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[2017] ZASCA 94
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NMB Bank Limited v Capsopoulos and Another (505/2016) [2017] ZASCA 94; [2017] 3 All SA 765 (SCA) (15 June 2017)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
JUDGMENT
Reportable
Case
No:
505/2016
In
the matter between:
NMB
BANK LIMITED

APPELLANT
and
DAVID
CAPSOPOULOS

FIRST RESPONDENT
LINDSAY
JOAN DENT CAPSOPOULOS
SECOND RESPONDENT
Neutral
citation:
NMB
Bank Ltd v Capsopoulos
(505/2016)
[2017] ZASCA 94
(15 June 2017)
Coram:
Shongwe
ADP, Ponnan and Leach JJA, Molemela and Gorven AJJA
Heard:
9
May 2017
Delivered:
15
June 2017
Summary:
Exchange
control; illegal payments of US dollars made by a bank by reason of a
fraud: recipient aware that payments made due to
a false
misrepresentation and would not otherwise have been made: recipients
resultantly complicit in the fraud: amounts paid to
be refunded to
the bank.
ORDER
On
appeal from:
KwaZulu-Natal
Local Division, Durban (Thatcher AJ sitting as court of first
instance):
1
The appeal succeeds with costs, such costs to include the costs of
two counsel where
employed.
2
The order of the court a quo is set aside and is replaced with the
following:
‘
The
defendants are ordered to pay the plaintiff, jointly and severally,
the one paying the other to be absolved:
(a)
$6 230 329.01
or the equivalent in South African Rand as at the date of payment.
(b)
Interest on each of the sums totalling $6 230 329.01 set
out in Annexure ‘D’ to
the plaintiff’s Particulars
of Claim calculated at the prescribed rate a tempore morae from the
date each sum was paid out
of the plaintiff’s Nostro account to
date of payment.
(c)
The plaintiff’s costs of suit.’
JUDGMENT
Leach
JA (Shongwe ADP,
Ponnan
JA, Molemela and Gorven AJJA concurring)
[1]
The appellant, a company which conducts business as a bank in
Zimbabwe, instituted action against the respondents claiming payment

of a sum in excess of $6.2 million.
[1]
This sum it alleged had been misappropriated from it in the years
2005 to 2007 under a scheme to which the respondents were parties.

The matter came to trial in the KwaZulu-Natal Local Division, Durban
which dismissed the appellant’s claim, having concluded
that
although the payments had been illegal under Zimbabwe’s
exchange control laws the respondents had not been shown to
have been
complicit in the fraudulent scheme under which the payments had been
made to them. The appeal to this court against that
order is with
leave of the court a quo.
[2]
The respondents, a married couple, who at the time of the events
giving rise to the appellant’s claim were living in Zimbabwe,

the country of their birth, had relocated to Durban by the time the
action was instituted. Whilst living in Zimbabwe, they had
conducted
business as purveyors of kitchen equipment and furniture, as well as
importers of goods and materials such as timber,
glass, carpeting and
chemicals which they supplied to hardware stores. The vehicle the
respondents used to conduct this business
was a private company, Haus
(Pty) Ltd (Haus), of which they were the sole shareholders and
directors.
[3]
Haus was not the only commercial entity in which the respondents had
an interest. In November 2004 they incorporated a limited
liability
company in Cheyenne, in the State of Wyoming, United States of
America. Known as Cardinal Finance LLC (Cardinal), they
used this
company to receive payments in foreign currency sourced in Zimbabwe
which, on their instructions, were used to pay not
only Haus’s
suppliers but also certain of their personal expenses, including a
family holiday to Disneyland.  Be that
as it may, in terms of
Cardinal’s articles of association, two Swiss companies, Baobab
Nominees Ltd and Baobab Trustees Ltd,
both of which appeared to have
traded under the name of IAP Investment & Trust Services AG of
Zürich, Switzerland, were
appointed managers of Cardinal.
[4]
Subsequently, in February 2006, the respondents gave a written
mandate to another Baobab company, Baobab Trust & Corporate

Services Ltd, a company registered in Charlestown, Nevis, West Indies
(that was also administered by IAP Investment &Trust
Services AG)
to establish a trust. The standard form mandate given by the
respondents in that regard reflects, in manuscript, the
name of the
trust as being ‘Danam Trust/Cardinal Finance Ltd’.
Despite this anomaly, one can accept that the trust
was created
simply under the name of Danam Trust (the Trust), the evidence of the
first respondent being that the word Danam was
derived from the names
of the respondent’s two children, Daniel and Amy.
[5]
It is impossible from the evidence on record to unravel the web
between the various Baobab companies and IAP Investment &
Trust
Services AG. But nothing turns on that for present purposes as the
matter was conducted on the basis that, individually or
collectively,
they constituted an entity referred to as ‘Baobab’ which
administered Cardinal’s day to day affairs.
What is of
importance, however, is that from 2005 to 2007, the period relevant
to the appellant’s claim, the beneficiaries
of the Trust were
the respondents and their children and that the Trust was the sole
holder of the shares in Cardinal. As will
appear more fully below,
the respondents used Cardinal in order to receive payments of US
dollars and to pay Haus’s foreign
suppliers. The respondents
therefore accept that all amounts paid to Cardinal in fact accrued to
their personal benefit.
[6]
Turning to the dispute, the evidence establishes that during the
period 2000 to 2009, the economy of Zimbabwe was in turmoil.
It was a
time of hyper-inflation when the value of the Zimbabwean dollar (Zim
dollar) was in free-fall against international currencies.
Although
the official exchange rate fluctuated around 250 Zim dollars to one
US dollar this was wholly unrealistic and a single
US dollar in fact
became worth billions or even trillions of Zim dollars. Effectively
the Zim dollar became worthless as a monetary
unit and, consequently,
it became virtually impossible to buy US dollars in Zimbabwe, even
for the plaintiff, a registered bank
and an authorised currency
dealer.
[7]
The undisputed evidence of Dr N Kereke, who during the period 2005 to
2007 was employed by the Reserve Bank of Zimbabwe as an
adviser to
its Governor, was that from 2003 the Central Bank of the country had
in its coffers about $301 million whilst the country’s
national
payment requirements were some $3.5 billion. Putting it bluntly,
Zimbabwe was bankrupt. In this situation, the Zimbabwean
fiscal
authorities found it necessary to exercise tight control over foreign
currency. Through the country’s Exchange Control
Act and
regulations promulgated thereunder, various extraordinary measures
were introduced in an attempt to bolster foreign reserves.
[8]
First, specific requirements were prescribed for any person who
wished to access foreign currency to pay a foreign debt. For
example,
importers like Haus who wished to pay a supplier in foreign currency
would have to go to their bankers, submit all the
requisite documents
including invoices or the like, before the bank could apply to the
Reserve Bank on those papers for permission
to effect the requested
payment. If approved, the payment of the foreign currency would be
made not to the person who had applied
for it, but by their bank
directly to the foreign supplier.
[9]
Secondly, on 12 January 2004 the Reserve Bank introduced a controlled
auction system of foreign currency. This was a mechanism
to
rationalise what little foreign currency there was available by
attempting to place all the capital resources that came into
the
country onto a platform where the government, through the Central
Bank, could allocate what was available for use to best meet
national
priorities. The auction system worked as follows. Importers or other
persons seeking foreign currency would apply through
authorised
dealers such as the appellant, declaring the purpose for which the
foreign currency was needed and the price they were
prepared to pay
for the foreign currency they needed. Acting on their client’s
behalf, the authorised dealers would then
place a bid and the
necessary documentation before the Central Bank for consideration.
Auctions were held twice a week. The Central
Bank would go through
all the bids that had been placed in order to determine those which
were of high priority and those which
should be regarded as being
superfluous given the pressures of the time. In prioritising the
various bids, the Central Bank placed
great emphasis on the nature of
imports to which the bids related. Thus, for example, fuel and other
imports likely to promote
production in the agricultural and mining
sectors, all of which were likely to prop up the prospects of an
economic recovery, were
afforded high priority. Imported white goods
like the household and electronic appliances imported by Haus, were
ranked much lower
on the scale of importance. This reflected the
desire of government to support local industry and not to import
goods fashioned
elsewhere. Once all of this was taken into account,
together with the amount that was offered and the quantity of foreign
funds
available, a bid would either be approved or rejected.
[10]
As a further measure, the Reserve Bank set up a system of strict
control over receipts of foreign currency. On receipt by a
bank of a
payment in foreign currency received by an exporter in payment of an
exported commodity, the bank was required to immediately
sell 40% of
the sum to the Reserve Bank at the official exchange rate, with the
proceeds being paid in Zim dollars into the exporter’s
local
bank account. The remaining balance of 60% of the foreign payment was
retained by the bank in a so-called ‘FCA account’
for a
limited time for the exporter to use, solely to meet its own import
requirements during that period.  The intention
of this was to
assist exporters to import raw materials to use in their own
production processes.  On 20 May 2005, the Divisional
Chief of
the Reserve Bank’s exchange control department gave notice to
the country’s banks that the foreign currency
retention period,
which until then had been 30 days, was reduced with immediate effect
to 21 days.
[11]
This did not mean that exporters had a free hand to deal with these
retained foreign funds. They could only be used to purchase
goods and
materials needed for their own production and, even then, subject to
exchange control approval being obtained and their
suppliers being
paid directly by their bank. This required an explicit declaration by
the exporter of the purpose for which the
requested payments were to
be made, and approval would only be forthcoming if the funds were to
be used to sustain production to
the benefit of the economy. In the
event of exporters not using their retention funds during the short
retention period, they had
to be liquidated by the banks holding them
on the Reserve Bank’s auction. In the case of the appellant
bank, it had a Nostro
account with American Express (Amex) in New
York in which it retained its clients’ US dollars either until
they were used
by its clients with Reserve Bank approval or until
they had to be liquidated on the auction.
[12]
The auction process was applied not only to funds held by exporters
in retention accounts, but also to so-called ‘free
funds’
being other foreign receipts such as payments for labour rendered
abroad. These funds, too, could not just be sold
by their holders to
persons of their choice but had to be liquidated through an
authorised dealer by way of the auction process.
All of this shows
just how important and valuable foreign currency had become, and how
closely regulated it was by the fiscus.
[13]
Of course, all of this caused great problems for importers in the
position of the respondents or, more strictly, their company,
Haus.
The Zim dollar became so devoid of value that foreign suppliers
refused to accept it in payment of their goods and insisted
upon
being paid both in another currency and in advance before dispatching
their wares to an importer in Zimbabwe. This put the
respondents
under pressure to obtain US dollars, the common denomination of
international trade, both to finance the survival of
their business
and to maintain their lifestyle. But it was almost impossible for the
respondents to source foreign funds from the
Reserve Bank. As they
required foreign currency to pay for the importation of goods that
were afforded such low priority, most
of their applications for
foreign currency submitted through their bank, Stanbic, were refused.
[14]
In order to obtain the necessary funds, the respondents consequently
turned to the parallel or black market – as did
many others in
their position. Of the two of them, only the first respondent
testified in the court a quo. He described how, by
way of a willing
seller - willing buyer process, US dollars changed hands for Zimbabwe
dollars between persons who were able to
agree on a rate. Thus, for
example, a foreign-based church that wished to make a payment in
United States dollars to its congregants
in Zimbabwe agreed to allow
the respondents to make payment in Zim dollars to the persons they
wished to benefit in Zimbabwe, and
then paid the agreed US dollars
equivalent to Cardinal.
[15]
In 2005, the first respondent had a conversation with Mr Edward Tome,
an acquaintance of some ten years but, according to the
first
respondent, certainly not a close friend. He testified that Mr Tome
informed him that he had surplus United States dollars
and asked if
he would be interested in purchasing currency from him. The first
respondent was aware of the system by which 40%
of payments for
exports had to be surrendered to the Reserve Bank with the exporter’s
bank retaining the balance, and said
that he understood that this
would be the source of the funds Mr Tome was offering to sell to him.
According to him, Mr Tome did
not explain the details of how he would
go about freeing up his surplus United States dollars in exchange for
Zim dollars. All
he was told was that he should furnish Mr Tome with
the orders that had been placed with Haus by clients in Zimbabwe in
order to
obtain sufficient US dollars to purchase those items abroad.
Mr Tome would then inform him of the rate of exchange he would
require
and, if he agreed to it, he would pay the required sum in
Zimbabwe dollars to whomsoever Mr Tome identified.
[16]
The first respondent agreed to this plan with alacrity. Pursuant
thereto he provided the required order forms from time to
time and,
in due course, was told by Mr Tome whom he should pay and how much in
Zim dollars. The majority of these payments were
deposited into what
purported to be a Reserve Bank account at the appellant bank,
although some were made to a company of Mr Tome’s
known as
Fourfort Enterprises and a few to other individuals. The appellant
would then pay the desired funds in US dollars to Cardinal
and,
pursuant to this, proof of such payment would be provided by Mr Tome
to the respondents by way of what is known as a swift
form. This the
respondents would send on to Baobab, the administrators of Cardinal,
for administration purposes in order for them
to verify that the
funds had been received by Cardinal in its Swiss bank account. When
that had been done, Baobab would be instructed
to make payments on
behalf of Cardinal to Haus’s suppliers.
[17]
The respondents’ case initially, was that they were doing no
more than buying Mr Tome’s surplus funds. During
cross-examination of the first respondent, this morphed into them
buying foreign currency from whoever Mr Tome identified,

although the latter was responsible for arranging with the appellant
to have the US dollars that the respondents needed and paid
for in
Zim dollars transferred to Cardinal’s Swiss bank account. The
first respondent, however, denied all knowledge of the
protocols of
the bank and precisely how this was being done.
[18]
The keystone of the respondents’ case was that they did not
think it had been unlawful for Mr Tome to sell them his,
or anyone
else’s, surplus funds. The first respondent, who gave this
evidence, is an obviously astute businessman. In 2007,
he closed the
Cardinal account with AKB in Zürich and switched the funds that
had been held in that account to another Swiss
bank, Bank Safra, in
an account in the name of Execulink 55; and thereafter from there to
another Safra Bank account held in the
name of Triumph SA, that being
a company registered in Panama of whom the respondents and their
children are the beneficial owners.
After that Cardinal was dissolved
in September 2007. In 2008 an account was opened at Bank Safra in the
name of Trade Plus Holdings
Inc, another company incorporated in
Panama of which the beneficial owners are the respondents and their
children. And for a while
the respondents had a banking account with
HSBC in Jersey to which certain payments were made by Cardinal. All
of this shows that
the first respondent is a man of the world having
wide commercial experience and interests. He is certainly not a naïve
individual
unversed in the operation of foreign exchange and
international finance.
[19]
The undisputed evidence of Dr Kereke was that the directives issued
by the Central Bank relating to foreign exchange were widely

published on multiple platforms, including both television, and radio
and in the popular press. Authorised dealers, such as the
banks in
Zimbabwe, on receiving these directives were obliged to circulate
them to their individual and corporate clients. All
of this evidence
was unchallenged by the respondents. The daily business of the
respondents involved the importation of goods and
the concomitant
necessity to deal with foreign exchange. In the light of the
financial plight of the country, they must have been
acutely aware of
the restrictions relating to the use of foreign currency.
[20]
Moreover, if the respondents had thought that the whole process was
legal they would hardly have embarked on the secret method
of
communicating with Cardinal about the funds that were paid out. The
instructions they sent to Switzerland were sent in the form
of a code
in which payments were referred to as ‘shipments’,
invoices were referred to as ‘pictures’, and
US dollars
were referred to as ‘roses’ or ‘flowers’. The
first respondent explained that this was done
as ‘US dollars
was a very sensitive subject or topic so it was basically a way we
communicated with the administrators regarding
the US dollars’.
Sensitive though the issue of US dollars may have been, the necessity
to encode their instructions to the
administrators of Cardinal speaks
of only one thing – that the respondents knew the payments of
the money they had allegedly
‘bought’ from Mr Tome and
others, had been unlawful.
[21]
The inevitable conclusion that has to be drawn from all of this is
that the respondents must have been aware that the 60% surplus
funds
which an exporter was paid but which were held by its bank, had to be
used by that exporter for the furtherance of its business
and could
not be sold to other persons for their use. In the light of this, the
first respondent’s explanation that he thought
that Mr Tome was
legally free to deal with his surplus just cannot be accepted.
[22]
It was argued on behalf of the respondents that even if they
appreciated that their purchase of US dollars from Mr Tome was

unlawful, this does not mean that they also knew either that the
appellant was being defrauded or that it was suffering a loss
in the
process. The precise methodology of how the various payments in US
dollars came to be made to Cardinal does not need to
be analysed in
any undue detail for present purposes. It suffices for purposes of
this judgement to record that central to the
internal fraud
perpetrated upon the appellant was a forged Reserve Bank letter
purporting to authorise the transfer of US dollars
in repayment of a
fictitious loan made to the Reserve Bank. Use was also made of the
order forms provided by the respondents which
appear to have been
falsified so as to reflect that the goods therein reflected had been
exported rather than imported. These fictitious
export transactions
were supported by various other forged documents, including deposit
confirmations, dealer tickets and Swift
instructions. It was on the
strength of this false documentation that the appellant made the
payments to Cardinal. This it did
by way of transfers from its Nostra
account held in New York with American express to the credit of
Cardinal’s account with
AKB Bank. Arising out of 85 different
transactions conducted in this way, the appellant came to transfer a
total in excess of six
million US dollars to Cardinal’s account
in Switzerland.
[23]
Of course, to achieve all of this needed the complicity of a number
of bank officials to either actively prepare false information
or to
turn a blind eye on improper regulatory procedures. The principal
offender appears to have been a Mr Mandara who was
Mr Tome’s
contact at the appellant. Subsequent investigations revealed that at
least another 16 bank officials were in on
the scheme. In any event,
both Mr Mandara and Mr Tome took to their heels when the wrongdoing
was uncovered and their whereabouts
were unknown at the time the
present case came to trial.
[24]
The first respondent, when he testified, attempted to make out that
he knew nothing of any illegalities that occurred at the
bank. He
alleged that he had not even heard of Mr Mandara, let alone met him
or any other bank official that acted in the furtherance
of the
fraud. That may well be so, but counsel for the appellant argued that
the evidence as a whole showed that the respondents
knew that Mr Tome
could not have lawfully obtained foreign exchange to be transferred
to Cardinal and that they must therefore
have known that the
appellant’s ‘internal processes were being corrupted to
affect the transfers’.
[2]
In the court a quo a similar contention was rejected, with the court
finding that although there were unsatisfactory elements about
the
first respondent’s evidence, these could be ‘attributed
to his hesitancy about confessing that he had embarked
upon the
foreign exchange laws of Zimbabwe by dealing in foreign exchange with
someone who was not an authorised foreign exchange
dealer’.
[25]
In my view, the trial court was being unduly charitable in this
regard. The first respondent was on many aspects an unsatisfactory

witness who became evasive whenever the shoe began to pinch. I accept
that he may not have known all the precise details of the
bank’s
processes or the actions taken within the walls of the appellant’s
bank, but he must have known that the US
dollars were being paid by
the appellant to Cardinal solely as a result of improper procedures.
[26]
In regard to this latter issue, it is highly improbable that the
respondents, experienced business people, would have entrusted
Mr
Tome who, on their own evidence, was just an acquaintance and not a
friend, with the huge amounts of money that they did without
having
an idea as to how he meant to go about using them to procure foreign
currency on their behalf. For the reasons already given,
they could
not have believed that he was merely selling his surplus or that he
was lawfully entitled to do so. Moreover, the first
respondent
admitted that he knew that in order for payments to a foreign
supplier to be made in US dollars by a bank in Zimbabwe,
approval
from the Reserve Bank was required; he also knew that the Reserve
Bank had refused to give its approval to most of Haus’s

applications for US dollars to pay its suppliers; and he knew that
the direct payment by a bank of foreign currency to Cardinal
would be
irregular and in contravention on the foreign exchange regulations.
In the light of all of this, he must have known that
there had to
have been a misrepresentation regarding the nature of the payments
that were being requested or a corruption of procedures
required to
lawfully obtain foreign currency, for Mr Tome to obtain what
purported to be Reserve Bank approval to pay Haus’s
suppliers.
Had the appellant or the Reserve Bank not been misinformed, any
application for US dollars would have been refused as
in the past.
[27]
As I have already indicated, crucial to the success of the fraudulent
scheme perpetrated upon the appellant was the fictitious
loan by
Cardinal to the Reserve Bank. This ‘loan’ was reflected
on fraudulently created documentation and led the appellant
to use
its scarce forex reserves to repay it in instalments on the strength
that the Reserve Bank had authorised such payments.
At the outset,
the first respondent stated that he personally had no knowledge that
part of the scheme had involved this fictitious
loan. He remained
steadfast in this, despite it having been pointed out to him that it
was recorded on the swift return MT 299
forms, forwarded to him when
each payment was made, that the funds were being transferred ‘for
further credit to Cardinal
Finance LLC A/C 1670169034 Ref RBZ Loan to
516’. When this was put to him, he became extremely evasive
about whether he had
ever seen the documents in question although he
clearly must have done – they were the very same documents he
had sent on
to Cardinal in order to verify that the amounts paid had
been received in Switzerland. Finally he was driven to concede that
he
may well have seen the documents, but stated that he had not seen
any reference to the loan on them. As 83 of the 85 swift advices
had
the loan reference emblazoned on them, and were received by him over
an extended period of time, this cannot be believed.
[28]
The court a quo held that even if the first respondent had seen the
references to a loan, this did not point towards him knowing
that the
US dollars he was purchasing were in effect stolen from the bank. I
disagree. The reference to the loan which he knew
did not exist
pointed squarely towards skulduggery within the appellant bank and
that the representations on which the bank had
relied were false. The
first respondent knew that the appellant would not have paid had it
known the truth and that the reason
given for the payment as
reflected on the swift form, was false. Even if he did not know
precisely how this had come about, if
he had seen the reference to
the repayment of the loan, as he must have done, he would have known
that the payments were being
made on the strength of a false
pretence. He was therefore complicit in the fraud upon the appellant.
[29]
This is all the more so when one takes into account the fact that a
number of the Zim dollar payments made by the first respondent
on
behalf of Haus went neither to the appellant nor Mr Tome’s
company, Fourthfort, but to officials in the appellant bank
or third
parties on their behalf . Certain of these amounts were not
insubstantial: in one instance sufficient to purchase a house;
in
another to buy a motor vehicle. The inference is inevitable that
these payments were made to grease the palms of the bank officials

concerned in order to facilitate the fraud upon the bank. The first
respondent attempted to avoid this by stating that all he did
was pay
the persons Mr Tome told him to pay, and that he did not know that
the payments were being made to or on behalf of any
employees of the
appellant. In the overall scheme of things, this is highly
improbable. It is most unlikely that the first respondent
would not
have inquired why such substantial payments were to be made to
persons who at first blush had nothing to do with Mr Tome
or his
business. These obviously suspicious payments and the first
respondent’s unsatisfactory explanation as to why he made
them
point squarely to them being designed to ensure the operation of a
clearly unlawful scheme to have the appellant part with
its precious
US dollars.
[30]
It is unnecessary to analyse the evidence, especially that of the
first respondent, in any greater detail. In all the circumstances
I
have mentioned, the respondents must have known that the payments
that were made had to have been a product of a scheme that
was not
above board and that the appellant must have been persuaded to make
them on the basis of false information. The payments
made to Cardinal
were not only unlawful in that they offended Zimbabwe’s forex
laws, but they were made pursuant to a fraud
upon the appellant to
which the respondents were complicit, even if they were not aware of
the finer details of how the appellant’s
processes had been
corrupted.
[31]
In these circumstances, I can see no reason why the respondents
should not repay the US dollars which the appellant was fraudulently

induced to pay to Cardinal and in respect of which they personally
derived the benefit. In
Nissan
South Africa (Pty) Ltd v Marnitz NO & others (Stand 186 Aeroport
(Pty) Ltd Intervening)
2005 (1) SA 441
(SCA) the appellant, Nissan, was a customer of a bank
that due to a clerical error  had incorrectly paid a sum in
excess of
R12 million to a third party, Maple Freight CC (Maple).
Maple realised that the sum had been paid to it by mistake but,
instead
of returning it, transferred it into a call account in order
to earn interest for itself until it received a demand for repayment.

However, by the time the mistake was discovered, Maple had used a not
insubstantial portion of funds. Maple also went into liquidation

before it repaid Nissan. At the time of its liquidation, Maple’s
account was in credit in an amount of approximately R10.5
million of
which some R9.75 million could be traced to the funds paid in error.
Maple’s liquidators contended that the entire
R10.5 million
formed part of the insolvent estate and was subject to a
concursus
creditorum
for distribution amongst creditors. Nissan, on the other hand, sought
an order declaring that the sum of R9.75 million did not
fall into
the insolvent estate and should be paid to it.
[32]
In considering these opposing contentions, this Court relied upon its
earlier decision in
First
National Bank of Southern Africa Ltd v Perry NO & others
2001 (3) SA 960
(SCA). In that case it was held that a thief who
deposited a stolen amount into a banking account was not entitled to
claim the
stolen amount from that bank; and further that, despite the
rule that once money is mixed with other money without an owner’s

consent, ownership passes by operation of law, the stolen funds could
be recovered from the bank by way of an enrichment action
brought by
the person from whom they had been stolen. In the light of this,
Streicher JA in
Nissan
said
the following:
[3]
‘
Payment
is a bilateral juristic act requiring the meeting of two minds . . .
Where A hands over money to B mistakenly believing
that the money is
due to B, B, if he is aware of the mistake, is not entitled to
appropriate the money. Ownership of the money
does not pass from A to
B. Should B in these circumstances appropriate the money such
appropriation would constitute theft . .
. In
S v
Graham
it
was held that if A mistakenly thinking that an amount is due to B
gives B a cheque in payment of that amount and B, knowing that
the
amount is not due, deposits the cheque, B commits theft of money
although he has not appropriated money in the corporeal sense.
It is
B’s claim to be entitled to be credited with the amount of the
cheque that constitutes the theft.
…
The
position can be no different where A, instead of paying by cheque,
deposits the amount into the bank account of B. Just as B
is not
entitled to claim entitlement to be credited with the proceeds of a
cheque mistakenly handed to him, he is not entitled
to claim
entitlement to a credit because of an amount mistakenly transferred
to his bank account. Should he appropriate the amount
so transferred,
ie should he withdraw the amount so credited, not to repay it to the
transferor but to use it for his own purposes,
well knowing that it
is not due to him, he is equally guilty of theft.’
[33]
In the light of the principles laid down in these cases, the mere
fact that the payments to Cardinal were unlawful in that
they were in
breach of the statutory provisions of foreign exchange, may in itself
have been sufficient for the appellant’s
claim to succeed. But
that is not necessary to decide as not only did the respondents know
that the payments were illegal, as the
first respondent eventually
conceded in the court a quo, but they were transferred as part of a
fraudulent scheme designed to mislead
and to which they were
complicit.  Even if the respondents did not know the precise
details of how the fraud was being committed,
they must have known
that the Reserve Bank would never have authorised the payments if it
had known the truth (in fact the fiscus
was not defrauded – the
false documents reflecting Reserve Bank approval which had not been
obtained were used to induce
the appellant to pay Cardinal) and that
the funds were therefore being paid as part of a scheme designed to
circumvent the country’s
foreign exchange provisions. No less
importantly, they must also have known that the appellant was only
paying the amounts it did
on the strength of false information and
that the appellant was therefore the victim of a fraud to which they
were party. In these
circumstances, the respondents had no right to
the US dollars that were paid by the appellant into Cardinal’s
account and
were not entitled to appropriate those funds for their
own purposes. The appellant is entitled to be repaid those amounts,
and
the court a quo erred in reaching the contrary conclusion.
[34]
It was suggested both in earlier proceedings and in the court a quo
that as the respondents had paid the then current price
in Zim
dollars for the US dollars transferred to Cardinal, the appellant
could not be said to have suffered loss. The answer to
this is, of
course, that the Zim dollars became worthless almost overnight. In
proceedings brought by the appellant in Switzerland
to attach and
freeze the credit balances of certain bank accounts of the
respondents as security for its claim in the present proceedings,
the
Supreme Court of the Canton of Zürich, in its judgment of 25 May
2012 granting the appellant such relief, said:
‘
The
loss on which the alleged attachment claim is based therefore
consists . . . in the alleged unlawful debiting of the attaching

creditor’s USD account. From this perspective, the attaching
creditor’s representation is both conclusive and sufficiently

substantiated.
One
way or another, on the basis of the undisputed facts it is to be
assumed that over a period of two years USD amounts totalling
over 6
million (USD 6,230,329) were credited to Cardinal by the
attaching creditor, and that these amounts could not have
been
purchased in Zimbabwe legally. In light of the extreme inflation in
Zimbabwe, which reached unimaginable proportions during
the relevant
period in spite of the devaluation, the attaching creditor’s
standpoint that a loss arose for the attaching
creditor in the sum of
the USD which were withdrawn from its nostro account is credible. On
any objective (summary) view, the attaching
creditor did not receive
anything like economically equivalent counter-performance but only a
currency which already at that time
was economically meaningless, and
which the attaching creditor as a bank licensed to operate in
Zimbabwe was not able to convert
back into USD. The loss can
therefore neither be removed or reduced by the ZWD which were paid by
Haus.’
[4]
[35]
This reasoning is unassailable and, in this Court, the respondents
accepted both its correctness and that their payment of
Zim dollars
to the appellant is no bar to the relief being sought. They also
accepted that the amount claimed, namely USD6 230 329.01

million is the total that the appellant transferred to Cardinal
pursuant to the fraudulent scheme. In the light of this, counsel
for
the respondents accepted, quite correctly, that if the appeal
succeeded in respect of the merits of the claim, which for the

reasons given it must, the appellant would be entitled to judgment
against the respondents in that sum
.
[36]
Attached to the plaintiff’s particulars of claim as annexure D
is a schedule in which the various payments making up
the sum of
$6 230 329.01 are reflected, detailing the amount of each
payment and the date it was made. The appellant claimed
interest at
the prescribed rate
a
tempore morae
on those individual amounts calculated from the date each had been
paid out of the appellant’s Nostro account to date of
repayment
in full. No objection was made to such an order which seems to me to
be appropriate in the circumstances. It will be
set out in the order
below.
[37]
The appellant was represented by two counsel, at least for part of
the appeal proceedings. The employment of two counsel was
a wise and
reasonable precaution given the nature and importance of this matter
and the sum at stake. I have no difficulty in allowing
the cost of
two counsel where so employed.
[38]
In the result the following order is made:
1
The appeal succeeds with costs, such costs to include the costs of
two counsel where
employed.
2
The order of the court a quo is set aside and is replaced with the
following:
‘
The
defendants are ordered to pay the plaintiff, jointly and severally,
the one paying the other to be absolved:
(a)
$6 230 329.01
or the equivalent in South African Rand as at the date of payment.
(b)
Interest on each of the sums totalling $6 230 329.01 set
out in Annexure ‘D’ to
the plaintiff’s Particulars
of Claim calculated at the prescribed rate a tempore morae from the
date each sum was paid out
of the plaintiff’s Nostro account to
date of payment.
(c)
The plaintiff’s costs of suit.’
_____________
LE
Leach
Judge
of Appeal
Appearances:
For
the Appellant:
M J Fitzgerald SC (with him K Spottiswoode)
Instructed
by:

Werksmans, Cape Town
Webbers,
Bloemfontein
For
the Respondent:
A Annandale
SC
Instructed
by:

Kenny Verhage & Associates, Umhlanga
Claude Reid
Inc, Bloemfontein
[1]
This is a reference to United
States dollars.
[2]
I quote the heads of argument.
[3]
Nissan
paras 24-25.
[4]
The references to USD and ZWD
are of course to US dollars and Zim dollars respectively.