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[2021] ZALMPPHC 24
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Strydom N.O and Others v Brandt (4579/2019) [2021] ZALMPPHC 24 (6 May 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(LIMPOPO
DIVISION, POLOKWANE)
CASE
NO: 4579/2019
REPORTABLE:NO
OF
INTEREST TO OTHER JUDGES:NO
REVISED
Date:6/5/2021
In
matter between:
PIETER
HENDRIK STRYDOM N.O
FIRST
PLAINTIFF
HAROON
ABDOOL SATAR MOOSA N.O
SECOND
PLAINTIFF
DEON
MARAIS BOTHA N.O
THIRD
PLAINTIFF
and
NEIL
PETER BRANDT
DEFENDANT
JUDGMENT
MAKGOBA
JP
[1]
The First, Second and Third Plaintiffs are the joint liquidators of
Free
Agape Enterprises (Pty) Ltd (in liquidation) (“Free
Agape”), duly appointed as such on 7 March 2019. Free Agape was
finally liquidated on 12 June 2018, the effective date of liquidation
being 22 March 2018.
The Plaintiff have
instituted an action against the Defendant, based on
section 26
of
the
Insolvency Act 24 of 1936
, claiming an order that the disposition
in terms of which Free Agape paid an amount of R 304 300.00 to the
Defendant be set aside
and the Defendant be ordered to repay the said
amount to Plaintiffs.
[2]
On the 13 August 2018 the High Court, Western Cape Division in Case
No.11938/2019
granted an order as follows:
2.1.
declaring
the investment scheme conducted by the directors thereof under the
name and style of Free Agape Enterprise (Pty) Ltd (in
liquidation)
and the respective trading names under which the scheme was
conducted, propagated and marketed, namely Choice Lifestyle
Change,
CLC, Beleggingstrust Free Agape, Choice Beleggingstrust and lnduna
Holdings, are declared to be illegal, unlawful and void;
2..2..
declaring all investment agreements and related agreements
entered into between members of the public or entities as investors
with
Free Agape Enterprises (Pty) Ltd (in liquidation) null and void.
[3]
The case that was made out by the applicants (the Plaintiffs in this
case)
in their application for the aforesaid declarators, is that
Free Agape conducted an unlawful multiplication or pyramid scheme
over
an extended period of time, which involved millions of
transactions of receiving deposits, styled “investments”
and
paying out so-called “dividends” to investors. It did
so under the various names referred to in the declaratory order.
For
purposes of the present case, Choice Lifestyle Change, is the most
important.
[4] The
Defendant is Neil Peter Brandt, a businessman residing in Polokwane.
The Defendant
was a member of Choice Lifestyle Change, from which he
received a significant amount of money over a period of time, which
included
repayment of the deposits or “capital payment”
he had made and so-called “dividends”.
In this action the
Plaintiffs claim repayment of the amounts received by the Defendant,
and to this end instituted action against
him for an order in terms
of
section 26
of the
Insolvency Act, 24 of 1936
and for judgment
against the Defendant.
Factual
Background
[5]
The first witness to testify for the Plaintiffs is Mr Pieter Hendrik
Strydom,
the liquidator primarily dealing with the litigation arising
from the administration of the insolvent estate of Free Agape and
also the liquidator who conducted the enquiry under sections 417 and
418 of the Companies Act 61 of 1973 before Retired Judge Eberhardt
Bertelsman in April 2019. The evidence of Mr Strydom follows
hereunder.
[6]
The most important role players in the saga preceding the liquidation
of Free Agape, were Mr. Maarten Stapelberg and his associate, Mr.
Wouter Botha, residents of Polokwane.
They
conceived the idea that became known to the public as “
Choice
Lifestyle Change”
and were the incorporators of Free Agape.
Choice was described as an affiliate of Free Agape, a division of
Free Agape and / or
a product of Free Agape.
Members of the public
were recruited by Stapelberg and Botha to apply for membership of
Choice, which was only available to Christians.
In terms of a recruitment
form, a member of Choice was invited to make payments which entitled
the member to participate in the
business of Choice, whereby Choice,
acting through Free Agape, used the funds received from members to
make “fixed deposits”
with financial institutions. These
fixed deposits were purportedly used to issue guarantees in favour of
unidentified business
entities which required bridging finance for
short periods of time and were prepared to pay high rates of
interest. The returns
were between 14% and 17% per month.
[7]
The scheme attracted hundreds of people who deposited millions of
rands
into the bank accounts used by the perpetrators. By all
accounts they were making good money.
The scheme also attracted
attention of the Registrar of Banks and the South African Reserve
Bank, who instructed Ernst & Young
Advisory Services (Pty) Ltd to
conduct an investigation into the legality of the business of Free
Agape.
[8]
Stapelberg died on 15 December 2017, and predictably, the scheme fell
apart and the payments stopped. The executor of his deceased estate
placed the company under business rescue and Mr. Herman Bester
was
appointed as the business rescue practitioner.
While
Bester was in the process of establishing whether Free Agape was
conducting any business that could be rescued, an urgent
application
was launched in the High Court, Western Cape Division, for orders
setting aside the business rescue, placing the company
under final
liquidation and convening an enquiry under ss. 417 and 418 of the
Companies Act, 61 of 1973.
[9]
Mr Strydom testified that upon investigations no record of an entity
by
the name of “Choice Lifestyle Change” could be found
and that the documents evidencing the Defendant’s application
for membership and the contract that he concluded with Choice
Lifestyle Change demonstrated that there was no difference, in
substance,
between Free Agape and Choice. The insolvent company, Free
Agape, had no underlying genuine profit producing business activity
and the only source of income was the deposits paid by the investors.
The
insolvent company had no other income from which to repay the capital
investments or the so-called dividends to the investors.
[10] Mr
Strydom could not obtain any proof of the alleged bridging finance
which was required for the unidentified business.
The insolvent
company therefore did not receive any proceeds from the alleged
bridging finance to generate an income. The insolvent
company, upon
receipt of a deposit, used the money to pay claims then due, whether
capital and / or the interest, of other investors
who had invested
earlier.
The deposits of the later
investors was utilised to pay earlier investors’ capital and
“dividends” and also salaries,
bonds, bank charges, while
the only chance of later investors to recover their capital and
interest thereon, was that more investors
may contribute further
deposits.
[11]
In conclusion, Mr Strydom stated that the business model of
the insolvent company
and the lack of genuine profit producing
business activity precluded any benefit accruing to the insolvent or
ever being at all
likely to accrue in the future.
[12]
The second witness for the Plaintiffs is Mr Jakob Jan Dekker, a
chartered accountant
specializing in forensic accounting
investigation. He was called to testify as an expert witness in that
field. Mr Dekker conducted
a forensic investigation into the assets
and liabilities of Free Agape. He analysed the bank statements
relating to the insolvent
company and in the process did a
reconstruction of the transactions between investors and the scheme
and could thereby determine
the date of insolvency of the scheme.
[13]
Mr Dekker in reconstructing the transactions between the investors
and the insolvent, determined
that the twelve bank accounts
identified and analysed by him were all used in the day to day
administration of the insolvent company.
He demonstrated that some
payments relating to the Defendant, were made to the Belegginstrust
account and payments to the Defendant
were made from one of the ABSA
accounts. In other instances payments were reflected to and from the
Defendant on the Standard Bank
cheque account from April 2017.
[14]
Mr Dekker described Mr Wouter Botha as a member or co-director of the
insolvent company
in that he found evidence that Mr Wouter Botha
received a monthly salary from the bank accounts utilised by the
scheme.
[15]
Mr Dekker testified that the investors did not do anything to deserve
the returns which
was paid out to them and the payments were
therefore not made for value.
[16]
After the closure of the Plaintiff’s case the Defendant applied
for absolution from
the instance. The application was dismissed and
the Defendant closed his case without leading evidence in his
defence.
[17]
Counsel for the Defendant made the following admissions and / or
concessions from the bar:
17.1.
That Free Agape was insolvent from at least 18 December 2014 and has
been insolvent at all material times
thereafter.
17.2.
That the dispositions made were received by the Defendant.
17.3.
That the dispositions were made not for value.
Section
26 - Dispositions without value
[18]
Section 26(1) provides as follows:
(1)
Every disposition
of
property
not made for
value
may be set aside by the Court if such disposition was
made by an insolvent-
(a)
more than two years before the sequestration of his estate, and it
is proved that, immediately after the disposition was made, the
liabilities of
the insolvent exceeded his assets;
(b)
within two years of the sequestration of his estate, and the
person claiming under or benefited by the disposition is unable to
prove that, immediately after the disposition was made, the assets of
the insolvent exceeded his liabilities:
Provided that if it is
proved that the liabilities of the insolvent at any time after the
making of the disposition exceeded his
assets by less than the value
of the property disposed of, it may be set aside only to the extent
of such excess
[19]
“Disposition” means any transfer or abandonment of rights
to property and includes
a sale, lease, mortgage, pledge, delivery,
payment, release, compromise, donation or any contract therefore, but
does not include
a disposition in compliance with an order of the
Court, and “dispose” has a corresponding meaning
[1]
.
A disposition of property
includes every act by which an insolvent parts with an asset in its
estate, whether such asset is a corpus,
a sum of money or a right of
action.
[2]
A disposition without
value is a disposition for which no or inadequate benefit or
value is or has been received or promised
as a
quid
pro quo
[3]
.
[20]
The date upon which the disposition was made, whether more than two
years before the liquidation
of the estate, or within two years of
the liquidation of the estate, is relevant to determining where the
onus lies. In the present
case, the dispositions that the Plaintiffs
seek to set aside were all made within two years of the effective
date of winding up
of the estate, and therefore the claim lies under
section 26(1)(b)
of the
Insolvency Act.
A party claiming under
section 26 (1)(b) of the Act must allege and prove
[4]
:
20 .1. that
there was a disposition of property;
20.2.
that it was made by the insolvent;
20.3.
the date of the disposition; and
20.4.
that the disposition was not made for value.
[21]
The only statutory defence available to the Defendant, provided that
the disposition took
place within two years of the liquidation, as in
the present case, is that immediately after the disposition was made,
the assets
of the insolvent still exceeded the liabilities.
The Defendant in the
present case has admitted receipt of the payments, the dates upon
which the payments were made and that the
disposition was not made
for value.
Points 20.1, 20.3 and
20.4 above are thus common cause. The only point in dispute is
whether the disposition was made by the insolvent.
Was
the disposition made by the insolvent/ Free Agape?
[22] The
Defendant has placed the source of the payments in dispute. He
disputes that the dispositions
were made by the insolvent company,
Free Agape.
The evidence for the
Plaintiffs in the present case shows that the source of the payments
to the Defendant was Free Agape.
[23]
The uncontroverted testimony of Mr Strydom was that no record of any
juristic entity by
the name of “Choice Lifestyle Change”
could be found. The documents evidencing the Defendant’s
application for
membership and the contract that the Defendant
concluded with Choice Lifestyle Change
[5]
clearly show that there was no difference - in substance - between,
Free Agape and Choice Lifestyle Change.
Mr Wouter Botha with whom
the Defendant dealt with was described as a member or co-director of
Free Agape. The latter company appears
on the letterhead of Choice
Lifestyle.
Consequently, Choice
Lifestyle appears to be a trade name of the company known as Free
Agape Enterprises (Pty) Ltd.
[24]
The declaratory order granted in the Western Cape Division of the
High Court in case number
11938/2019 shows clearly that the
investment scheme conducted by the directors of Free Agape
Enterprises (Pty) Ltd (in liquidation)
was also conducted, propagated
and marketed under the respective trading names of Choice Lifestyle
Change, CLC, Belegginstrust
and others.
The use of the different
bank accounts of First National Bank, ABSA and Nedbank is simply a
feature of a fraudulent scheme.
The analysis of the bank
statements by Mr. Dekker, the forensic accountant shows the flow of
funds between these bank accounts.
It does not matter under whatever
name the bank accounts were conducted.
[25]
Mr. Dekker in reconstructing the transactions between the investors
and the insolvent company
determined that the twelve bank accounts
identified and analysed by him were all used in the day to day
administration of the insolvent
company, namely Free Agape
Enterprises (Pty) Ltd.
For example, he
demonstrated that some payments relating to the Defendant were made
to the Belegginstrust account at First National
Bank but payments to
the Defendant were made from one of the ABSA accounts. Furthermore,
payments were reflected to and from the
Defendant on the Standard
Bank cheque account from April 2017.
[26]
In my view the Plaintiffs have presented sufficient evidence to show
that the depositions
relating to the subject-matter of this action
were made by the insolvent company, Free Agape.
Insolvency
of Free Agape
[27]
It is trite that in the event that the disposition was made more than
two years before
the liquidation, the Plaintiff bears the onus of
proving that immediately after the disposition was made the
insolvent’s
liabilities exceeded its assets
[6]
.
[28]
In the event that the disposition was made within two years of the
liquidation, like in
this instance, the Plaintiff need only prove the
disposition without value, and on proof of this alone, the
disposition will be
set aside unless the Defendant can show that
immediately after the disposition was made, the insolvent’s
assets exceeded
its liabilities
[7]
.
That is the only
statutory defence available to a defendant facing a claim in terms of
section 26 (1)(b), where the Plaitiff has
successfully demonstrated
that a disposition was made for no value.
In
casu,
the
Defendant conceded that Free Agape was insolvent from at least 18
December 201 and has been insolvent at all relevant times.
Furthermore, the Defendant conceded that the disposition was made for
no value.
Costs
[29]
Mr. Dekker is a qualified charted accountant specializing in forensic
accounting investigation.
He was mandated by the
Plaintiffs to do a forensic analyses and to address the following
specific issues:
29.1.
to reconstruct the transactions between investors and the scheme;
29.2.
to determine the date of insolvency of the scheme; and
29.3.
to identify whether specific investors received beneficial treatment
over others.
I am of the view that Mr.
Dekker’s services and in particular his report, were necessary
and served the interests of the estate
as whole and the creditors and
debtors involved. His services were necessary to enable Plaintiffs to
identify and recover from
those investors who received more than
their investments.
[30]
The evidence of Mr. Strydom, the liquidator, was that there are
approximately 400 - 500
actions that have been instituted or will be
instituted and that this matter is the first to go on trial. The
legal issues involved
in this matter are of significant importance to
the liquidators and the creditors, including other investors whose
interests they
represent.
[31]
I am persuaded that the legal issues involved in this matter and the
complexity of the
matter merit the attention of the High Court and
also the employment of senior counsel.
Conclusion
[32]
The Plaintiffs have made out a good case for the relief sought. In
the result the following
order is granted:
32.1.
The dispositions made by Free Agape Enterprises (Pty) Ltd to the
Defendant during the period 24 November
2016 to 18 December 2017 in
the total amount of R304 300-00 are set aside in terms of section
26
(1)(b) of the
Insolvency Act, 24 of 1936
;
32.2.
The Defendant is ordered to repay the amount of R 304 300-00 to the
Plaintiffs in their capacity as duly
appointed liquidators of Free
Agape Enterprises (Pty) Ltd (in liquidation);
32.3.
The Defendant to pay interest on the amount of R304 300-00 at the
rate of 7% per annum from date of judgment
to date of final judgment;
32.4.
Cost of suit, such costs to include the following:
32.4.1.
the qualifying costs of the forensic auditor, Mr Jan Decker,
including the costs of his attendance at Court to testify in this
action;
and
32.4.2.
the
costs of two Counsel.
E M MAKGOBA
JUDGE
PRESIDEN
OF THE
HIGH COURT, LIMPOPO
DIVISION, POLOKWANE
APPEARANCES
Heard
on
:3
&
4 May 2021
Judgment
delivered on
:6
May 2021
For
Plaintiffs
:HR
FourieSC
S
Venter
Instructed
by
:Loubser
&
Loubser
c/o
Becker Attorneys
Polokwane
For
Defendant
:
SVM Van der Hoven
Instructed
by
:
Wiese & Van der
c/o
Rheeder
Attorneys
Polokwane
[1]
Section 2
of
Insolvency Act, 1936
.
[2]
See Lane N.O. v Olivier Transport 1997(1) SA 383 (CPD) at 385 G - H.
[3]
See Estate Jager v Whittaker and Another,
1944 AD 246
at 250
[4]
See Rousseau N.O. v Visser
1989 (2) SA 298
(C) at 307
[5]
Annexure “A1” to “A4” to Defendant’s
Plea , pages 50-53
[6]
Section 26(1
)(a),
Insolvency Act
[7]
Section 26(1)(b)
,
Insolvency Act