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[2015] ZASCA 158
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Griffiths v Janse van Rensburg NO (20269/2014) [2015] ZASCA 158; [2016] 1 All SA 643 (SCA); 2016 (3) SA 389 (SCA) (26 October 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20269/2014
In the
matter between:
JONATHAN
BRIAN
GRIFFITHS
APPELLANT
and
JACOBUS
HENDRIKUS
JANSE
VAN RENSBURG NO
FIRST
RESPONDENT
ROMANA
BERNADETTE KNUTH NO SECOND
RESPONDENT
Neutral
citation:
Griffiths
v Janse van Rensburg NO
(20269/2014)
[2015] ZASCA 158
(26 October 2015)
Coram:
Shongwe, Pillay, Petse and Saldulker
JJA and Gorven AJA
Heard
:
1
September 2015
Delivered:
26
October 2015
Summary:
Insolvency ─
dispositions ─ requirement in s 29 of the Insolvency Act
that dispositions must be made in the ordinary
course of business ─
broad test restated and applied ─ dispositions made pursuant to
void contracts ─ test
not satisfied ─ dispositions
correctly set aside ─
mora
interest on an award setting aside such disposition under s 32(3)
of the Insolvency Act ─ debt arises only on judgment
─ no
amount due before judgment on which
mora
interest can run ─
mora
interest to run only from date of judgment.
ORDER
On
appeal from:
Eastern
Cape Local Division of the High Court, Port Elizabeth (Brooks AJ
sitting as court of first instance), judgment reported
sub
nom Janse van Rensburg NO & another v Griffiths
[2014] 2 All SA 670
(ECP).
1 The appeal
is dismissed with costs.
2 The
cross-appeal is dismissed with costs.
JUDGMENT
Gorven
AJA (Shongwe, Pillay and Saldulker JJA concurring):
[1]
This matter concerns four payments made to the appellant (Mr
Griffiths) by the Usapho Trust (the Trust),
which was established in
terms of the Trust Properties Control Act.
[1]
The payments followed two agreements to make what the parties termed,
and I shall term, investments with the Trust. These were,
in law,
contracts of loan. The Trust was the vehicle through which Maureen
Clifford and her associates operated a pyramid scheme.
The
investments were made in the scheme, which later collapsed. The Trust
was sequestrated on 24 September 2000. The
respondents are
the trustees in insolvency of the Trust. I shall refer to them as the
trustees. To avoid confusion, I shall refer
to actions of the
trustees appointed under the Trust Property Control Act to administer
the Trust and who did so prior to sequestration
as actions of the
Trust.
[2]
Ms Clifford and others were convicted in a criminal trial which
followed the sequestration. In the court below, the trustees brought
an action which included a claim based on s 29 of the Insolvency
Act (the Act)
[3]
to set aside the four payments made
to Mr Griffiths.
[2]
Section 29(1) reads as follows:
‘
Every
disposition of his property made by a debtor not more than six months
before the sequestration of his estate or, if he is
deceased and his
estate is insolvent, before his death, which has had the effect of
preferring one of his creditors above another,
may be set aside by
the Court if immediately after the making of such disposition the
liabilities of the debtor exceeded the value
of his assets,
unless
the person in whose favour the disposition was made proves that the
disposition was made in the ordinary course of business and
that it
was not intended thereby to prefer one creditor above another.’
[4]
The onus
to prove all the issues dealt with in this section up to the proviso
introduced by the word ‘unless’, rests
on the party
attempting to set aside the disposition. If this onus is discharged,
the onus then shifts to the person wishing to
retain the disposition
to prove the last two issues.
[3]
After a number of conferences were held in terms of rule 37 of the
Uniform Rules of Court, the following
matters were agreed. The
payments were dispositions by the Trust. They were made less than six
months before the Trust was sequestrated.
The payments had the effect
of preferring Mr Griffiths above other creditors. After each of the
payments was made, the liabilities
of the Trust exceeded its assets.
Agreement on these matters had the effect of discharging the onus on
all of the issues required
to be proved by the trustees.
[4]
The onus thus shifted to Mr Griffiths to prove both components of the
proviso. These were that the dispositions
were made in the ordinary
course of business and that when the payments were made there was no
intention to prefer Mr Griffiths
over other creditors. The trustees
admitted the second of these. Accordingly, the only remaining issue
at the trial was whether
the payments were made in the ordinary
course of business.
[5]
It is necessary to set out the relevant facts concerning the
payments. Mr Griffiths made two investments
of R100 000 each.
The first was made on 15 December 1999. As seems to be
customary in pyramid schemes, the first
loan was repaid on the due
date of 23 March 2000. It was paid by a cheque in the sum
of R100 000 drawn on the account
of the Trust and deposited by
Mr Griffiths into his account on 27 March 2000. Along with
that payment, an amount of R12 000
was paid in cash in respect
of agreed interest. This amounted to interest at a rate slightly
higher than 42 percent per annum.
The second investment was
made by Mr Griffiths on 6 April 2000. That was repaid on
3 June 2000, three
days after the agreed date. The capital
of R100 000 was deposited by the Trust into the account of Mr
Griffiths. Here, too,
he was separately paid cash of R12 000 in
respect of agreed interest. This amounted to interest at a rate
higher than 74 percent
per annum.
[6]
The following was also agreed. The business being carried on by the
Trust prior to its sequestration
was that of a pyramid scheme. The
investments were occasioned by the false and fraudulent
representations of Ms Clifford and her
associates, who acted on
behalf of the Trust. These included representations to the effect
that the scheme was viable, lawful,
not in contravention of any
statutory or regulatory provisions, not a pyramid scheme and that the
deposits would be utilised by
the Trust to purchase from certain
estate agents their rights to commissions which had been earned but
not yet paid. These rights
would be purchased from the estate agents
at a premium relative to the commissions to be earned. The Trust
would thus earn sufficient
profits to enable it to repay the
investments and the agreed interest at rates which were, in certain
cases, usurious. However,
Ms Clifford and her associates were aware
that the investments would be used to fund repayment to other
investors together with
interest thereon. It was admitted that the
scheme was unlawful as being a pyramid scheme, that the business
contravened the provisions
of s 11(1) of the Banks Act
[5]
and that it constituted a harmful business practice as envisaged in
paragraph 2 read with paragraph 1.1 of the notice
[6]
in terms of s 12(6)(iii) of the Consumer Affairs (Unfair
Business Practices) Act.
[7]
[7]
At the trial the parties agreed that a transcript of the evidence led
in the criminal trial could be
admitted as evidence without formal
proof. This also applied to a transcript of the evidence given by Mr
Griffiths at an insolvency
enquiry before the Master. In his evidence
Mr Griffiths testified that he had been referred to the Trust by a
bank employee. He
never actually met any of the people involved. When
he had contact with a person representing the Trust, he was told to
deposit
R100 000 into a particular bank account and that he
would receive R12 000 in interest after three months. He
struggled
to obtain payment on both occasions. For the first
investment, he received no documentation. For the second, he obtained
an acknowledgement
of debt which was only issued to him after he had
applied ‘considerable duress’. Although he did not know
the details
of the scheme, he was aware that it had something to do
with estate agents and, as he put it, decided to take a chance.
[8]
In the particulars of claim, the trustees pleaded, and it was
admitted, that there were four separate
dispositions: two of capital
and two of interest. The trustees alleged that Mr Griffiths was a
creditor of the Trust and that the
dispositions in question should be
set aside. His plea was to the effect that he was a creditor ‘.
. . based on an enrichment
cause of action against the Usapho Trust
for repayment of capital monies paid to such trust by the Defendant
in terms of an illegal
and void agreement (alternatively
agreements).’ He went on to plead that the Trust had a legal
obligation to repay the amounts
because the agreements were void and
illegal and that the obligation to repay arose when Mr Griffiths made
the investment payments.
[9]
Although the effect of the plea is that all four of the impugned
dispositions were made in the ordinary
course of business, it was
conceded on appeal that this was not true of the two amounts of
R12 000 representing interest.
Mr Griffiths accordingly acceded
to an order setting these aside. What thus remained in issue before
us was whether Mr Griffiths
proved that the two dispositions of
capital were made in the ordinary course of business and should thus
avoid the same fate. Since
there is no issue relating to the interest
amounts, the payments of the two capital sums will henceforth simply
be referred to
as the dispositions.
[10]
Brooks AJ in the Eastern Cape Local Division, Port Elizabeth, found
that neither the dispositions nor the
interest payments had been made
in the ordinary course of business. He set all four dispositions
aside and ordered Mr Griffiths
to pay R224 000 along with
interest from the date of judgment and costs. This appeal is with his
leave as is also the cross-appeal
against his failure to order
interest to run from the date of service of the summons rather than
from the date of judgment.
[11]
There has been much judicial comment on what is meant by the phrase
‘the ordinary course of business’.
It is not necessary to
rehearse all of it. This court has been consistent over many years in
the test to be applied. The test is
an objective one. The disposition
should be evaluated in the light of all relevant facts. This must be
done on a case by case basis.
Put traditionally, the disposition ‘.
. . must be one which would not to the ordinary [person] of business
appear anomalous
or unbusinesslike or surprising.’
[8]
The question is whether ordinary, solvent, businesspeople would, in
similar circumstances, themselves act as did the parties to
the
transaction.
[9]
Consideration should not be given to any intention to prefer or to
the fact that the party making the disposition was insolvent
at the
time since these are considered separately under other parts of the
section.
[10]
T
he question to be
answered is whether the
transaction
is one ‘with conventional terms which ordinary businesspeople
would normally have concluded under the given circumstances’.
[11]
In other words, t
he
disposition in question should not cause wrinkled noses or raised
eyebrows among solvent businesspeople who know the circumstances
in
which it was made.
[12]
The most recent judgment of this court dealing with the issue is
Gazit Properties v
Botha & others NNO
.
[12]
In that matter, the principles summarised above were accepted and
some of the dicta were referred to. Despite this, the trustees
submitted in the court below, and in this court, that
Gazit
Properties
narrowed
the test accepted by this court over the years. They submitted that
‘. . . it appeared to apply a
narrow test
requiring a close scrutiny of the disposition in question there,
viewed against the background of its
causa
– this despite earlier in the judgment referring with approval
to the strong authority, emanating from this honourable court,
espousing a broad test.’
[13]
The salient facts in
Gazit
Properties
were as
follows. A company, Malokiba Trading 19 (Pty) Ltd, which contravened
the Banks Act by procuring loans from the public without
being
registered as a bank, had borrowed money from Gazit Properties. Under
the loan, Gazit Properties would be paid interest of
2,5 percent of
the loan capital monthly. The agreement would remain in force
indefinitely but, after three months, could be cancelled
by either
party on 45 days’ notice. Gazit Properties gave the
requisite notice and demanded repayment, whereupon the
capital and
interest was paid. In contending that the disposition had not been
made in the ordinary course of business, the liquidators
originally
relied on contentions that the business was irregular in three
respects: it contravened the Banks Act; it constituted
a prohibited
pyramid scheme; and the interest rate paid was usurious. They
ultimately relied only on the contravention of the Banks
Act.
[14]
The trial court in that matter upheld the contentions of the
liquidators, which ‘laid heavy emphasis
on the fundamental
contamination . . . of the transaction whereby
Malokiba repaid the loans’. In essence,
the trial court there
found that a ‘tainted’ business model of necessity had
the result that no dispositions of that
business could be said to
have been made in the ordinary course of business.
[13]
This court disagreed. Whilst accepting that the scheme contravened
the Banks Act, it held that Malokiba had made the payments in
accordance with its obligations arising from valid loan
agreements.
[14]
This accords with the approach over the years that:
‘
.
. . [I]t must necessarily be a paramount principle of “business”
that . . . debts should be paid according to the
tenour of the
contract.’
[15]
[15]
In the present matter, Brooks AJ held that
Gazit
Properties
had
applied the well-worn broad test. I agree with this. In my view, the
submission that it narrowed the test accepted by this
court over the
years holds no water.
[16]
Brooks AJ went on to distinguish the facts in the present matter from
those in
Gazit
Properties
. This
was correct because the investment agreements in the present matter
were illegal and void whereas the loan in
Gazit
Properties
was
valid and enforceable. However, he went on to find that, because of
the ‘illegality of the business operations, the manner
in which
participation therein was secured and the exorbitant returns on
“
investment
”
alone’,
[16]
the dispositions were not made in the ordinary course of business. In
this he relied on a dictum that for a disposition to be made
in the
ordinary course of business, it must be ‘a lawful or valid
disposition made in the ordinary course of lawful business’.
[17]
[17]
In my view, this dictum goes too far and fails to appreciate the true
focus of the enquiry. The need for
a lawful disposition is
uncontroversial. It is clear that ordinary, solvent people of
business do not conclude unlawful agreements,
or attempt to obtain
unlawful dispositions. But when it comes to a requirement that the
disposition must be made in the course
of a lawful business, I cannot
agree. The inadequacy of this approach may be illustrated by the
following example. In the present
matter, the Trust was conducting an
unlawful business. If, as is possible, the Trust had leased premises
and concluded an agreement
with the municipality for the provision of
electricity, water and other services, it could hardly be contended
that all payments
of rental to the landlord and those under the
agreement with the municipality would be impeachable as not having
been made in the
ordinary course of business.
[18]
It seems to me that what the cases primarily focus on, and what was
overlooked in
Klerck
v Kaye
, is the
nature of the business relationship between the insolvent and the
recipient at the time the disposition was made, rather
than the
general nature of the business undertaken by the insolvent.
Thus,
in
Gazit Properties
,
although the manner in which the business in question was conducted
fell foul of the Banks Act, the relationship between the parties
was
one constituted by an enforceable contract of loan. The disposition
was the repayment of the loan in accordance with the terms
of the
contract.
Ordinary,
solvent, businesspeople would not shrink from such a transaction.
[19]
Case law lends support to this approach. Two examples of dispositions
that failed the test will be referred
to.
[18]
Estate Wege v
Strauss
[19]
dealt with the business of a bookmaker. A debt to a bookmaker was
held not to be illegal but could not be enforced in court.
[20]
The bookmaker normally required immediate repayment of a betting debt
but allowed debts of the insolvent to stand over for an indefinite
period. When the insolvent paid the debt, this court held:
‘
It
is not in the ordinary course of a bookmaker's business to allow the
settlement of debts due by a client to stand over for an
unlimited
period. If this is done, and a client whose liabilities exceed his
assets pays a betting debt long overdue, he does not
do so in the
ordinary course of betting business . . .’.
[21]
What is
apparent from this passage is that had the payment been made
immediately, which is the ordinary requirement of the business
relationship between a bookmaker and a client, it would have been
accepted as having been made in the ordinary course of business.
Payment of a debt is, after all, what is ordinarily required by a
business.
In view of
the particular business relationship between the bookmaker and the
insolvent, however, it was held that the payment in
question was not
made in the ordinary course.
[20]
In similar fashion, in
Paterson
NO v Trust Bank of Africa Ltd
,
[22]
an insolvent attorney, a potential purchaser of his practice and a
banker concluded an agreement whereby the banker granted an
overdraft
facility to the purchaser to provide the funds to purchase the
practice. The overdraft facility was granted on condition
that the
funds went into the overdrawn account of the insolvent attorney held
with the bank in question. This court accepted that
a tripartite
agreement was, at face value, a normal banking transaction. The
question was whether the clause in the agreement requiring
that the
funds loaned to the purchaser be paid into the insolvent’s
overdrawn account, was a clause arising in the normal
course of
business. This court held that it was not. The disposal of the
practice was therefore set aside.
[21]
The court below accordingly erred in applying the dictum in
Klerck
v Kaye
. This caused
it to focus on the general nature of the business conducted by the
Trust. It therefore failed to fully analyse and
to give due weight to
the relationship between Mr Griffiths and the Trust. As a result, it
also misconstrued the basis on which
Mr Griffiths contended that he
was entitled to retain the two capital sums forming the dispositions.
[22]
In
Fourie NO &
others v Edeling NO & others
,
[23]
it was held, in relation to such a scheme:
‘
All
loans made to the scheme were – in the light of at least the
provisions of section 11 of the Banks Act 94
of
1990 and a prohibition under the Consumer Affairs (Unfair
Business Practices) Act 71 of 1988 – illegal and therefore
void; this proposition of law is uncontested.’
[24]
The
agreement by the parties to this matter, that the investments were
illegal and void, accords with that dictum. In those circumstances,
‘[t]
he scheme
never had the least entitlement to retain investors’ money
until the date which had supposedly been agreed as the
due date for
repayment.’
[25]
In
Gazit
Properties
, over
and above its finding that the payment was made in terms of the loan
agreement and therefore in the ordinary course of business,
this
court said that if the loans in that matter had been void ‘the
money had to be repaid by the company on demand’.
[26]
That is in principle correct. Where payments are made pursuant to
void agreements, a claim for repayment would ordinarily lie under
the
condictio ob turpem
vel iniustam causam
,
which is one of the enrichment actions.
[23]
Mr Griffiths submitted that the dictum in
Gazit
Properties
applies
foursquare to the facts of the present matter. As was clear from the
plea, Mr Griffiths contended that he was a creditor
of the Trust by
virtue of the
condictio
.
He disavowed being a creditor pursuant to the investment agreements.
He submitted that, on the basis of the
condictio
,
the claims would have lain against the Trust for immediate repayment
of the two capital sums.
[24]
On the face of it, the only defence to such an action would have been
if it were shown that Mr Griffiths
had acted
ex
turpi causa
and if
the court declined to relax the rule
in
pari delicto potior est conditio defendentis
.
It is by no means self-evident that a person in Mr Griffiths’
place would have been aware of the illegality. As has been
stated,
such schemes attract investors because ‘history . . . teaches
us that in the human breast greed
and gullibility are often partners.
It is on these twin weaknesses that all confidence-tricksters trade;
and not a few flourish.’
[27]
The trustees readily conceded that there was no evidence that Mr
Griffiths acted
ex
turpi causa
or had
any knowledge that the investments were tainted.
The
trustees did not seek to advance the case that Mr Griffiths knew that
the transactions were unlawful either in the court below
or in this
court.
There is
therefore no issue concerning the relaxation of the
par
delictum
rule.
[25]
Would a payment under the
condictio
qualify as one which was made in the ordinary course of business?
I
am prepared to accept for present purposes that had he made claims
under the
condictio
they would have
been enforceable.
Such
claims would have arisen at the time that he made each of the
investments.
If the
directors of a company discover that employees are conducting a
pyramid scheme along with other legitimate business, the
duty of the
directors would be to immediately halt the scheme and repay the
amounts received pursuant to it.
Similarly,
if a person has invested in an unlawful scheme and discovered this
fact the natural reaction would be to demand repayment
of their
investment, not in terms of the unlawful scheme but under the
condictio
.
If repayments were made in those circumstances they would be
dispositions arising from lawful,
enforceable, obligations on the part of the company to the investors
in the scheme. To my mind,
ordinary, solvent, businesspeople, aware
of the illegality of the loans, would have seen nothing extraordinary
or untoward about
a repayment on the basis of the
condictio
– indeed, they would have expected it.
[26]
Mr Griffiths accepted that, if the capital and interest had been paid
together in a single payment, a single
disposition would have been
made which would not have been enforceable under the
condictio
.
He did so because the dispositions relating to interest were made
without any legally enforceable obligation for the Trust to
make
them. They could not fall under the
condictio
and could only have derived from the void investment agreements. The
submission as regards the interest is correct, but illustrates
the
fallacy of Mr Griffiths’ approach. He focuses on what, properly
conceived, might have been a lawful basis for the dispositions
if he
had invoked it.
In
doing so he ignores and thereby seeks to avoid the true basis upon
which the payments were actually made.
[27]
The focus, however, must be on the dispositions themselves
.
As was said in
Fourie’s
Trustee v Van Rhijn
:
[28]
‘
The
disposition is either in the ordinary course of business, or it is
not; the standard is a concrete and objective one, and it
has regard
to the "disposition." The disposition is the transaction
taking place between payor and payee’.
In
regarding the dispositions, a court looks at the ‘substance and
not the mere description of the transaction’.
[29]
[28]
What, then, were the ‘transactions’ which took place
between the Trust and Mr Griffiths at the
time the dispositions were
made? Mr Griffiths was unaware that the investment agreements were
void when he demanded the payments.
He was, therefore, unaware that
he had a valid claim under the
condictio
.
He accordingly did not invoke the
condictio
as the basis for demanding the payments. The demands were made, and
acceded to, for payment of the agreed amounts under the void
investment agreements. All four payments were made within the same
factual matrix. It is not open to Mr Griffiths to argue that,
if he
had invoked the
condictio
,
the payments would have been made in the ordinary course. On a
factual level, he did not do so. He demanded the full amounts due
under the void investments, which happened to be paid in four, rather
than two, sums.
The
payments, and hence the dispositions, were made by the Trust as
payments due in respect of the repayment of the investments,
not
under the
condictio
.
[29]
If, immediately before the payments were demanded and made, Mr
Griffiths had become aware of the illegality
and demanded and
received payment of only the capital on the basis of the
condictio
,
he would have been in a different position. The business relationship
between him and the Trust would then have been one arising
from the
condictio
.
But it is impermissible to apply an
ex
post facto
,
theoretical overlay to the dispositions. The ‘transactions’
arising from the business relationship between Mr Griffiths
and the
Trust at the time arose from the void agreements, not from the
condictio
.
[30]
In
Jacobson and Co’s
Trustees v Jacobson and Co
,
[30]
De Villiers AJA said the following:
‘
Now
before the Court would be entitled to say that the disposition was in
the ordinary course of business it would have to be satisfied
that it
is in possession of all the facts, for only then would it be in a
position to decide whether the contracts themselves,
which form the
basis of the transaction, are genuine; since a delivery that rests on
a contract which itself is open to question
cannot be said to be a
delivery in the ordinary course of business.’
The test
is objective and considers whether, at the time and in the
circumstances in which they were made, the dispositions gave
effect
to a valid underlying
causa
.
The transactions in the present matter are hit by the dictum in
Jacobson
.
The
payments were made
under the
investment
agreements. The dispositions must accordingly be treated on the same
footing as the interest payments because they were
part of the same
transactions.
[31]
In my view, applying the broad, objective test to the facts of this
matter, the repayments of the capital
amounts did not take place in
the ordinary course of business. Therefore, not only the dispositions
relating to interest, but also
those relating to capital, were
correctly set aside. The appeal must fail.
[32]
As regards the cross-appeal, the trustees submitted that the order of
the court below ought to be varied
‘to allow for the payment of
mora
interest on the judgment debt, from date of service of summons to
date of payment (the proper order, although not claimed, should
have
been interest from date of the disposition)’. They submitted
that the court below erred in ordering interest to run
only from the
date of judgment.
[31]
Judgment was handed down on 25 March 2014.
[33]
The trustees based this submission on s 32(3) of the Act which
reads as follows:
‘
When
the Court sets aside any disposition of property under any of the
said sections, it shall declare the trustee entitled to recover
any
property alienated under the said disposition or in default of such
property the value thereof at the date of the disposition
or at the
date on which the disposition is set aside, whichever is the higher.
’
The
submission developed along the following lines. Property is defined
in the Act as movable or immovable property.
[32]
This broad definition includes money. Where the actual property
cannot be restored, the greater of its value at disposition and
that
at judgment must be restored. Where the property is money, it was
submitted, ‘. . . the money itself can no longer be
recovered
(unless the money was enclosed in a receptacle or sealed in some
way).’ The payment of
mora
interest is ordered so as to compensate a creditor for the loss
suffered by not receiving payment on the due date.
[33]
The section therefore implicitly refers to interest being recoverable
on dispositions sounding in money from the date of the disposition.
[34]
In making this submission, the trustees sought to distinguish
Janse
van Rensburg & others NNO v Steyn
,
[34]
where this court disallowed a claim for
mora
interest from the date of service of the summons. In the alternative,
they submitted that
Janse
van Rensburg
was
wrongly decided and invited us to depart from it.
[35]
In
Janse van
Rensburg
this court
dealt with a prayer claiming interest
a
tempore morae
.
[35]
The issue was when the
mora
period began to run. The concept of
mora
relates to the time at which an obligation is due. If, for example, a
contract requires payment to be made by a certain date and
the party
required to perform it fails to do so, that party is said to be in
mora
,
or breach, of that obligation. That is an example of
mora
ex re
and interest
a tempore morae
would run from that date. Where a contract does not fix a time and,
after a reasonable time has elapsed, one party demands payment,
the
demand places the debtor in
mora
.
This is an example of
mora
ex persona
. When
that demand is made by the service of a summons, the
mora
ex persona
would
run from the date of service. In either instance, the debtor is not
in
mora
until the payment is due. As regards unliquidated debts, the common
law has been varied by s 2A of the Prescribed Rate of
Interest
Act.
[36]
This provides for interest to run from the date of demand, subject to
a court’s discretion.
[37]
[36]
Duet and Magnum
Financial Services
CC (in Liquidation) v Koster
[38]
decided the issue of when an obligation to pay arises under the
sections of the Act in question, albeit in the context of
prescription.
This court there found that the liquidators were
‘entitled to have a declaration made by a court that brings a
debt into
existence’.
[39]
There is no debt in existence, and therefore no obligation to pay,
until an order is made. Therefore,
Janse
van Rensburg
found,
no interest can run from before the date of judgment. This is because
the term
a tempore
morae
cannot refer
to a time prior to when the debt arises.
[37]
The trustees relied on the principle articulated in
Bellairs
v Hodnett and another
,
[40]
to the following effect:
‘
It
may be accepted that the award of interest to a creditor, where his
debtor is
in mora
in
regard to the payment of a monetary obligation under a contract, is,
in the absence of a contractual obligation to pay
interest, based
upon the principle that the creditor is entitled to be compensated
for the loss or damage that he has suffered
as a result of
not receiving his money on due date . . .’.
[41]
But this
does not apply to debt under s 29 of the Act. In
Bellairs
,
the debtor was in
mora
prior to judgment. In such a case, a creditor would suffer a loss if
interest were not to run from due date to date of judgment.
Put
simply, however, in the present matter, the due date is the date of
judgment. If interest runs from that date, the loss envisaged
in
Bellairs
cannot be suffered.
[38]
The trustees contended that
Janse
van Rensburg
was
wrong in its finding that ‘the ordinary incidence of demand by
means of service of the summons giving rise to
mora
ex persona
must
yield to the effect’ of s 32(3) of the Act.
[42]
All that this means, however, is that demand by service of a summons
in an action to set aside a disposition under one of these
sections
does not give rise to
mora
ex persona
. This is
because, as was explained in
Duet
and Magnum
, the
debt only comes into being at the time of a court’s declaration
to that effect. The debt is not one arising from contract
or delict.
It is a statutory debt. A demand does not place the person to whom a
disposition has been made in
mora
since there is, at the time of demand, no debt to enforce and no
payment due.
Janse
van Rensburg
explained that ‘the debtor is in
mora
only from date of judgment.’
[43]
Far from the finding in
Janse
van Rensburg
being
clearly wrong, it was, in my respectful view, entirely correct.
[39]
The trustees went on to submit that, in
Janse
van Rensburg
, this
court should have found that the section ‘. . . implicitly
enjoins a court to order the payment of interest on restored
monies
in respect of an impeached transaction as from the date of the
disposition.’ This submission rests on the assertion
that money
must have lost value between the date of disposition and the date of
judgment. But this confuses two situations. The
first claims ‘
mora
interest on the judgment debt, from date of service of the summons’.
This is what was relied on by the trustees and has been
dealt with
above.
[40]
The second situation would arise where judgment is claimed in an
amount exceeding the amount of the disposition
because of a reduction
in the value of money between the date of disposition and the date of
judgment. It is clear that the object
of s 32(3) is to ensure
that the property brought back into the estate for the benefit of
creditors has not diminished in
value. It may be that a case could be
made out for an increased award in certain circumstances where money
forms the disposition.
Judgment could then be granted for payment of
a higher amount. Interest would run on that higher amount from date
of judgment according
to the principle in
Janse
van Rensburg
. But
the trustees did not contend for this at the trial or on appeal.
Whether such a case can be made out, and the correctness
of the
reasoning of the trustees referred to in paragraph 32 hereof, must
therefore be left for decision at a time when these issues
arise
squarely. No finding on them can be made in this matter. The
cross-appeal must therefore be dismissed with costs.
[41]
The following order is made:
1 The appeal
is dismissed with costs.
2 The
cross-appeal is dismissed with costs.
___________________
T
R Gorven
Acting
Judge of Appeal
JUDGMENT
Petse
JA (dissenting)
[42]
I have had the privilege of reading the judgment of Gorven AJA. On
most of his views I am in respectful agreement.
I, too, agree that
the cross-appeal must fail for the reasons that he gives. But on some
other issues relating to the main appeal
I respectfully disagree with
my learned colleague. Regrettably, our differences of opinion lead to
divergent results.
[43]
In what follows I deal with the points of disagreement. The facts of
this case have been summarised in the
judgment of my learned
colleague and will not be repeated in this judgment save to the
extent necessary to promote a better understanding
of this judgment.
[44]
In his judgment, Gorven AJA readily accepts (in para 24 above): (a)
that there was no evidence that the appellant
had acted
ex
turpi causa
or had
knowledge that the investments were somehow tainted, hence the
question of the relaxation of the
par
delictum
rule did
not apply; (b) that had the appellant made his claims under the
condictio
such
claims would have been enforceable in relation to the capital amounts
invested in the scheme; and (c) that had the payment
to the appellant
been made in a single transaction a claim under the
condictio
would not have been enforceable. And, despite the fact that the Trust
paid the interest separately from the payment of the capital
amounts
the appellant could not succeed because all the payments made to him
by the Trust were made pursuant to the underlying
agreements.
Consequently, Gorven AJA holds that the appellant could not, long
after those payments were made, seek to rely on the
condictio
for to do so would have the effect of avoiding ‘the true basis
upon which the payments were actually made’. (Para 28-30
above.)
[45]
Put differently, my learned colleague considers that since the
appellant was not aware that his investment
agreements with the Trust
were void, it was not open to him
ex
post facto
to fall
back on the
condictio
when in actual fact he had demanded ‘the full amounts due under
the void investments’ and not under the
condictio
.
For this conclusion my learned colleague relies on
dicta
in some decisions of our courts which he cites in support of his
finding.
[44]
(Para 27 and 29 above.)
[46]
On the basis of the passages cited by my learned colleague he
concludes that on the facts of this case, the
repayments of the
capital amounts to the appellant were not made in the ordinary course
of the business of the insolvent Trust.
With respect I find myself
unable to subscribe to this view. On the facts of this case, I cannot
discern anything which suggests
that the two payments made in respect
of the capital amounts invested with the Trust were not made in the
ordinary course of the
business of the Trust. And, there is, in my
view, nothing that suggests that ‘the contracts themselves,
which form the basis
of the transactions’, are not otherwise
‘genuine’. Nor can it be said that the dispositions
‘rest[ed] on
a contract which itself is open to question’.
It is after all trite that in applying the
‘ordinary-course-of-business’
test, a court must have
regard not only to the terms of the disposition itself but also to
the circumstances in which such disposition
was made. (See for
example in this regard
Pretorius’
Trustee v Van Blommenstein
1949 (1) SA 267
(O) at 273 and 277.)
[47]
Both in this court and the court a quo the appellant heavily relied
on
Gazit
Properties
[45]
in contending that
the two payments representing the capital amounts were made in the
ordinary course of business. There this court
held that the fact that
Malokiba (that is the insolvent) had conducted the business of a bank
in contravention of s 11(1) of the
Banks Act 94 of 1990 did not taint
the loan agreements. It went on to state that Gazit Properties ‘was
vested with a contractual
right to be repaid as soon as it cancelled
the loan agreements. . . ’ and that Malokiba ‘concomitantly
had a contractual
obligation to make the payment’. And that the
fact that Malokiba had ‘contravened the [Banks] Act [did] not
mean that
the loan agreements were not normal agreements. . .’
[48]
How then, it may be asked, could the appellant be expected to invoke
the
condictio
when he demanded payment if he was unaware of the illegality of the
business conducted by the Trust? He would surely not have been
aware
that (to borrow the phraseology adopted in the majority judgment)
‘the “transaction” arising from the business
relationship between [the appellant] and the Trust at the time arose
from void agreements, [and] not from the
condictio
’.
In my view the fact that the appellant ‘misconceived’ the
nature of his
causa
in making demand for repayment of the investment amounts is
understandable for, as I have already stated, he was not aware at
that stage that his agreements with the Trust were void.
[49]
I am fortified in this view by what was stated by this court in
Fourie NO v Edeling NO
[2004] ZASCA 28
;
[2005] 4 All SA 393
(SCA) para 13:
‘
The
scheme never had the least entitlement to retain investors’
money until the date which had supposedly been agreed as the
due date
for repayment. The perpetrators of the scheme knew the investments to
be illegal. There is, on the other hand, no evidence
that any of the
investors knew their investments to be tainted, nothing from which to
infer that any of them acted
ex
turpi causa.
That
being so, no question arises of relaxing the [
par
delictum
] rule. . .
Upon receipt of a
payment the scheme was liable promptly to repay it to the investor
who had a claim for it under the
condictio
ob iniustam causam
.
’
[46]
(My emphasis.)
[50]
Although these remarks were made in the context of a consideration of
s 30(1)
of the
Insolvency Act 24 of 1936
, they apply, by parity of
reasoning, with equal force to the facts of this case. The Trust upon
receipt by it of the payments made
by Mr Griffiths, ‘was liable
promptly to repay’ to him such moneys under the
condictio
ob iniustam causam
in respect of which he had a claim.
[47]
It is also instructive that in
Gazit
Properties
, whose
facts are comparable to the facts of this case, this court said the
following:
‘
Gazit
was entitled, had it become aware of the misrepresentation to cancel
the contracts. But until cancelled, [they] remained valid
and
enforceable and payment in [their] terms (especially by the guilty
party) could never be regarded as not being in the ordinary
course of
business.’
[48]
[51]
Accordingly I would uphold the appeal with costs. As already stated
at the outset I am in respectful agreement
with the order relating to
the cross-appeal.
_________________
X
M Petse
Judge
of Appeal
APPEARANCES:
For
Appellant:
E A S Ford
SC
Instructed by:
Pagdens Attorneys, Port Elizabeth
McIntyre & Van der Post,
Bloemfontein
For
Respondents:
S C Rorke SC (with him O R Ronaasen)
Instructed
by:
De Villiers Inc, Port Elizabeth
Christo Dippenaar Attorneys,
Bloemfontein
[1]
Trust Property Control Act 57 of 1988.
[2]
This is not strictly accurate since, except where
provided for by Statute, a trust is not a legal person. ‘[I]t
is an accumulation
of assets and liabilities’ which vest in
the trustees. A trust estate can therefore only act through the
trustees.
Land and Agricultural Bank of
South Africa v Parker & others
2005 (2) SA 77
(SCA) para 10.
[3]
Insolvency Act 24 of 1936
.
[4]
My emphasis.
[5]
Banks Act 94 of 1990.
[6]
Notice 1135 of 1999 in
Government
Gazette
No. 20169 of 9 June 1999.
[7]
Consumer Affairs (Unfair Business Practices) Act
71 of 1988. This was repealed by the
Consumer Protection Act 68 of
2008
but was in operation whilst the scheme was being conducted.
[8]
Malherbe’s Trustee v Dinner & others
1922 OPD 18
at 22.
[9]
Hendriks NO v Swanepoel
1962
(4) SA 338
(A) at 345A-346A.
[10]
See
Hendriks
at 342F-H and 345A-B.
[11]
My translation of the dictum of FA Grosskopf JA
in
Amalgamated Banks of South Africa
Beperk v De Goede & 'n ander
[1997]
ZASCA 30
;
1997 (4) SA 66
(SCA) at 78C-D: holding that the
transaction there met the test because it was one ‘met
gebruiklike terme wat gewone besigheidsmense
normaalweg onder die gegewe omstandighede sou aangegaan het.’
[12]
Gazit Properties v Botha & others NNO
[2011] ZASCA 199; 2012 (2) SA 306
(SCA).
[13]
Gazit Properties
para
7.
[14]
Ibid
para 9.
[15]
Fourie’s Trustee v Van Rhijn
1922 OPD 1
at 5, approved in the minority
judgment in
Hendriks
at 343A-D.
[16]
Paragraph 31, h
is
emphasis.
[17]
Per Scott AJ in
Klerck
NO v Kaye
1989 (3) SA 669
(C) at
676B-D.
[18]
There are numerous
similar
examples of judgments which focus on the particular business
relationship. See
Hendriks
(above note 7);
Jacobson and Co’s
Trustees v Jacobson and Co
1920 AD 75
;
Zeeman v Botha’s Trustee
1923 AD 167.
[19]
Estate Wege v Strauss
1932
AD 76.
[20]
Ibid at 81.
[21]
Ibid
at 85.
[22]
Paterson NO v Trust Bank of Africa Ltd
1979 (4) SA 992 (A).
[23]
Fourie NO & others v Edeling NO &
others
[2004] ZASCA 28; [2005] 4 All
SA 393 (SCA).
[24]
Ibid para 13.
[25]
Loc cit.
[26]
Gazit Properties
para
11.
[27]
Commissioner for Inland Revenue v Insolvent
Estate Botha t/a ‘Trio Kulture’
[1990]
ZASCA 2
;
1990 (2) SA 548
(A) at 554D-E.
[28]
Fourie’s Trustee v Van Rhijn
(note 13 above) at 5.
[29]
Per Kotze JA in
Zeeman
(note 17 above) at 174.
[30]
Note 17 above
at 79.
[31]
The prescribed rate of interest was varied from
15.5 per cent per annum to 9 per cent per annum as from 1 August
2014 (GN
R554, GG 37831, 18 July 2014). Judgment was handed down in
March 2014. As such, the rate of 15.5 per cent per annum applied.
The rate prescribed at the time when interest begins to run governs
the calculation of interest and does not vary if the prescribed
rate
is adjusted in the interim.
Davehill
(Pty) Ltd v Community Development Board
1988
(1) SA 290
(A) at 300G-302A.
[32]
Section 2.
[33]
Bellairs v Hodnett & another
1978 (1) SA 1109
(A) at 1145D.
[34]
Janse van Rensburg & others NNO v Steyn
[2011] ZASCA 71; 2012 (3) SA 72 (SCA).
[35]
Paragraph 18.
[36]
Prescribed Rate of Interest Act 55 of 1975
.
[37]
Section 2A(5)
gives a court that discretion.
[38]
Duet and Magnum Financial Services CC (in
Liquidation) v Koster
2010 (4) SA 499
(SCA).
[39]
Duet and Magnum
para
13.
[40]
Note 32 above.
[41]
Ibid at 1145D-F.
[42]
Paragraph 20.
[43]
Ibid
.
[44]
Fourie’s Trustee v Van Rhijn
1922 OPD 1
at 5;
Jacobson
and Co’s Trustees v Jacobson and Co
1920 AD 75
at 79.
[45]
Gazit
Properties v Botha & others NNO
[2011] ZASCA 199; 2012 (2) SA 306 (SCA).
[46]
This dictum was applied in
Gazit
Properties
(above) para 11.
[47]
De Groot
Inleidinge
3.1.15 (see also
D
50.17.206);
Pucjlowski v Johnston’s
Executors
1946 WLD 1
at 6; see also
Wilken v Kohler
1913 AD 135
at 145; Daniel Visser
Unjustified
Enrichment
(2008) at 16-24 and 85-90;
J C Sonnekus
Unjustified Enrichment in
South African Law
(2008) at 27;
Jacques du Plessis
The South African
Law of Unjustified Enrichment
(2012)
at 1-3.
[48]
Para 13.