Premier of Gauteng Province and Others v A Re Ageng Social Services (NGO) and Others (Kish Gas (Pty) Ltd Intervening), Premier of Gauteng Province and Others v A Re Ageng Social Services and Others (Kish Gas (Pty) Ltd and Another Intervening) (2016/41493; 2016/44645) [2017] ZAGPJHC 416 (31 October 2017)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2017
>>
[2017] ZAGPJHC 416
|

|

Premier of Gauteng Province and Others v A Re Ageng Social Services (NGO) and Others (Kish Gas (Pty) Ltd Intervening), Premier of Gauteng Province and Others v A Re Ageng Social Services and Others (Kish Gas (Pty) Ltd and Another Intervening) (2016/41493; 2016/44645) [2017] ZAGPJHC 416 (31 October 2017)

Links to summary

SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO:   2016/41493
In
the matter between:
THE
PREMIER OF GAUTENG
PROVINCE
First

Applicant
THE
MEMBER OF THE EXECUTIVE COUNCIL
SOCIAL
DEVELOPMENT (GAUTENG PROVINCE)
Second

Applicant
LIFE
RECOVERY CENTRE (RANDFONTEIN)
WITPOORT
TREATMENT CENTRE
(NGO)
Third

Applicant
LIFE
ESIDIMENI (PTY)
LTD
Fourth

Applicant
and
A
RE AGENG SOCIAL SERVICES
(NGO)
First

Respondent
ABSA
BANK LTD
(Registration
No:
1986/004794/069)
Second

Respondent
THE
BRANCH MANAGER
MRS
MARTIE MOSTERT
(ABSA
BANK - RANDFONTEIN
BRANCH)
Third

Respondent
KISH
GAS (PTY)
LTD
Intervening

Party/Fourth Respondent/
And
CASE
NO: 2016/44645
In
the matter between:
THE
PREMIER OF GAUTENG
PROVINCE
First

Applicant
THE
MEMBER OF THE EXECUTIVE COUNCIL
SOCIAL
DEVELOPMENT (GAUTENG PROVINCE)
Second

Applicant
LIFE
RECOVERY CENTRE (RANDFONTEIN)
WITPOORT
TREATMENT CENTRE
(NGO)
Third

Applicant
LIFE
ESIDIMENI (PTY)
LTD
Fourth

Applicant
and
A
RE AGENG SOCIAL SERVICES
(NGO)
First

Respondent
FIRST
NATIONAL BANK LTD
(a
Division of FIRSTRAND BANK
LTD)
Second

Respondent
KISH
GAS (PTY)
LTD
Intervening

Party/Third Respondent
THE
MEMBER OF THE EXECUTIVE COUNCIL
Intervening
Party/Fourth Respondent
FINANCE
(GAUTENG PROVINCE)
JUDGMENT
SPILG,
J
INTRODUCTION
1.
The case commenced with an urgent
ex parte
application t
o
recover an amount of R10 181 070 which it was alleged
the first respondent, A Re Ageng Social Services (”
ARA”)
,
had fraudulently appropriated out of its bank account.  Unless
otherwise necessary the amount will simply be rounded off
to R10.18
million.
2.
The applicants were identified as the Premier of Gauteng, the Member
of the Executive Council for Social Development; Gauteng
Province,
Life Recovery Centre Randfontein (Witpoort Treatment Centre) NGO and
Life Esidimeni (Pty) Ltd. They were cited respectively
as the first
to fourth applicants.
All
the applicants were represented by the State Attorney. This includes
Life Recovery and Life Esidimeni. The founding affidavit
did not
contain a supporting affidavit or a resolution filed by either Life
Recovery or Life Esidimeni. This was subsequently cured

after ARA took issue with the State Attorney’s entitlement to
represent private parties.
[1]
The
first two applicants will be referred to individually as
the
Premier
and the
MEC; Social Development
or collectively
either as  “
Social Development
” or “
the
department
”. The other applicants will be referred to as
“
Life Recovery”
and “
Life Esidimeni”
.
Aside
from ARA, the applicants also cited Absa Bank Ltd (‘
Absa”)
and its branch manager at Randfontein as the second and third
respondents.
3.
ARA is a registered not for profit organisation (“
NPO”
).
It  provides  shelters for abused women and children as
well as adult diversion programs and runs victim empowerment
centres
from a number of police stations.
4.
The applicants contended that ARA had agreed to act as a conduit for
monies which Social Development was paying out to Life Recovery
in
respect of a service level agreement. They alleged that ARA refused
to pay the R10.18 million it had received in its Absa bank
account to
Life Recovery or its administrator being Life Esidimeni but
unlawfully appropriated the amount for itself.
The
applicants also relied on an acceptance letter by ARA dated 22 June
2016 which Social Development contended was the underlying
agreement
pursuant to which its officials transferred the amount into ARA’s
account some four months later. This was relied
on as a legal basis
for recovering from ARA the full amount that had been appropriated
even if a portion was no longer traceable
into a bank account.
5.
ARA’s main defence is that it never claimed an entitlement to
the money and was willing to pay the amount over but because
of its
concerns regarding the possible irregular utilisation of its account
had requested Social Development to provide both proof
of source and
proof that the funds had been properly authorised to be paid over to
the intended service provider. ARA also contended
that the acceptance
letter of 22 June was unrelated to what it claims was an undisclosed
transfer of the R10.18 million into its
bank account on 18 October
2016.
Furthermore
ARA averred that after requiring such proof from Social Development’s
officials, but before the original ex
parte
application was
brought, R5 million was transferred out of its Absa account. It
claimed that the bank account was hacked or otherwise
compromised by
unauthorised persons.
Social
Development has continued to rely on its original cause of action
based on theft and a breach of the alleged agreement in
terms of
which ARA was to act as a conduit. It also contended that the
condictio
indebiti
applied
in that ARA was unjustifiably enriched as a result of the payment it
made under the mistaken belief that ARA  would
transfer the
amount to the intended beneficiary
[2]
.
6.
Since the grant of the original order and the disclosure of ARA’s
defences, this case has spawned numerous orders pursuant
to
applications and counterapplications brought by a number of parties,
including those not initially cited. The court file now
consists of
some 1200 pages and the several hearings resulted in the presentation
of over 180 pages of heads of argument.
7.
In part this may be attributed to an attempt by one or other party to
follow the money trail in the expectation that the R5 million

transferred out of ARA’s account may be recovered and may
reveal whether or not ARA can be linked to the recipients.
Furthermore
the parties considered it necessary to address the
serious allegations and counter allegations made by one or the other
of fraud,
money laundering, breaches of the
Public
Finance Management Act, 1 of 1999(the “
PFMA”
)
and alleged unlawful threats by officials of the department against
ARA which impact directly on the provision of basic social
services
to the most vulnerable in our society.
8.
Of the R10.18 million
which was transferred into ARA’s account an amount of
R5 137 244.08 remains unaccounted for
[3]
.
Social Development contends that it is entitled to obtain a final
order on the papers alternatively that the matter should
await the
outcome of a trial action to be instituted. ARA submits that the
application should be dismissed or referred to trial.
Each
party contends that, even if the matter is to be resolved by way of
trial, it is entitled to a special costs order.
Throughout the
proceedings the parties have sought costs orders on the attorney and
own client scale.
9.
It is best to start with an overview of the more relevant
applications and counterapplications brought by the parties who were

originally cited and those who have since intervened.
A.
Urgent
ex parte
application of 23 November
2016
10.
On 23 November 2016 the applicants obtained an urgent interim order
without notice (
ex parte
)under case no 41493/2016 freezing
monies standing to the credit of ARA at Absa Bank in the total sum of
R10 181 070.
The order was returnable on 31 January
2017.
11.
The applicants alleged that Social Development had transferred the
amount in question to ARA on 18 October 2016 under an agreement

which, it contended, required ARA to act as a conduit and immediately
pay over the sum received to Life Recovery and Life Esidimeni.
It
was averred that Life Esidimeni was “
responsible
to attend to the administration and management”
of
Life Recovery.
[4]
12.
In order to freeze ARA’s
account and have monies still standing to the credit of its account
with Absa paid back to the Premier
and the MEC: Social Development
the applicants relied on what may be loosely described as the theft
of monies by appropriation.
[5]
I
have already mentioned that the applicants also relied on a breach of
contract, being the alleged breach of the 22 June 2016 acceptance

letter, and the
condictio
indebiti
.
This was in order to support a claim for the recovery of any
shortfall either by way of a final order or by way of a separate

action to be instituted within 30 days.
[6]
It
was contended that the applicants had received information from an
anonymous source that “
the Directors of the First
Respondent
(i.e. ARA)
authorised that an amount of R5
million be transferred out of the said account  … in
order to settle outstanding debts
of the First Respondent due to
Absa...”
and that this amounted to common law theft.
It
is evident that the applicants relied on the real right to “
follow
”
their alleged funds and
recover them from any bank account to where it might be traced. This
explains why they also pursued claims
based on personal rights
flowing from an alleged agreement.
[7]
13.
The application came before Tsoka J who granted a rule returnable on
31 January 2017 in terms of which ARA and Absa were to
show cause why
the amount in issue, or any lesser amount standing to the credit of
ARA’s account with Absa, should not be
repaid and why they
should not be liable for the costs on an attorney and own client
scale.
B.
Urgent Application of 14 December 2016
14.
After Absa produced ARA’s bank statements the applicants were
able to ascertain that two large amounts had been transferred
out of
ARA’s account. The first amount, for R670 000, was
transferred on 19 October 2016 to an account held at First
National
Bank (“
FNB”)
.   The other for R5 million
was transferred on 10 November 2016 into a different account held at
FNB.
15.
This led to the
Applicants launching a second urgent
ex
parte
application
similar to the original one save that it was now directed at freezing
the monies that had been traced to the two FNB
accounts. Part B of
the notice of motion was for final relief in terms of which the
applicants sought repayment of these amounts
from ARA, Absa and the
ultimate recipient into whose account the amounts might be traceable,
alternatively that the applicants
be directed to institute action
proceedings within 60 days.
[8]
16.
On 14 December 2016 Wepener J granted a rule returnable on 31 January
2017 which required ARA, FNB or the relevant FNB account
holders to
show cause why the two amounts should not form part of the monies
that had been transferred into ARA’s account
and why they
should not be paid back to the Premier and the MEC; Social
Development.
C.
ARA’s Rule 6(12)(c) urgent application of 29 December 2016
17.
Although the previous orders had been served on Absa, ARA was only
served on 23 December.  Since the applications had been
launched
ex
parte
ARA elected to bring an application under rule
6(12) (c). It asked the court to reconsider the initial applications
and sought
revised orders;
a. Directing that the
amount held in ARA’s Absa account be transferred to the trust
account of the State Attorney until the
determination of the case on
31 January 2017;
b. Declaring that the
other amount, of R670 000, held at FNB belonged to ARA.
18.
After hearing argument it was evident that the amount of R670 000
was not traceable back to, and therefore did not form
part of, the
R10.18 million originally transferred by Social Development into
ARA’s account on 18 October 2016. Accordingly
ARA was entitled
to the declarator regarding that amount.
Pursuant
to an agreement between the parties the balance of the R10 181 070
which remained in ARA’s Absa account,
namely the sum of
R4 998 530.30, was transferred to the trust account of the
State Attorney. FNB was also required to
respond fully to the
subpoena
duces tecum
which had been issued on 14 December
2016. This was in order to ascertain the identity of the holder of
the account into which
the R5 million had been transferred and to
determine if any subsequent transfers could be traceable back to this
amount.
19.
Essentially the case made out by the applicants remained that ARA had
fraudulently transferred the amount into this as yet unidentified

account held at FNB, whereas ARA contended that the amount had been
transferred by unknown persons who had hacked into its account.
At
this stage the issue appeared to be limited to one of costs which I
reserved for argument on 13 January 2017. The date selected
would
afford the parties sufficient time to consider the bank statements
that FNB were subpoenaed to provide.
20.
For sake of completeness I set out the order made on 30 December:
1
Paragraph 2
of the Order granted on 14 December 2016 under case number 2016/44645
is hereby deleted and the hold placed on
account number 62627732424
at First National Bank Ltd is hereby lifted immediately.
2
It is
declared that the funds presently held in account number 62627732424
at First National Bank belong to A re Ageng Social Services
(NGO).
3
Paragraph 2
of the Order granted on 23 November 2016 under case number 2016/41493
is hereby deleted and the hold placed on
account number [...] held at
Absa Bank is hereby lifted immediately.
4
The sum
currently in that account, in the sum of R4 998 550.36, is
to be transferred to the trust account of the State
Attorney, the
details of which are the following:
Standard Bank Egoli
Branch
Account Number [...]
Branch Code: 001805
5
First
National Bank is ordered to respond fully to the subpoena duces tecum
issued under case no. 44645/2016 on 15 December 2016
on or before
13 January 2017.
6
The question
of costs is reserved for argument on 13 January 2017.
21.
At the hearing of 13
January 2017 the holder of the FNB account into which the amount of R
5 million had been transferred from ARA’s
account was
identified as Kish Gas (Pty) Ltd. The
rule
nisi
was
extended to 31 January 2017 and then again to 28 February 2017 in
order to enable the parties to file further affidavits. I
also
directed that the rule be served on FNB, Kish Gas, Mr Kishan
Jawaharal of Kish Gas and Kish Gas’ attorneys
[9]
.
Kish
Gas was also ordered to file such affidavits as it wished on the
merits of the application by no later than 13 February 2017.
[10]
22.
Kish Gas filed an
affidavit explaining how it came to receive the R 5 million. The bank
statement attached to the affidavit revealed
how all but R 45 275.56
was disposed of within a matter of 24 hours through some 26
individual transfers to ostensibly separate
recipients, although it
is evident that one of the payments went to a firm of attorneys
[11]
. Kish Gas tendered the amount that remained into the State
Attorney’s trust account pending the final determination of the

action that the applicants intended to bring for recovery of the
balance of the amount that had initially been transferred into
ARA’s
account on 18 October 2016.
The
rule in the main application was then extended from 28 February to14
March.
D.
Application by Kish Gas on 28 February 2017
23.
Aside from delivering an answering affidavit explaining how it dealt
with the R5 million that came into its account Kish Gas
also brought
an application to have its FNB account unfrozen.
24.
The applicants had no difficulty in doing so once the amount of
R45 275.56 had been tendered into the State Attorney’s

trust account.
E.
Ageng’s counter-application of 7 March 2017 for payment
25.
In the meanwhile ARA brought an urgent counter-application for
hearing on 14 March in order to coincide with the return day
of the
main application and of the rule 6(12) (c) application.
26.
The counter-application was for payment of subsidies totalling R
979 981 which ARA contended had become due and payable
during
January 2017. Social Development refused to pay the amount on the
ground that ARA was guilty of defrauding it and claimed
that it was
diverting ARA’s subsidies to other organisations which it had
since appointed to deliver the services which had
been provided by
ARA.
27.
On 8 March 2017 the Premier and the MEC gave notice under rule 30(b)
to remove causes of complaint relating to the counter-application.
28.
It was however of concern
that the original amount of R10 181 070 may have been drawn
from Treasury pursuant to a fraudulent
or irregular transaction, as
appeared from the allegations made by ARA and from a concession that
had been made during earlier
argument by Social Development that the
procurement of funds was irregular
[12]
.
If that was the case then the proceeds which were recovered and now
held by the State Attorney, of just under R5.45 million, belonged
to
Treasury and not to the Premier or MEC; Social Development.
29.
It appeared that National
Treasury was ultimately responsible and had an interest in the
outcome of the litigation
[13]
.
It was therefore necessary to allow it and the parties a reasonable
time to file papers. In view of this the original rule was
extended
to 13 April 2017.
30.
ARA however argued that its counterapplication could not wait until
then as the plight of its employees and the consequences
for the
individual beneficiaries were dire if it did not receive the amount
withheld by the Department before 31 March.
For
this reason it was inappropriate to hear the application and
counter-application together
.
Without
deciding urgency or any other preliminary point the
counterapplication was separated. Social Development was then
afforded
time to file its answering affidavit.
31.
I accordingly made the following order which dealt both with the
possible intervention of Treasury at the hearing of the main

application to be heard on 13 April and with disposing of the
counterapplication prior to that on 27 March:
1.
The rule
nisi is extended to 13 April 2017.
2.
The parties
in this order will be referred to as cited under case number [...]
although the order and the documents to be served
relate to both that
case number and case number 44645/2016.
3.
The first
and second respondents must file any supplementary affidavits by no
later than Wednesday 29 March 2017.
4.
This rule
nisi, together with the whole application, must be served on National
Treasury.
5.
Should
National Treasury elect to file any affidavits on the merits of the
application they must do so by 04 April 2017.
6.
The first
and second Applicants are responsible for serving forthwith all the
papers referred to in para 2 on National Treasury.
Furthermore and
without being prescriptive;
a.
National
Treasury may wish to be joined as a party;
b.
The issue of
whether the monies currently held by the State Attorney, which
constitute the remaining proceeds of a payment made
of R10 181 070
on 18 October 2016 under reference TREAS/IBS to A re Ageng Social
Services (NGO), were lawfully paid pursuant
to a service level
agreement concluded between the Department of Social Development,
Gauteng Provincial Government and Life Recovery
Centre Randfontein
(Witpoort Treatment Centre), and whose funds according to the
Department were administered and managed by Life
Esidimeni Pty (Ltd).
A copy of the underlying agreement relied on is attached marked “A”.
National
Treasury’s attention is furthermore drawn to;
i.
The apparent
discrepancy in how the breakdown of the total amount payable under
the agreement is arrived at, as set out in clause
4.2 thereof;
ii.
The
admission by the Department that the payment to A Re Ageng did not
follow the
Public Finance Management Act 1 of 1999
as payment was
made to a party other than the contracted service provider and that
payments had been made in similar fashion on
two previous occasions,
one in June 2016 under the same agreement of R13 million and an
amount of R 14 million to SANCO in April
2016 (see paragraph 40 of
the applicants’ second replying affidavit).
c.
Whether
National Treasury or Provincial Treasury claims any entitlement to
the remaining proceeds currently held by the State Attorney
by reason
of the regularity or lawfulness of the transaction pursuant to which
the payment of R10 181 070 was authorised
or made.
7.
In the event of Kish
Gas Pty (Ltd) being referred to in any papers filed by National
Treasury then National Treasury must also serve
on Kish Gas Pty (Ltd)
at the address of its attorneys of record, Forbay Attorneys care of
AJ Ndhlovu Attorneys 51 Main Street,
Marshalltown, Johannesburg,
reference BJS003 (email: info@forbayattorneys.co.za).
8.
In regard to
the counter-application brought by A re Ageng Social Services (NGO)
against the first and second Applicants;
a.
By no later
than 13h00 on Friday 17 March 2017 the first Respondent must provide
the first and second Applicants with the documents,
for the period
January to March 2017 inclusive referred to in paras 8 and 9a of the
letter dated 12 January 2017 from the Department
to the first
Respondent and that the original invoices must be made available for
inspection to the department on 15 March 2017
between 10h00 to 16h00
at the first respondent’s premises.
b.
The first
and second applicants must file their answering affidavits by no
later than 22 March 2017
c.
The first
respondent must file any replying affidavit by no later than 24 March
2017
d.
A rule nisi
is hereby issued calling on ABSA Bank Ltd, the second respondent, to
show cause before this court at 10 am on 27 March
2017 why any amount
that may be payable by the first or second applicants to the first
respondent arising out of the counter-application
should not be paid
into ABSA Bank Randfontein Bank account number  [...] and that
such amount may only be transferred out
of such account into
First National Bank account number [...] held in the name of the
first respondent;
9.
The
counter-application is postponed for hearing at 10h00 on 27 March
2017.
10.
The costs
of the counter-application set down on 14 March 2017 are reserved.
32.
I heard argument, considered the matter to be urgent and on 30
March 2017 granted ARA the main relief it sought. The reasons
for
doing so are contained in a separate judgment. The order reads:
1. The matter is
urgent and condonation is granted to the first respondent.
2. The first and
second applicants are ordered to pay the sum of R979 981
together with interest at the prescribed rate as
from 16 January 2017
into the account of A Re Ageng held at Absa Bank Ltd  by no
later than 7 April 2017.
3. In the event of any
portion of this amount not having been utilised on or before 31 March
2017 for the purpose for which allocated
then;
a.
The first respondent is to;
i.
submit, by
no later than 18 April 2017 a deviation request asking permission to
retain the funds and use them for some other service-delivery
related
purposes; or
ii.
make
arrangements with the Department of Social Development , Gauteng
Province (“the Department”) by no later than 18
April
2017 for the unspent funds;
b.
Failing the aforegoing, the Department may;
i.
deduct the
unspent funds from any subsidy allocation of the following financial
year, if applicable; subject to the first respondent’s
right to
challenge such decision
iii.
institute
proceedings for recovery of such amounts as it contends have been
overpaid.
4. Costs are reserved
for determination at the hearing of the main application
.
33.
The MEC for Finance (Gauteng Province), (“
MEC Finance”)
sought leave to intervene by reason of her responsibilities and role
in the management and control of the Gauteng Provincial Revenue
Fund.
After hearing the parties and pursuant to agreement   an
order was made on 14 April granting the MEC; Finance leave
and
directing that the R 5 043 825.92 held by the State
Attorney was to be transferred or deposited immediately into
the
Gauteng Provincial Revenue Fund PMG bank account, the account number
provided at the hearing by the MEC for Finance being the
account from
which the original R10.18 million had emanated.
The
amount was made up of the R 4 998 550,36 received by the State
Attorney from ARA’s Absa account and the R 45 275, 56 it
had
received from Kish Gas’  FNB account.
34.
During the course of
argument
Adv
Steyn
for
the MEC; Finance confirmed that Provincial Treasury took the
allegations of unlawfulness seriously and had launched an
investigation
into the payments under
s 18(2)
of the PFMA. This
appears from the contents of the affidavit of the MEC; Finance, Ms B
Creecy
[14]
. In the same
affidavit the MEC; Finance was scathing of ARA and said:  “
Ageng
attempts to style itself as a custodian of public funds and as a
self-appointed guardian of the province’s payment systems.”
[15]
The MEC; Finance drew
this conclusion from the statement made by ARA that Social
Development had repeatedly refused to provide proof
of the basis on
which the funds had been lawfully transferred into its account on 18
October.
The
affidavit later goes on to repeat in almost exact terms as before,
that: “
Ageng
has styled itself as a custodian of public funds and as a
self-appointed guardian of the province’s payment systems.
That
is improper. The Gauteng Provincial Treasury is the true custodian of
these funds and has a duty under the PFMA to monitor
and enforce
compliance with the PFMA within the province”
[16]
35.
Counsel submitted on
behalf of the MEC; Finance that it was inexplicable how ARA could
dispute the entitlement of the Premier or
the MEC; Social Development
to repayment of the R10.18 million even if the original payment to it
was unlawful and  in breach
of Social Development’s
systems and protocols. It was submitted that this constituted “
a
further ruse
(i.e.
by ARA)
for
refusing to return the funds”
and
that “
questions
relating to the legal validity of the arrangement and underlying
agreement, and conduit payments in general, are immaterial
to a
determination of this application”
[17]
.
36.
The submission that the legal status of the conduit arrangement and
the underlying agreement between the parties to the litigation
was
irrelevant was a constant theme as was the assurance that the matter
was being investigated internally. At this stage it suffices
to state
that what was omitted was the recognition that on its version ARA was
a whistle blower which had attempted, without success,
to escalate
its concerns of an unlawful transfer of funds to the MEC; Social
Development prior to the latter bringing the present
application
against ARA.
Counsel
however conceded in argument that if regard is had to the size of
Social Development’s budget it is unlikely that
an audit would
have picked up the irregularity; the auditors would only have seen
ARA as the recipient of the funds, not Life Recovery,
let alone
Social Development’s actual designated recipient, Life
Esidimeni.
37.
I should add that this matter continued to be adjourned at the
request of the parties in order to pursue the paper trail in
the
expectation of securing a resolution on motion of the main
outstanding issue; namely whether ARA was party to a fraud on Social

Development or whether it was inadvertently sucked into what it
termed a money laundering operation in which one or more officials

within Social Development were complicit.
Both
partes submitted that there was a real possibility of securing
evidence which could finally resolve the matter on paper and
thereby
avoid the institution of action proceedings. This course of action
appeared desirable having regard to Social Development’s

decision to terminate the provision of funding to ARA, the impact
that the closure of ARA’s facilities and the termination
of its
services, (which had been provided for over 12 years) would have on
the individuals who depended on it and also because
of the broader
public interest.
F.
ARA’s application against the MEC Finance and the Department
of Social Development
38.
The Premier and MEC; Social Development had failed to pay the amount
of R979 981 in terms of the court order of 30 March.
This
prompted ARA to bring an urgent application requiring the MEC;
Finance to pay this amount to it. The application also sought
to hold
the Premier and the MEC; Social Development in contempt of the
earlier court order.
39.
Social Development responded by contending that the payment was
being processed and that there were administrative delays
in what
appeared to be a belated loading of the request for payment into the
financial system. While the communications from the
Department may
have been equivocal, which justified the launching of the
application, it was evident that there was no wilfulness
or
mala
fides
on the part of Social Development. It was also evident that
when argument was heard the amount was being transferred albeit that

it was not yet reflected in ARA’s bank statements.
G.
Introduction of further evidence- application of 17 May 2017
40.
ARA sought to introduce the affidavit of an IT expert in support of
its contention that the Absa account had been hacked. ARA
also
contended that Absa had failed to make a proper disclosure to the
court of relevant information at its disposal in regard
to the
transfer of the R5 million out of ARA’s account and the
utilisation of ARA’s online banking profile.
41.
On 25 May an order was formulated to address the further
documents that Absa was alleged to have in its possession. It
read:
1.
ABSA BANK
LIMITED (“ABSA”) is afforded an opportunity to reply
by no later than 11 June 2017 to the Supplementary
Affidavit of A RE
AGENG SOCIAL SERVICES (NGO), which affidavit is to be served together
with this Order,;
2.
By no later
than 11 June 2017 ABSA BANK LIMITED is to produce, by delivery to
both  the APPLICANTS and A RE AGENG SOCIAL SERVICES
(NGO)
,
copies of the following documents, or to state under oath
in an affidavit to be delivered by that date either why it refuses
to,
or is unable to, produce any of the said documents:
2.1 The SWIFT report
in respect of the payments made by the Department of Social
Development into the account of A RE AGENG on or
about 29 June 2016
and 18 October 2016;
2.2 All records kept
in terms of Section 22 of the Financial Intelligence Centre Act
(“FICA”) in respect of the Account
held in A RE AGENG’s
name with ABSA as from 1 January 2016 until the closure of the
account in April 2017;
2.3 All reports made
to the Financial Intelligence Centre in terms of Section 28 of FICA
including but not limited to payments made
by the DEPARTMENT OF
SOCIAL DEVELOPMENT (“the Department”) into the account of
A Re Ageng on 29 June 2016 and 18 October
2016, and the disputed
payment made from A RE AGENG’s account to the Account of KISH
GAS (“Kish”) on or about
10 November 2016 (“the
disputed payment”);
2.4 The audit records
of the disputed payment;
2.5 Documents
evidencing the occasions when A Re Ageng utilised its Internet
Banking Facility;
2.6 Documents
evidencing that the Notify Me SMS was sent and received in relation
to the disputed transaction;
2.7 Documents
evidencing how the beneficiary added on 9 November 2016 were so
added;
2.8 Documents
evidencing that the beneficiary referred to in 2.4 above was property
authorised using a One Time Pin or other method
of dual-form
authentication;
2.9 Documents
evidencing how the payment limit on the account was increased and
that dual-form authentication was utilised and/or
when the payment
limit was increased;
2.10 Documents
evidencing how the disputed payment was made, and whether dual-form
authentication was utilised and/or required;
2.11 The Anti Money
Laundering Report which was compiled by ABSA under FICA pertaining to
A RE AGENG’s account;
2.12 Any and all
reports or correspondence made by ABSA to any other party, or any
other bank, regarding the account of A RE AGENG
or any suspicious
activity in respect of that account;
2.13 The records,
whether extracted from its electronic database or otherwise,
detailing all changes made, whether electronically
or otherwise, to A
RE AGENG’s account, from 1 June 2016 to date, reflecting the
dates and nature thereof, and including but
not limited to:
2.13.1
Beneficiaries loaded and deleted;
2.13.2  Payment
limit increases;
2.13.3  Notify Me
detail changes;
2.13.4  Flags
raised on the account.
2.14
The records, whether extracted from its electronic database or
otherwise, providing full details of;
2.14.1. the identities
of all ABSA employees who accessed the account from 1 June 2016 to
date, and the purpose for which they accessed
the account;
2.14.2. all mobile and
land telephone numbers linked to the account, and dates when such
numbers were loaded and/or removed;
2.14.3. the identity
of the user who authorised the deactivation of the internet profile
for User no 4 on the account on 14 November
2016 as well as details
of the I.P address of the person or entity who deactivated said user;
2.14.4. the date when
User Number 0004 was created on the system;
2.14.5. the identity
of the User that authorised the increase of the limit from R300 000,
00 to R6 million, including the IP
address which was used to increase
the limit;
2.15
Documents recording the fraudulent activity on the account of A RE
AGENG on or about 31 October 2016 and the steps taken by
ABSA in
response to this activity;
2.16
Documents setting out and/or recording the reasons why A RE AGENG was
advised to change its PIN on 1 November 2016 by
ABSA’s
fraud division;
2.17
The records, whether extracted from its electronic database or
otherwise, providing full details of the User and the IP address
used
to access the account on 2 November 2016; and
2.18
The Report by ABSA’s internal investigators;
The
terms “document/s” and “record/s” are used
interchangeably and refer to documents, including electronic
data
stored on a computer or server which is capable of being retrieved
and is accessible in a manner usable for subsequent reference
3.
The
Provincial Treasury and/or the APPLICANTS may provide this
documentation to the South African Police Services.
4.
The
APPLICANTS may file a supplementary affidavit by no later than 18
July 2017;
5.
A RE AGENG
may file a supplementary affidavit, by no later than 8 August 2017;
6.
All
supplementary affidavits are to be served upon Provincial Treasury
and ABSA.
7.
This matter
is postponed to Monday 14 August 2017 at which hearing any issue
relating to the order for the production of documents
by ABSA will
also be dealt with.
42.
In-house legal counsel at Absa deposed to an affidavit which
effectively repeated that it was not possible to hack into the
system
as contended for by ARA. The affidavit also claimed that ARA’s
account transfer limit was increased from R300 000
to R6 million
on 10 November 2016 by IP_address 105.229.222.185, User 4 on account
4057144691.
However
the actual transaction sheet that was attached revealed that the
significant change to the transfer limit in fact occurred
on 31
October at 21h25 from another IP address (105.5.124.199) albeit by
User 4. The transaction sheet also reflected that on 9
November the
same User utilised IP_address no 105.229.222.185 to add Kish Gas’
account as an authorised payee.  This
was at 15h20 and the same
User later then used the same IP_address to effect the transfer the
R5 million to Kish Gas.
43.
I should point out that in an earlier affidavit Absa’s in-house
counsel contended that Absa’s investigation department
was of
the view that the payment of the    R5 million was a
normal banking transaction conducted via ARA’s
internet banking
facility in the ordinary course and that this was substantiated by
the “
Sure Check”
sms sent and delivered to a
certain Mafu’s cellphone.
44.
ARA did not file a further affidavit by its expert after
receipt of the ASA documentation. It was however contended that

ex-facie the documents supplied by Absa both pursuant to the court
order of 25 May and earlier;
a. Of the initial amount
that had been deposited on 30 June 2016 an amount of R13 034 958
was physically transferred out
of ARA’s account to an FNB
account (which would have been that of Life Esidimeni) by an Absa
teller at its Randfontein branch.
b. On 18 October 2016 an
amount of R10.18 million was transferred into ARA’s account and
recorded on the bank statement as
“
NPF CREDIT”
and
then “
TREAS/IBS”
followed by an EFT reference
number.
It is not disputed that
on the same day Absa was requested by ARA to find the source of the
transfer and was advised that the reference
number was electronically
generated but that it did not resemble any official reference,
thereby making it difficult to trace the
source. This is what
prompted ARA to transfer   R670 00 out of its Absa account
to its FNB account. This represented
the balance of the amount
standing to its credit excluding the R10.18 million. The amount was
transferred by way of an ATM transfer
using a debit card on 19
October. Accordingly only the questioned amount of R10.18 million was
left in the account.
On another attempt at
locating the source, an Absa official advised that the amount
appeared to have been deposited from an FNB
Forex department.
c. On 31 October Absa
detected suspicious activity on ARA’s account whereby three new
beneficiaries were loaded onto its banking
profile.  Absa
contacted ARA which confirmed that these beneficiaries had been
fraudulently loaded. Absa therefore suspended
ARA’s internet
banking facility and directed that it physically reinstates the
internet facility by attending at its branch.
This reveals that Absa
recognised that the security of ARA’s banking platform had been
compromised.
d. On 1 November Ms Mafu
who is the financial administrator of ARA, attended at Absa’s
Randfontein branch to re-instate the
internet banking facility and
selected new personal PINs to access ARA’s internet banking
platform.  It is in dispute
whether she also changed the
passwords.
e. Absa acknowledged that
on 7 November Mafu had completed an Absa loss form reporting an
unauthorised withdrawal by an unknown
person on 4 November and again
on 5 November. An amount of R1 000 had been withdrawn on each
occasion from a SASWITCH ATM.
f. The R5 million was
transferred out of ARA’s account by way of an internet banking
transaction. The transaction could only
be effected by a person who
had all the log-in details. This would include PINs, passwords and
account details pertaining to ARA’s
internet banking platform.
g. There was no evidence
of the internet facility being used to transfer ARA’s funds
prior to that. ARA claims that it had
not done so because, when the
internet facility had been created at Absa’s request (due to
the number of transactions going
through the account), the profile
was not set up properly with the consequence that it was never
possible to log-in.
h.
Although
the amount that could be withdrawn was increased on 31 October to R6
million ABSA did not produce among the documents it
was ordered to,
any proof that a “
Sure
Check
“
was
accepted in regard to this change.
[18]
THE
ISSUES
45.
The main issue is whether the Premier and the MEC; Social Development
are entitled on motion o the relief sought in their applications.

They sought together with Life Recovery and Life Esidimeni orders
under case numbers 41493 /2016 and 44645/2016;
a. Declaring that an
amount of R10 181 070 paid by the Premier and the MEC on 18
October 2016 into ARA’s account
with Absa, or any lesser sum
standing to the credit of that account, does not form part of its
monies and is to be repaid;
b. Declaring that the
amount of R670 000 paid by ARA out of its Absa account into an
FNB account does not form part of the
monies in the latter’s
bank account and is to be paid back to the Premier and MEC;
c. Declaring that the R5
million paid by ARA out of its Absa account into  an FNB account
similarly  does not form part
of the monies in the latter’s
account and is to be paid back;
d. Alternatively to the
declaratory and restitution orders, an interdict freezing these
monies in their respective accounts pending
the finalisation of an
action to be instituted within 60 days against ARA or Absa, or the
holders of the accounts into which the
monies were later transferred,
for payment of such amounts.
e.
Costs
on an attorney and own client scale against ARA.
[19]
f. Part B of the order
took the matter no further. In effect on the return date the
applicants sought to extend the interdict until
the outcome of an
action to be instituted.
46.
It will be recalled that Tsoka J’s initial order was based on
the matter being finally determined on the return date.
It also
appears that the applicants hoped that the full amount of R10.18
million would be traceable and recovered. By the time
the second
ex
parte
application was launched it became evident that this was
unlikely to be the case in respect of the outstanding R5 million that
had
been disposed of out of Kish Gas’ account.
47.
It is evident that in the first application the Premier and MEC were
not granted relief in a form which would allow them to
sue for any
portion of the R10.18 million that was no longer traceable. The
second order granted
ex parte
can be construed in conformity
with the grant of an interdict pending the outcome of an action for
recovery of the R5 million that
was transferred into Kish Gas’
account.
48.
Adv Joubert
contends that the applicants were successful in
that all but some   R5 million has been repaid, effectively
by ARA, and
that on paper it is evident that this amount could only
have been transferred out of ARA’s account by one of its
authorised
employees. In this regard reliance is placed on Absa’s
contention that it would not have been possible for an outsider to

hack into ARA’s internet banking platform.
49.
I do not share Adv
Joubert’s optimism with regard to making a finding on the
papers. Firstly the court must apply
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A). In short the applicants can only obtain final relief
if the respondent admits the facts set out by the applicant and if
its
own facts support the grant of the relief, unless of course the
respondent’s denials do not raise a real, genuine or bona
fide
dispute of fact.
[20]
In
the present case the affidavit of Mr Pienaar, the IT expert, which
was filed on behalf of ARA supports its contention that the
account
had been hacked: Among other things, that Absa did not mention at the
meeting on 1 November that the transfer limit had
been increased on
31 October. It is also contended that the transaction of R5 million
should have been flagged and held in escrow.
Furthermore, Absa’s
in-house counsel claimed in an affidavit that the increase in the
amount that could be transferred had
only been effected after the
meeting- but this statement, which I consider material,  has
proven to be incorrect.
50.
There was also an
unauthorised and unexplained change in the profile information on 2
November which relates to Mafu where her name
was listed twice, first
as User 0001 and then as User 0004, that User 1 was deleted and User
4 added and identified as “
Mrs
Mafu
”
.
It is common cause that Mafu is unmarried. Moreover User 003 was also
deactivated, yet she is an employee of ARA and remains an
authorised
signatory on the account. These issues were not addressed in Absa’s
affidavit.
[21]
The
upshot is that, on motion proceedings, the possibility of an outside
hacking cannot be ruled out. It is therefore unnecessary
to consider
whether in law a case of vicarious liability has been made out by the
applicants as the assumption cannot be made that
the only person who
could be involved in the withdrawal of the R5 million was a member of
ARA’s personnel.
[22]
51.
Similarly the applicant’s reliance on a breach of the alleged
agreement fails to take into account the denial that the
letter was
intended to cover more than the first tranche payment. There
certainly was no evidence presented to support the applicant’s

contentions. On the contrary one would have expected that after the
lapse of over three months since the authorisation letter of
22 June
2016 an official of Social Development or someone from Life Recovery
or Life Esidimeni would have contacted ARA to pre-cognise
it to
expect a deposit of R10.18 million into its account.
52.
Nor do any of the applicants explain why it would have taken so long
to regularise the registration of Life Recovery on Social

Development’s systems considering that the service level
agreement had been concluded more than three months earlier.
Presumably
they would have had difficulty explaining certain of the provisions
of that agreement which included an acknowledgement
that payments
would be subject to Treasury Regulation 8.4.2 and that the funds must
be transferred to a banking account described
as “
the
legitimate bank account”
and
specifically identified in the service level agreement as FNB acc no
[...].
[23]
53.
On the other hand
Adv Ben-Zeev
argues that ARA had been
substantially successful in that the claim by the applicants for
payment of the R670 000 was unsuccessful
and that the initial
case made out had failed to make material disclosures; more
particularly, that ARA had informed officials
of Social Development
prior to the first application being launched that it accepted that
it was not entitled to the money but
needed assurance that the funds
could be lawfully given to Life Recovery (or for that matter Life
Esidimeni) or even be given back
to Social Development by reference
to the paper trail leading up to the  payment to the ultimate
intended recipient.
54.
The applicant in an
ex parte
application is obliged to
disclose all facts that might influence the court in coming to a
decision and that a failure to do so
may result in the order being
set aside and rescinded even if the non-disclosure is not wilful or
mala fide
. See
Schlesinger v Schlesinger
1979 (4) SA
342
(W) at 348E-350B and
Cometal-Mometal SARL v Corlana
Enterprises (Pty) Ltd
1981(2) SA 412 (W) at 414D-E; see also
National Director of Public Prosecutions v Basson
2002 (1) SA
419
(SCA) at para 21.
55.
Margo J in
Cometal-Mometal
at 414H pointed out that among the
factors to be considered in deciding whether or not to subsequently
set aside the
ex parte
order where there has been a
non-disclosure are;
“
the extent to
which the rule has been breached, the reasons for the non-disclosure,
the extent to which the Court might have been
influenced by proper
disclosure in the ex parte application, the consequences, from the
point of doing justice between the parties,
of denying relief to the
applicant on the ex parte order, and the interests of innocent third
parties …..”.
56.
This was echoed by the following statement in
Phillips and others
v National Director of Public Prosecutions
2003 (6) SA 447
(SCA) at para 29 where Howie P said the following:
“
It is trite
that an ex parte applicant must disclose all material facts that
might influence the Court in deciding the application.
If the
applicant fails in this regard and the application is nevertheless
granted in provisional form, the Court hearing the matter
on the
return day has a discretion, when given the full facts, to set aside
the provisional order or confirm it. In exercising
that discretion
the later Court will have regard to the extent of the non-disclosure;
the question whether the first Court might
have been influenced by
proper disclosure; the reasons for non-disclosure and the
consequences of setting the provisional order
aside.”
The
underlying requirement where an applicant seeks interim relief
without notice remains its duty to display
uberrima fides
towards the court:
Cometal-Mometal
at 414H.
See
also
Berrange v Hassan and another
2009 (2) SA 339
(N) at
354A-G (confirmed on appeal in
Hassan and another v Berrange
NO
2012 (6) SA 329
(SCA)).
57.
On analysis the case made out by Social Development relies on three
causes of action.
a. Theft of monies out of
a bank account;
b. An unjust enrichment
claim under the
condictio indebiti
;
c. A breach of the 22
June acceptance letter.
58.
It is necessary to point out that while Life Recovery and Life
Esidimeni may have been cited as co-applicants they do not purport
to
make any claim against ARA or seek recovery of any monies from it.
Only Social Development through the Premier and its MEC does.
APPLICANTS’
CAUSES OF ACTION
59.
A claim by Social Development under the
condictio indebiti
cannot
get out of the starting blocks for a number of reasons.
In
order to succeed Social Development would have to show that ARA was
enriched in an amount representing the unrecovered portion
of the
R10.18 million.
It
is common cause that this is the amount which was transferred to Kish
Gas. Kish Gas confirms that it has no association with
ARA and the
paper trail ends there. Accordingly the applicants cannot show any
enrichment by ARA
60.
Moreover Social Development relies on an agreement in terms of which
ARA received the amount on behalf of Life Recovery. The
letter of 22
June deals in clear terms with the receiving of money and I did not
understand the applicants to argue otherwise.
The
salient portion of the letter for present purposes reads:
“
I, Mrs …
Lenyehelo …, the director of A Re Ageng Social Services accept
to hold the first quarter funding on behalf
of Life Recovery Centre
Randfontein as to be transferred by the Department of Social
Development.”
The
letter is signed on behalf of ARA by both Lenyehelo as director and
Ms Kunene as deputy director.
61.
Two things follow from ARA receipting the money as agent for Life
Recovery.
Firstly,
it precludes Social Development from arguing that payment was made
pursuant to an error that may be construed as reasonable
or excusable
in the circumstances
[24]
. It
is clear that the payment was not made in error, and if it was then
the error cannot be construed on any basis to have been
reasonable or
excusable: the responsible officials of Social Development acted
deliberately and with full knowledge of the implications
of using ARA
as a conduit.
Secondly,
as our law stands, a payment made to an agent on behalf of a
disclosed principal does not satisfy an essential requirement
of the
condictio,
even if
it can be shown that only the agent was enriched. Only the principal
can be sued under the
condictio
indebiti.
[25]
Presumably it is for the principal to in turn recover the
amount from the agent. I should add that there was no cession of
any
right of action by Life Recovery in favour of the Premier or the MEC;
Social Development.
62.
The claim based on the appropriation of monies in ARA’s account
that were earmarked for Life Esidimeni is also problematic.
Assuming
that the money could be recovered by Social Development despite it
entering the account as the money which now “
belonged
”
to Life Recovery under the purported agreement in terms of which ARA
held it as the latter’s agent, then the undisputed
statements
by ARA to officials of Social Development at a meeting on 8 November
and its actions (which will be dealt with in more
detail later)
cannot amount to acts of appropriation.
Accordingly,
at best, Social Development will have to show that ARA appropriated
the monies by transferring them out of the Absa
account on 10
November. Since the overt actions of ARA are inconsistent with it
knowingly appropriating the money Social Development
would also have
to show grounds for attributing vicarious liability to ARA for the
unauthorised actions of any of its employees
who may have been
complicit in hacking the Absa account.
63.
It is therefore evident that Social Development cannot succeed on
motion with a claim based on the
condictio indebiti.
The issue
that must still be considered is whether this aspect of the
applicants’ case should be referred to trial or await
the
outcome of action proceedings.
64.
Finally Social Development appears to rely on the terms of the
22 June 2016 acceptance letter.
65.
In its terms the letter is limited to ARA agreeing to hold “
the
first quarter funding”
Although
the terms of the funding for Life Recovery under its service level
agreement with Social Development were not known to
ARA, the
agreement was attached to the applicants’
ex
parte
application.
The first tranche is recorded in that agreement to be the amount
which was in fact transferred into ARA’s account
at the end of
June 2016.  The agreement is dated 22 June 2016 which is the
same date that ARA signed the acceptance letter
as requested by Mrs
Maluleke of Social Development.
[26]
I
add that it is somewhat surprising that each page of the service
level agreement between Social Development and Life Recovery
is
marked “
Confidential”
;
unlike all the service level agreements that were produced to this
court between Social Development and ARA.
[27]
66.
Returning to the basis on which Social Development alleges that ARA
received the R10.18 million; at best for it there is a dispute
as to
whether the letter was intended to cover only what it admits was in
fact the first tranche payment under its service level
agreement with
Life Recovery (which was made at the end of June) or whether it also
covered the  October payment
67.
I believe that the
applicants would also have evidential difficulties as the document is
in the form of a unilateral undertaking
and, as mentioned earlier,
there was never a follow up communication by any of the applicants to
pre-cognise ARA that it was to
expect a transfer of R10.18 million
and  immediately forward it onto the ultimate recipient.
[28]
68.
It is evident that the applicants cannot succeed on motion with a
cause of action based on the letter of acceptance. Once again
the
question arises whether the application should be referred to trial
in one way or another.
69.
I have already dealt with case law on the failure to disclose
material information in
ex parte
applications and the effect
it may have on the outcome of the application itself.
70.
Earlier I also mentioned that two weeks prior to launching the first
ex parte
application on 23 November 2016 a meeting was held on
8 November between ARA and officials from Social Development.
I
must cover this meeting in some detail before weighing up whether the
application should be referred to evidence or await the
outcome of an
action. It is necessary to do so in order to determine whether the
discussions which took place at the meeting, and
which were recorded
in subsequent letters, should have been disclosed in the
ex parte
applications of 23 November and 14 December; and what
consequences ought to follow if they were not.
MEETING
OF 8 NOVEMBER AND RECORDAL OF EVENTS BY ARA IN LETTERS TO SOCIAL
DEVELOPMENT
71.
In contending that Social Development had failed to disclose material
facts, ARA claimed in the rule 6(12)(c) application of
27 December
2016 that;
a. Lenyehelo together
with other of its board members repeatedly asked Social Development
officials for bank- generated proof of
payment of the R10, 18 million
and for confirmation that the transmission of funds to Life Recovery
and Life Esidimeni was lawful
and legitimate but that neither was
forthcoming;
b. Social Development had
untruthfully claimed that ARA’s staff had avoided meeting with
its officials. ARA referred to two
meetings, one on 8 November and
the other on 15 November, as well as “
countless telephonic
conversations
”. ARA claimed that Lenyehelo had already
informed Social Development on 15 November that R5 million had been
unlawfully transferred
out of its Absa account without authorisation
and forwarded its bank statement as proof. This is disputed by the
applicants and
I will accordingly ignore the allegation.
72.
In amplification of the discussions that were held with the officials
on 8 November ARA attached two letters recording what
it claimed had
transpired at these meetings. It is significant that none of the
letters was responded to, particularly bearing
in mind that they were
not dealt with at all in the applicants’ founding papers.
73.
The first letter, dated
10 November 2016, was addressed to Ms Tsakane Maluleke. The other was
addressed to Ms Nandi Mayathula-Khoza
the MEC; Social Development but
was only given by hand on 15 November 2016.
[29]
The main difference between the two letters is that in the one to the
MEC; Social Security Lenyehelo gave an overview of the events,
lodged
a complaint and sought the MEC’s intervention to investigate
and “
take
the appropriate action against officials who abuse our trust and
faith”.
Both
letters recorded what transpired at the meeting of 8 November,
although the one to Maluleke was in greater detail.
74.
The contents of both Lenyehelo’s affidavit and the letter to
Maluleke claimed that Maluleke had contacted her to advise
that she
would be attending ARA’s offices at 9 am on 8 November in order
to escort Lenyehelo to the bank. When Lenyehelo
replied that members
of ARA’s board would have to be present the meeting was then
changed to 11 am on the same day.
75.
At the meeting Maluleke
requested that ARA release the R10.18 million into the account of
Life Recovery at Rand Merchant Corporate
Bank
[30]
as had been done in June in relation to the R13 million odd. It was
then resolved that this would be done “
once
the department… provides us with a bank generated proof of
payment indicating the source of the deposit which would
be taken to
our bank since the bank cannot trace where the money is from since is
reference no. is the same as the R13 087 578,
44 deposited
in June but completely different from those coming directly from DSD
to A re Ageng for the past 13 years.”
76.
It was also contended that the reason for insisting on establishing
the source of the money was outlined to Maluleke at the
meeting and
reiterated in the letter; namely that ARA was “
being put in
a precarious position of transferring monies to bank accounts that
have absolutely nothing to do with the relationship
between itself
and DSD as based upon obligations accruing from the signed service
level agreement between our organisation and
the DSD
.”
77.
Lenyehelo claimed that Social Development had failed to supply
the information and continued to make telephonic demands
“
in
an attempt of dragging us as management to our bank to make the
transfer irrespective
”.
78.
In the letter Lenyehelo claimed that at the meeting Social
Development  agreed to supply ARA on the following day
(i.e. 9
November) with;
a. a formal letter from
Social Development confirming that an NPO could hold monies on behalf
of others who are not on the system
since this was common practice.
In the letter of 10 November it was contended that Maluleke had made
this statement at the meeting.
b. feedback as to whether
the money came through foreign exchange (“
Forex”
)
and if so a copy was requested of the application that was made to
the South African Reserve Bank allowing the money to enter
ARA’s
account.
79.
The letter of 10 November to Maluleke traced the history of the
attempts made by ARA to establish the source of the deposit.
It also
set out events which ARA claimed had occurred since the meeting of 8
November. These are set out in the following paragraphs.
80.
ARA’s financial advisor attempted to locate the source of the
money that had entered ARA’s account and advised it
to contact
the person from Absa’s division who had picked up that ARA’s
account had been hacked on 31 October in the
hope that this could be
traced. In the letter Lenyehelo expressly stated that this had been
brought to Maluleke’s attention
but she had dismissed it in
another telephone conversation.
81.
The letter of 10 November then mentions the name of Mr Themba
Msimang. By reason of its significance the entire passage is
repeated;
“
what is also of
concern to us… is the audacity of Mr Themba Msimang to contact
our bank without our consent after Ms Maluleke
wanted us to give her
the name and contact no of our financial advisor which we correctly
refused, to contact our bank regardless
and bully his way into
determining who is responsible for our account and to rudely instruct
her to make that transfer leaves much
to be desired.”
Lenyehelo
also complained that this was indicative of the way in which Msimang
had addressed them since the outset and although
his conduct had been
raised with Maluleke and Gumani he continued to act in this manner at
the bank.
82.
Despite Social Development’s agreement to supply the
information by 9 November, not only did it fail to do so but
according
to the letter of 10 November there continued to be;
“
sheer
intimidation and harassment from Mr Themba Msimang and Mr Gumani,
informing us that the transfer must be made immediately
so that the
“head office” should not freeze our account which would
have severe consequences to our programme and staff
complement.”
83.
The letter then mentioned that Lenyehelo had never experienced such
abuse and disrespect and took exception to the treatment
she was
receiving from the department. She added that “
threatening
me to do as you wish or else you will stop funding… those who
really need it, is really taking this to another
level
”.
Lenyehelo
set out that ARA had 30 full time staff members and 32 volunteers who
receive stipends and that it runs two shelters in
Bekkersdal and
Simunye catering for 20 abused women and their children in the one
shelter and 16 in the other. She added that ARA
also runs adult
diversion programmes and has victim empowerment centres in six police
stations serving the West Rand. Lenyehelo
then said that she would
“
continue to protect and empower those who are in need for
as long as I live and no one will stop me…”
84.
The letter of 10 November referred to what Lenyehelo contended
comprised “
criminal activity levelled against us and in
particular me relating to this money which is currently under police
investigation.”
This was then outlined as follows;
a. In the early hours of
Monday 31 October ARA’s bank account was hacked and
beneficiaries were loaded in an attempt to transfer
funds out of its
account. ARA was notified about the attempt by Absa’s fraud
division and was advised that the incident was
under investigation;
b. On about Friday 4
November Lenyehelo’s cellphone number was unlawfully ported to
MTN. It was contended that this enabled
the hackers to obtain a
one-time pin number for internet transfers. It was pointed out that
her cellphone number was one of the
official numbers linked to the
account.
c. During the period when
Lenyehelo was unaware that her cellphone number had been ported,
which meant that she would not receive
bank notifications, R2000 was
successfully withdrawn from her account in an apparent trial run.
d. On 7 November
Lenyehelo was contacted by Vodacom who advised that her number had
been illegally ported to MTN. This explained
the successful SASWITCH
ATM withdrawal. She stated in the letter that Absa was contacted as
soon as she became aware of the unauthorised
withdrawals, that she
had informed the police, and that another case was opened which was
being investigated by SASWITCH’s
Fraud Unit.
e. After Maluleke and
Gumani left ARA’s offices on 8 November Lenyehelo realised that
she was being watched by occupants of
a vehicle that was parked
opposite ARA’s offices. The vehicle then followed Lenyehelo
when she left the office. Because of
her fears she went to the police
station and as she turned in there the vehicle sped off. This
incident was also reported to the
police and is also now under
investigation.
Lenyehelo then called
Maluleke and related the incident “
in order to alert her
that this money situation of hers is putting my life at risk moreover
monies that are not mine and do not
have control over.”
Lenyehelo identified the registration number as DJ65KP GP and
provided it to warrant office Mosiapoa of SAPS.
f. Maluleke had been
contacting ARA’s administration staff requesting details of the
other board members who were present
at the meeting of 8 November. In
the letter Maluleke was requested to direct all such queries  to
Lenyehelo personally.
85.
It should be noted that these incidences occurred prior to Maluleke
instructing Lenyehelo on the morning of 9 November that
she would be
arriving with officials from Social Development’s head office
to escort her to the bank in order to have the
money released.
Lenyehelo
claimed that she had refused to do so and reminded Maluleke of the
agreement that her department would “
provide us with the
necessary documentation”
pursuant to which ARA’s
board would give permission to transfer the monies.
86.
The letter of 10 November to Maluleke reiterated that “
nobody
is refusing to transfer the money back
but in light of
what has transpired
things will be done correctly this time
around
” (emphasis added)
. This is a key passage
in the letter.
87.
The letter concluded with Lenyehelo regretting that she had agreed to
the request of transferring the R13 million odd at the
end of June
2016 and that as Management they had trusted the representations made
by Maluleke at the time and “
will not commit that mistake
yet again. Money will be transferred once all the correct procedures
have been made and ARA is comfortable
that it is not opening itself
to be used in this way again.”
88.
A second letter was addressed to the MEC; Social Development, Ms
Mayathula-Khoza. It was hand delivered on the morning of 11
November
at the Birchwood Hotel to Mr Mbwanja who is the spokesperson for the
MEC. This was pursuant to Lenyehelo bringing the
matters that had
been raised with Maluleke to his attention on 10 November and Mbwanja
advising, later that day, that she should
set it out in writing.
89.
By reason of her not retaining a copy of the letter Lenyehelo then
prepared a typed one, virtually identical to the earlier
one but
which included certain subsequent events. She handed it over at the
meeting held on 15 November 2016 at which she claimed
to have told
them that R5 million had been hacked out of ARA’s account. The
letter is dated 10 November and aside from repeating
the substance of
the email to Maluleke of 10 November;
a. requested the MEC’s
formal and urgent intervention concerning what she claimed to be
harassment, intimidation and threatening
conduct levelled against
her, her staff and “
above all the continued services I am
rendering to the public under the auspices of A re Ageng
.”
b. Most significantly
Lenyehelo urged the MEC to look into the conduct of the officials
with regard to the source of the funding
and procedures followed in
respect of these transactions. She then specifically named these
officials and their positions;
i.
Mr Themba Msimang, the Director Partnership and Province
ii.
Ms Tsakane Maluleke, the Deputy Director Social Work West Rand Region
iii.
Mr Gumani, the Director of Finance West Rand Region
c. Lenyehelo then set out
ARA’s complaints and informed the MEC that on 22 June 2016 she
had received a call from Maluleke
who requested her to hold funds on
behalf of Life Recovery.  It was claimed in the letter that
Maluleke had explained that
the money could not be transferred
directly into Life Recovery’s bank account because the
department was experiencing delays
in finalising the organisation’s
registration and that Life Recovery needed to be launched on 26 June.
By reason of the good
relationship spanning some 13 years which ARA had with Social
Development and understanding the difficulties
in raising funds for
projects Lenyehelo said that she had not been concerned about
Maluleke’s request. Under the impression
that ARA would be
helping out Lenyehelo in good faith had asked her deputy to write a
mandate acceptance letter.
d. Lenyehelo added that
Maluleke was contacted to provide the amount so that it could be
inserted in the acceptance letter. Maluleke
told her that she was not
certain and that it could be between R10 million to R13 million. As
explained in the letter to the MEC,
it was for this reason that the
acceptance letter did not refer to an amount but instead stipulated
that ARA was accepting on behalf
of Life Recovery an amount
representing the first quarter payment.
Bearing in mind that the
MEC is cited as the second applicant I consider this passage also
relevant as it demonstrates that ARA’s
allegations in this
regard were known to the second applicant prior to the launch of both
ex parte
applications.
e. When the money was
cleared through ARA’s bank account Lenyehelo contacted Maluleke
who said that she would provide the
account number for Life Recovery
once she received it. When these details were provided on about 8
July ARA transferred the amount
save for R50 0000 which, in the
letter, the MEC was informed was used “
strictly to the
benefit of the organisation and not the benefit of any of our staff
members.
”
f.
Lenyehelo wrote that she
had also alerted Absa to ensure that ARA would not be liable to SARS
and this was evidenced in a communication
to the bank advising that
it was solely an intermediary
[31]
.
The communication was attached to the letter.
g. The letter alleged
that ARA did not realise that the bank details provided by Maluleke
were not those of Life Recovery but of
Life Esidimeni and that on
enquiring Maluleke stated that they  “
were managed by
the same people and therefore it was acceptable”
.
It was then pointed out
in the letter to the MEC that Maluleke and Gumani informed Lenyehelo
that it was common practice for the
department to request established
organisations to hold monies for transfer to NPOs waiting
finalisation of registration on Social
Development’s data base.
h. The MEC was also
informed that Maluleke had been asked at the meeting of 8 November
why Life Esidimeni’s account was not
used from the start to
transfer the full R23 million since it had been in existence for far
longer than ARA. Maluleke had replied
that, while Life Esidimeni had
been in existence for long a time, it had been registered on the
Department of Health’s database
but not on that of Social
Development. She claimed that   Life Esidimeni was regarded
as a new organisation and it’s
details were similarly waiting
to be fully loaded on the department’s database.
i.  Maluleke also
mentioned that “
since the Department of Health withdrew
funding from Life Esidimeni, Department of Social Development
saw
an opportunity to go in and fund it.
” (emphasis added)
The fact that this was pertinently mentioned in the letter, its
relevance and the red flags it raises will
be addressed later.
90.
In addition to repeating key aspects covered in the letter to
Maluleke, Lenyehelo in her letter to the MEC added the following;
a. On 18 October 2016
ARA’s bank had been approached to find out the source of the
funds. The bank  advised that this
was difficult to trace as the
electronically generated reference number did not resemble any
official reference and, at the time
of writing the letter to the MEC,
Absa was unable to trace the reference with any certainty to find out
who had transferred the
funds into the account.
When an Absa consultant
was again approached he indicated that the money appeared to have
been deposited at an FNB Forex department.
ARA therefore made
enquiries from possible overseas funders. In the letter to the MEC
Lenyehelo expressly said that because Absa
was unable to recognise
the reference number “
we were even of the opinion that the
money could have been deposited incorrectly and didn’t want any
part of illegal monies.”
b. Since foreign exchange
could have been involved ARA  considered requesting Absa to
contact the Reserve Bank to establish
whether they had approved the
remittance of the money into the country by international funders and
whether ARA’s profile
or supporting documents were used in the
transaction.
Because of the concern
regarding the legitimacy of these funds ARA advised the MEC that to
avoid any attempt to freeze its account
if the monies had been
illegally obtained it had transferred all funds, other than the
R10.18 million, that were standing to the
credit of its Absa account
into an FNB account.
Once again this part of
the letter is significant for reasons that will be addressed shortly.
c. Lenyehelo also
recorded in the letter that she had raised the concerns regarding the
Reserve Bank with Gumani at the meeting
of 8 November. He said that
“
because of the huge amount the only explanation would be
that the money was transferred from the DSD to the Reserve Bank via
FNB
Forex and back into A re Ageng”
.
She
also mentioned that at the meeting Gumani claimed that the difference
in reference numbers could be attributable to the huge
sums involved
since ARA had never been funded millions by the department.
It
will be recalled that Gumani was a Director of Finance and one would
expect ARA to accept his explanations as reliable.
91.
The letter to the MEC then dealt with the attempted hacking of ARA’s
Absa account on 31 October. This is found under the
headings
“
Beginning of Harassment”
and “
Beginning
of Illegal Activity
”. Further incidents were dealt with
under “
Increased Scale of Illegality
”.
Under
the heading “
Continued demand to escort us to the bank”
Lenyehelo informed the MEC that on 9 November Maluleke had instructed
that she would  attend at ARA’s offices with Msimang
and
stressed that they were contemplating freezing ARA’s account.
This despite Absa having advised that the spreadsheet supplied
by the
department did not assist in determining the source of the funds. The
spreadsheet was attached to the letter
It
was pointed out that freezing ARA’s account would affect its
programmes and the livelihood of staff.
92.
The letter also informed
the MEC that immediately after the discussion with Maluleke and
without ARA’s permission Msimang
had contacted the bank and
instructed it to transfer the monies over to Life Recovery.
[32]
The
MEC was expressly requested to intervene particularly as Lenyehelo
was concerned that they were charting dangerous territories.

Lenyehelo said that her conscience “
did not allow her to
take the easy way out by transferring the money over”
and
that:
“
The people that
I have issues with are holding high positions and are using the
department’s resources to railroad people
like us. As directors
they have fiduciary responsibilities which they choose to overlook in
order to gain whatever their agendas
are. They should however not
bring the reputation and good that the DSD stands for down.”
The
letter to the MEC concluded:
“
I have faith in
you and appreciate all that you do in assisting us to help others,
that is why you were the only person I could
bring this to in order
to investigate, and take the appropriate action against officials
that abuse our trust and faith.
Hoping
to hear from you at your earliest convenience.”
93.
It is to be noted that
the meetings of 8 and 9 November described in these letters took
place immediately
prior
to
the
transfer of the R5 million out of ARA’s account at Absa.
The transfer was effected at 15h58 on 10 November
[33]
.
This appears to have occurred later on the same day as Maluleke
received the letter from ARA and after Lenyehelo had escalated
the
complaint to the MEC’s office.
THE
DISTRIBUTION OF THE R5 MILLION
94.
It will be recalled that once the monies found their way into Kish
Gas’ bank account they were dispersed within twenty
four hours
to twenty-nine separate accounts, some of which appear to be related
entities. There is nothing alleged by Social Development
to suggest
that ARA had the capability to disperse money so quickly. It appears
beyond dispute that the process adopted could only
have been
implemented at such short notice and with such speed by someone who
already had the capability of doing so.
95.
The conduct of Lenyehelo and her actions in notifying the bank and
the police prior to the R5 million being moved out of ARA’s

Absa account on 10 November would be suicidal if she was involved in
its transfer to Kish Gas. In particular she would have no
reason to
believe that Absa and the authorities would not monitor the account
after the earlier reports she had made and the concern
she had raised
that the monies might be tainted.
96.
It is therefore apparent
that at least the controlling mind of ARA could not have initiated
the fraud in such a systematic manner,
bearing in mind also that
ARA’s experience seems limited to effecting simple transfers in
and out of its account, generally
for a few thousand Rand. By
contrast the distribution of the R5 million, the transaction
contended for by Krish Gas involving the
alleged overnight purchase
of fuel and the speed with which the R5 million was dispersed into
numerous accounts, if true, indicates
a more sophisticated operation
directed by someone outside ARA
[34]
.
REFERAL
TO TRIAL
97.
Nonetheless, since the applicants seek a referral to trial in some
form or other, when exercising a discretion I should consider
whether
or not these inferences may be displaced by oral evidence or some
other relevant consideration.
98.
The first difficulty is that the claim will be against ARA. While it
may be that someone within ARA was complicit in hacking
the account,
ARA’s conduct from 31 October was consistent with bringing to
the attention of Absa and the authorities its
concerns that its
account had been compromised. As indicated earlier, ARA could not
have assumed that Absa would have ignored any
suspicious looking
transaction.  I now turn to the effect that this has on the
case.
99.
The three passages from the letters of 10 November which I emphasised
earlier were never brought to the court’s attention
in either
of the two
ex parte
applications.  The letter of 10
November to Maluleke was available and in my view should have been
attached to the application.
The letter which was directed to
the MEC; Social Development, albeit only received on the 15th of
November, should also have been
brought to that court’s
attention; particularly bearing in mind that the MEC as the second
applicant is a direct party to
the proceedings.
In
my view the decisions of
Schlesinger
and
Cometal-Mometal
are directly in point.
100.
There is a further factor to be considered. The Premier and the MEC;
Social Development have threatened action proceedings
against ARA.
Their applications indicated that such proceedings would be brought
within 60 days. It is also apparent that they
should by now have
enough information at their disposal to pursue an action against ARA
or Kish Gas, or both. Yet they have not
done so despite the lapse of
some 11 months since the first application was brought and some 8
months since Kish Gas’ identity
and details of the twenty-nine
accounts into which it had transferred the R5million became known.
101.
There are also concerns as to whether ARA will be the only party
cited. If it is, then ARA has already indicated that it will
seek to
join Absa and Kish Gas.  Insofar as Kish Gas is concerned, the
explanation provided as to how the R5 million came
into its account
is not convincing, is riddled with commercial improbabilities and the
lack of documentation to support the source
of the fuel, let alone
the dissipation of all but R45 000 of the R5 million that entered its
account, is also of concern.
102.
For these reasons it is my view that there should be finality to the
application and that if Social Development is minded to
bring an
action, then it must do so. The disposal of this application should
not wait if regard is also had to the material failure
to disclosure
the contents of the 10 November letters which, if revealed, would
have required explanation by the applicants in
their founding
affidavits. This is particularly so bearing in mind their reliance on
the anonymous source, when the MEC; Social
Development had already
been notified per ARA’s letter of 10 November of the reason for
transferring all but the R10.18 million
out of its bank account.
103.
There is a further issue
that arises. It concerns the anomalies regarding the way Social
Development transferred the full R23 million
to ARA. While the R13
million transferred in late June 2016 was pursuant to discussions
with ARA, which accepted that the amount
was being held as a conduit
for Life Recovery, the underlying justification for doing so appears
to offend relevant legislation
[35]
and no adequate explanation has been offered as to why Social
Development should take over facilities, which chronologically appear

to have been at the last minute, and without any tender process, from
the Department of Health in circumstances where the
latter
considered the facilities too expensive and where neither the
ultimate recipient, nor its “
administrator”
,
being respectively Life Recovery and Life Esidimeni, sought recovery
of the monies.
[36]
I have also
mentioned that the effect of this  explanation is to bring into
question the manner in which Social Development
dealt in its books
with the earlier but similarly structured payment of R14 million it
claims to have made in April 2016 to Life
Recovery using SANCA as the
conduit and what agreement or other transaction was used to support
the payment.
104.
The papers indicate that Social Development provides funding and
oversees its utilisation by organisations which provide social

services to those in need.  They may be small organisations
which do not have the capacity to administer budgets themselves
or
are unable to access adequate funding from the communities they
serve. They are therefore dependent for their survival, and
for being
able to provide services for the vulnerable and abused, on the
subsidies allocated by the Department.  If the contents
of
Lenyehelo’s letters to Maluleke and the MEC Social Development
of 10 November are correct, then certain officials within
the
department appear to have made it their personal fiefdom. The course
this case took  has exposed certain officials who
believe they
can wield autocratic powers with impunity, as there seemingly is no
adequate accountability. They have the power to
switch funding on and
off with scant regard for the wellbeing of the individuals in need of
care (who in this case are generally
indigent women and children who
are victims of abuse).
105.
As I understand the documents and service level agreements supplied,
Social Development provides a resource intended to fill
a desperate
need within historically disadvantaged communities which do not have
access to established welfare organisations. The
department is
mandated to provide funding for the benefit of those identified to be
in need of specific care. It is not intended
that the department
provides the services directly to those in need, nor can it. It
requires a delivery vehicle and presumably
looks at the projects
submitted by suitably qualified persons or organisations (which would
result in their being registered on
the system as a registered
service provider) that can most efficiently, competently and
economically provide for an identified
social assistance need whether
on its own or with the assistance of intermediaries performing
demonstrable and essential added
value services.
106.
If ARA’s allegations are correct, then the threatened closure
by officials, if ARA did not conform to their bidding and
whose
actions appear to be procedurally irregular, suggests that the
department has been compromised. The MEC’s failure to
mention
ARA’s letter in the
ex parte
applications, raises
concerns regarding the oversight of senior officials and their
accountability.
107.
Kish Gas’ explanation of how it came to the R5 million through
some transaction with an unknown foreigner who wished
to export fuel
at a price which includes local duties without any paperwork to speak
of for customs or in regard to its procurement
, in my respectful
view, cries out for investigation.  More so, if regard is had to
the fact that the twenty-nine or so transferee’s
of the R5
million should be readily identified. Yet the court has not been
informed of the outcome of any of the investigations
mentioned in the
papers even though they were initiated some time ago either by
complaints laid by ARA with the police, or  which
were alluded
to by the MEC: Finance or pursuant to Absa’s own
investigations.
108.
There is a confirmed
breach of the PFMA. The structures and systems in place appear to
have been deliberately compromised by officials
within Social
Development. While this may be as a result of poor administration in
registering service providers, the potential
for the system being
abused is self-evident
[37]
.
109.
In this context it would be remiss not to refer again to the contents
of the affidavit in which the MEC; Finance contended
that the
allegations made by ARA were not matters of relevance to the court
but were matters to be dealt with internally.
Firstly
the allegations of ARA were essential to the defence it raised.
Secondly ARA pertinently relied on being in the position
of a whistle
blower entitled to receive statutory protection. Far from being an
officious bystander ARA was entitled to be concerned
about the
legality of the monies entering its account and had brought the
matter to the attention of both the official it was dealing
with in
the department and to the MEC; Social Development.
The
subsequent events do not provide comfort particularly when there is
no explanation regarding the conduct of senior personnel
within the
Department in relation to matters which for reasons I have already
set out, at this stage indicate
prima
facie
a
contravention of the PMFA.
[38]
110.
In the present case, officials within Social Development have seen
fit to terminate any further funding to ARA.  These
are
allegations made  in the last set of papers filed.  If this
is maintained then it has a direct impact on  those
in need of
care and counselling and who have come to ARA for assistance. It is
reasonable to anticipate that the best outcomes
are achieved where
care and counselling are provided by persons with whom the individual
has built up a relationship of respect
and trust.
111.
The uncontested evidence presented when ARA brought its counter claim
for payment of amounts that were outstanding and in the
contempt
application is that department officials did not ensure that those
treated by ARA at the time when Social Development
purported to close
it down were provided with any alternate NPO which could be
considered, suitable or adequate in the circumstances.
112.
This brings into question
whether the officials within Social Development appreciate that they
are custodians of funds which are
required to be distributed to
competent service providers for the benefit of those most in need of
care.  Their actions as
contended for by ARA indicate that
certain officials are not beyond utilising coercive measures which
fall well outside their mandate
or powers.
[39]
REFERRAL
113.
The MEC claimed in a brief replying affidavit deposed to by the
department’s director of legal services that the allegations

made by ARA were not matters of relevance to the court and that they
would be considered internally.
114.
I am afraid that this gives little comfort when no explanation has
been given  regarding the conduct of senior personnel
within the
department in relation to matters which for reasons I have already
set out at this stage
prima facie
indicate a contravention of
the PFMA.
115.
The court’s role cannot be as a passive onlooker when matters
come before it which involve the possible misappropriation
of public
funds allocated in the national budget for alleviating the plight of
the most vulnerable and needy in our communities
and impact on the
NGO’s who provide much needed services and care. By their
nature, few NGOs are likely to have the resources,
resilience or the
locus
to ensure that a proper investigation takes place.
Moreover
the consequences in the present case have been that those in
authority within the department have seen fit to terminate
any
further funding to ARA. This naturally has a direct impact on the
latter’s ability to provide the necessary care for
the abused
women and children who have come to depend on it. The conduct of the
department in removing ARA as a recipient of social
welfare funding,
prior to any investigation leaves one with a sense of unease about
the commitment of the department to undertake
a thorough and fair
investigation.
116.
There is another element to this case which is of grave concern. It
affects the rights of the individual to be protected from
unlawful
acts of intimidation, surveillance, financial sabotage, interception
of data and other unlawful acts utilising clandestine
resources
accessible by reason of positions of power or authority which are
then used to invade the economic and privacy rights
of members of the
community.
117.
In
South African Association of Personal Injury Lawyers v Heath
and others
[2000] ZACC 22
;
2001 (1) BCLR 77
(CC) at para 4  the
Constitutional Court said the following;
"Corruption and
maladministration are inconsistent with the rule of law and the
fundamental values of our Constitution.
They undermine the
constitutional commitment to human dignity, the achievement of
equality and the advancement of human rights
and freedoms.  They
are the antithesis of the open, accountable, democratic government
required by the Constitution.
If allowed to go unchecked
and unpunished they will pose a serious threat to our democratic
State."
In
Gama v
Transnet Limited
2010
JDR 0059 (GSJ)
[40]
, at para 28
of the judgment I accepted that this passage was said in the context
of the Special Investigating Units and Special
Tribunals Act, but
considered that the purpose of the PFMA Act is similarly to hold
accountable the Board and officers of both
State-owned corporations
and government controlled entities.  I also referred to ss
195(1) and (2) (b) of the Constitution
which require public
administration to be accountable and to meet high standards of
professional ethics.
118.
S 195(3) of the Constitution provides that:
‘
National
legislation must ensure the promotion of the values and principles
listed in subsection (1).’
The
PFMA is one of the pieces of legislation born of this provision.
119.
It is not unusual for a court to refer conduct which at face value
appears to contravene legislation or disciplinary codes
for
consideration to the appropriate authorities or to a professional
body.
120.
In the present case the concerns which this court has are
sufficiently serious for it to refer to the responsible authorities

the possible contravention of PFMA in relation to financial
misconduct (i.e.; unauthorised or irregular expenditure) as
contemplated
in s 81 of the PFMA or if the cheques were authorised by
provincial treasury in a manner constituting financial misconduct as
contemplated
by s 82 of the PFMA.
Under
the PFMA the appropriate authority is National Treasury by reason of
the powers and duties conferred upon it by, among others,
ss 6(1)(f),
6(2)(b), (c), (e), (f) and (g)  of the Act  bearing in mind
the resources that were brought to bear on Lenyehelo
and, if her
allegations are correct, suggest that the use of an unsuspecting and
legitimate NGO as a conduit to effect the
improper transfer of funds
might not be  isolated.
121.
By reason of the provincial department’s audit requirements
provided for in ss 19 and 41(1) (c) (i) it also appears that
the
Auditor-General should receive a copy of this judgment for
consideration.
122.
Finally the nature of the
transfers through an ostensible intermediate party’s hands to a
party that is not the actual service
provider for use by another
without any proof of the department’s paper trail or proof of
the manner in which it was actually
accounting for it in its books
raises concern about the breach of FICA and POCA
[41]
.
The clandestine porting of Mrs Lenyehelo’s cellphone, the
transfer of R2000 and then the alleged hacking of her account
to
transfer R5million into another account appear to be within the ambit
of the Special Investigating Units and Special Tribunals
Act 74 of
1996  (“
SIU
Act)
.
This Act is concerned with investigating serious malpractices or
maladministration in connection with the administration of State

institutions, State assets and public money as well as any conduct
which may seriously harm the interests of the public.
[42]
.
It
seems that an appropriate route, bearing in mind that aside from the
PFMA there may also be contraventions of FICA or POCA, is
to refer
the papers and the contents of this judgment to the Director of
Public Prosecutions who may be in the best position to
consider how
the complaint is to be pursued and whether or not other charges
should be considered and if so which investigative
arm of SAPS should
be involved.
[43]
COSTS
123.
In
Schlesinger
and
Cometa-Mometal
the courts considered
making a special order for costs where relevant information was
withheld in
ex parte
proceedings.  While I cannot speak
for the presiding judges who heard the
ex parte
applications,
I for one formed a strong
prima facie
view of serious
malfeasance by ARA upon reading the applicant’s papers, which I
did first.
124.
I am satisfied that if the letters of 10 November had been revealed
in the
ex parte
applications then the court would have had
difficulty in taking a
prima facie
view that ARA intended to
dissipate the monies. Moreover the applicants would have been
compelled to draw their papers differently
in order to deal with the
letter of 10 November to the MEC.
This
is because the letters contained an explanation as to why monies that
formed no part of the R10.18 million were transferred
out of ARA’s
account, contained a statement that ARA recognised that the money was
not due to it, that it would pay the amount
over provided there was
sufficient proof as to the legitimacy of the payment and its source
and that even Absa considered the documentation
provided by the
department on the spreadsheet to be inadequate. Furthermore the
letter alleged that despite the failure to produce
such proof as
undertaken the  department’s officials resorted to
bullying tactics, that ARA was concerned about attempts
to hack its
account and had approached the bank with its concerns.
In
essence the letters provided explanations and perhaps equally
significantly had named senior officials within the department
and
asked the MEC to intervene on the very issue of ensuring that the
money ARA had received could be lawfully dealt with by it.
[44]
125.
In short the letter would have alerted the court to treat with
circumspection the claim in the founding papers that the money
had
been stolen by ARA to pay Absa. It also would have revealed that ARA
was alive to the threatened freezing of its account well
before the
application was heard which would have removed the argument
justifying a court to dispense with notice.
126.
The court takes a very serious view of the failure to place ARA’s
two letters before the court, having regard to the
circumstance of
this case and the fact that the letters were not only in the
possession of senior officials of Social Development
but ought to
have been in the possession of the MEC prior to her bringing the
application as the second respondent. A punitive
costs order is
therefore appropriate
ORDER
127.
For all these reasons I make the following order:
1.
Save the
extent that there have been orders made by consent the applications
brought under case number 41493/2016 and 44645/2016,
are dismissed.
2.
The first
and second applicants are to pay jointly and severally two thirds of
the first respondent’s costs incurred under
the above two case
numbers, which shall include two thirds of all the reserved cost
orders,  on the attorney and client scale
the one paying the
other to be absolved;
3.
The
Registrar is directed to forward a copy of this judgment to the
responsible senior official or head of the secretariat of:
a.
National
Treasury;
b.
the
Auditor-General;
c.
the Director
of Public Prosecutions;
d.
Former
Deputy Chief Justice Moseneke in his capacity as the arbitrator in
the
Life Esidimeni Alternative Dispute
Resolution proceedings being held at Emoyeni Conference Centre, 15
Jubilee Road, Parktown, Johannesburg
To the extent that any
of the recipients may request access to the contents of the court
files same shall be made available for
perusal and copying.
DATES
OF HEARING:
29
December 2016
30
December 2016
13
January 2017
31
January 2017
01
February 2017
28
February 2017
14
March 2017
27
March 2017
30
March 2017
13
April 2017
22
May 2017
25
May 2017
14
August 2017
DATE
OF JUDGMENT: 31 October 2017
FOR
APPLICANT: Adv. D Joubert SC
Adv.
VR Fouche
FOR
FIRST RESPONDENT: Adv. O Ben-Zeev
Tracy
Lomax Attorneys
FOR
SECOND
RESPONDENT:
Tim Du Toit & Co Inc.
FOR
MEC FOR FINANCE: Adv. A Stein
Adv.
A Msimang
Bowman
Gilfillan Inc.
FOR
KISH GAS: Adv. M Louw
Forbay
Attorneys
[1]
The State Attorney produced the relevant section entitling it to do
so
[2]
Founding affidavit to the first
ex
parte
Application,
para 11 p34
[3]
As will appear later this amount is made up of the R4 998 550.36
transferred by ARA out of its bank account to be held
in trust by
the State Attorney and the amount of R45 275.56 which was all
that remained of the R5 million that ARA alleged
had been unlawfully
hacked out of its account and which, as appears later, had found its
way into the account of an entity known
as Kish Gas .
[4]
Premier’s Founding affidavit para 6 p 32
[5]
Ibid para 23 p 41
[6]
First
ex
parte
application
p27 prayer 1 to Part B. This was changed to 60 days in the second
application
[7]
See
S v
Graham
1975
(3) SA 569
(A) at 574H.See generally
S
v  Grayston Technology Investment (Pty) Ltd and another
[2016]
4 All SA 908(GJ)
[8]
Second
ex
parte
application
p6 prayer 1 of Part B
[9]
Although the attorneys had not attended on the return date they had
contacted my registrar directly.
[10]
The order of 31 January reads:
1. The rule nisi is
extended to 28 February 2017.
2. The parties in
this order will be referred to as cited under case number 41493/2016
although the order and the documents to
be served relate to both
that case number and case number 44645/2016.
3. The first and
second applicants must file their replying affidavits by no later
than 13 February 2017.
4. The third and
fourth applicants must file any confirmatory and/or other affidavits
concerning the merits of this matter by
no later than 13 February
2017.
5. This rule nisi,
together with the whole application, must be served on the
following:-
5.1. FNB Bank;
5.2. Kish Gas (Pty)
Ltd, being the holder of the FNB bank account number [...] at its
business address situate at 271 Johan Rissik
Street, Waterkloof
Ridge, Pretoria, Gauteng, as supplied by the FICA documentation
discovered by FNB Bank;
5.3. Mr Kishan
Jawaharlal, at his business- and residential address, situate at 271
Johan Rissik Street, Waterkloof Ridge, Pretoria,
Gauteng, as
supplied by the FICA documentation discovered by FNB Bank;
5.4. Kish Gas (Pty)
Ltd’s attorneys, Forbay Attorneys, situate at 44 Hilda Street,
Pretoria, 0083.
5.5. AND ONLY in the
event of an acceptable form of proof of the State Attorney’s
authority to act in these proceedings
on behalf of each of the third
and fourth applicants not being produced in response to the first
respondent’s Rule 7 notices
by no later than Friday 3 February
2017 then service must also be effected on;
5.5.1. Life Recovery
Centre, Randfontein (Witpoort Treatment Centre) at No 28 Maugham
Road, Randfontein;
5.5.2. Life Esidimeni
(Pty) Ltd at Oxford Manor, 21 Chaplin Road, Illovo, Sandton
6. Should Kish Gas
(Pty) Ltd, FNB Bank, and in the event of para 5.5 of this order
becoming operative, Life Recovery Centre, Randfontein
(Witpoort
Treatment Centre) or Life Esidimeni (Pty) Ltd elect to file any
affidavits on the merits of the application, they are
ordered to do
so by no later than 13 February 2017.
7. The first and
second Applicants are responsible for serving forthwith all the
papers referred to in the preamble to para 5
on the persons
identified in paras 5.1 to 5.4 inclusive.
8. In the event
of para 5.5 of this order becoming operative then the first
respondent is responsible for serving forthwith
on the expiry of the
time limit therein, all  the papers referred to in the preamble
to para 5 on the persons identified
in para 5.5.1 and/or 5.5.2 as
the case may be.
9. The costs of the
application set down on 31 January 2017 are reserved.
[11]
Presumably the purpose of this sudden payment, of R620 000, out
of the proceeds of an unexpected transaction, can be readily

established from the attorneys concerned as can the originating
source of, and paper trail for, all of the fuel that was allegedly

supplied.
[12]
It must be recorded that subsequently Adv Joubert said that the
Department was withdrawing the concession and tendered an
explanation
for why it had been made.
[13]
See
National
Treasury and Others v Opposition to Urban Tolling Alliance and
Others
2012
(6) SA 223
(CC) at paras 27 and 71.
[14]
At para 38 p944
[15]
At para 20.4 p938
[16]
At para 42 p945
[17]
Heads of argument at para 34
[18]
A Sure Check is the process whereby an automated SMS is sent to a
cellphone number designated for this purpose by the account
holder
requesting a particular required response if a sensitive banking
procedure is being initiated on the internet banking
site (such as
adding a beneficiary or changing the withdrawal ceiling). Without a
positive reply from the designated cellphone
number (whether it be
a  digit or possibly the repeat of a one-time PIN number) the
bank will decline to process the request.
[19]
In the initial application costs were sought against ARA and Absa
jointly and severally.
[20]
At 634H-635C
[21]
The allegation was made in ARA’s supplementary affidavit at
paras 23-25 p1021. The response at para 28 p1063 does not address

these issues or the accusations levelled against Absa.
[22]
If regard is had to the number of attempts to unlawfully access
ARA’s account which were picked up by Absa and confirmed
by
ARA prior to the change of the transfer limit and the actual
transfer of the R5 million to an entirely new beneficiary, it
may
not be remiss to express a degree of surprise that the bank’s
risk profiling algorithms which one imagines would be
in place did
not red flag the significant increase of the withdrawal limit by
twentyfold despite Absa admitting that on the very
same day it had
detected a suspicious loading of three new beneficiaries which ARA
had immediately confirmed were fraudulent.
[23]
Service level agreement clauses 4.3 and 7.16 at pp 52 and 58 of the
court file. In particular
Clause
7.16 provides that:
“
Funds will be
transferred into the legitimate bank account of the Service
Provider”
[24]
Willis
Faber Enthoven (Pty) Ltd v Receiver of Revenue
[1991] ZASCA 163
;
1992
(4) SA 202
(A) at 223H-224G
[25]
Phillips
v Hughes; Hughes v Maphumulo
1979
(1) SA 225
(N) at 229C-F and
Minister
van Justisie v Jaffer
[1994] ZASCA 102
;
1995
(1) SA 273
(A)  at 280E-G
[26]
The possibility that the service level agreement was back-dated
therefore cannot be ruled out if Lenyehelo is correct that Maluleke

claimed not to have known the amount of the first tranche at the
time the letter was written: The actual amount was stipulated
in the
agreement.
[27]
There are four separate service level agreements between the
department and ARA. They are marked SLA1.1 to SLA1.4 at pp 548-644.
One
would expect enquiries to be made as to who decided that the Life
Recovery agreement should be treated differently, to whom
its
existence was restricted, from whom was its existence being withheld
and why. I mention this also because the contents of
Social
Development’s second replying affidavit reveal that in April
2016 it had also used SANCA as a conduit to pay an
amount of R14
million over to Life Recovery (see para 40 of the affidavit). An
explanation is given that this was for ad hoc
services that had been
provided. That may well be, but it is then surprising that the money
remained idle in the account.
On
Social Development’s own version in the present case a total
of more than R37 million was paid or was to be paid into
Life
Esidimeni’s account as the administrators of Life Recovery
within the space of six months.
[28]
This is all the more surprising if regard is had to the period of
time that was needed, according to Social Development in the

contempt proceedings, to process and effect a payment on its
systems.
[29]
See Annexures RC1 and RC2.
[30]
This cannot be the “
legitimate”
bank
account stipulated in the service level agreement as that is
identified as an FNB held account (see earlier footnote)
[31]
There is no suggestion in the communication that receipt of any
other monies was anticipated.
[32]
According to ARA, at this stage Maluleke and Msimang were still
insisting that payment be made over to Life Recovery.
[33]
Absa’s Electronic Funds System Payment Details – record
p93
[34]
Kish Gas’ version was that  on 8 November Kishan
Jawaharlal (“
Kish”
)
received a call from a Mr Morney Williams (“
Morney”
)
wanting to purchase fuel. They met on 9 November. Morney was
accompanied by a person whose name Kish no longer recalled. Morney

wanted to purchase R10 million worth of fuel. Kish required an EFT
payment  Although Morney wanted a once-off transaction,
Kish
advised that it was prudent to split the purchase into two deals of
R5million each. On 10 November at 18;05 Kish received
an email from
“
Tim
Tim
”
attaching
an Absa on line proof of payment notification of the transfer of R5
million into Kish Gas’ FNB account. On 11
November at 10;04
Morney indicated that they would proceed with taking delivery of ½
million litres of “
Diesel
PPM500 for export to Zambia
”
and
that delivery would commence that afternoon. The email was written
on behalf of Zengereri Fuels LLC, Julius Nyerere Drive,
Lusaka. Kish
Gas provided a tax invoice which reflects a total unit price of
R10.73. The fuel was loaded onto 12 tankers with
40 000l
capacity each. On 14 November Morney contacted him again. This was
after Kish Gas’ bankers had informed Kish
that the R5 million
might be part of a fraudulent transaction. Curiously Kish told
Morney that “
Kish
Gas will not entertain an electronic fund transfer however I
requested that he make a cash deposit at a branch of FNB. I

requested him to do this because the branches of FNB have cameras
and as such will be able to identify the perpetrator.”
Morney
did not proceed with the balance of the transaction.”
Curious
because Kish does not claim to have alerted the authorities to his
plan, let alone to have promptly informed them of how
Kish Gas came
to receive the amount and that another transaction was in the
offing. On 11 November of the R5 million all but
R164 000 had
been transferred out of Kish Gas’ account. By 12 November the
entire balance had been transferred out.
It
is evident that if Kish Gas is to be believed, already by 8 November
a plan was in place to transfer monies into Kish Gas’
account
for onward distribution. This was on the same day when  ARA met
with department officials and required proof that
the monies had not
been illegally transferred to it.
Since
no times are reflected as to when the amounts were transferred out
it cannot be said that they were effected prior to ordinary
business
hours which obviously would raise further suspicion. What however
requires an explanation is;
a. how the fuel could
have been procured so quickly as Kish Gas admits that it is an
intermediary between the producers and suppliers;
b. why a foreign company
would be prepared to pay a reasonably high price for local fuel
which price included duties when:
i. fuel for export must
be transported in  Removal of Goods (ROG) tankers;
ii. the Zambian company
would not be able to recover duties paid when the tankers crossed
the border and the fuel would be subject
to additional duties
imposed by the Zambian authorities when entering that country.
If
there was fuel supplied then ARA could never have gained from the
transaction since the money went directly out of ARA into
Kish Gas’
account and the amount paid for the fuel was high. If there was
little or no fuel supplied then  Kish Gas
becomes a suspect and
one would expect that it would be relatively easy for the
authorities to follow a paper trail not only
in respect of where the
money ended up and proof of the
causa
, but also in respect of
proof of receipt of fuel from a producer, when it was ordered and
delivered, where such a large quantity
could have been stored for
pumping into the 12 tankers, where the tankers came from and whether
there was any hiring charges,
whether they crossed the border and if
so what was cleared through customs. If suspicion falls on Kish Gas
then it should be
relatively easy to establish if there are links
between it or the ultimate beneficiaries and any person or official
employed
by or otherwise involved with any of the parties.
[35]
See the PFMA and the requirements in terms of Treasury Regulations
under the Finance Intelligence Centre Act 38 of  2001
(“
FICA”
).
By way of illustration Reg 17.1.1 provides that all transactions
must be supported  “
by
authentic and verifiable source documents , clearly indicating the
approved accounting allocation”
.
[36]
The “
confidential”
agreement produced
indicated, at face value at least, that the money was well overdue,
yet neither Life Recovery nor Life Esidimeni
sought payment directly
into either of their accounts. Life Esidimeni’s role has yet
to be fully explained and neither
it nor Life Recovery deposed to
any founding affidavits setting out why they did not require direct
payment considering that
it would have been common cause between
them and Social Development that ARA was holding any monies as agent
for them and not
for Social Development.
A
further concern is that the papers indicate that the R13 million odd
was paid into Life Recovery’s bank account at Rand
Merchant
Corporate Bank during July 2016, yet the service level agreement
stipulated that the only legitimate bank account into
which money
could be deposited was into one held with FNB. (see paras 52 and 75
supra
)
[37]
There has yet to be any internal documentation produced by Social
Development to indicate that the R10.18 million was to be received

by Life Esidimeni on behalf of Life Recovery and not that the
internal audit trail would end with ARA as recipient. That in
essence was the documentation requested by ARA as far back as the
meeting of 8 November because, on its version, it was concerned

about being an unwitting party to money laundering. The subsequent
provision of a service level agreement marked “
confidential”
in the
ex
parte
application
does little to allay these concerns.
[38]
Looming large are the acts of certain senior officials within Social
Development who are in breach of legislation concerned with

financial regularity. So too the curious situation where one
department of the Provincial Government finds a service provider
too
expensive, which itself is strange as any remuneration would be
pursuant to a costing evaluation process, yet another department

will effectively conclude in haste an agreement with the very same
service provider without any apparent tender or cost analysis.

Perhaps the most cause for concern is that neither Life Esidimeni
nor Life Recovery sought payment despite ostensibly having
provided
the services and the amount falling due. These unresolved issues
raise concerns about the genuineness of the transactions,
what or
for whom the payments were in fact intended and what services were
in fact rendered. The involvement of Life Esidimeni
in the
Department of Health scandal where at the time of this judgment
there remains no proper explanation for the removal of
patients in
haste to unregistered NPO  also raises red flags. Although
there is no need to make such a finding for the purposes
of the case
(and therefore I confine it to a footnote) ,  Lenyehelo’s
concern of ARA being used to launder money was
reasonable in the
circumstances.
[39]
Once again: According to ARA in its letters of 10 November, Maluleke
and Msimang were still requiring the R10.18 million to be

transferred into an account which, if regard is had to the purported
service level agreement between the department and Life
Recovery,
would have been unlawful as payment could only be made into the FNB
account identified in the agreement.
[40]
Gama
at
para 27
[41]
Finance Intelligence Centre Act 38 of 2001 and
Prevention of
Organised Crime Act 121 of 1998
[42]
See Preamble to the SIU Act
[43]
See e.g. the request made to the DPP by Bertelsmann J in
Blue
Cell (Pty) Ltd v Blue Financial Services Ltd and other
(unreported)
case no 14192/2010(NGHC) in the judgment delivered on 19 April 2012
[44]
It will be recalled that initially the officials required the money
to be paid over to Life Recovery.