flight from the power point presentation at that time had it been so
explained. He stressed that the role of the Company
as recipient of
the funds and investor in property was elaborately explained to the
plaintiffs. I have referred to the fact that
the documents, whether
the first, second or third power point representation, made no
reference to the involvement of the Company
at all. The second
defendant testified that a set of documents referred to as the ‘PIEK’
documents were at hand during
the power point presentation and the
process of investing in property was explained by referring to the
PIEK documents as an example.
Although reference to a bundle of
documents was made to Beevers, the fact the PIEK documents were
produced during the power point
presentation was not put to either
Bush or Astrup during their cross-examination. These documents relate
to bridging finance and
not to investment in property.
[55] The second
defendant, the only witness who testified on behalf of the
defendants, failed to impress as an honest and reliable
witness. He
failed to answer questions directly and not only does his version fly
in the face of probabilities that exist on the
undisputed facts, he
had to be reminded on a number of occasions that he had to answer the
questions directly and not to digress
into irrelevancies. Simple
questions were not answered.
[56] I have in some
instances referred to some of the deficiencies in the evidence of the
second defendant when I referred to the
evidence of the plaintiffs. I
do not repeat them but supply further reasons for coming to the
conclusion that the second defendant
was a wholly unreliable and
untrustworthy witness.
[57] There is also
his failure to call Rogers as a witness, who was available to back up
his version. In the circumstances, it can
safely be assumed that this
failure is a result of the fact that Rogers would not have supported
the version given by the second
defendant. Rogers acted as canvasser
to attract participation in the scheme and acted also on behalf of
the defendants in doing
so. He was actively assisting the second
defendant. He wrote letters, albeit to on behalf of RAET, but these
letters confirm his
close involvement with the other defendants and
the investment scheme.
[58] There are
further facts from which probabilities are apparent or which indicate
that the version supplied by the second defendant
must be rejected.
Rogers represented RAET as well as the second defendant. It is clear
that the defendants failed to distinguish
between the first and
second defendants, RAET and others but that the defendants are now
raising the different entities in order
to attempt to dilinear their
different functions. In that sense, Rogers as interested person in
RAET, assisted and acted and represented
the defendants in conducting
commercial deals with the plaintiffs. Indeed Mr Cohen, during
argument, conceded that the defendants
do not take issue with what
was said and done by Rogers.
[59] The second
defendant would have the court believe that he explained the
investment into property fully to the plaintiffs. Had
he done so, and
referred to the role of the Company, the plaintiffs, who were
interested in short term investments, would have
realised that, once
a deal was put together, they would have absolutely no security for
their funds whatsoever. The only beneficiaries
(had the deal with the
Company been explained), would have been the borrower and, in the
event of default, the Company of which
the second defendant was the
sole director and shareholder. The plaintiffs would have a right of
action against the Company. They
would have no security for the
return of their funds and interest. I find it highly improbable that
the plaintiffs would have invested
in such a speculative and risky
investment, had it been explained to them. Indeed, the version put by
Mr Roos to Beevers i.e. that
he would be investing in property, was
not true. The plaintiffs would not have invested in property, even on
the defendants’
version which was that the plaintiffs invested
in the Company, the latter which intended to do business deals
relating to property.
[60] According to
the second defendant, he explained to the plaintiffs that, should the
borrowers default, they would become involved
with the Company and
partake in the management thereof as far as the acquisition of the
properties were concerned. The version
is belied by the fact that the
plaintiffs were never invited to participate in the management of the
affairs of the Company when
the borrowers did default. Nor did they
have anything in writing that would entitle them to participate in
the management of the
Company of which the second defendant was the
sole director and shareholder. If indeed the plaintiffs had been told
of this right,
it is inexplicable why the second defendant did not
invite them to participate in the management of the affairs of the
Company
when the borrowers defaulted. It too, is indicative that the
plaintiffs were never told of this so-called right.
[61] What is really
astounding is the evidence of the second defendant that, despite the
detailed business agreement entered into
between the plaintiffs and
the Company, which would result in the Company obtaining a 20%
interest and the plaintiffs 80% interest
in the properties, should
the Company acquire such properties, the second defendant offered the
entire property in a 100% share
to the plaintiffs, contrary to the
alleged agreement. This would obviously be to the detriment of the
Company and its shareholder.
Again, as in so many instances, the
actions of the second defendant were contrary to what the alleged
agreement was. As actions
speak louder than words, I am of the view,
that this conduct shows that the rather elaborate agreement alleged
by the second defendant
to have existed between the plaintiffs and
the Company, never existed. The second defendant’s actions were
contrary to such
alleged agreement and in my view, refute the
existence of any agreement between the plaintiffs and the Company.
The external manifestation
of the agreement, which support the
plaintiffs’ version, is destructive if the defendants’
version. The defendants’
counsel, correctly in my view,
conceded that:
‘On a
conspectus of the evidence, the primary intention behind the
plaintiffs depositing money into the trust account of Inc
was to get
their money back within a short period of time after having made
money by interest being paid to them at 3% per month
for a period of
somewhere between four to five months.’
Such intention was
naturally based upon what the second defendant had told them at the
power point presentation.
[62] Once it became
clear that the first defendant was not going to repay the monies
advanced by the plaintiffs, correspondence
was exchanged. It is
significant that the so-called involvement of the Company is not
initially disclosed. If regard is had to
the various letters written
by the second defendant on behalf of the first defendant, the
non-existent role of the Company becomes
more apparent. An example is
the letter written by the defendants on 31 March 2008 to Beevers. The
letter is on the first defendant’s
letterhead and is addressed
to Beevers. It requires the deposit which is to be invested, to be
paid to the first defendant. It
states: ‘We thank you for your
assistance herein.’ There is no reference that the letter is
written on behalf of the
Company. It is clear that the first
defendant acted as principal. As was the case of the letter that
emanated from the first defendant,
the defendants continued to give
the impression that the first defendant was the principal. As an
example, in a letter of 8 July
2008, the second defendant, on a
letterhead of the first defendant, records as follows:
‘I trust that
you are well. I have to report on two matters namely VAN011 and
JOL003. In both instances the transaction was
not cancelled (i.e. the
deposit paid was not refunded) and we therefore have to proceed to
sell the properties. In the first instance
the due date for payment
was 30th June 2008 and we have already instructed agents and
auctioneers to proceed with the sale. There
is a good possibility
that funds will be received from a major business transaction in the
first week of August and obviously if
the full amount is paid, only
then the sales process will stop.’
Again, he was not
writing on behalf of the Company but on behalf of the first
defendant. So he also wrote on 28 July 2008:
‘The
instruction from John indeed came through not to re-invest the moneys
and we will immediately pay the money over to you
as soon as the
client pays over the monies into our trust account. This
unfortunately has not happened yet and we are in the process
of
selling the properties to recover our money. Your interest will keep
on running until transfer of the properties takes place.
I will
immediately advise as soon as the properties in question has been
successfully sold and thereafter transferred.’
A large number of
letters in a similar vein exists. They refute any involvement of the
Company. There is a notable absence of documents
which one would have
expected to find at a company which was receiving funds and paying
them out.
[63] The so-called
full disclosure made by the second defendant during the power point
presentation, also lacks credibility as a
result of his
non-compliance with what he alleged he would do in cases where
investments in property by the Company would occur.
The second
defendant testified that he fully complied with his undertakings, in
particular by adhering to the process as explained
by him to the
plaintiffs: that is to ensure that the following documents are all in
place before an investment in property would
be made:
‘Process from
an investment point of view Section 20/OTP
• Agreement
• Special power
of attorney
• Cancellation
agreement
• ID/FICA
• Rates and
taxes
• Cancellation
figures
• Solvency
affidavit
• Formal sworn
valuation
• Deed search
• Acknowledgment
of debt
• Statement of
assets and liabilities
• Income and
expenses
• Sect. 20
Recordal
• Compliance
with all relevant legislation.’
It is common cause
however, that the defendants failed to obtain or complete a large
number of the documents in each transaction.
I draw the inference
that the second defendant never undertook or explained to the
plaintiffs that he would obtain such documents
with the result that
there was no need to comply with his so-called obligations as it was
never conveyed to the plaintiffs that
there would be such compliance.
[64] In all the
circumstances I find that, whatever the manner in which the second
defendant structured the scheme which he and
Rodgers pursued, the
plaintiffs were advised that they would lend money to the first
defendant, there being no difference between
it and the second
defendant attorney, as far as they were concerned and the defendants
would then lend the money to third parties
by way of bridging
finance. The defendants further undertook that the monies lent by the
plaintiffs would be repaid with compound
interest of 3% per month
within a relatively short period of time of approximately 4 months by
the first defendant.
[65] The first
defendant failed to repay the amounts lent to it by the plaintiffs
and the plaintiffs are entitled to judgment in
their favour. The
parties agreed that the costs are to follow the event.
[66] The defendants
pleaded that this Court has no jurisdiction to hear this matter as
the agreements contended for by the plaintiffs
had to be performed in
Pretoria through the bank account of the first defendant at Pretoria.
This matter was argued before me
at the outset of the hearing –
not as a special plea but on the basis that there should be a
separation of the issue of jurisdiction
from the remainder of the
issues in terms of the provisions of Rule 33(4) of the Uniform Rules.
The ruling given by me gave the
reasons why the instruction for
payment in Pretoria is irrelevant to the fact that the payment had to
be effected in the bank accounts
within this Court’s
jurisdiction. I do not repeat my judgment refusing the separation of
the issue which was given at the
outset of the hearing. The evidence
of Beevers regarding the payment in Johannesburg was not challenged.
Passmore testified that
the plaintiffs’ money was to be repaid
electronically into the plaintiffs’ accounts. This was not
challenged. The evidence
of the two other plaintiffs who testified
that the repayment had to occur in Johannesburg was similarly left
unchallenged. There
is consequently no reason not to accept that the
repayment would have occurred within this Court’s area of
jurisdiction.
Indeed payments which the first defendant did make to
Bush were made into his account in Johannesburg. It has not been
suggested
by the defendants that payment to the plaintiffs would have
had to be made at any other place. The fact that the defendants were

required to make payment into the accounts which are within the
court’s area of jurisdiction was said to be irrelevant as,
it
was argued, payment occurs when the instruction for payment is given
by the defendants in Pretoria. For this proposition Mr
Roos relied
on Salmon v Moni’s Wineries Ltd
1932 CPD 127
and Blumberg v
Sauer
1944 CPD 74
as well as Buys v Roodt (nou Otto)
2000 (1) SA 535
(O). However, all three these cases dealt with cheques and the place
of payment being where the cheque was payable. See the Buys
matter
supra at 540I. This is to be distinguished from payment “into
an account” as testified by the plaintiffs.
The cases based on
cheques are distinguishable from the present matter where payment
into bank accounts within the court’s
area of jurisdiction, was
required. See Coloured Development Corporation Ltd v Sahabodien
1981
(1) SA 868
(C); Venter v Venter
1949 (1) SA 768
(A); Vereins-Und
Westbank AG v Veren Investments and Others
2002 (4) SA 421
(SCA).
[67] I agree with
the argument of Mr Du Toit that an act of effecting electronic
transfer in Pretoria does not in itself constitute
payment. It is
the receipt of money in the bank account of the recipient that would
constitute payment. Mr Roos referred to Pollak
on Jurisdiction at
pages 64 to 65 and in particular to the matter of Veneta Mineraria
Spa v Carolina Collieries (Pty) Ltd
1985 (3) SA 633
(D) where it was
said at 643B-D:
‘… it
is well established that for breach of contract a plaintiff may sue
in the Court of the place where the contract
was entered into, the
forum contractus , which in the wide sense is understood to include
the place where the contract is to be
performed. … In Frank
Wright (Pty) Ltd v Corticas "BCM" Ltd at 463 it is pointed
out that, when the place of performance
is relied upon for
jurisdiction,
“the breach in
respect of which the defendant is sued must be a breach of a duty
which he was bound to perform within the
jurisdiction" …’
The passage supports
the case for the plaintiffs. I am of the view that payment by
electronic transfer can only occur when the party
entitled to receive
such payment receives it in his bank account. If the duty is to pay
over so that the recipient can have access
to the funds in his own
account, a failure to do so is a failure which occurs in Johannesburg
i.e. within the area of jurisdiction
of this Court. There is
consequently no merit in the plea. Mr Cohen did not persist with the
argument regarding a lack of this
court’s jurisdiction, and the
plea falls to be dismissed.
[68] In all the
circumstances I grant the judgment in favour of:
68.1 The first
plaintiff against the first and second defendants jointly and
severally for:
68.1.1 Payment of
the sum of R1 902 345.30;
68.1.2 Payment of
the interest on the sum of R1 500 000.00 at the rate of 3% per month
compounded monthly from 29 November 2007
to 10 January 2008;
68.1.3 Payment of
interest on the sum of R2 150 000.00 at the rate of 3% per month
compounded monthly from 11 January 2008 to 17
March 2008;
68.1.4 Payment of
interest on the sum of R2 032 827.40 at the rate of 3% per month
compounded monthly from 18 March 2008 to 24 June
2008;
68.1.5 Payment of
interest on the sum of R1 952 345.21 at the rate of 3% per month
compounded monthly from 25 June 2008 to 1 December
2008;
68.1.6 Payment of
interest on the sum of R1 902 345.21 at the rate of 3% per month
compounded monthly from 2 December 2008 to date
of final payment.
68.2 The second
plaintiff against the first and second defendants jointly and
severally for:
68.2.1 Payment of
the sum of R1 400 000.00;
68.2.2 Payment of
the interest on the sum of R1 000 000.00 at the rate of 3% per month
compounded monthly from 11 January 2008 to
date of final payment;
68.2.3 Payment of
interest on the sum of R400 000.00 at the rate of 3% per month
compounded monthly from 14 April 2008 to date of
final payment.
68.3 The third
plaintiff against the first and second defendants jointly and
severally for:
68.3.1 Payment of
the sum of R350 000.00;
68.3.2 Payment of
the interest on the sum of R350 000.00 at the rate of 3% per month
compounded monthly from 11 January 2008 to
date of final payment.
68.4 The fourth
plaintiff against the first and second defendants jointly and
severally for:
68.4.1 Payment of
the sum of R940 000.00;
68.4.2 Payment of
the interest on the sum of R500 000.00 at the rate of 3% per month
compounded monthly from 11 January 2008 to
date of final payment;
68.3.3 Payment of
interest on the sum of R440 000.00 at the rate of 3% per month
compound monthly from 31 May 2008 to date of final
payment.
68.5 In addition,
the first and second defendants are ordered to pay the costs of all
four the plaintiffs. The costs are to include
the costs of two
counsel where two counsel were employed, one of which is a senior
counsel.
[69] I request the
Registrar of this Court to forward a copy of all documents that
served before this court and this judgment, to
the Law Society of the
Northern Provinces as well as the Financial Services Board.
WEPENER J
JUDGE OF THE HIGH
COURT
COUNSEL FOR THE
PLAINTIFF: Adv Stephan du Toit SC
Adv H F Oosthuizen
PLAINTIFF’S
ATTORNEYS: Alan E Warrener Attorneys
COUNSEL FOR THE
DEFENDANT: Adv J F Roos SC
Adv SS Cohen
DEFENDENT’S
ATTORNEYS: Larry Marks Attorneys
DATES OF HEARING:
16 - 22 November 2010
COUNSEL FOR THE
PLAINTIFF: Adv Deon Cloete
PLAINTIFF’S
ATTORNEYS: Olivier & Malan Attorneys
COUNSEL FOR THE
DEFENDANT: Adv S S Cohen
DEFENDENT’S
ATTORNEYS: Michael Salomon & Associates
DATES OF HEARING:
28 - 31 January 2013
DATE OF JUDGMENT:
8 February 2013