Sackstein NO and Others v Benade (1959/2001) [2009] ZAECPEHC 37 (31 July 2009)

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[2009] ZAECPEHC 37
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Sackstein NO and Others v Benade (1959/2001) [2009] ZAECPEHC 37 (31 July 2009)

FORM A
FILING SHEET FOR EASTERN CAPE
HIGH COURT, PORT ELIZABETH JUDGMENT
PARTIES
:
LESLIE NEIL SACKSTEIN N.O, JACOBUS HENDRIKUS JANSE VAN RENSBURG
N.O AND ROMANA BERNADETTE KNUTH N.O. VS JOHANNES TOBIAS BENADE
-
CASE NUMBER: 1959/2001
Registrar:
Magistrate:
High
Court:
EASTERN
CAPE HIGH COURT, PORT ELIZABETH
DATE
HEARD: 11/5/09
DATE
DELIVERED: 31/07/09
JUDGE(S):
PILLAY J.
LEGAL
REPRESENTATIVES –
Appearances:
for
the Appellant(s): ADV. VAN DE LINDE
for
the Respondent(s): ADV. BEYLEVELD
Instructing
attorneys:
Appellant(s):
DE
VILLIERS INC.
Respondent(s):KAPLAN
BLUMBERG
CASE
INFORMATION -
Nature
of proceedings
:
CIVIL MATTER
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE, PORT ELIZABETH)
CASE NO:
1959/2001
In the matter between:
LESLIE NEIL
SACKSTEIN N.O.
First
Plaintiff
JACOBUS
HENDRIKUS JANSE VANRENSBURG N.O
Second
Plaintiff
ROMANA
BERNADETTE KNUTH N.O
Third
Plaintiff
And
JOHANNES TOBIAS
BENADE
Defendant
JUDGEMENT
Pillay J,
This action is
based on four courses of action. The first being in terms of section
26 of the Insolvency Act, No 24 of 1936 (“the
Act”) alternatively
in terms of section 30 thereof. The third cause of action is in
terms of section 29 of the act and the fourth
being a claim based on
enrichment. In these proceedings, I was told, the plaintiffs pursue
only the claim against the defendant
in terms of section 29 of the
act. This was also recorded in the minute of the pre-trial
conference held in terms of Rule 37 of
the Uniform Rules of court on
16 March 2009.
I was also informed that the First
Plaintiff had since the institution of the action resigned as a
trustee of the insolvent estate
of the Usapho Trust (“the Trust”).
An amendment in accordance therewith was effected in due course and
I have noted this.
Background
The action flows
from the collapse of a ‘pyramid scheme’. It entails a process to
equally distribute the residue in the insolvent
estate of Usapho
Trust
(by
which the pyramid scheme was known).
Some of those involved in operating
the aforementioned scheme were convicted of fraud and theft in
respect of their participation
therein. It is not necessary to deal
with all the details of the respective convictions. Where necessary
material aspects of
the trust operations will be referred to. The
trust was finally sequestrated on 14 September 2000.
While the action was being prepared
for trial certain factual issues material to the cause of action were
disputed.
However, I was
informed that with time and for the purposes of this particular
hearing only, the following became common cause between
the parties.
Common cause
The defendant, as
creditor
of the trust, received four payments made on behalf of the trust.
These were as follows:
(i) R 20 000-00 - 17 March 2000
(ii) R 299
500-00 - 17 March 2000
(iii) R 22
000-00 - 5 June 2000
(iv) R
28
000-00
- 20
July 2000
TOTAL R 549 500-00
It is also common
cause between the parties that at all material times hereto, the
trust was insolvent and that each of these payments
was a
‘disposition’ as envisaged by section 2 of the act.
The operation of
the business of the trust consisted of conducting the business of a
bank as envisaged in the Banks Act no 94 of
1990 though the trust was
not a registered bank. It was also an operation which contravened
section 12(6) A3 of the Harmful Business
Practices Act No 71 of 1989.
Furthermore it was agreed between the parties that the operations of
the trust was in fact a scheme
based on common law fraud and on
fraudulent misrepresentations made on behalf of the trust by persons
entitled to make representations
on its behalf to members of the
public. Such misrepresentations included, inter alia (a) that
invested capital would be lent by
the trust to estate agents at a
discounted rate and thereby general income for the trust when in
truth, such income would be used
to pay or assist in paying amounts
due to other depositors or investors instead of benefiting the trust;
(b) that deposits together
with agreed interest thereon would be paid
out of such trust income when in fact it would only be able to do so
from capital paid
to it by other investors; and (c) the trust was not
generating any income or generating insufficient income to service
the trust
for the purpose of making repayments as promised and that
in truth, such payments would be made (and were indeed so made) out
of capital investments.
Section 29
(1) of the act.
Section 29(1) reads as follows:
“29 Voidable Preferences
Every disposition
of his property made by a debtor not more than (6) six months before
the sequestration of his estate or, if
he is deceased and his estate
is insolvent before his death, which has had the effect of
preferring one of his creditors above
another, may be set aside by
the court if immediately after the making of such disposition
the liabilities of the debtor exceeded the value of his assets,
unless the person in whose favour the disposition was made proves

that the disposition was made in the ordinary course of business and
that it was not intended thereby to prefer one creditor
above
another”.
Despite the
agreement
as to the insolvency of the trust, the plaintiffs called Mr Wessel
Greef of Wessel Greef and Strydom, Chartered accountants (SA)
to
testify about his analysis of investor claims against the insolvent
trust estate, based on the claim forms, in general and in
particular
that of the defendant.
He testified that
he had acquired a Bachelor of Commerce degree in 1970 and qualified
as a Chartered Accountant in 1975. He explained
that he has been
involved in a number of forensic investigations in a number of cases
and has testified in many criminal and civil
matters in that regard.
His credentials were not challenged.
His investigations and indeed
conclusions were based on the liquidation and distribution accounts
of the insolvent trust estate.
He testified that
the cash residue of the trust was R 5,986m which was far short of
what it owed to many creditors. He concluded
that creditors would
therefore be paid out a percentage of what they were owed by the
trust.
He also noticed
that the defendant, as a creditor,
had
been paid in full in respect of the payments in question. He
concluded that the effect of such payments to the defendant,
was that
he was being preferred above the other creditors.
His evidence was
not challenged in any detail. In particular, his conclusion that the
relevant payments to the defendant had the
effect of preferring him
above other creditors was not challenged.
It is clear that in
the light of the evidence of Mr Greef, the concessions made by the
defendant, the agreements between the parties
(including those made
for the purposes of this hearing only) and that which is common
cause, the only issues to be decided are
the following:
Whether the four payments as
aforementioned were made in the ordinary course of business; and
Whether or not
they were made with the intention of preferring the Defendant as
against any of the other creditors.
While there are
four separate payments of relevance, it seems to me that each of them
was paid on the same basis and within the
same context and each would
therefore be decided in the same manner. In other words all of them
were either made in the ordinary
course of business and were not
intended to prefer the defendant above any other creditor. In
principle, they can all be taken
as one in considering both
questions.
No reasonable
alternative to his conclusion was put to Mr Wessels save that it was
suggested (as I understood it) that it did not
necessarily follow
that the payments were made with the intention of preferring the
defendant above other creditors. No detail
accompanied that
proposition. Given the concession in regard thereto, I accept his
conclusion as correct and justified in so far
as it is necessary to
do so. Indeed, Mr Byleveld did not argue that the effect of such
payments did not prefer the defendant above
other creditors.
‘
may’
– Does it create a discretion in section 29(1)
It is necessary, to briefly deal with
the import of the word ‘may’ used in the section. Lest it be
suggested that it renders
the application of the specific provision,
discretionary, the contextual perspective thereof needs to be
examined.
The context in which the word ‘may’
is used does not afford it a meaning so as to create a wide
discretion. While the word
‘may’ is permissive by its very
nature, it is sometimes without alternative when it is used to
indicate some instructive process.
As was stated in
Gunn and Another NNOV Barclays Bank DCO 1962(3) SA 678A @ 685,
‘
it
is improbable that the legislature, in providing this remedy for the
benefit of creditors in insolvency, intended it to be accompanied,

and its employment be hampered, by the uncertainty implicit in so
wide a discretion. It would rather seem that the intention was
to
confer a right of recovery…..’
See
also: Volkskas Bpk No v Barclays Bank (DC & O
1955 (3) SA 104
T.
Therefore in so far
as it might be con
strued
that the application of section 29(1) is totally discretionary, it is
clearly not. The provisions thereof have to be followed
and the
obvious consequences must flow therefrom, absent any of the defences
provided for therein.
‘
Ordinary
Cour
se
of Business’
The operation of
the business in question was illegal. The defendant was paid and
benefited
from money gathered from a fraudulent activity. Mr Byleveld argued
that the payments made by the trust to the defendant
was in
accordance with their agreement and therefore in the ordinary course
of business since he received payment (including interest)
as a
return for his investment or part thereof as the case may be.
The dispositions in
question are contextually required to be made in the ordinary course
of business. In dealing with section 29(1),
it is necessary to
examine what is meant by ‘ in the ordinary course of business’.
The maximum
‘
statutum
loquens de aliquo actu vel instrumento vel alia dispostione intelligi
debet de valida, non invalida’
comes to mind in regard to this issue.
It
means that where the law refers to a transaction, act, written
document or another provision it must be construed to be a reference

to a lawful or valid and not an unlawful or invalid transaction, act,
document or provision.
It is inconceivable
that the law would give full recognition to and approve the taking of
benefits from an illegal act. Even if
business people have become
accustomed to a particular process from which consequences flow and
which is ultimately found to be
illegal, then it cannot be regarded
as having been completed in the ordinary course of business. Such a
process would in my view
fall outside the scope of ‘ordinary
business’.
In S v Maphele 1963 (2) SA 651(A)
@ 655 D-E, the following was said:
“
It is a
recognised canon of construction of statutes that any reference in
any law to any action or conduct, is presumed, unless
the contrary
intention appears from the statute itself, to be a reference to
lawful or valid action or conduct
”.
(Union Government v Silverhout
1925 AD 322
@ 339; Olivier b Botha
and Another
1960 (1) SA 678(O)
@ 685; Ndhlovu v Mathega
1960 (2) SA
618(A)
at 624; De Kock Helderberg Ko-op Wijmakerij Bpk 1962(2)SA
419(A) @ 426).
The
qualification in regard to this statement is also to be found in
Abbott v Commissioner of Inland Revenue 1963 (4) SA 552K @ 556
E-F
where the following was explained:
‘
Such
presumptions are, however, merely guides and must give way where
other considerations, such as those of language context and

circumstances indicate a contrary intention on the part of the
legislature’.
There is no
indication in the act, and specifically in section 29(1) that a
‘disposition made in the ordinary course of business’
should be
read or construed to mean anything but a lawful or valid disposition.
See also: Du Plooy NO v National
Industrial Credit Corporation Ltd 1961(3) 741(W) @ 744.
The payments in
question constituted disposition as defined. At best for the
defendant, as was subtly suggested, he did not know
of that the trust
was insolvent at the time of receiving the payments. Making such
payments constituted offences. That he may
have been unaware that an
offence was being committed by the payer is irrelevant to the
determination of whether the disposition
was made in the ordinary
course of business. See: Est van Schalkwyk v Hayman & Lessen
1947(2) SA 1035 (C) @ p1048.
If the employment
of this section would fail by virtue of the receiver being unaware of
the fraud being committed in presenting
payment to him, then the
legislature would be giving approval to an illegal transaction.
Absent anything to the contrary in the
act, the dispositions in
question cannot be construed to be transactions in the ordinary
course of business. Furthermore, in
my view, to qualify as a
transaction within the course of ordinary business, it must be that
which obtains between people in business
transacting in circumstances
which give rise to the intended consequences expected by the normal
community.
In the
circumstances, it cannot be found that the payments made to the
defendant were made ‘in the course of ordinary business’
as
envisaged in section 29(1) of the act.
Intention of the Payer
It was
argued
by Mr Byleveld that by the nature of the operation of this scheme,
the payment could conceivably have been made to the defendant
to
entice further investment deposits and perhaps other investors and
that this was at least the dominant intention in making the

respective payments to the defendants. It follows, so it was argued,
that even if that had the effect of preferring one creditor
above
another, it must be assumed that that was not the intention when
making the payments to the defendant and therefore the application
of
section 29(1) to set aside the dispositions in question must fail.
The person who
acted on behalf of the
trust
in making the payments was by all accounts, Mrs Clifford, one of the
convicted fraudsters.
She would have been
the best person to say what her intentions were (or were not) when
she made the payments in question. She was
not called to testify and
there was no explanation save that I was informed that the defendant
(or his legal adviser) chose not
to call her.
I am asked to draw inferences which
favour the defendant in regard to the intentions of Mrs Clifford when
she made the payments.
Inferences are very rarely relied upon
to make important findings such as that which I am asked to make.
This is especially so
when there is no acceptable reason for not
producing the best evidence available to shed light on precisely what
is sought to be
inferred.
In addition, the
absence of such evidence might itself lead to an inference with which
the defendant would be uncomfortable.
In the circumstances, it is not
possible to make any inference in that regard.
What is before me
is evidence that the effect of the payments in question was to prefer
the defendant above the others. Absent
any evidence to the contrary,
the facts, circumstances and logic dictate that they were made with
the intention of preferring the
defendant above the other creditors.
She must have known the situation at the material time but
nonetheless proceeded with the
payments in question. It follows
therefore that the disposition in question were not made in the
ordinary course of business
and that they were made with the
intention of preferring the defendant above the other creditors.
The defen
dant
has not proved that the payments were made in the ordinary course of
business and not with the intention of preferring him
above any other
creditors.
In the
circumstances, the payments are rendered
voidable
preferences.
Interest
Any monies so
re
ceived
would have accrued interest had it still been in the insolvent
estate. This in turn would have been to the benefit of the
creditors.
I think it would be fair for interest on the amount to be returned
to be paid as well. The parties have agreed that
should I award
interest, it should be calculated in the following terms:
‘
At the rate of
15,5% per annum on the judgment amount from the 8 August 2001 up to
and including 26 April 2002 and from 7
th
March to date of payment’.
Costs
The costs should follow the result and
I have no reason to order anything out of the ordinary in this
matter.
I will therefore grant an order:
(a) Setting aside
the dispositions as voidable preferences in terms of
section 29
of
the
Insolvency Act;
(b) that the
defendant pay to plaintiff the sum of
R
549 500-00 and interest thereon at the rate of
15.5% per annum from 8 August 2001 up to and including 26 April
2002
and from 7 March 2008 to date of payment.
(c) that the defendant pays the costs
of this action.
___________________________
PILLAY J
JUDGE OF THE HIGH COURT