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[2012] ZAECPEHC 30
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Stewart and Another v Prinsloo and Others (1431/2011, 1430/2011, 1824/2011, 2196/2011) [2012] ZAECPEHC 30 (15 May 2012)
7
NOT REPORTABLE
IN THE HIGH COURT OF
SOUTH AFRICA
EASTERN CAPE –
PORT ELIZABETH
Case No: 1431/2011
1430/2011
1824/2011
2196/2011
Date Heard: 7 May 2012
Date Delivered: 15 May
2012
In the matter between
STEWART N.O. MICHAEL
LAWRENCE
…..............................
First
Plaintiff
PARKER N.O. WAHIDA
…...............................................
Second
Plaintiff
(in their capacity
as the duly appointed
joint trustees of
the consolidated
insolvent estate of
Graeme Minne and
Carolina Frederick
Minne)
and
PRINSLOO ETIENNE
HENRY
….......................................
First
Defendant
PRINSLOO HESTER
JOHANNA
…................................
Second
Defendant
PRINSLOO STANLEY
HENRY
…......................................
Third
Defendant
TRYTSMAN GERT
JOHANNES
…...................................
Fourth
Defendant
HERSELMAN CHRISTO
…................................................
Fifth
Defendant
JUDGMENT
REVELAS J
This judgment concerns
the question of costs after the parties had settled the matter.
[1] The plaintiffs
instituted action against five defendants in four separate actions
which were consolidated because the cause
of action and the defences
thereto were similar in all four matters. These matters were settled
insofar as the merits and quantum
were concerned and the Registrar
was advised on 19 April 2012, that the only remaining issue to be
determined between the parties
would be the question of costs which
would be argued on the trial date.
[2] The plaintiffs
instituted their action against the defendants in their capacities as
joint trustees of the consolidated insolvent
estate of Graeme Minne
and Carolina Frederika Minne, who were referred to in the pleadings
respectively as Graeme and Erica and
during argument as “the
Minnes”. The estates of Graeme and Erica Minne were
provisionally sequestrated on 8 June 2010
and finally on 6 July 2010.
Thereafter their estates were consolidated and administered as one
estate.
[3] During the period
30 July 2002 to 27 November 2009 Graeme and Erica Minne conducted an
illegal pyramid or Ponzi scheme in terms
whereof they solicited and
received loans from investors on the verbal representations of Graeme
Minne. The loans were utilised
in foreign currency exchange market
trading. Investors would receive a fixed monthly or annual return
(“the return payments”)
and the investors would be repaid
the capital amounts of the loans at the end of the term of the loans.
The period relevant to
the action in question is 2006 to 2009, when
the scheme was terminated in November, by the Reserve Bank under the
Consumer’s
Affairs (Unfair Business Practices) Act, 71 of 1988.
[4] The money lent from
investors was paid into a bank account which appears to have been in
the name of Erica Minne trading as
“Minne Opleiding” held
at ABSA bank.
[5] In the plaintiff’s
particulars of claim it is alleged that the representations made by
Graeme Minne were false and with
the intention to induce investors to
deposit loans into the aforesaid account and, in fact caused the
investors, some of whom were
the defendants, to do so. The monies
which were invested were applied for the personal benefit of Graeme
and Erica Minne, to effect
returns to some investors, and to repay
certain investors their loans. The loans were documented by way of
written loan agreements
entered into between investors and Graeme
Minne, who personally accepted liability for the repayment of the
loans and the return
payments of the investors. Due to the Minne’s
eventual insolvency, certain investors who made loans to them were
never repaid.
This the Minnes had done while their liabilities
exceeded their assets.
[6] Because the return
payments made in relation to the scheme were illegally made, the
plaintiffs instituted the claims against
the defendants based on
section 26(1) of the Insolvency Act, No 24 of 1936 (“the Act”)
(“the section 26 claim”)
alleging the return payments
constituted dispositions without value and, in the alternative
thereto claims in terms of section
30(1) of the Act )”the
section 30 claim”) alleging the payments constituted undue
preferences.
[7] In their
particulars of claim the plaintiffs also alleged that Graeme and
Erica Minne contravened the provisions of the Bank
Act 9 of 1990 in
soliciting and accepting loans from the general public. Another
breach of the law allegedly committed, was conducting
a harmful
business practice under the Consumers Affairs (Unfair Business
Practices) Act, 71 of 1988.
[8] The defendants
pleaded that the loans were lawful and therefore the interest earned
by them was lawful and the payments to them
were not impugned
dispositions as foreseen in the
Insolvency Act.
[9
] In the alternative,
the defendants pleaded that should the Court find that the agreements
were illegal they were concluded in
good faith without knowledge of
the illegality. In their counterclaims the defendants claimed
repayment of the capital amounts
invested by them in the scheme. In
the alternative, they pleaded (relying on the principle of in
pari
delicto potior conditio defendentis
) that they were entitled to
repayment of the capital amounts they had invested in the event of
the court finding that the contracts
were illegal.
[10] The effect of the
settlement agreed between the parties was that the defendants had
conceded that they were not entitled to
the return payments
(interest) but nonetheless insisted on their entitlement to the
loans.
[11] The settlement
agreement in question was handed up in terms whereof the defendants
would pay to the plaintiffs certain amounts.
The amounts appear to
represent the amount received by the defendants as gains, returns or
interest, and not the loans (or investments)
to the Minnes.
[12] The plaintiff’s
submitted that in the light of the pleadings and the settlement
itself, they had succeeded on all the
broad issues raised, and
therefore the defendants should pay their costs. According to the
plaintiffs, the issue whether the defendants
were only entitled to
the amount of the loans, could not by itself have caused the
incurrence of any appreciable expense, bearing
in mind that those
amounts were stated to carry interest which, at best for the
defendants, meant repayment of, alternatively retaining
the full
amounts repaid to them. Since this issue is not one wholly distinct
from and unconnected to the issues on which the plaintiffs
have
succeeded, the plaintiff contended, the defendants “conceded a
substantial right on the part of the plaintiff”.
[13] The plaintiff also
emphasized the fact that the defendant never tendered the amounts for
which they settled, either through
the tender process or in their
pleading and that they would not conceded that any repayments have
been received by them. The plaintiff
also submitted that the fact
that the settlement amount is R214 000.00 as opposed to the
amount of R1 160 000.00
should not play a significant role
as it is a settlement amount.
[14] The defendants
argued that the theme which ran through their defence like a golden
thread, was that they were entitled to repayment
at least of their
loans or the amount they had invested in the scheme which they did
not concede. As a result, the plaintiffs were
not as successful as
they had maintained.
[15] It is trite law
that the award of costs is a matter which falls within the court’s
wide discretion, which must be exercised
judiciously and with due
regard to the facts of the case and fairness to the parties. This
discretion is also subject to certain
limitations. There is also the
general rule that the successful party should be awarded its costs,
except in special circumstances.
[16] Another factor to
be considered is that the amount settled upon, is one which could
have been awarded by the Magistrate. The
plaintiff contended that in
view of the complexity of the matter, the question of costs on the
magistrate’s scale does not
find application.
[17] The facts and
questions of law in this matter were very similar to those in the
matter of
Fourie NO and Other v Edeling NO and Others
2005[4]
All SA 393 (SCA), known also as the
Krion
judgment. The
parties made various submissions about the
Krion
judgment. The
defendant submitted the judgment is very clear on the aforesaid
questions. The plaintiffs argued that it “does
not afford a
complete answer”, particularly in respect of a claim in terms
of
section 30
of the
Insolvency Act. Save
for the aforesaid, I do not
intend to elaborate on their submissions in this judgment.
[18] The matter became
settled. The mysteries of the
Krion
judgment were not explored
in relation to the facts of the matter. No experts testified. I also
have to take into consideration
that the plaintiffs’ claims are
based monies paid out in the course of an illegal scheme and that the
Minnes, on the plaintiffs
own version, were fraudsters and some of
the defendants (at least), their victims.
[19] All the trite
principles pertaining to the award of costs lose much of their force
and import when parties settle a matter.
Broadly speaking neither
party showed a great degree of success in this matter. I was not
persuaded to exercise my discretion in
the plaintiffs’ favour.
[20] In the
circumstances I decline to make any costs order.
[21] The following
order is made:
The first defendant is
to pay to the plaintiff the sum of R90 000.00.
The second and third
defendants are to pay to the plaintiffs the sum of R62 000.00.
The fourth defendants
is to pay to the plaintiffs the sum of R44 000.00.
The fifth defendant is
to pay to the plaintiffs the sum of R14 000.00.
Payment of the
aforesaid amounts are to be made by the defendants to the plaintiffs
by close of business on or before 21 May 2012
into the following
banking account:
Name: The Consolidated
Insolvent Estate of G and CF Minne
Bank: Nedbank Current
Account
Account Number:
1514276690
Branch Code: 15140500
Branch Name: Randridge
Should the defendants
neglect to pay the aforesaid amounts to the estate as aforesaid,
then the amounts as claimed by the plaintiff
in the particulars of
claim in the actions as consolidated, together with the interest
thereon and costs will become immediately
due, owing and payable by
the defendants to the plaintiffs.
The fees in respect of
the expert witness, Mr J Spies, shall be allowed which shall
include, but not be limited to, his report
as well as his fees in
respect of his preparation and reservation for trial.
Each party is to pay
its own costs.
___________________
E REVELAS
Judge of the High Court
Counsel for the
plaintiff’s: Adv JH Dreyer SC
Instructed by: Brooks &
Brand Inc
c/o Rushmere Noach
Corporated
Counsel for the
defendant’s Adv B Pretorius SC
Instructed by: Roelofse
Meyer Inc
Date Heard: 7 May 2012
Date Delivered: 15 May
2012