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[2016] ZAGPPHC 508
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Pratt v First Rand Bank Limited (27048/03) [2016] ZAGPPHC 508 (30 June 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 27048/03
30/6/2016
Not
reportable
Not
of interest to other judges
In
the matter between:
ANNE
ELIZABETH MARY
PRATT
Applicant
and
FIRSTRAND
BANK
LIMITED
Respondent
JUDGMENT
Tuchten
J:
1.
This urgent application arises from a transaction structured by the
applicant (Ms Pratt) on advice given by Mr Versveld, an official
of
the respondent (FirstRand) in 2001.The dispute has, on separated
issues decided in this Division against Ms Pratt, twice received
the
attention of the Supreme Court of Appeal on appeal. In each case the
decision of the lower court was upheld. In addition, the
Supreme
Court of Appeal has on other issues relating to the present dispute
denied Ms Pratt leave to appeal against decisions made
in this
Division. On 3 December 2015, this court finally determined the
dispute by granting judgment in favour of FirstRand, ordering
Ms
Pratt to pay FirstRand R19 634 279,49 together with interest reckoned
from 19 June 2007 and costs.
2.
The present application is for an interdict precluding FirstRand from
executing on its money judgment, pending the outcome of
an action yet
to be instituted to set aside the money judgment and all those
judgments which preceded it. Ms Pratt asserts that
FirstRand obtained
its judgments by fraud.
3.
In 2001, FirstRand lent Ms Pratt R25 million. The loan was a
component in a wider transaction. The transaction was designed to
enable the R25 million to be exported from South Africa. Reduced to
its essentials relevant for present purposes, the transaction
was
structured as set out below.
4.
As at 1999,
Ms Pratt owned 20% of the shares in Anne Pratt and Nyasulu (Pty)
Limited (APN), a South African company. 10% of the
shares in APN were
held by Ms Nyasulu.
[1]
The
balance of the shares were subscribed for and held by Monument Trust
Company Limited (Monument).
5.
On 29 January 1999, Mr John Rice, then Ms Pratt's accountant,
presented the share certificate reflecting Monument's shareholding
in
APN to Standard Bank. In its capacity as an authorised dealer, a
status conferred by the Reserve Bank, the share certificate
was
endorsed to reflect that the shares in question were held by a non
resident of South Africa.
6.
in 2000, the Fast Track Trust, an Isle of Man trust, bought the 70%
of APN's shares held by Monument for R700. These shares were
then
held by Fast Track in the name of its nominee. Ms Pratt appeared to
the Supreme Court of Appeal to be an astute and successful
businesswoman and at least a beneficiary of and perhaps the
controller of Fast Track.
7.
In 2000, Ms Nyasulu sold her 10% interest in APN to Ms Pratt and the
name of APN was changed to Anne Pratt & Associates (Pty)
Limited
(APA).
8.
In 2002, Ms Pratt became the sole member of Classy Living CC (CL). Ms
Pratt either lent to CL or made available to it as her
member's
interest the R25 million lent to her by FirstRand.
9.
In 2002 CL bought from Fast Track the latter's 70% interest in APA
for R25 million. For reasons not explained on the papers,
the
designation by Standard Bank of the holder of the shares as at 1999
as a nonresident was afforded to Fast Track. No point
was made
of this at any stage of the litigation or before me.
10.
At the request of Ms Pratt, the R25 million was then transferred from
South Africa to a bank account held on behalf of Fast
Track in
Jersey.
11.
As Ms Pratt
makes plain in her founding affidavit in the present application, the
purpose of the scheme was to enable her lawfully
to take the money
she had borrowed out of South Africa. There were provisions in the
scheme for securities to be provided to FirstRand.
Ultimately
FirstRand was to get a transaction fee,
[2]
interest and repayment of the capital lent. Ms Pratt apparently hoped
to benefit from what she hoped would be the fall of the rand
against
other currencies.
12.
But things did not work out for Ms Pratt and in fact at a time
crucial to Ms Pratt's investment strategies the rand relatively
appreciated against other relevant currencies. She then decided to
repatriate her investments, or some of them, and make use of
the
amnesties granted from time to time by the Reserve Bank to persons
who had contravened the exchange control regulations.
13.
But in relation to the R25 million which she had borrowed from
FirstRand, Ms Pratt adopted a different strategy. She asserted
that
the transaction was one whereby capital or a right to capital had
been directly or indirectly exported from South Africa in
contravention of Exchange Control reg 10(1)(c). This, she claimed,
rendered her loan agreement with FirstRand unenforceable with
the
consequence that she was not liable on the loan agreement. She
accepted, though, that in principle she might be liable to FirstRand
under the principles of unjustified enrichment.
14.
As I have explained, Ms Pratt lost the argument and the Supreme Court
of Appeal has affirmed the judgments of this court, all
of which has
resulted in the declaration of her liability to FirstRand in a
substantial amount. But now she seeks to reopen the
argument. She
says that the earlier judgments were all induced by a fraud
perpetrated upon the court by FirstRand. In the present
application
she asks that the equitable discretion vested in the courts to stay
execution of its process be invoked in her favour
pending an action
which she says she will institute to set aside the judgments.
15.
Regulation 10(1)(c) reads as follows:
No
person shall, except with permission granted by the Treasury and in
accordance with such conditions as the Treasury may impose
enter into
any transaction whereby capital or any right to capital is directly
or indirectly exported from the Republic.
16.
it is
important for present purposes to identify how the dispute between
the parties was procedurally presented to the courts. By
summons
dated 25 September 2003, Ms Pratt instituted an action against
FirstRand
[3]
for an order
declaring the transaction
ab
initio
null
and void. She pleaded the components of the transaction; that she had
been advised by Mr Versveld, an employee of FirstRand,
to conclude
the transaction;
[4]
that the
purchase price for the shares was to the knowledge of FirstRand not
based on an independent auditor's report and was significantly
in
excess of these shares' fair value; that the transaction was not
concluded at arms' length; that the transaction was concluded
and
effected without Treasury permission; and that the transaction and
its implementation were thus in contravention of reg 10(1)(c)
and
accordingly
ab
initio
illegal
and void.
17.
FirstRand generally denied these central allegations and denied
specifically that Versveld was employed to provide advice of
the
nature alleged. While admitting that Versveld did in fact provide
advice, FirstRand denied that the loan agreement component
of the
transaction was entered into pursuant to Versveld's advice or that
the loan agreement gave effect to the advice that Versveld
did in
fact give.
18.
FirstRand went on to plead that it was an authorised dealer as
defined in the Exchange Control Regulations and that as an authorised
dealer FirstRand was, on behalf of the Treasury, authorised on behalf
of the Treasury to approve the purchase of foreign exchange.
19.
Of
considerable significance for present purposes, FirstRand also
pleaded that in terms of a specific ruling of the Treasury, ruling
E5(c)(a), FirstRand was authorised to remit through normal banking
channels the local sale or redemption proceeds of non-resident
owned
assets. Under ruling E5(c)(a), FirstRand asserted that it was
accordingly permitted to conclude and implement the transaction.
[5]
20.
Ms Pratt replicated to FirstRand's plea. She specifically denied that
ruling E5(c)(a) permitted FirstRand whether in its terms
("in
fact") or in law to act in contravention of reg (10(1)(c).
21.
FirstRand, as well as filing a plea, delivered a counterclaim for
enforcement of the loan agreement component of the transaction
or, in
the alternative, a claim for the R25 million and interest based on
unjustified enrichment.
22.
On these pleadings, the onus was on Ms Pratt to prove the case she
had pleaded. This was appreciated by the parties, as appears
from the
customary minute of their pre-trial conference on the file and by the
learned trial judge before whom the matter came.
I mention this
because there is a suggestion in one of the judgments of the Supreme
Court of Appeal that the parties had not appreciated
where the onus
in fact lay.
23.
In January 2006, before the case was called in the trial court,
something rather unusual, at least in my experience, took place.
Leading counsel for FirstRand addressed his opponent, an eminent
senior member of the Pretoria bar and leading for Ms Pratt, formally
in writing. Counsel gave his opponent a written summary of the
anticipated evidence of a witness, Mr Ribbens, whom FirstRand
intended
to called to give factual evidence "concerning the
manner in which the Treasury in practice granted permissions or made
exemptions."
24.
The case came to trial before Mokgoatlheng AJ. When leading counsel
for Ms Pratt opened the case, he informed the court that
the parties
had agreed that the result of the entire case, on the merits, was to
depend on the determination of four identified
issues. I shall call
this the trial agreement. Quantum would therefore, if necessary,
stand over for later determination.
25.
The four issues are in summary and to the extent presently relevant
expressed in the following four questions:
25.1. Did the transaction
fall within the ambit of reg 10(1)(c)?
25.2. If so, was
permission for the transaction granted by the Treasury?
25.3. If not, did the
transaction contravene reg 10(1)(c)?
25.4. If so, did the
contravention result in the nullity of the agreements which
constituted the transaction?
26.
Counsel for Ms Pratt then opened her case by addressing the court. In
anticipation of the evidence of the witness foreshadowed
to be called
by FirstRand, counsel for Ms Pratt recorded their objection to the
admissibility of the evidence to be presented but
accepted that the
evidence might be led and the issue of admissibility decided at the
end of the case.
27.
Counsel for Ms Pratt then closed her case without calling any
evidence.
28.
On behalf of FirstRand, the anticipated witness, Mr Ribbens, then
gave evidence. He was the only witness to testify at the trial.
Mr
Ribbens was the official at FirstRand in charge of exchange control
and the person with whom the general manager: exchange control
in
that department of the Reserve Bank liaised in relation to any issue
not dealt with through the normal day to day structures
of their
respective banks. Mr Ribbens testified that the Reserve Bank issued
rulings from time to time which were not made available
to the
general public. Instead these rulings were given to the Reserve
Bank's "authorised dealers". These authorised
dealers were
financial institutions which the Treasury had empowered to effect
transactions in relation to foreign exchange generally,
including the
export of rands from South Africa to other jurisdictions.
29.
The general
effect of Mr Ribbens' evidence was that the Reserve Bank
[6]
identified categories of transactions which it regarded as worthy of
its permission such as is contemplated in reg 10(1)(c). If
an
authorised dealer regarded a transaction put up to it by a client as
one falling within the scope of such a ruling, the authorised
bank
was empowered then by the Reserve Bank to give effect to it, provided
it did so through normal banking channels. In a case
where the
authorised dealer did
not
regard
the proposed transaction as falling within the scope of a ruling, and
only in such a case, the proposed transaction was reported
to the
Reserve Bank and scrutinised at a meeting of a committee established
for this purpose. The latter process is considerably
more cumbersome
and time consuming than the former. The Reserve Bank did not deal
directly with the public but only through authorised
dealers. The
Reserve Bank issues to its authorised dealers a document called the
exchange control manual, which is a general guide,
both to authorised
dealers and the public, on exchange control rulings.
30.
There was a rulings committee convened by the exchange control
department of the Reserve Bank on which representatives of authorised
dealers served. At the meetings of this committee, the content of
rulings both existing and proposed were discussed. Matters requiring
attention at a higher level could be escalated to a liaison committee
consisting of representatives of the banks and the Reserve
Bank. At
meetings of this latter committee, typically, issues were discussed,
rulings were made and guidance given. In addition,
bank officials
could contact the Reserve Bank by telephone, typically for guidance
on more simple issues. Where a new instrument
came onto the market,
Mr Ribbens might have a brief telephone discussion with a senior
official in the Reserve Bank and obtain
guidance. Or a bank might
make a formal application and treat the outcome of such an
application as a precedent for future conduct.
31.
I interrupt this narrative to point out that the administrative
decision making involved in the conferring or withholding of
permissions required by the regulations takes place in a manner
markedly different from that in which administrative decisions
normally are made. The authorised dealer is not the agent or delegate
of the Treasury to make the required administrative decision.
A
representative of the Reserve Bank does not in the first instance
apply his mind to the facts of the proposed transaction. Instead,
the
authorised dealer is required to interpret the mind of the Treasury,
as it were, to divine whether the proposed transaction
does or does
not fall within the ruling.
32.
The justification for the system is that foreign trade between South
African residents and the rest of the world simply would
not be
possible if every proposed transaction enjoyed the individual
attention of the decision makers within the Treasury. Because
this is
so, blanket permissions are granted in advance in the way I have
described to balance the competing considerations of exchange
control
on the one hand and the efficient operation of South Africa's
commercial, industrial and financial systems on the other.
33.
No doubt, this system is open to criticism. But to criticise it would
be otiose in the context of the present case. There was
no
constitutional attack on the system in any of the courts before which
different aspects of the present dispute served. Nor was
there any
constitutional attack before me. So the system must be taken, warts
and all, as reflecting existing law.
34.
To continue
with the thrust of the evidence of Mr Ribbens: exchange control in
relation to the rand holdings of non-residents within
South Africa
was abolished on 13 March 1995, ie before the time when the
transaction presently under scrutiny was considered. Mr
Ribbens
testified about how ruling E5(c)(a)
[7]
was understood and applied by FirstRand. A non-resident entity was
broadly defined as one in which 75% or more of its capital or
voting
power was held by non-residents.
35.
In relation to shares held by a person or entity claiming to be a
non resident, an authorised dealer would ensure that
the funds
to pay for the shares have been brought in from outside South Africa
or emanate from a non-resident rand account. The
dealer would
scrutinise the sale agreement and get a valuation certificate,
preferably from a chartered accountant registered in
South Africa. In
such a case, the dealer has permission from the Reserve Bank to enter
into transactions exporting funds derived
from the sale of such
shares without further reference to the Reserve Bank.
36.
A most important step in practical terms is that once the authorised
dealer is satisfied that these requirements have been met,
the share
certificate in relation to the shares in question is stamped "non
resident endorsed". Such a stamp is
treated as proof that the
shares in question are held by a non-resident. The existence of the
stamp allows the non-resident at
any time in future to sell the
shares and export the capital derived from such a sale out of South
Africa.
37.
Ruling ES(c)(a) reads:
The local sale or
redemption proceeds of non-resident owned assets in South Africa may
be regarded as remittable through normal
banking channels. Such
proceeds may also be freely used in the common monetary area by
nonresidents for investment and other
purposes and may
accordingly be credited to non-residential accounts.
38.
This must be read with ruling E5A(1)(a), which reads:
The attention of
Authorised Dealers is also drawn to the provisions of,
inter alia,
Exchange Control Regulation 10(1)(c). In this regard it is
essential that all securities related transactions, between a
resident
and a non-resident immigrant whereby capital or any right to
capital is directly or indirectly exported from the Republic,
especially
those which have cross-border flow implications, are
carefully scrutinised and documentary evidence such as broker's notes
validated
trade advices, sighted in order to ensure that such
transactions are conducted at arms length and in market related
prices. In
the case of any doubt on the part of the Authorised
Dealer, concerned the proposed transaction is to be referred to the
Exchange
Control Department of the South African Reserve Bank.
39.
The argument for Ms Pratt in the trial court was that there was no
evidence that FirstRand carefully scrutinised the transaction.
But Mr
Ribbens testified that as a matter of practice within FirstRand, the
crucial component of the transaction was that FirstRand
was presented
by Ms Pratt with the relevant share certificate duly stamped (by
Standard Bank, it will be recalled) to reflect the
holder of the
shares as a non-resident.
40.
The mechanics of the transaction were that CL, the purchaser of the
shares in APA, applied to FirstRand to buy from FirstRand
foreign
currency (US dollars, as it happened) to pay the purchase price for
the shares into the account of a company nominated
by Fast Track
trust called Falcon Management Ltd in a bank in Jersey in the Channel
Islands.
41.
The argument was then made, and lost, on behalf of Ms Pratt that the
evidence of Mr Ribbens was inadmissible. There was no cross
examination of Mr Ribbens. No further evidence was adduced on either
side.
42.
On this evidence, Mokgoatlheng AJ concluded that the transaction was
indeed one falling within the purview of reg 10(1)(c).
The first of
the four questions was therefore answered in favour of Ms Pratt. But
the second question was, crucially, answered
against Ms Pratt.
Mokgoatlheng AJ found that the evidence before him established that
permission as contemplated in the regulation
had been granted. After
the other questions were disposed of, an order issued, dismissing Ms
Pratt's summons.
43.
The order
of Mokgoatlheng AJ went on appeal to the Supreme Court of Appeal. On
12 September 2008, under case no. 416/07, Ms Pratt's
appeal was
dismissed.
[8]
During the course
of the judgment, the Supreme Court of Appeal observed that, having
regard to the incidence of the onus of proof,
the absence of evidence
of any failure to grant permission should have been fatal to Ms
Pratt's case and that the evidence of Mr
Ribbens in relation to the
blanket permission conferred on authorised dealers through the
relevant rulings had given rise to a
rebuttable inference of fact
that permission for the transaction had in fact been granted.
44.
The case then resumed in this Division in relation to FirstRand's
counterclaim for payment. On 7 April 2010, some 19 months
after the
dismissal of her appeal, Ms Pratt gave notice of her intention to
amend her plea to the counterclaim to allege that FirstRand
devised
and implemented the transaction
with the fraudulent intention of
circumventing reg 10(1)(c) and that the transaction was for this
reason void. The amendment was opposed but on 27 July 2010 was
allowed on application by Goodey AJ. FirstRand then replicated that
the issue was
res judicata.
45.
The issues
raised by the amendment and the replication were once again separated
(in this instance against the opposition of Ms
Pratt) and came before
Fabricius J, who upheld the
res
judicata
point.
The learned judge considered that the issue raised by the amendment
was whether permission had been granted and that this
issue had been
before and had been decided against Ms Pratt by Mokgoatlheng AJ. Once
again, the issue went to the Supreme Court
of Appeal. Once again, the
argument went against Ms Pratt. On 11 September 2014, under case no.
696/13,
[9]
the appeal was
dismissed and the reasoning of Fabricius J was upheld. This date is
important because it was then, at the latest,
that Ms Pratt must have
known, and therefore did know, that the existence of the order of
Mokgoatlheng AJ was an insuperable bar
to her entitlement to
ventilate the allegation that FirstRand had devised and implemented
the transaction with the fraudulent intention
of circumventing reg
10(1)(c). But of course the notice of amendment of 7 April 2010 shows
that by that date, at the latest, Ms
Pratt was ready to run a fraud
defence. The delay of nineteen months, though, between the order of
Mokgoatlheng AJ and the notice
of amendment introducing the fraud
defence remains unexplained.
46.
But Ms Pratt took no steps to attack the validity of the order of
Mokgoatlheng AJ. Instead, shortly before the resumed hearing
once
again in this Division before Fabricius J on the merits of the
counterclaim (which translated to a trial of the quantum of
FirstRand's claim for payment), Ms Pratt applied to amend her plea to
the counterclaim to plead yet another variant of her fraud
defence.
On 3 November 2015, leave to amend was refused, as was leave to
appeal the refusal of the amendment, both in this Division
and, on 23
February 2016, in the Supreme Court of Appeal. Ms Platt then applied
for a stay of the quantum trial pending a petition
to the Supreme
Court of Appeal. The application for a stay was dismissed by
Fabricius J. On 3 December 2015, Fabricius J adjudicated
the
counterclaim and found for FirstRand in the sum of R19 634 279,
interest and costs. Ms Platt presented no evidence in relation
to the
counterclaim. Ms Pratt applied for leave to appeal the quantum order
and, later, for a postponement of her own application
for leave to
appeal the quantum order. Both the application for postponement and
the application for leave to appeal the quantum
order were dismissed
by Fabricius J on 30 March 2016. The present application was launched
on 13 April 2016.
47.
From quite soon after she concluded the transaction, Ms Pratt formed
the view on advice she received that the transaction was
unlawful.
This view ripened into a belief that Versveld and (it must inevitably
follow) other officials of FirstRand had known
the transaction was
unlawful for want of the requisite blanket permission under reg
10(1)(c) but had nevertheless put her,
Ms Pratt, into the
transaction. The motive for their so doing was said by counsel for Ms
Pratt in reply to be the desire to earn
the transaction fee for
FirstRand.
48.
In the
present application, Ms Pratt relies, as became clear during
argument, on two documents which came to her knowledge, she
says,
after Mokgoatlheng AJ gave judgment. I shall deal with them both
below. But for present purposes, I need to say that the
one document,
a minute of a meeting, was probably in FirstRand's possession at all
material times and should probably have been
discovered.
[10]
The second such document, a report by accountants KPMG, is one which
was, according to FirstRand, never in FirstRand's possession.
[11]
49.
The action
which Ms Pratt says she intends to bring is one for
restitutio
in integrum.
Where
it is brought on the ground that the other party has suppressed a
document, the party seeking
restitutio
must
show that the suppression was fraudulent, that the document was not
available to the applicant before judgment sought to be
set aside and
that production of the document would have led to a different result.
Where the applicant knows of the true position
before judgment is
granted against her, she cannot thereafter succeed in a claim for
restitution.
[12]
50.
The document in question is a minute of the fortieth meeting of the
exchange control liaison committee held on 3 March 1999.
A
representative of First National Bank of Southern Africa Ltd, a
predecessor of FirstRand, attended the meeting. The material
which
according to Ms Pratt is relevant, indeed decisive, of her dispute
with FirstRand, is contained in item 6(c) of the minute.
Item 6 is
headed "New Matters". The item reads:
Several schemes involving
the movement of funds by individuals, in terms of the Individual
Investment Allowance, which ultimately
find their way back into a
South African Company were referred to your Department for
consideration. The Control's replies stated
that Regulation 10(1)(c)
was being contravened. However as indicated to you in many instances
these would not be detected by Authorised
Dealers as they are being
structured in such a manner as to circumvent Regulation 3(1)(f) and
other Excon requirements. Audit firms
and the legal fraternity are
advising clients on the relative structuring.
The Control undertook to
address the professional forums on these issues. Has this been done
or is it still your intention to approach
the relative bodies?
At this stage a large
number of their members appear to be unsure of your stance in this
regard. (B.C.T. Mcleod - Nedcor Bank Limited).
Mr Mcleod gave a brief
explanation of the point raised. The main thrust was that certain
professional firms are advising their clients
on how to use these
schemes. It was felt that Exchange Control should make their views
known at the various forums that they attend.
Various comments from
the forum acknowledged the problem within the banking sector and also
the fact that it is difficult to convince
Authorised Dealers'
customers that the various schemes are not permissible. The
Chairperson advised that the individual allowance
facility was not
introduced to enable the movement of funds on this basis and is not
what the Minister of Finance intended when
the facility was granted.
He advised that the matter had been taken up with the Law Society and
that it will be taken up with SAICA.
The Control will also bring
these schemes to the attention of the Minister of Finance and SARS.
The Authorised Dealers were requested
to ensure that their side of
any arrangements in this regard be kept above-board. Any individual
requests to participate in any
of the so called schemes will be and
should be declined since it was not the intention of the Minister of
Finance to create a mechanism
for individuals to exit more than what
is permitted.
51.
Ms Pratt
finds significance in this minute in that it deals, so she says, with
what she calls "loop structures'. I find no
reference to loop
structures in the minute. It seems to me that what was being
addressed was the case of South African residents
who were using
their "individual investment allowances" to invest in South
African companies. The connection of this
minute to the present
transaction seems to me tenuous. The minute appears to be no more
than a discussion between high officials
as to the purposes for which
individual investment allowances were being sought to be put. There
is no suggestion that the expressions
of views were ever translated
into a ruling. Nor is there any indication that ruling E5A(1)(a),
which I quoted in paragraph 38
above, was ever qualified, let alone
amended.
[13]
52.
The suggestion on behalf of Ms Pratt appears to be that the phrase
"at arms length and in market related prices" is
to be read
conjunctively. But this submission raises a myriad of difficulties
for Ms Pratt. Her particulars of claim in terms raised
the issue that
the transaction was
neither
at arms' length nor at a market
related price. But Ms Pratt's counsel decided not to take the point
and instead confined the case
on the merits to the four questions.
53.
Furthermore, it is incontestable that Ms Pratt was advised at an
early stage that the transaction was a "blatant contravention"
of reg 10(1)(c). This appears from a lengthy written opinion dated 28
July 2003 given to Ms Pratt by a partner in a firm of attorneys.
The
contravention, the opinion said, started
... with the use of
travel allowance money which was donated by you to the offshore
trust, to in turn fund the acquisition of 70%
of the issued share
capital of the SA company when it was formed, at a relatively nominal
consideration of R700 ... .
54.
One does
not know why eminent senior counsel and his junior decided at the
trial before Mokgoatlheng AJ to abandon a point which
Ms Pratt now
presses with such enthusiasm. Nor does one know why the allegation
that Mr Rice, then Ms Pratt's own accountant, had
overvalued the
shares was not pressed. The veil which shrouds communications between
legal advisor and client has not been lifted.
It is not suggested
that counsel were incompetent or gave no proper attention to their
brief.
[14]
It is not suggested
that counsel were not authorised to conclude the trial agreement.
Counsel for FirstRand have cited authority
for the proposition that
once the matter has been placed by a lay client in the hands of
counsel, the lay client is bound by decisions
such as these when made
by counsel. I need not refer to such authority because counsel for Ms
Pratt accepted that such was the
position.
55.
As I have said, one does not know why the trial agreement was
concluded. Nor does one know why the decision was made to run
a case
such as this without calling the plaintiff herself. One does not know
why, almost as curiously, the 'no arms' length, not
market related'
point was abandoned - if Ms Pratt believed in the point as she says
she does. This is particularly so because counsel
for Ms Pratt were
in a position to extract from Mr Ribbens, if the point were good, a
concession that would have made the case
for her. By the time the
trial agreement was concluded, Ms Pratt was very well informed on
exchange control matters and the proprieties
of what she calls loop
transactions. The irresistible inference is that at the time of the
trial already Ms Pratt knew the point
was bad. What has changed since
then? Nothing that I can see.
56.
I turn to the KPMG report. This report was commissioned by the
Reserve Bank to investigate Ms Pratt's complaints that the
transaction
had been illegal. During January 2004 Ms Pratt
participated in the KPMG investigation. She says that she believed
that KPMG had
compiled a report of their investigation. Indeed it
had; the report was handed to the Reserve Bank in 2004. But, Ms Pratt
claims,
she only obtained a copy of the report in March 2016.
57.
The report reflects a number of interviews with officials who worked
in FirstRand's foreign exchange department at the relevant
time.
Several of them took the view that the transaction fell into a grey
area or was against the spirit of the law. Versveld himself
discussed
the transaction with some of his colleagues. His view was that the
transaction was not in conflict with the regulation.
58.
Ms Pratt asserts that the content of the KPMG report shocked her and
that the report confirmed her belief that FirstRand had
contravened
reg 10(1)(c). She claims that the report constitutes proof that
FirstRand had withheld from the trial before Mokgoatlheng
AJ its
knowledge that the transaction contravened the regulation.
59.
I do not agree. The report shows nothing more than that officials
within FirstRand held different opinions on the subject. The
issue
always was whether the blanket permission conferred by the Reserve
Bank through ruling E5A(1)(a) applied to the transaction.
Nothing in
the KPMG report persuades me that the officials within FirstRand who
were actually involved in the transaction, including
Versveld, held
the view that the blanket permission did not apply to the
transaction.
60.
The system applied by the Reserve Bank, which requires that officials
within authorised dealers use their own discretions in
interpreting
and applying Reserve Bank rulings framed in general terms, inevitably
leads to a situation where the opinions of officials
on particular
transactions can differ. Nothing in the KPMG report, viewed in the
context of the factual matrix, persuades me that
even if the report
had been introduced in evidence the result of the trial before
Mokgoatlheng AJ would have been any different.
61.
As I see it, Ms Pratt faces an insurmountable difficulty. She has not
suggested that she is not bound by the trial agreement.
The trial
agreement identifies one of the crucial issues as being whether the
transaction was effected with the requisite permission.
On Ms Pratt's
own reasoning, she had to prove that the officials of FirstRand
involved in the transaction
knew
that ruling E5A(1)(a) did not
cover the transaction. There was simply no evidence to that effect.
62.
But even if
one accepts for the sake of argument (which I do not) that Versveld
and the other officials knew that ruling E5A(1)(a)
did not cover the
transaction, Ms Pratt for present purposes and her allegedly proposed
action for
restitutio
would
still have to prove that FirstRand fraudulently concealed that
evidence from the trial court. So she has to prove a double
fraud:
firstly, conclusion of the transaction in the knowledge that the
transaction was not covered by ruling E5A(1)(a); and, secondly,
a
fraudulent concealment of that knowledge from the trial court. The
furthest counsel for Ms Pratt could go in that latter regard
was the
submission that there rested on FirstRand a duty to call witnesses to
testify on its behalf in the trial who would give
this damaging
evidence. Counsel suggested that this duty of self- incrimination
arose from the fact that FirstRand is a powerful
institution. I do
not agree. There is no fraud in electing not to call a witness who
might harm your case, whether you are an accused
person in the
criminal courts or a financially powerful institution.
[15]
63.
In the
general comment on rule 45A, which provides, as does the common law,
that a court may suspend the execution of its order
for such period
as it may deem fit, Erasmus,
Superior
Courl Practice
(looseleaf
ed) observes, with reference to authority, that a court will grant a
stay of execution where real and substantial justice
requires it or,
put another way, where injustice will otherwise be done. The
discretion must of course be exercised judicially
but is not
otherwise limited. The same author points out that in particular
circumstances, it may be appropriate in exercising
the discretion to
borrow from the requirements for an interlocutory interdict. As Ms
Pratt has formulated the relief she seeks
in the form of such an
interdict, I think it would in this case be appropriate to do so.
[16]
64.
There are other factors to which I think I should have regard in
determining whether an injustice would be done if the interim
interdict sought by Ms Pratt did not issue. The first is that for the
last thirteen years, Ms Pratt has had what I might call a
Rolls Royce
ride through the highways of the South African legal system. After a
multitude of hearings, FirstRand has won an order
for payment which
is no longer subject to any appeal.
65.
And then Ms Pratt has been less than forthcoming about her financial
position. She says that she will suffer harm if the order
for payment
is carried into execution because execution against her assets would
be monetarily and emotionally devastating to her
and to those whom
she supports professionally and personally.
66.
But she had the benefit of the R25 million which FirstRand lent to
her. What has she done with the money? Why are the capital
sum and
its proceeds over the last thirteen years not available for
repayment? What and where are Ms Pratt's assets and what are
they
worth? Ms Pratt does not provide answers to any of these questions.
67.
Allied to these concerns is the fact that the money judgment is
attracting interest and because of the large amount involved,
increasing at a prodigious rate. If Ms Pratt's assets are not
presently sufficient to cover the judgment, then there is a risk
that
if I interdicted execution and FirstRand were ultimately successful,
the practical value of the judgment would be eroded by
an ultimate
inability to satisfy it.
68.
Ms Pratt says that she has known for years that she was the victim of
a fraud perpetrated by FirstRand. Why did she not bring
the action
for
restitutio
at the latest when the Supreme Court of Appeal
affirmed the
res judicata
ruling of Fabricius J? She claims
that the KPMG report precipitated her actions in this connection. But
years ago she could have
instituted her action and required Reserve
Bank officials to testify and produce documents, including the KPMG
report, under subpoena.
She did not need to go through the intricate
amendment process. She could simply have issued summons for
restitutio.
That she did not do so suggests to me that the
present application is purely strategic, yet another attempt to
string out the legal
process.
69.
I am reinforced in this conclusion by the fact that even today, Ms
Pratt has not instituted her action for
restitutio.
And the
last of the factors which I weigh is that my refusal to grant an
interdict will not close the door on what Ms Pratt says
is her quest
for justice. Nothing prevents her from paying to the extent of her
financial resources what the courts have said she
owes, instituting
her action and recovering what she has paid, with interest, if and
when she is ultimately successful.
70.
So, borrowing from the requirements for interim interdicts, I find
that Ms Pratt has made out a weak case, at best, on the merits
and
that the balance of convenience is against her. I am thus far from
satisfied that the refusal of an interdict will result in
an
injustice.
71.
I make the following order:
1. The application is
dismissed.
2. The applicant must pay
the respondent's costs, including the costs consequent upon the
employment of two counsel.
___________________
NB
Tuchten
Judge
of the High Court
30
June 2016
[1]
Described by Ms Pratt as her then empowerment co-shareholder.
[2]
My description.
[3]
And one other defendant against which no relief was sought.
[4]
Ms Pratt did not allege that Versveld concluded the loan component
of the transaction on behalf of FirstRand. It appears that
other
officials represented FirstRand in this regard.
[5]
FirstRand also joined by third party notice the firm of chartered
accountants which had valued the shares, a matter of no consequence
for present purposes.
[6]
The terms Treasury and Reserve Bank appear throughout to have been
used interchangeably. I shall do the same.
[7]
Section E of the exchange control rulings deals with transactions
with non-residents.
[8]
The judgment of the SCA was reported as Pratt v First Rand Bank
[2008) ZASCA 92
[9]
Reported as Pratt v FirstRand Bank Limited
[2014] ZASCA 110
[10]
I come to these conclusions because the direct assertions to this
effect in the founding affidavit were not traversed at all
in the
answering affidavit.
[11]
I say this because FirstRand directly denied having been in
possession of the KPMG report and counsel for Ms Pratt accepted for
present purposes that Ms Pratt's case had to be argued on the
footing that this denial was true.
[12]
Port Edward Town Board v Kay and Another
1994 1 SA 690
D
[13]
In a very terse answer to one of the relevant paragraphs in the
founding affidavit (para 96 at p433), it is suggested by FirstRand
that the characterisation by Standard Bank of the shares disposed of
in the transaction as held by a non-resident was an example
of what
the minute deprecates.
[14]
The very idea of such a thing in the present circumstances is
absurd.
[15]
It is unnecessary for present purposes to determine whether this
general proposition applies, inevitably, to organs of state
which
have constitutional obligations.
[16]
The factors influencing the grant or refusal of an interim interdict
pending a review in the constitutional era were set out
by my
brother Fabricius J in Afrisake NPC and Others v City of Tshwane and
Others, a judgment delivered in this Division on 14
March 2014 under
case no 7419212014.