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[2008] ZASCA 35
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Joint Stock Company Varvarinskoye v Absa Bank Ltd. and Others (164/07) [2008] ZASCA 35; [2008] 3 All SA 130 (SCA); 2008 (4) SA 287 (SCA) (28 March 2008)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case
no: 164/07
In
the matter between:
JOINT STOCK COMPANY
VARVARINSKOYE ...
Appellant
and
ABSA BANK LIMITED ...
First
Respondent
LIEBENBERG DAWID RYK
VAN DER MERWE NO
...
Second
Respondent
LIEZEL MAGRIETHA PONT
NO
...
Third
Respondent
THEODOR WILHELM VAN
DEN HEEVER NO
...
Fourth
Respondent
ENVER MOHAMED MOTALA
NO
...
Fifth
Respondent
METALLURGICAL DESIGN &
MANAGEMENT (PTY) LTD ...
Sixth
Respondent
________________________________________________________________
Coram
:
Howie P, Navsa, Ponnan, Maya et
Cachalia JJA
Date of hearing:
26
February 2008
Date of delivery:
28
March 2008
Summary
:
Appropriation by bank of money held in clientâs account â account
used for specific purpose of funding the establishment of
a mine and
processing facilities by other parties â bankâs client having no
legal interest in the money appropriated â held
that appellant
proved an entitlement to the money appropriated â bank ordered to
repay the money.
Neutral citation:
Joint
Stock v Absa Bank Ltd
(164/07)
[2008] ZASCA 35
(28 March 2008)
________________________________________________________________
JUDGMENT
________________________________________________________________
NAVSA JA
NAVSA JA:
[1] On 10 December 2005 the first
respondent, Absa Bank Limited, a company conducting business as a
registered commercial bank, appropriated
an amount of R28 244 780.59
1
standing to the credit of an account
held at its Sandton Business Centre branch by its client,
Metallurgical Design and Management
(Pty) Ltd â the sixth
respondent, which has its registered office in Parktown,
Johannesburg. I shall for the sake of convenience
refer to the first
respondent as Absa and the account in question as account 1313.
[2] The appellant, a company
incorporated according to the laws of the Republic of Kazakhstan,
with its registered office in Varvarinka,
in the Province of Kostanay
Oblast, in that country, laid claim to the money appropriated by
Absa. It applied to the Johannesburg
High Court for an order in the
following terms:
â
1.
Declaring that the rights to the monies which stood to the credit of
the Absa account at the time of [Absaâs] purported appropriation
thereof, vests in the Applicant;
2. Ordering [Absa] to pay
the Applicant a sum of money equal to the sum purportedly
appropriated, together with
mora
interest at the rate of
15.5% per annum from the date of purported appropriation,
alternatively the date of demand.â
[3] In this appeal we are called upon
to decide whether the Johannesburg High Court (Willis J) was correct
in dismissing the application.
The present appeal is before us with
the leave of that court.
The Background
[4] The appellant is a company
associated with the European Minerals Corporation (EMC), which has
offices in Hampshire, England. EMC
is a mineral exploration and
development company which holds interests in mineral projects in
Kazakhstan. EMC is listed on both the
Toronto and London Stock
Exchanges.
[5] EMCâs key asset is the
Varvarinskoye gold-copper deposit located in Northern Kazakhstan,
held through subsidiary companies,
namely the appellant, Althames
Holdings Limited and Three K Exploration and Mining Limited. The
establishment of a gold and copper
mine and processing facilities at
the site is known as the Varvarinskoye Project (the VP). EMC decided
that the appellant would be
responsible for the VP and would
establish the mine and processing facilities.
[6] South Africa was the country to
which the appellant looked to appoint a project engineer and lead
contractor for the VP for the
purpose of supplying, on a design-build
and turnkey basis, a complete and functional mineral plant for the
production of gold ore
and gold and copper concentrate. The company
it chose was MDM Ferroman (Pty) Ltd, to which I shall refer as MDM.
[7] The sixth respondent and MDM are
associated companies with common directors â bar one.
[8] On 28 September 2005, three months
after MDM commenced work on the VP, the appellant and MDM concluded a
written contract. In
terms of the contract MDM was the lead
contractor and had the right to appoint subcontractors. The contract
price was US$ 55 744
623. The contract incorporated âThe General
Conditionsâ published by the
Federation
Internationale des Ingenieurs-Conseils
.
The contract is made up of a number of constituent parts and is
voluminous and complex.
[9] Design and manufacturing work on
the VP continued. The finance for the project was raised by the
appellant through EMC and associated
companies. Furthermore, the
appellant entered into a debt facility, guaranteed by EMC, with
Investec Bank Limited, Investec Bank
(UK) Limited and Nedbank Limited
as lenders. No drawdown on the loan facility took place because of
MDMâs demise, which will be
dealt with in due course.
[10] The appellant was concerned,
before MDM was appointed as lead contractor, about MDMâs reputation
of repeated failures to pay
subcontractors money it had received from
previous employers in terms of construction or engineering contracts.
The appellant had
an interest in ensuring that subcontractors would
be paid, to enable delivery of plant and equipment within schedule
and thus to
keep the VP on track. A safeguard was therefore built
into the contract to address this concern. This was done by the
insertion of
a sub-clause in the contract.
[11] The relevant sub-clause is 14.4,
which provides:
â
Schedule
of Payments
The Schedule of Payments
will reflect a maximum payment entitlement for the Contractor from
time to time which is commensurate with
the cashflow
forecast/drawdown profile set out in the Facility Agreement,
irrespective of any acceleration in the programmed progress
of the
Works which the Contractor may achieve. For the avoidance of doubt
any additional sums which may become payable to the Contractor
pursuant to the terms of the Contract shall not be subject to such
maximum payment entitlement.
Notwithstanding any other
provision of Sub-Clause 14, each Statement shall certify the amount
of each interim payment which is due
to be paid by the Contractor to
each Subcontractor and the Employer may deposit such amounts into an
account to be maintained with
ABSA Bank or, by agreement with the
Contractor, Investec Bank (the âSubcontractor Accountâ).
Signatures from both the Contractor
and Investec Bank Limited (âthe
Subcontractor Account Bankâ) will be required to make any payments
from the Subcontractor Account.
Sums may only be
withdrawn from the Subcontractor Account if the Contractor makes a
request in writing to the Subcontractor Account
Bank and the
Subcontractor Account Bank has received a copy of an invoice from the
relevant Subcontractor detailing the amount of
such payment, the
account into which the amount should be paid and an irrevocable
instruction from the Contractor to make such payment
to the
Subcontractorâs account.â
[12] Sub-clause 14.4 instituted a
mechanism to ensure that payment was made conditional upon certain
formalities being met in order
to ensure delivery of the plant and
equipment on schedule. It is undisputed that sub-clause 14.4 is a
clause common to construction
and engineering contracts. In practice,
the procedure adopted to give effect to this sub-clause was as
follows:
(i) MDM would submit a request for an
interim draw to the appellant, which included amounts due to
subcontractors and attached the
invoices from them;
(ii) the appellant would endorse MDMâs
own claim for remuneration as well as the subcontractorsâ invoices
as âapprovedâ, ensure
that sufficient funds had been transferred
to account 1313 to cover the proposed payments, and send copies of
the approved invoices
to Investec Bank and MDM;
(iii) cheques drawn in favour of MDM
and the subcontractors would then be drawn against account 1313 and
jointly signed by MDM and
an authorised signatory employed by
Investec Bank, the latter in its capacity as administrator of the
debt facility having the right
to refuse payment if it was not
satisfied that the proposed payment fell within the scope of the VP
contract.
[13] The appellant had from the outset
intended to open an account with Investec Bank dedicated to payment
of the accounts of MDMâs
subcontractors, but there had been a delay
in this regard. In the interim, the appellant decided to use account
1313, held by the
sixth respondent, to pay to both MDM and its
subcontractors the money earned in respect of the VP.
[14] Account 1313 had been opened by
the sixth respondent approximately three years before the VP contract
was concluded. When money
destined for the subcontractors and MDM was
first deposited by the appellant into account 1313, the account had a
nil balance â
prior to this the account had been dormant for a
considerable period. Only money due to the subcontractors and money
earned by MDM
were deposited into this account. No money was paid out
other than in accordance with sub-clause 14.4.
[15] Before account 1313 was utilised
by the appellant, the VP contract was supplied to Absa. Absa knew
about the process referred
to in sub-clause 14.4. On 7 June
2005, in a letter addressed to EMC, Absa confirmed the arrangement in
relation to the authorised
signatories.
[16] It is necessary to record that
MDM, the sixth respondent and various other associated companies held
a number of banking accounts
with Absa. On 23 May 2005, the directors
of the sixth respondent executed a document in terms of which they
agreed that any credit
balance on any of the sixth respondentâs
accounts may at any time, in the discretion of Absa, be set-off
against any money owed
by the sixth respondent to Absa.
[17] By late November 2005 MDM was
experiencing financial difficulties and the relationship between the
appellant and MDM had become
strained. It is not contested that
during this period MDM failed to release cheques due to
subcontractors and that, despite there
being sufficient funds in
account 1313, cheques were dishonoured.
[18] On 1 December 2005 the sixth
respondent, MDM and two other companies entered into a deed of
cross-suretyship, whereby they
bound themselves, jointly and
severally, as sureties and co-principal debtors in favour of Absa for
payment, on demand, of any sum
or sums of money which any of them may
owe Absa from whatever cause arising.
[19] The sixth respondent was the
holder of another account with Absa, to which I shall refer as
account 7348. On 10 December
2005 account 7348 was overdrawn,
with a debit balance of R60 150 608.36. The agreed limits of the
overdraft facility of R17 million
granted to MDM and the sixth
respondent had thus been exceeded. On 10 December 2005, relying
on the written agreements referred
to in para 16 above and on the
deed of cross-suretyship referred to in the preceding paragraph, Absa
purported to apply set-off in
relation to the money held in account
1313 and reduced the credit amount in that account to R80.59. As
pointed out above, immediately
before this was done, the credit
balance in account 1313 had been R28 244 780.59. At that time two
other MDM accounts reflected credit
balances of R5 269 574.12 and R7
789 006.64 respectively. On 11 December 2005 those two balances
were reduced to R74.12 and
R6.64 respectively. The debit balance on
account 7348 was thus reduced to R18 847 408.36 but still
exceeded the credit
limit of R17 million.
[20] On 31 January 2006 the appellant,
following the procedure set out therein, cancelled the VP contract.
[21] On 1 February 2006 MDM was placed
in provisional liquidation by order of the Pretoria High Court. On 17
February 2006 the second,
third, fourth and fifth respondents were
appointed as joint provisional liquidators by the Master of the High
Court. The provisional
liquidation order was subsequently made final.
I record that the sixth respondent has also been placed in
liquidation, but for present
purposes that occurrence is irrelevant.
This is particularly so because neither the sixth respondent nor its
liquidators have ever
laid claim to any of the money appropriated by
Absa.
[22] The appellant claimed that the
money in account 1313 rightly âbelongedâ to it and that
consequently Absa was not entitled
to apply set-off against the funds
in the account, as none of its debtors referred to in preceding
paragraphs had any entitlement
to or interest therein. The appellant
demanded that Absa return the money which it had appropriated. The
appellantâs demand was
rejected, leading to the application, the
dismissal of which ultimately gave rise to this appeal.
[23] Summarising the appellantâs
case, account 1313 was utilised to warehouse money destined for MDM
and its subcontractors, until
formalities were complied with
entitling either or both to withdrawals of money. At the time that
the money was appropriated by Absa,
there was no money due to MDM and
the subcontractors were the only persons who had any claim to what
was in the account. The money
appropriated had been deposited for the
very specific purpose of meeting subcontractor claims. Subsequent to
the appropriation by
Absa, in order to keep the VP going, the
appellant had found approximately R28 million from its own
resources to pay subcontractors
their due. No subcontractor
now
had any further claim to any of the
money that had formerly been held in account 1313. Absa knew of the
source and purpose of the
deposits and could not have been under any
illusion that the sixth respondent had any rightful interest in or
claim to the money
that had been appropriated.
2
The money therefore rightfully
âbelongedâ to the appellant.
[24] Absaâs case, on the other hand,
is that money deposited into a bank account of a client becomes the
property of the bank, and
only the sixth respondent (the account
holder) had any right to contest the appropriation which, in the
circumstances of the documentation
executed by its debtors, referred
to earlier, it was unable to do â Absa, it will be recalled, relied
on set-off to justify the
appropriation. A third party, such as the
appellant, had âno right whatsoeverâ to the money which stood to
the credit of the
sixth respondentâs account. In addition, there
was no contractual nexus between the appellant and the subcontractors
and the appellantâs
interest in account 1313 ceased the moment it
discharged its obligation to the lead contractor, MDM, by âpayingâ
the money into
that account.
[25] The provisional liquidators filed
an affidavit for the âassistanceâ of the court, providing
information and stating that
they would abide any decision of the
court. MDM does not appear to be in possession of any meaningful or
tangible assets. Mr Gordon
McCrae, one of the directors and major
shareholders of MDM, informed the liquidators that amounts due to MDM
were included in the
money appropriated by Absa. On that basis the
liquidators did not discount that MDM might have retained an interest
in part of the
amount appropriated. However, neither Mr McCrae
nor the liquidators specified or itemised such interest. Mr McCrae
also
disputed the appellantâs right to cancel the VP contract. The
liquidators, however, have themselves not adopted a position in
relation
to the cancellation of the contract.
[26] In argument before us counsel for
Absa tentatively suggested that as the termination of the VP contract
did not appear to have
been accepted by MDM the consequence is that
all the entitlements to the money appropriated could not be finally
decided. This submission
has to be seen against Absaâs answering
affidavit in which it states clearly and concisely that it does not
dispute the termination
of the VP contract by the appellant. Even
now, more than two years later, the liquidators have not taken any
steps contesting the
appellantâs cancellation of the VP contract,
nor is there any indication that there is likely to be any such
action. There has
as yet been no specific claim asserted on behalf of
MDM (in liquidation) to any part of the money appropriated.
[27] In the appellantâs replying
affidavits it took great care to repeat that all the funds deposited
into account 1313 were used
only to pay subcontractors and MDM, and
for no other purpose. An affidavit filed by the appellantâs
attorney refers to bank statements
and other documentation and
contains an exhaustive analysis of entries into and withdrawals from
account 1313 and demonstrates that,
at the time of the appropriation,
the only debits unaccounted for were sundry bank and foreign exchange
charges (neither of which
is in issue). It was submitted that, in the
light of the accounting exercise conducted by the appellantâs
attorney, no interest
on the part of persons other than
subcontractors (who had already been paid from another source) could
be proved.
The court below
[28] Willis J appreciated that he was
dealing with a â
quasi-vindicatory
â
claim. He considered that it was in
dispute that the funds in account 1313 were, as a matter of objective
fact, the funds of the appellant
and further that Absa knew that this
was the case. On that basis, he dismissed the application with costs,
including the costs of
two counsel and the costs previously reserved
(in relation to a postponement to enable the appellant to finalise
its replying affidavit).
Willis J âemphasisedâ that he was in no
way determining the actual merits of the case and that there was
nothing to prevent the
appellant from proceeding against Absa by way
of an action.
Application to lead further
evidence on appeal
[29] The appellant sought to introduce
documentation emanating from Absa, including internal memoranda, in
order to demonstrate that
the bank had knowledge of the source and
ownership of the funds. It also sought to introduce transcripts of
parts of the evidence
presented at an enquiry in terms of sections
417 and 418 of the Companies Act 61 of 1973 into the affairs of the
sixth respondent
(in liquidation), to the same effect.
[30] In my view, this application must
fail. I shall, in due course, set out the reasons for the refusal of
the application. Thus,
in deciding the issues in this appeal, I will
therefore only have regard to the record in the court below.
Conclusions
[31] It is not correct, as contended
for on behalf of Absa, that it is a universal and inflexible rule
that only an account holder
may assert a claim to money held in its
account with a bank. Nor does the proposition that money deposited in
an account becomes
the property of a bank, necessarily militate
against a legitimate claim by another party.
[32] In
McEwen
NO v Hansa
1968 (1) SA 465
(A), a mortgage bond debtor made monthly payments into a savings
account with the Allied Building Society in the name and under the
control of Mr Mortimer. It was clear that, save for very limited
purposes, there was never any intention that Mr Mortimer would
acquire
any rights whatever in relation to the monies deposited into
the account. When Mr Mortimer was sequestrated the question arose
whether
the amount standing to the credit of the account formed part
of Mr Mortimerâs insolvent estate. In that case, as in the present,
it was submitted that only the account holder had the exclusive right
to claim money therein. That submission was rightly rejected.
[33] In
McEwen
this Court accepted the
basic proposition that when the money was deposited with the Building
Society it passed into ownership of
the latter.
3
The issue before it was properly
identified as follows: Who had the right to claim the credit balance
in the savings account? In that
case this Court considered the
account holder to be the agent of the mortgage debtor. Of importance
is the following dictum:
â
Under
circumstances such as these, this Court should not, in my opinion,
allow the apparent, as distinct from legal, absolute right
of control
vested in the agent prior to his insolvency to withdraw monies from
the account to transcend the realities of the situation
so as to
permit the insolventâs creditors to reap the benefit of that which
was in truth never legally vested in the insolvent
himself.â
4
The funds in an account may also
âbelongâ to someone other than the account holder or, for that
matter the bank or institution
holding the money.
[34] In
Dantex
Investment Holdings (Pty) Ltd v National Explosives (Pty) Ltd (in
liquidation)
1990 (1) SA
736
(AD), the appellant and respondent had, prior to the latterâs
liquidation, entered into a factoring agreement in terms of which
the
respondent, as cedent, would offer claims against its debtors for
sale to the appellant, as cessionary. It was agreed that the
cedent
would attend to the collection, on due date, of every debt relative
to a ceded claim and deposit all monies into a banking
account
nominated by the cessionary. The latter did not nominate an account
and the monies collected were paid into the banking account
of the
cedent, which then made an equivalent payment to the cessionary. Some
time later, the cedent ceased paying over to the cessionary
the
amounts it collected from the debtors. The funds were retained and
used in the continuing operations of the cedent. In the local
division an order was sought directing the cedent company (in
liquidation) to pay over to the cessionary the amounts collected from
the debtors. The local division refused to grant the order, holding
that the cessionary had no real right in relation to the funds
in the
bank account, but only a personal right which did not entitle it to
anything more than to prove a concurrent claim.
[35] On appeal (in
Dantex
)
this Court held that the local division had been correct in
concluding that the question was whether the cessionary had a better
claim to the funds collected and that the question had to be
formulated in this way for the reason that the bank was undoubtedly
the owner of funds in the bank account. The court considered that in
McEwen
,
the account had been opened and
operated on the mortgagorâs behalf by the insolvent as agent, but
that in the case before it the
account was a general one and that
there was therefore no question of the funds being âearmarked
fundsâ in respect of which a
quasi-vindicatory claim was competent.
It was only if the cessionary was the owner of the money or had some
other real right that
it would not be obliged to queue in the
concursus creditorum
as
regard payment of its claim. The following dictum is significant:
â
If
there had been an agreement between Dantex, the Standard Bank and
Natex, that moneys deposited in this account in respect of debts
ceded to Dantex could only be withdrawn by Dantex that would, of
course, alter the position. That is not the case here. There is
no
evidence to suggest that the Bank agreed to hold the funds in respect
of those cheques as agent for Dantex. Had Dantex nominated
a bank
account as provided for in the agreement, and had the cheques in
question been paid into that account, the position might
have been
different.â
5
[36] In the present case the basis on
which Absa claimed the right to appropriate was set-off, in relation
to money owed to it by
its debtors, including the sixth respondent
and MDM â nothing more. It is clear that Absa was aware, from the
outset, of the purpose
of account 1313. It knew of the source and
very specific purpose of the funds and that the sixth respondent had
no involvement or
interest in the money. The sixth respondent, the
bank and the appellant in effect agreed that the funds could only be
withdrawn after
compliance with a prescribed procedure which did not
involve control of any kind by the sixth respondent. The sixth
respondent and
the bank merely acted as the appellantâs agents to
warehouse the money in account 1313 for the specified purpose. In
these circumstances
there can be no question of set-off against money
in account 1313, to which money none of Absaâs relevant debtors
could legitimately
lay claim.
[37] A relationship
between banker and client is based on contract. It involves a debtor
and creditor relationship in terms of which
the banker becomes owner
of money deposited on the clientâs account subject to its
obligation
to
its client
to
pay cheques drawn on it.
6
In the South
African cases cited above the bank was not a disputant, was
uninterested and stood back whilst others claimed âownershipâ
of
money in an account. In the present case the bankâs knowledge of
the source and purpose of the funds in account 1313 is of course
directly relevant to its asserted right to effect set-off, which it
claimed by virtue of a contract entered into with the account
holder,
its client. Furthermore, its knowledge is highly relevant in relation
to the appellantâs claim that the bank and the account
holder had
agreed to warehouse the money in account 1313 and that there was thus
no entitlement to the money on the part of either.
[38] If we accept,
as we must, that in this case the bank had knowledge of the source
and purpose of the funds, then it is not necessary
to consider other
theoretical hypotheses, such as what the position might have been had
the bank not possessed such knowledge. For,
as stated in
McEwen
:
â
However,
as the Building Society is not a party to the present proceedings, I
express no view in relation to their possible knowledge
and pause
only to record that, on the papers before the Court, the
aforementioned intention, as deposed to by the respondent, Allison,
and Mortimer, is not in any way denied by the Building Society.â
7
Similarly, in
Dantex
the following
appears at 749I-J:
â
There
is no evidence to suggest that the bank agreed to hold the funds in
respect of those cheques as agent for Dantex.â
Nor, it seems to me, would it be
advisable, to lay down any abstract general principle of law based on
such a speculative hypothesis,
in the absence of a proper alternative
factual matrix and I accordingly refrain from doing so. This is
particularly so, since we
were referred to no South African authority
dealing with the bankâs assertion of its right to ownership as
against claims by persons
other than the account holder and where it
was held that in those circumstances the bankâs knowledge of
contractual arrangements
between its account holder and other parties
was irrelevant. In any event, for present purposes, that situation is
entirely irrelevant.
[39] In the present case, as stated in
para 36 above, the bank and the account holder had agreed that the
funds could be withdrawn
only upon a particular procedure being
followed which did not involve any control by the account holder. As
pointed out earlier it
has been clearly proved that the account
holder and the bank had agreed to act as the appellantâs agent to
warehouse the money
in account 1313. I am disinclined to decide this
matter other than on the basis of the facts of the present case,
namely, that the
bank had the knowledge referred to above, which was
directly relevant in relation to the claim and defence in the present
dispute.
[40] The appropriation in question was
effected by a bookkeeping entry. There was no suggestion that the
funds appropriated by Absa,
wherever presently held, could not be
traced as the funds emanating from account 1313, or that there was
some other impediment in
this regard. It was not the basis of Absaâs
defence, for example, that the money appropriated could not be
followed to where it
was presently held on the basis that it was not
the same coinage, and therefore could not be recovered in the manner
sought by the
appellant.
[41] In
Nissan
South Africa (Pty) Ltd v Marnitz NO and Others (Stand 186 Aeroport
(Pty) Ltd Intervening)
2005
(1) SA 441
(SCA), Streicher JA, in dealing with the perplexing
question of the appropriate remedy available to a person laying claim
to money
wrongfully transferred from its own bank account to another
over which it had no control, and considering an earlier decision by
this court,
8
said the following:
â
This
Court was aware that its decision may not be strictly according to
Roman-Dutch law but stated that Roman-Dutch law was a living
system
adaptable to modern conditions. As a result of the fact that
ownership in specific coins no longer exists where resort is
made to
the modern system of banking and paying by cheque or kindred process,
this Court came to regard money as being stolen even
where it is not
corporeal cash but is represented by a credit entry in books of
account.â
9
[42] In the
Nissan
case this court took into account that
it was common cause that, if it concluded that the liquidators in
that case were not entitled
to the contested funds, the appellant was
entitled to payment thereof and made an order accordingly. In the
present case the parties
were agreed that, if we find that no person
other than the appellant had any interest or claim to the money
appropriated by Absa,
the appellant was entitled to the relief
sought. I can see no reason why, in the present case, for the reasons
stated in the
Nissan
case and considering the conclusions
arrived at in the preceding paragraphs, a similar result should not
follow.
[43] It is now necessary to set out
the reasons for refusing the application by the appellant for leave
to adduce further evidence
on appeal. The appellant sought to have
the application to adduce further evidence decided conditional upon
the appeal (on the present
record) being dismissed. This is
notionally difficult to appreciate. Even though Willis J described
his judgment as not finally settling
the dispute between the parties,
it certainly cannot be contended that his was not a final judgment
susceptible to an appeal. A decision
by this court on the correctness
of the decision of Willis J would in itself be final. It is
conceptually not tenable first to consider
the correctness of that
final decision and then to decide whether or not to introduce the new
evidence. After such a decision a court
is
functus
officio
. An appellant
wishing to re-open its case must therefore make an election before
the appeal hearing whether to apply for re-opening.
If that is
refused the appeal proceeds. If it is granted there has to be
remittal and the appeal will fall away.
[44] It has been suggested that the
appellant was prompted to apply to adduce evidence on appeal because
of the finding of the court
below that it could not, on the available
facts, arrive at a conclusion in relation to the âownershipâ of
the funds and the knowledge
of the bank in relation thereto. In my
view, this suggestion is without merit. It is clear from what is set
out in the appellantâs
founding affidavit, supplemented by the
uncontested evidence contained in its replying affidavit, that Absa
was fully aware of and
party to the arrangements to use account 1313
for the VP. It is abundantly clear from those affidavits that, on
Absaâs own documentation,
referred to by the deponents, Absa knew
of the source of the funds and of the arrangements concerning payment
to MDM and subcontractors.
The evidence sought to be introduced at
this stage, in effect, will achieve nothing more than enhancing an
already established case.
[45] Furthermore, even taking into
account the stressed circumstances under which the appellant launched
proceedings in the Johannesburg
High Court, it nevertheless had at
its disposal the means provided by the rules of court
10
to compel the production of the bank
statements and documents which it now seeks to introduce. That
evidence was in existence at the
time that the application was first
brought. The evidence in relation to the enquiry in terms of the
provisions of the Companies
Act referred to earlier, cannot fully be
appreciated until and unless it is considered in the context of all
the relevant evidence
adduced at the enquiry, which has not been
proffered.
[46] For all these reasons the
application for leave to adduce further evidence must be refused.
[47] There is one further issue
requiring attention. Willis J, in dismissing the appellantâs
application with costs, included an
order that the costs were to
include the costs previously reserved in relation to an opposed
application by the appellant for a postponement
in order to finalise
its replying affidavit. It is uncontested that the appellant had,
prior to the postponement being argued, tendered
to pay the costs of
the postponement on an unopposed scale, which tender was refused. In
all the circumstances there appears to be
no justification for Absa
to have adopted such a stance. The order in relation to the reserved
costs should therefore be altered.
[48] The following order is made:
1. The application for leave to adduce
further evidence is dismissed with costs, including the costs of two
counsel.
2. The appeal succeeds with costs
including the costs of two counsel.
3. The order of the court below is set
aside and substituted as follows:
â
(i)
It is declared that the rights to the monies which stood to the
credit of the ABSA account (account number 40-5616-1313) on 9
December 2005, vest in the Applicant;
(ii) The First Respondent
is ordered to pay the Applicant the sum of
R28
244 780.59
,
together with
mora
interest at the rate of
15,5%
per
annum
from
10 December 2005.
(iii) The First
Respondent is ordered to pay the costs of the application, including
the costs of two Counsel.
(iv) The Applicant is
ordered to pay the costs related to the postponement granted on
12 September 2006, in terms of the tender
on its behalf, on the
unopposed scale and the respondent is ordered to pay the costs
occasioned by opposition.â
_________________
M S NAVSA
JUDGE OF APPEAL
CONCUR:
HOWIE P
PONNAN JA
MAYA JA
CACHALIA JA:
[49] I have read the judgment of my
colleague Navsa JA and agree with the order he proposes. I come to
the same result but via another
route. The essential difference is
that I consider the bankâs knowledge of account 1313âs intended
purpose to be irrelevant to
its claimed entitlement to set-off the
money that was held in that account.
[50] The facts have carefully been set
out in the main judgment. They need not be repeated. That the bank
owned the funds that had
been deposited in account 1313 is
undoubtedly so. But it is well-established that ownership of the
money held in an account does
not, of itself, preclude the assertion
of rights of other parties to the money. This is because the solitary
act by someone who opens
a separate bank account in the name of
another and deposits money in that account does not confer any
special title on the person
named as the account holder.
11
Thus, where an agent opens a separate
account on behalf of a principal and deposits money into that
account, the agent, or anyone
claiming title through him or her has
no vested right in the money.
12
And it follows, logically, that if the
account holder has no title to the money so deposited, so too does
the bank not have. The fact
that the bank owns the money does not
detract from this conclusion. Where, as in this case, there is a
dispute between the parties
regarding their entitlement to funds that
have been deposited in a separate bank account, the intention of the
parties to the agreement
must be determined. And
McEwen
,
I think, makes clear that the intention with which the bank holds the
money is irrelevant to the determination of this question,
13
unless it is a party to the agreement.
[51] The only question, therefore,
that is relevant in this appeal is whether the terms of the agreement
between the appellant and
MDM, particularly clause 14.4 thereof,
conferred any title on the sixth respondent to the funds, which the
appellant had deposited
into account 1313. Absa asserts that because
payments by the appellant into the account were made to discharge its
obligations to
MDM, the appellant no longer had a proprietary
interest in the money. And, so it says, the fact that the money may
have been paid
for a certain purpose, namely to pay sub-contractors,
does not detract from this.
[52] I do not agree with Absaâs
submission. The purpose of clause 14.4 and the use of account 1313
are discussed at paragraphs [10]-[14]
of the main judgment. It is
plain that the account was held in the name of the sixth respondent
solely to warehouse the money pending
the appellantâs authorisation
for payment to be effected to the subcontractors. The sixth
respondent had no involvement in the
agreement or the VP and
therefore had no personal claim to the money in the 1313 account.
Until authorisation for payment to the
subcontractors was forthcoming
from the appellant, MDM had no claim to the money either. And in
respect of the money that was appropriated
it is common cause that
the appellant had not authorised MDM to make payments to the
sub-contractors. MDM therefore had no personal
claim to the money
before this. Neither did the sixth respondent, which was no more than
the nominated account holder for the VP
project.
[53] Properly construed the agreement
between the appellant and MDM required the money, which the appellant
had deposited into account
1313, to be held in trust and to be dealt
with only according to its instructions. Whether Absa was aware of
the arrangement ought
not to have any bearing on the matter. For the
same reason I would hold that it was unreasonable, in the
circumstances, for the appellant
to apply to adduce further evidence
to demonstrate that Absa was indeed aware.
___________________
A CACHALIA
JUDGE OF APPEAL
1
The
amount left in credit in that account was R80.59 after Absa Bank
Limited passed a debit of R28 244 700 on the basis that the
account
holder was indebted to it in a sum far exceeding the latter amount.
The basis of the appropriation and the challenge to
it is dealt with
in later paragraphs. The appellant seeks an order for payment of the
entire credit amount in that account before
the appropriation. See,
in particular, para 19 below.
2
In
this regard what is said by Mr Francois van der Colff, Absaâs
regional credit manager at its Sandton Business Centre branch
in the
answering affidavit on behalf of Absa is significant:
â
From about May
2005 until the beginning of December 2005, Dr Gideon Van Rhyn (âVan
Rhynâ) and Mr Marius Ittmann (âIttmannâ),
respectively a
business banker and a senior analyst in the employ of the First
Respondent, dealt with MDM and the Sixth Respondent
on a direct
basis to manage the relationship between the First Respondent and
these customers. During this time, MDM and the Sixth
Respondent
would furnish Van Rhyn and/or Ittmann with information, particularly
financial information, regarding the business affairs
of the two
companies. They were updated by representatives of MDM and the Sixth
Respondent regarding the companiesâ business
activities, including
MDMâs Varvarinskoye project in Kazakhstan. Included in the
information provided by MDM were copies of contracts
entered into
between MDM and the Applicant.â
3
See
also
S
v Kearney
1964
(2) SA 495
(AD) and
S
v Kotze
1965
(1) SA 118
AD.
4
At
472D-E.
5
At
749H-750A.
6
See
F R Malan and J T Pretorius assisted by S F du Toit
Malan
on Bills of Exchange, Cheques and Promissory Notes
4 ed (2002) p 335.
7
Page
469B-C.
8
The
case referred to was
S v
Graham
1975 (3) SA 569
(A)
where the question arose whether an accused was guilty of the theft
of a cheque of R37 153.88 or of the theft of that amount
and the
court was dealing with the principle of Roman-Dutch law that only
corporeal things were capable of being stolen.
9
Para
24.
10
See
inter alia Uniform rule 35(13).
11
Vereins-Und
Westbank AG v Veren Investments
2002
(4) SA 421
(SCA) para 14.
12
McEwan
(supra)
para 32;
Dantex
(supra)
34 at 749I-50B.
13
At
469A-C;
Barnard
Jacobs Mellet Securities (Pty) Ltd v Matuson
2005
CLR 1
(W) para 26.