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[2013] ZAFSHC 169
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Iliad Africa Trading (Pty) Ltd t/a Builders Market, Welkom v Boshoff, Boshoff v Iliad Africa Trading (Pty) Ltd t/a Builders Market, Welkom (A59/2013, 1140/2011) [2013] ZAFSHC 169 (26 September 2013)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Appeal No.: A59/2013
In
the appeal between:
ILIAD AFRICA
TRADING (PTY) LTD
t/a BUILDERS
MARKET, WELKOM
........................................
Appellant
Registration number:
1997/010059/07)
and
JOHANNES HENDRIKUS
BOSHOFF
.................................
Respondent
In Re: Case No.:
1140/2011
JOHANNES HENDRIKUS
BOSHOFF
......................................
Applicant
and
ILIAD AFRICA
TRADING (PTY) LTD
t/a BUILDERS MARKET
WELKOM
.....................................
Respondent
Registration number:
1997/010059/07)
_____________________________________________________
CORAM:
JORDAAN, J
et
DAFFUE, J
et
THAMAGE, AJ
_____________________________________________________
JUDGMENT:
DAFFUE, J
HEARD ON:
23 SEPTEMBER 2013
_____________________________________________________
DELIVERED ON:
26 SEPTEMBER 2013
_____________________________________________________
INTRODUCTION
[1] This is an appeal to
the Full Bench of the Free State High Court concerning the
entitlement of respondent to claim from appellant
his provident fund
benefits which have been paid to appellant.
THE PARTIES
[2] Appellant is Iliad
Africa Trading (Pty) Ltd t/a Builders Market, Welkom. The respondent
is Johannes Hendrikus Boshoff a former
employee and branch manager of
the Welkom branch of appellant.
THE RELIEF CLAIMED
AND OBTAINED
[3] Respondent instituted
motion procedure in the Free State High Court claiming payment from
appellant in the amount of R219 944.16,
being a portion of
provident fund benefits due and payable to him, but which had been
paid over by the Iliad Provident Fund (the
Fund) to appellant.
[4] Appellant, relying
primarily on set-off, opposed the application. The matter was argued
on 15 December 2011 when judgment was
reserved.
[5] On 26 January 2012
Rampai J directed appellant to pay respondent the amount of
R101 992.14 (R219 994.16 less an amount
of R117 952.02
previously paid by appellant to respondent) plus interest on
R101 992.14 and the costs of the application.
[6] On 31 August 2012
Rampai J dismissed appellant’s application for leave to appeal
with costs, but on 14 February 2013 the
Supreme Court of Appeal, per
Leach JA and Van der Merwe AJA, granted leave to appellant to appeal
to the Full Bench. The order
of the Supreme Court of Appeal reads as
follows:
“
Leave to
appeal is granted to the Full Bench of the Free State High Court.
Without seeking to limit the issues in
any way, leave has been granted the Full Bench (sic) on the issue
whether the respondent
(Boshoff) had the necessary
locus standi
to seek repayment of the account (sic) improperly paid by the pension
fund to the applicant (Iliad), as his right to recover in
full
whatever sum he had become entitled to receive from the pension fund
on his resignation could not have been affected and would
be
recoverable from the pension fund without it being reduced by the
amount of the improper payment to Iliad.
In the circumstances, it would seem
that the pension fund was obliged to pay Boshoff his pension sum
without any reduction of the
amount it had improperly paid to Iliad
was (sic) obliged to refund the pension fund. But at first blush
Boshoff has no claim against
Iliad.”
Throughout this judgment
reference will be made to “provident fund” and not
“pension fund” as referred to
in the order of the Supreme
Court of Appeal as it is apparent that respondent was a member of the
Iliad Provident Fund and entitled
to provident fund benefits and not
pension.
GROUNDS OF APPEAL
[7] The Supreme Court of
Appeal raised a point of law which was never raised by appellant,
either in the opposing affidavit that
served before Rampai J, or in
any of the two applications for leave to appeal. This aspect has been
raised for the first time in
the notice of appeal prepared on receipt
of the order of the Supreme Court of Appeal. The following grounds of
appeal are now raised:
7.1. The learned Judge
erred in ordering the appellant to effect payment of R101 992.14
to the respondent (as the balance that
remained after the appellant
had paid the undisputed (sic) amount of R117 952.02 to the
respondent).
7.2. The learned Judge
erred by not considering that the respondent’s indebtedness
towards the appellant for the amount of
R101 992.14 had not been
disputed, alternatively there was no genuine and
bona fide
dispute of this indebtedness, and that set-off had accordingly taken
place.
7.3. The learned Judge
erred in finding that because of the improper payment of R219 994.16
from the Iliad Pension Fund to
the appellant of monies that were due
by the Pension Fund to the respondent, the appellant was obligated to
effect payment of this
amount to the respondent. In this regard, the
learned Justice failed to appreciate set-off had taken place of the
indebtedness
between the appellant and the respondent
vis-à-vis
each other, and for the amount of R101 992.14.
7.4. The learned Judge
erred by placing too much emphasis on the manner in which the
appellant come (sic) into possession of the
money, and to find that
the appellant should effect payment of the undisputed amount
(R101 992.14) to respondent, notwithstanding
the respondent’s
pre-existing indebtedness towards the appellant.
7.5. The learned Justice
furthermore erred in holding that the respondent had
locus standi
to seek repayment of the entire amount improperly paid by the Iliad
Pension Fund to the appellant, and to seek this payment from
the
appellant and not the pension fund.
FACTUAL MATRIX
[8] Respondent was
employed by appellant’s Welkom branch for a period of nine
years. He was the branch manager. He resigned
effectively on 30
November 2010.
[9] Appellant is a
participating employer in terms of the Pension Fund Act, 24 of 1956,
who participated in a scheme whereby a fund,
the Iliad Provident Fund
(“the Fund”) has been established. These two entities are
separate legal
personae
. The Fund was at all relevant times
managed and administered by Alexander Forbes.
[10] As a member of the
Fund respondent was entitled to his provident fund benefits upon his
resignation. The amount due and payable
as calculated on 17 August
2011 was R496 003.79.
[11] Respondent is the
sole member of a close corporation, Hanlein Boerdery CC, a customer
of appellant for which an open account
with credit facilities was
granted during respondent’s employment. Respondent bound
himself as surety and co-principal debtor
in solidum
with his
close corporation to appellant for the due and proper fulfilment of
all obligations of the close corporation towards appellant.
[11] During 2011 and
after respondent’s resignation, appellant issued summons out of
this court against respondent claiming
payment of an amount of
R208 139.93 based on his suretyship and the indebtedness of the
principal debtor, Hanlein Boerdery
CC. Summons was served at the
domicilium citandi et executandi
address of respondent and as
no notice of intention to defend was given, default judgment was
granted on 10 June 2011 for the aforesaid
amount, interest and costs.
In the meantime appellant caused a criminal charge to be laid against
respondent, but according to
the documents before us, nothing further
transpired in this regard.
[12] A warrant of
execution was issued and served on the
domicilium
address, but
no attachment was made. Eventually appellant informed the Fund of the
civil judgment obtained against respondent,
which caused the Fund to
pay the capital amount of the judgment debt, interest and costs in
the total amount of R219 994.16
to appellant on 17 August 2011.
The balance of the provident fund benefits was paid to respondent.
Payment by the Fund to appellant
was not done in terms of any court
order obliging it to pay same or as a result of any attachment
consequent upon the default judgment.
At that stage appellant was
already in receipt of respondent’s application for rescission
of judgment referred to in the
next paragraph. In the application for
rescission of judgment, which forms part of the documents before us,
respondent averred
in paragraph 17 of his founding affidavit as
follows:
“
Op die datum
van my bedanking sal die volgende gelde my derhalwe toegeval het:
17.1 Salaris en verlof R88 000.00
17.2 Voorsorgfonds
R480 683.51
TOTAAL R568 683.51
MIN: Verskuldig ten opsigte van
Hanlein Boerdery
R101 992.14
NETTO TOTAAL
R466 691.37
”
If the affidavit is read
in its entirety and in context there can be no doubt that respondent
admitted liability in his personal
capacity towards appellant in the
amount of R101 992.14 and conceded that this amount might be
deducted from any funds owing
to him by appellant.
[13] Respondent, averring
that he did not receive the summons and that he had a
bona fide
defence, applied for rescission of judgment. The application was
opposed, but on 3 November 2011 Kruger J rescinded the judgment.
It
is apparent from the rescission application that respondent signed
two documents, to wit
(i) a withdrawal
notification to Iliad Provident Fund; and
(ii) an instruction and
indemnity in favour of the Iliad Provident Fund;
the purpose of which was
to facilitate payment of the provident fund benefits to respondent.
In the second document respondent’s
full bank details were
provided and the following is significant:
“
2. The
Member is entitled to receive a retirement benefit in terms of the
Rules of the Fund. The Member hereby
instructs
the Fund to pay over the retirement benefit as specified below after
any deductions for tax…”
In the last paragraph the
following is stated:
“
It is agreed
that;
On payment of the Member’s
retirement benefit
in accordance with the rules of the Fund and
the Member’s instruction
, the Member hereby unconditionally
absolves the Fund and as necessary indemnifies and keeps indemnified,
the Fund from and against
all and any loss… as a result of the
aforesaid
instruction.
” (emphasis added)
[14] On 13 April 2011 one
Stuart Veal of Bay Union Employee Benefit Consultants (Pty) Ltd
informed respondent’s attorney,
Mr Peyper of Welkom, in an
email as follows:
“
On the 28
th
of
February we were advised by Paul Fleming of Iliad’s Building
Material Division, that a docket had been opened against Mr.
Boshoff
at the Bloemfontein Park Road police station with Case No.
1195/02/2011. We were instructed that the Employer would be
claiming
against Mr. Boshoff’s Provident Fund in terms of Section 37D of
the Pension Funds Act. We have no details as to
the nature of the
case or claim made by the Employer.”
[15] As indicated
supra
the record does not provide further details pertaining to this issue
at all. I am not exactly sure what the relationship between
Bay Union
Employee Benefit Consultants and the Fund is, but Mr Peyper responded
to this email in a letter dated 14 April 2011 wherein
he clearly
indicated when and under what conditions the Fund might pay over
money to an employer in terms of
section 37D(b)(ii)
of the
Pension
Funds Act, 24 of 1956
.
SECTION 37D
OF THE
PENSION FUNDS ACT, 24 OF 1956
, AND THE POINT OF LAW RAISED
[16]
Section 37D
deals
with certain deductions that may be made by a Fund from pension
benefits, including provident fund benefits. The only relevant
subsection thereof is
s 37D(1)(b)(ii)
which reads as follows:
“
1. A
registered fund may
…
..
deduct any amount due by a member to
his employer on the date of his retirement or on which he ceases to
be a member of the fund,
in respect of
…
..
compensation (including any legal
costs recoverable from the member in a matter contemplated in
sub-paragraph (bb)) in respect
of any
damage caused
to the
employer
by reason of any theft, dishonesty, fraud or misconduct
by the member
, and in respect of which
(aa) the member has in writing
admitted liability to the employer; or
(bb) judgment has been obtained
against the member in any court, including a magistrate’s
court,
from any benefit payable in respect of
the member or a beneficiary in terms of the rules of the fund, and
pay such amount to the
employer concerned; …” (emphasis
added)
[17] Rampai J correctly
found as follows in paragraph [26] of his judgment:
“
[26] The
debt by Hanlein Boerdery BK which gave rise to the suretyship
agreement signed by the applicant in favour of the respondent
was, in
my view, not underpinned by the requisite
causa
as envisaged in
section 37D.
Since the respondent was not
procedurally entitled to recover such a pure commercial debt from the
provident fund, the provident
fund was not legally obliged to pay
over to the respondent any pension money due to the applicant.”
However, the latter part
of paragraph [26] of the judgment is quite simply not correct. I
quote:
“
It would
seem, for this reason alone, that the court order in question (the
default judgment) was erroneously sought and erroneously
granted.
That specific judgment by default has, on different grounds, since
been rescinded. Accordingly no valid
causa
exists for the respondent’s continued retention of the
applicant’s pension money.”
This aspect will be dealt
with
infra
in more detail.
[18] It is clear that
respondent instructed the Fund to pay his provident fund benefits
into his bank account in accordance with
the rules of the Fund. The
Fund adhered partially only to this instruction as indicated
supra
.
If the respondent has a right to claim the balance of the amount due
and payable to him from the Fund, on what legal ground could
he claim
payment from appellant if the Fund acted contrary to his instructions
and the law by paying the balance to his ex-employer?
I’ll
consider this later.
[19] In
Cape Dairy
and General Livestock Auctioneers v Sim
1924 AD 167
the facts
were as follows:
The plaintiff claimed the
balance purchase price of livestock sold to the defendant on a
Sunday. The transaction was unlawful and
in contravention of the law
at the time. The defendant did not take this point at all in the
magistrates’ court, but in the
Transvaal Provincial Division,
that court raised the question on appeal, stating it was the duty of
the court not to enforce any
contract which was in violation of the
law, whether or not the parties raised the issue. The Provincial
Division reversed the magistrate’s
judgment whereupon the
plaintiff sought leave to appeal to the Appeal Court. The first
ground of appeal was that it was not the
duty of the Provincial
Division sitting, as a court of appeal, to
mero motu
take the
point that the sale was illegal. Innes CJ stated the following at
170:
“
Mr. Fischer
exercised a wise discretion in abandoning the first of the suggested
grounds for the application. When a Court is asked
to enforce or
uphold a contract which the law expressly forbids, it is not only
justified but bound to take cognizance of the prohibition
and the
consequent illegality.”
Refer also to
Yannakou
v Apollo Club
1974 (1) 614 (AD) at 623G – H and
F
& I Advisors (Edms) Bpk en ‘n Ander v Eerste Nasionale Bank
van Suidelike Afrika Bpk
[1998] ZASCA 65
;
1999 (1) SA 515
(SCA) at 526B –
C.
[20] Unlike the judgments
referred to, there is no illegality
in casu
, but the point
that needs to be made is that a court may in particular circumstances
mero motu
take cognisance of legal points. The often quoted
judgment of
Paddock Motors (Pty) Ltd v Igesund
1976 (3)
SA 16
(AD) is referred to with specific reference to the following
dictum
at 23D – F:
“
It is clear
that ‘the duty of an appellate tribunal is to ascertain whether
the court below came to a correct conclusion on
the case submitted to
it.’” (per Innes, J, in
Cole
v Government of the Union of South Africa
1910 AD 263
at p 272.) For this reason the raising of a new point of
law on appeal is not precluded, provided certain requirements are
met:
“’
If
the point is covered by the pleadings, and if its consideration on
appeal involves no unfairness to the party against whom it
is
directed, the Court is bound to deal with it. And no such unfairness
can exist if the facts upon which the legal point depends
are common
cause, or if they are clear beyond doubt upon the record, and there
is no ground for thinking that further or other
evidence would have
been produced had the point been raised at the outset. In presence of
these conditions a refusal by a Court
of Appeal to give effect to a
point of law fatal to one or other of the contentions of the parties
would amount to the confirmation
by it of a decision clearly wrong.’”
(per Innes J in
Cole’s
case
supra
at pp 272 – 273.) That it would create an intolerable position
if a Court were to be precluded from giving the right decision
on
accepted facts, merely because a party failed to raise a legal point,
as a result of an error of law on its part, has also been
accepted by
this Court in
Van
Rensburg v Van Rensburg en Andere
1963 (1) SA 508
(AD) at p 510 (A).”
See also
Barkhuizen
v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) at par
[39]
, p 336 and
Government of the Republic
of South Africa and Others v Von Abo
2011
(5) SA 262
(SCA) at paras [18] and [19], p 270.
[21] In
Alexkor Ltd
and Another v The Richtersveld Community and Others
[2003] ZACC 18
;
2004 (5)
SA 460
(CC) at par
[43]
p 476 the Constitutional Court referred with
approval to the rule enunciated in
Paddock Motors
supra
, and stated as follows:
“
The
rationale for this rule is that the duty of an appeal court is to
ascertain whether the lower court reached a correct conclusion
on the
case before it. To prevent the appeal court from considering a legal
contention abandoned in a court below might prevent
it from
performing this duty. This could lead to an intolerable situation, if
the appeal court were bound by a mistake of law on
the part of a
litigant. The result would be a confirmation of a decision that is
clearly wrong. As the Court (in
Paddock
Motors) put it:
‘
If the
contention the appellant now seeks to revive is good, and the other
two bad, it means that this Court, by refusing to investigate
it,
would be upholding a wrong order.’”
[22] As indicated, Rampai
J correctly found that the requisites for payment by the Fund to
appellant as employer were not met
in casu
and therefore the
Fund could not lawfully ignore respondent’s instruction and pay
over his provident fund benefits to appellant.
Respondent’s
claim lies against the Fund who ignored the
Pension Funds Act,
respondent
’s instructions and the rules of the Fund.
[23] No legal basis
exists for respondent’s claim against appellant. Appellant is
not contractually bound to make payment
and it has not been alleged
and proven that respondent is entitled to damages as a result of
delict, or that respondent is entitled
to compensation based on
enrichment. Mr Grewar on behalf of respondent conceded this. None of
these legal bases are available to
respondent. Respondent based his
cause of action purely and squarely on the rescission of the default
judgment and I quote from
paragraph 25 of the founding affidavit:
“
Ek doen met
eerbied aan die hand dat die Applikant geregtig is op uitbetaling van
die gelde op sterkte van die vonnis wat nou tersyde
gestel is ….”
This allegation and the
finding of Rampai J that, once the judgment had been rescinded no
valid
causa
existed
for the appellant’s continued retention of the money received
from the Fund and that respondent was entitled to payment
from
appellant in respect of the amount received, are incorrect. Even
assuming that respondent would be entitled to claim back
money he had
paid to appellant in terms of the judgment or warrant issued, which
was valid at the time, fact is that respondent
never made any payment
at all as the Fund paid appellant in conflict with the
Pension Funds
Act, respondent
’s instructions and the rules of the Fund. The
appeal should therefore succeed as respondent does not have any claim
against
appellant, but against the Fund.
SET-OFF
[24] In my view it is not
required to deal with the issue of set-off as the application of the
point of law dealt with
supra
should really depict the end of
the matter. However and on the basis that another court might find
that such conclusion is incorrect,
I shall deal with this issue which
was uppermost in the legal representatives’ and the court
a
quo
’s minds when the matter was argued and judgment finally
pronounced.
[25] Set-off is a method
by which contractual and other debts may be extinguished. If two
parties are reciprocally indebted to each
other and if the debts are
equal, both are discharged, but if they are unequal, the smaller is
discharged and the larger is reduced
by the amount of the smaller.
See Christie’s,
The Law of Contract in South Africa
, 6
th
ed at 494. Set-off, also referred to as compensation or
compensatio
,
is not dependent on an agreement and is automatic. It has to be
pleaded and proved only to inform the court that it has occurred.
See
Schierhout v Union Government (Minister of Justice)
1926
AD 286
at 289 and 290 where Innes CJ remarked as follows:
“
When two
parties are mutually indebted to each other, both debts being
liquidated and fully due, then the doctrine of compensation
comes
into operation. The one debt extinguishes the other
pro
tanto
as effectually as if payment had been made. Should one of the
creditors seek thereafter to enforce his claim, the defendant would
have to set up the defence of
compensatio
by bringing the facts to the notice of the Court – as indeed
the defence of payment would also have to be pleaded and proved.
But,
compensation once established, the claim would be regarded as
extinguished from the moment the mutual debts were in existence
together.”
[26]
In
casu
there can be no doubt that appellant’s
claim against respondent as surety and co-principal debtor was
acknowledged by respondent
in the amount of R101 992.14. It is a
liquidated and admitted claim. It was due and payable. Respondent
conceded that the
amount might be deducted from the monies appellant
owed him. Under the circumstances appellant was entitled to rely on
set-off
and the appeal should succeed on this basis as well.
[27] Having said this,
the court
a quo
referred
to collateral issues which are with respect unnecessary to consider
for purposes of this appeal. I shall refrain from doing
so, but
merely wish to deal with the following. The fact that Kruger J
rescinded the default judgment did not take the matter any
further
insofar as no finding was made that respondent did not owe the amount
of R101 992.14 to appellant. Kruger J elected
to set aside the
default judgment insofar as he was of the view that
rule 31(2)
did
not provide that default judgments could be set aside in part. Rampai
J incorrectly relied in paragraph 27 of his judgment
on the outcome
of the rescission application. The following
dicta
are with respect incorrect and cannot be
supported:
“
The alleged
set-off is tainted by an illegality. The respondent’s continued
retention of the applicant’s pension money
flagrantly
undermines the legal effects of the rescission of the default
judgment. The legal effect of the rescission was that
payment to the
respondent by the provident fund was retrospectively nullified.
Therefore, the respondent no longer had a right
to hold the proceeds
of the applicant’s pension fund.”
Rampai J mentioned also
that Kruger J had found that the appellant was obliged to repay the
full amount which it received from the
Fund. No such finding was
made. It is reiterated that payment was effected to appellant by the
Fund which was not a party to the
proceedings.
RELIEF
[28] As indicated
supra
the appeal should succeed and the order of the court
a quo
should
be set aside. There is no reason why the general rule should not
apply and consequently appellant is entitled to his costs
of appeal,
including the costs of the application for leave to appeal to the
Supreme Court of Appeal as well as the costs of the
first
unsuccessful application to the High Court for leave to appeal.
ORDER
[29] Wherefore the
following orders do issue:
1. The appeal succeeds
with costs, including the costs of both applications for leave to
appeal, firstly to the High Court and secondly,
to the Supreme Court
of Appeal.
2. The order of Rampai J
is set aside and substituted with the following:
2.1 The application is
dismissed with costs.
_____________
J.P. DAFFUE, J
I
concur.
_______________
A.F. JORDAAN, J
I concur.
________________
S.J. THAMAGE, AJ
On behalf of appellant:
Adv S. Grobler
Instructed by:
Hill McHardy & Herbst
Inc
BLOEMFONTEIN
On behalf of respondent:
Adv D.M. Grewar
Instructed by:
Vosloo Attorneys
BLOEMFONTEIN
/spieterse