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[2019] ZAGPJHC 295
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VBS Mutual Bank (In Liquidation) v Ramavhunga and Another (25062/2018) [2019] ZAGPJHC 295 (23 August 2019)
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO:
25062/2018
In
the matter between:
VBS
MUTUAL BANK (IN LIQUIDATION)
Applicant
and
ANDILE
MALUSI ATTWELL RAMAVHUNGA
First
Respondent
ZANELE
PERTUNIA MAZEER RAMAVHUNGA
Second
Respondent
JUDGMENT
MATOJANE
J
Introduction
[1]
This
is an application for the final sequestration of the joint estate of
the respondents, Mr and Mrs Ramavhunga, who are married
in community
of property. The joint estate of the respondents was provisionally
sequestrated on 3 August 2018 by a court order
granted by His
Lordship Mr Justice Tsoka.
[1]
[2]
The application finds its genesis in the
large-scale fraud perpetrated on retail depositors of the applicant,
VBS Mutual Bank (‘VBS’
or the ‘Bank’) which
includes, among other things: members of the Venda community;
business institutions; and public
institutions, including local
municipalities and the Public Investment Corporation (‘PIC’).
[3]
The fraud has caused the VBS a loss of at
least R1 521 925 280.40, which led to the Bank’s
severe liquidity
crisis. On 10 March 2018 VBS was placed under
curatorship in terms of
s 81
of the
Mutual Banks Act 124 of 1993
read with s 69(1) of the Banks Act 94 of 1990.
SizweNtsalubaGobodo Incorporated (‘SNG’), a firm of
auditors,
was appointed as the curator of the Bank. Annosh Rooplal
(‘Rooplal’), a director of SNG, conducted preliminary
investigations
into the fraudulent scheme and deposed to the founding
affidavit in support of the present application.
[4]
Pursuant
to Mr Rooplal’s initial findings, the Deputy Governor of the
South African Reserve Bank, in his capacity as the Chief
Executive
Officer of the Prudential Authority, established in terms of s 32
of the Financial Sector Regulation Act 9 of 2017
(the ‘FSR
Act’) appointed Advocate Terry Motau SC as investigator to
conduct an investigation into the Bank.
[2]
The investigation uncovered numerous serious irregularities,
including wide-scale fraud, in the conduct of the banking business
of
VBS.
[5]
Mr Rooplal obtained an affidavit deposed to
by Mr Phophi Londolani Mukhodobwane (‘Mukhodobwane’) in
terms of s 136(1)(a)
and s 140(6) of the FSR Act, dated 22
May 2018. Mukhodobwane, who was the Head of Treasury of VBS, is a
co-perpetrator of
the fraudulent scheme. VBS relies on his evidence
in the affidavit to assert that Ramavhunga participated and benefited
from the
aforesaid fraudulent scheme, which involves Vele Investments
(Pty) Ltd (‘Vele’). VBS assert that Ramavhunga is jointly
and severally liable to VBS for the loss occasioned as a result of
the fraud.
Background
facts
[6]
The following facts are either common cause
or at least not disputed. The fraudulent scheme involved Vele.
According to Mr Rooplal,
the scheme was devised and executed by the
following executives and officials within VBS: Tshifhiwa Calvin
Matodzi (’Mr Matodzi’),
the Chairman of the VBS Board of
Directors and the Chairman of Vele; Andile Malusi Attwell Ramavhunga
(the first respondent in
this matter), VBS’ Chief Executive
Officer; Robert Madzonga (‘Mr Madzonga’) who is
VBS’ former Chief
Operations Officer and who thereafter became
the Chief Executive Officer and Chief Operating Officer of Vele;
Phophi Londolani
Mukhodobwane, VBS’ Head of Treasury; and
Phillipus Nicholas Truter (‘Truter’) VBS’ Chief
Financial Officer.
[7]
The estates of Mr Matodzi, Mr Mukhodobwane,
Mr Truter and Mr Madzonga have been finally sequestrated. Vele was
finally wound-up
on 31 July 2018.
The
fraudulent scheme
[8]
According
to Rooplal, the fraudulent scheme was effected in the following
manner: Truter created fictitious deposits by manufacturing
general
ledger entries on the EMID system.
[3]
He would then set up and use ‘suspense accounts’ within
VBS to create fictitious deposits, from where they were credited
to
the intended beneficiaries’ VBS accounts. Truter then credited
the fictitious deposits to VBS accounts held by the perpetrators
or
VBS accounts held by Vele or its related parties. Mr Mukhodobwane
would authorise the release of the fictitious deposits out
of the VBS
accounts into a bank account held in another bank. The money flowing
out was the real money that had been deposited
therein by the
depositors.
[9]
The fictitiously created deposits were used
by the perpetrators to clear their numerous overdraft facilities,
purchase immovable
properties and high-end motor vehicles and a
helicopter.
[10]
VBS seeks the final sequestration of the
joint estate of the first and second respondent on the basis that Mr
Ramavhunga knowingly
participated and benefited from the fraud
described above which involves Vele.
Hearsay
evidence
[11]
Mr Ramavhunga argues that Mr Mukhodobwane’s
affidavit, which is relied upon by VBS, amounts to inadmissible
hearsay evidence
and ought to be struck out by the Court. Mr Rooplal,
in his affidavit, states that after his appointment as a curator, he
conducted
a preliminary investigation that confirmed fraud amounting
to R1.5 billion. His investigation was confirmed by Mr Mukhodobwane
in his affidavit. The corroboration cannot, therefore, be hearsay.
[12]
Second,
Tsoka J, in his judgment provisionally sequestrating the joint estate
of the Ramavhungas, has already determined that Mr
Mukhodobwane’s
affidavit does not constitute hearsay evidence and that even if it
does, it is admissible under the
Law of Evidence Amendment Act 45 of
1988
. Tsoka J‘s decision on the admissibility of Mr
Mukhodobwane’s affidavit is a finding of law and can only be
overruled
on appeal. See
Macdonald’s
Corporation v Joburgers Drive-Inn Restaurant (Pty) Ltd and
another
.
[4]
Disputes
of fact
[13]
It is
trite that where there is a genuine and bona fide dispute as to
whether the respondent in sequestration proceedings is indebted
to
the applicant, the court should as a general rule dismiss the
application.
[5]
In
Kalil
v Decotex (Pty) Ltd
,
[6]
Corbett JA held as follows:
‘…
In
regard to
locus
standi
as a creditor, it has been held, following certain English authority,
that an application for liquidation should not be resorted
to in
order to enforce a claim which is
bona
fide
disputed by the company. Consequently, where the respondent shows on
a balance of probability that its indebtedness to the applicant
is
disputed on
bona
fide
and reasonable grounds, the Court will refuse a winding-up order. The
onus
on the respondent is not to show that it is not indebted to the
applicant: it is merely to show that the indebtedness is disputed
on
bona
fide
and reasonable grounds….’
[14]
Ramavhunga does not dispute the allegations
of fraudulent activities within VBS. His defence is that he was not,
at any time, a
participant in the fraudulent scheme. He explains that
to the extent that massive fraud was committed, he does not bear
personal
knowledge of the details thereof. He states that he relied
on information provided to him by his subordinates.
[15]
The
remarks by Corbett JA in the oft-quoted case of
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
is apposite:
[7]
‘…
.It
is correct that, where in proceedings on notice of motion disputes of
fact have arisen on the affidavits, a final order, whether
it be an
interdict or some other form of relief, may be granted if those facts
averred in the applicant's affidavits which have
been admitted by the
respondent, together with the facts alleged by the respondent,
justify such an order. The power of the Court
to give such final
relief on the papers before it is, however, not confined to such a
situation. In certain instances, the denial
by respondent of a fact
alleged by the applicant may not be such as to raise a real, genuine
or bona fide dispute of fact….
[such as] where the allegations
or denials of the respondent are so far-fetched or clearly untenable
that the Court is justified
in rejecting them merely on the papers….
’
[16]
The assertion by Ramavhunga that he was
unaware of what was happening at VBS, including the perpetuation of
the fraudulent scheme
is untenable and demonstrates a lack of bona
fides on his part. Ramavhunga, as a Chartered Accountant and the
Chief Executive Officer
of VBS, must have known that VBS paid for and
purchased a helicopter for an amount of R12 825 000. He
must also have
known that Mr Matodzi purchased a Ferrari for an
amount of R6 500 000.
[17]
Ramavhunga was involved when Vele
fraudulently acquired shares valued at R80 million in VBS to
become the majority shareholder
in VBS. Insure (Pty) Ltd (‘Insure’)
deposited an amount of R80 million into VBS, which purported to be
payment by Vele
for its shareholding in VBS. The deposit was placed
with VBS for two weeks for a purpose unrelated to the VBS share
acquisition
transaction. On 13 March 2017, the deposit was withdrawn
by Insure in the ordinary course of business.
[18]
In order to create a paper trail, Mr
Ramavhunga addressed a letter to the VBS Board in which he motivated
for Vele’s acquisition
of shares in VBS, stating that Vele has
deposited amounts over R250 million into VBS during periods of
liquidity distress. Also,
he stated that Vele, through Insure, had
held deposits over R1.5 billion over a six-month cycle which was
false.
[19]
One of the essential disputes was the R15
million that Ramavhunga received from Vele. He was one of the five
individuals that received
a ‘bonus’ payment on the very
day that R350 million was fictitiously created in Vele’s VBS
account. I agree with
the findings of Tsoka J when he dealt with the
issue in these terms:
‘
[19]
On 01 August 2017, Dambale submitted an invoice for the said amount
of R15 million, R6 million being the introductory fee while
the R9
million was the success fee. He is, however, unable to explain how in
August 2017, the period when he introduced one Mhlanga
to Matodzi for
the acquisition of Mvunonala, he or Dambale could have been entitled
to R9 million success fee when nothing at that
stage was concluded.
He changed tact. His explanation, which is implausible, is that
August 2017 is the period he travelled to
Zimbabwe to negotiate the
acquisition of Mvunonala. However, this does not explain the success
fee of R9 million in August 2017
when the deal was in its gestation.
In his evidence before the investigation instituted by the Deputy
Director-General of the SARB
in terms of Act No. 9 of 2017, he
conceded that Mvunonala was purchased by Gazela Trust as far back as
April 2017. The explanation
that he went to Zimbabwe to negotiate the
purchase of Mvunonala is, therefore, a lie.
[20]
The uncontested evidence is that the shares in Mvunonala as at April
2017 were owned by Gasela Trust, which acquired Mvumonala
for R700
million. That the R15 million is the proceeds of fraud is more
probable if not true. The attempted explanation by Ramavhunga
of the
origins of this amount is not only beyond reasonable doubt false but
is a lie. The R15 million is the proceeds of fraud
perpetrated on
VBS. In the result, the court finds his explanation implausible and
not bona fide. VBS has established a prima facie
case against him for
the provisional sequestration of his estate.’
[20]
According to Mr Rooplal, there was no
declaration of this arrangement in any of the board or governance
meetings, nor was there
any other formal declaration to the Bank in
violation of his fiduciary duties and good corporate governance
standards expected
of a bank CEO.
[21]
Mr Mukhodobwane alleges that fictitious
contract finance deals were created to generate fictitious profits he
states that Mr Ramavhunga
signed fictitious contract finance deals
totalling approximately R100 000. Witnesses have testified in
the investigation conducted
by Advocate Motau SC that Ramavhunga had
taken the ‘credit decisions’ in respect of those
fictitious contract finance
deals. Mr Ramavhunga admitted in his
testimony in the investigation that he signed the fictitious
contracts.
[22]
Ramavhunga was aware of the bribery and
corruption involving payments of commissions to influential persons.
Two senior executives
of the PIC, Mr Magagula (the Head of Risk at
the PIC) and Mr Nesane, (the Head of Legal at the PIC) were
respectively appointed
by the PIC as non-executive and alternate
directors of VBS. Both Mr Magagula and Mr Nesane confessed, under
oath, that payments
made to them by Vele were bribes to keep them
silent. Nesane testified that Ramavhunga knew that the payments were
bribes.
[23]
Ramavhunga, as CEO of VBS, aggressively
pursued the opportunity for VBS to obtain a R1 billion deposit from
the Passenger Rail Agency
of South Africa (‘PRASA’).
Ramavhunga admits that he instructed Mukhodobwane to pay Bhekwam
Holdings (Pty) Ltd (‘Bhekwam
Holdings’) R1.5 million as a
‘performance incentive’ in this regard. He alleges that
Bhekwam Holdings had an
agreement with VBS for it to try and convince
PRASA to open a bank account with VBS. According to Mr Rooplal,
Ramavhunga failed
to disclose that Mr Gift Manyanga, VBS’ Chief
Banking Officer, is the sole director of Bhekwam Holdings and that
Bhekwam
Holdings is Mr Manyanga’s alter ego. Mr Ramavhunga and
Mr Manyanga signed the agreement. The agreement does not refer to
PRASA or the facilitation of the 12-month deposit from PRASA (as Mr
Ramavhunga alleged).
[24]
Mr Ramavhunga does not explain why a
‘performance incentive’ had to be made to Manyanga’s
Bhekwam Holdings when
Manyanga had, in his capacity as Chief Banking
Officer of VBS, and without reference to Bhekwam Holdings,
corresponded with Ms
Page, the CFO of PRASA, regarding its potential
R1 billion deposit.
[25]
Despite knowing that Ms Page and Mr
Botabota of PRASA were against opening an account with VBS, a payment
of R1.5 million was made
into Mr Manyanga’s Bhekwam Holdings
account.
[26]
On 24 January 2018, Mr Ramavhunga wrote to
the new PRASA acting Group Chief Executive Officer, Mr Molepo, to
motivate the deal.
He offered PRASA an increased rate of 9.25% per
annum, and falsely claimed that Vele had an asset base of
R50 billion. Ramavhunga
further stated that VBS was ‘one
of the most highly capitalised banks in the country with a current
capital adequacy of 32%
against industry average of 15%’.
[27]
Despite Ms Page and Mr Botabota’s
disapproval, Mr Molepo agreed to a deposit with VBS, to which Ms Page
emphatically refused.
[28]
I find that Ramavhunga has failed to raise
a bona fide disputes of fact on the papers, as he failed to seriously
and unambiguously
address the facts he says he disputes. His denials
are fictitious and intended merely to delay the inevitable.
Liquidated
claim
[29]
Ramavhunga contends that VBS has failed to
establish a liquidated claim against him. He argues that the claim on
which VBS has based
its application is not for a liquidated amount as
the amount has not yet been determined. Ramavhunga refers to
Rooplal’s
affidavit where it is stated that the Bank has
suffered a loss of over R1 521 925 280.54. Mr
Ramavhunga maintains
that the debt cannot be proven without extrinsic
evidence as the investigation itself remains ongoing.
[30]
In
Irvin
& Johnson Ltd v Basson
,
[8]
a manager was dismissed when an investigation into the affairs of the
branch that he managed revealed that he had to misappropriated
funds
from his employer, the sequestrating creditor. The investigations
were not yet complete. The respondent argued unsuccessfully
that the
applicant had not proven a liquidated claim. The court held:
‘
For
the present purposes, it is of no consequence, in my view, that the
full extent of the respondent's liability may eventually
prove to be
in excess of the amount of R103 925,49. The evidence, as it
stands, if it is accepted, establishes a liability
of not less than
the amount to which I have referred. ..
[31]
I accordingly find that VBS’ claim of R1 521 925 280.46
is a liquidated claim and it therefore satisfies
the requirements of
sections 9(1) and 12(1)(a) of the Insolvency Act 24 of 1936 (the
‘
Insolvency Act&rsquo
;).
[32]
I now turn to consider the essential issue relating to the provisions
of
section 12(1)
read with
sections 9(1)
of the
Insolvency Act. The
section provides as follows:
‘
12.
Final sequestration or dismissal of a petition for sequestration
—
(1)
If
at the hearing pursuant to the aforesaid rule nisi the court is
satisfied that
(a)
the
petitioning creditor has established against the debtor a claim such
as is mentioned in subsection (1) of section nine; and
(b)
the
debtor has committed an act of insolvency or is insolvent; and
(c)
there
is reason to believe that it will be to the advantage of creditors of
the debtor if his estate is sequestrated, it may sequestrate
the
estate of the debtor.
[31]
Section 9(1)
of the
Insolvency Act, in
so
far as is relevant to this matter, provides that a creditor who has a
liquid claim for not less than R100 against a debtor who
has
committed an act of insolvency or is insolvent may petition the court
for the sequestration of the estate of the debtor. It
is not disputed
that it will be to the advantage of creditors of the joint estate if
the estate is sequestrated.
Factual
insolvency
[32]
Mr Ramavhunga submits that VBS has not in
its founding papers made the critical averment that he is factually
insolvent and has
not attended to any valuation his assets and
liabilities. He argues that that VBS has failed to provide any
evidence that he and
his wife are factually insolvent and that their
liabilities exceed their assets.
[33]
The court is
empowered to grant a final order of sequestration despite the fact
that factual insolvency was not specifically relied
upon in the
application.
[9]
Such proof need not be direct. It is enough if facts are proved from
which the inference of insolvency is fairly and properly
deducible.
[10]
The question of whether or not the debtor is, in fact, insolvent is
decided on the balance of probabilities. If the debtor’s
liabilities (fairly valued) exceed his assets (fairly valued) he is
insolvent.
[34]
In
the investigation, Mr Ramavhunga testified before Advocate Terry
Motau SC that he was indebted to Mr Matsepe, who had granted
him
a personal loan of R750 000. He testified that he had repaid
R100 000 and that he is unable to repay the balance
due to Mr
Matsepe. The best proof of solvency is payment of debts, and
consequently, Mr Ramavhunga’s failure to pay is itself
an
indication of actual insolvency.
[11]
[35]
Ramavhunga admits receipt of R15 million
from Dambale Holdings. Neither he nor Dambale have filed tax returns
in respect of this
income, and they have not been assessed for income
tax. Since Dambale is Ramvhunga’s alter ego, it is likely that
he is personally
responsible for this tax liability.
[36]
Mr Ramavhunga has failed to disclose that
he has a bank account with Investec Bank into which more than R2.1
million was deposited
between August 2018 and April 2019, despite him
being advised of his obligations in terms of
s 23
of the
Insolvency Act.
Advantage
to creditors
[37]
There is a reasonable possibility that a
pecuniary benefit will redound to VBS if the joint estate of the
respondents is sequestrated.
The is also the prospect that the
trustee of the joint estate will be in a position to conduct a proper
enquiry into the affairs
of Mr Ramavhunga and his wife which might
yield further assets falling into the insolvent estate that may have
been concealed.
VBS has discharged the onus of establishing that
there is reason to believe that the sequestration will be to the
advantage of
creditors.
[38]
In the circumstances, I find that a proper
case has been made out for the sequestration of the respondents
joined estate.
I
accordingly make the following order:
1.
The joint estate of Ramavhunga, Andile
Malusi Attwell (Identity Number […]) and Ramavhunga, Zanele
Pertunis Mazeer (Identity
Number […]) is placed under final
sequestration;
2.
The cost of the application, including the
costs of two counsel, shall be the costs in the sequestration of the
estate.
_____________________________
K E MATOJANE
JUDGE OF THE HIGH COURT
GAUTENG LOCAL DIVISION, JOHANNESBURG
Date
of hearing: 21 June 2019
Date
of judgment: 23 August 2019
Appearances:
Counsel
for the Applicant: Adv. M Antonie SC
Adv.
E van Vuuren SC
Adv.
Gishatha Singh
Instructing
Attorneys: Werksmans Attorneys
Counsel
for the Respondents: Adv. J H Groenewald
Instructing
Attorneys: BDK Attorneys
[1]
VBS Mutual Bank (In
Liquidation) v Ramavhunga and Others
(2018/25062;
2018/25057) [2018] ZAGPJHC 516 (3 August 2018).
[2]
In terms of
section 134 of the FSR Act.
[3]
The EMID
system is an electronic banking platform which records the
accounting entries relating to banking transactions.
[4]
McDonald's Corporation v
Joburgers Drive-Inn Restaurant (Pty) Ltd and Another; McDonald's
Corporation v Dax Prop CC and Another;
McDonald's Corporation v
Joburgers Drive-Inn Restaurant (Pty) Ltd and Another
1997 (1) SA 1
(A) at 27D-E
.
The Appellate Division in this case found that a decision on the
admissibility of evidence is one of law.
[5]
Badenhost v Northern
Construction Enterprises Ltd
1956 (2) SA 346
(T) at 347-8
.
[6]
Kalil v Decotex (Pty) Ltd
and Another
1988 (1) SA
943
(A) at 980B-C.
[7]
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634H-635C.
[8]
Irvin & Johnson Ltd v
Basson
1977 (3) SA 1067
(T)
at
1072H-B.
[9]
Smith
and Walton (SA) (Pty) Ltd v Holt
1961 (4)
157 at 166 E-H.
[10]
Absa Bank Ltd v
Rhebokskloof (Pty) Ltd & Others
1993 (4) SA at 443B-E.
[11]
See
Cohen v Jacobs (Stand
675 Dowerglen (Pty) Ltd intervening)
[1998] 2 All SA 433
(W) at 443 ‘Factual insolvency may also be
established indirectly by adducing circumstances indicative thereof
–
such as the facts that respondent’s debts remain
unpaid…’