About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2012
>>
[2012] ZAFSHC 230
|
|
Stewart NO and Another v Bekker and Others (2349/11, 3006/11, 3008/11) [2012] ZAFSHC 230 (4 December 2012)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No. : 2349/11
Case No. : 3006/11
Case No. : 3008/11
In the matter between:-
M L STEWART N.O.
............................................................
First
Plaintiff
W PARKER N.O.
.............................................................
Second
Plaintiff
and
T BEKKER
.......................................................................
First
Defendant
T I FERREIRA
............................................................
Second
Defendant
J BEZUIDENHOUT
........................................................
Third
Defendant
_____________________________________________________
HEARD ON:
6
NOVEMBER 2012
_____________________________________________________
DELIVERED ON:
4 DECEMBER 2012
_____________________________________________________
JUDGMENT
_____________________________________________________
MOCUMIE, J
[1]
The first and second plaintiffs
(“the plaintiffs”)
are insolvency practitioners and administrators of insolvents
estates. They were appointed joint trustees of the insolvent estate
of Graeme Minne and Carolina Frederika Minne
(“the Minnes”)
.
They are cited in their capacity as the joint trustees of the
consolidated insolvent estate of Graeme Minne and Carol Minne
(“the
estate”)
, duly appointed as such in terms of a certificate
of appointment issued by the Master of the High court, Cape Town, on
18 November
2010 under the Master’s reference number C613/2010.
[2]
The first, second and third defendants
(“the defendants”)
are members of the public
(“investors”)
who
invested in the illegal pyramid scheme conducted by the Minnes during
the period 30 July 2002 to 27 November 2009.
[3]
It is common cause between the parties that the Minnes solicited and
received loans from investors on false verbal representations
on the
basis that such loans would be utilised for legitimate foreign
currency exchange market trading by the Minnes, in particular
Graeme
Minnes, from which the investors would receive a fixed monthly or an
annual return and that the investors would be repaid
the capital
amount of the loans at the end of the terms of the loans.
[4]
The loans made by investors were paid into a banking account in the
name of CF Minne trading as “
Minne Opleiding”
held
at ABSA Bank Limited. These loans were documented as written loan
agreements entered into between the investors and Graeme
who
personally accepted liability to repay the loans and the return of
the payments to the investors.
[5]
It is further common cause that at that stage the Minnes were
virtually insolvent in that their respective liabilities exceeded
their respective assets. Furthermore the loans of certain investors
who made loans to the scheme were not repaid. Thus they contravened
section 11 (1) of the Banks Act 94 of 1990 by conducting the business
of a bank through soliciting and accepting loans from the
general
public as a regular feature of the scheme when they were not a public
company or registered as a bank.
[6]
The scheme furthermore constituted a harmful business practice as
defined in Notice 1135 of 1999 (Government Gazette no 20169
dated 09
June 1999), promulgated in terms of s12 (6) of the Consumers Affairs
Act 71 of 1988, and was declared unlawful in terms
of the said
Notice.
[7]
This scheme of loans and payments between individuals outside the
framework of banks is an illegal pyramid scheme, now commonly
known
as Ponzi/pyramid scheme.
1
The
loans and payments made between the Minnes and the investors
constitute dispositions of another’s property within the
meaning of s2 of the Insolvency Act 24 of 1936 (the
Insolvency Act.)
2
[8]
The plaintiffs instituted action against the defendants in three
separate actions (Case no 2349/11; 3006/11 and 3008/11), which
were
later consolidated as the cause of action and the defences in the
three matters were similar, the only material difference
being the
monies received by the various investors/defendants. For purposes of
this application, reference will be made to Case
No 3008/2011,
ML
Steward N.O and W Parker N.O and J Bezuidenhout,
as the same
principles will be applicable to all the other matters.
[9]
The merits of the matters became settled to the extent that the
parties agreed that the first defendant pays the amount of R30
000,
00 to the plaintiffs; second defendant pays the amount of R130 000,
00 to the plaintiffs and third defendant pays the amount
of R136 000,
00 to the plaintiffs.
[10]
The remaining issue that had to be determined by this Court was the
appropriate costs order to be made having regard to the
circumstances
of the each case.
[11]
The estate of the Minnes was provisionally sequestrated on 8 June
2010 and finally sequestrated on 6 July 2010.After the plaintiffs
were appointed as Trustees, they conducted insolvency interrogations.
In respect of third defendant the interrogation was held
on 6 April
2011 as is evidenced on pages 3000086 to 300089 of the discovered
documents. The plaintiffs thereafter issued summons
claiming from
Bezuidenhout the amount of R536 000.00. This amount was arrived at
from calculating all the various amounts that
appear on page 10, para
[3], of the Particulars of Claim.
[12]
In his plea the third defendant admitted the particular amounts
invested in the scheme and pleaded that he was entitled to
retain
those amounts. The third defendant furthermore filed a counter claim
in which he claimed payment of the capital amount he
had invested.
The plaintiffs in their plea to the counter claim denied that the
third defendant was entitled to repayment of any
amount whatsoever.
[13]
Section 26
of
the
Insolvency Act, No 24 of 1936
, provides as follows:
“
26 Disposition
without value
(1) Every disposition of property not
made for value may be set aside by the court if such disposition was
made by an insolvent-
(a)
more than
two years before the sequestration of his estate and it is proved
that, immediately after the disposition
was made, the liabilities of
the insolvent exceeded his assets;
(b)
within two
years of the sequestration of his estate, and the person claiming
under or benefited by the disposition
is unable to prove that,
immediately after the disposition was made, the assets of the
insolvent exceeded his liabilities:
Provided that if it is proved that the
liabilities of the insolvent at any time after the making of the
disposition exceeded his
assets by less than the value of the
property disposed of, it may be set aside only to the extent of such
excess.”
[14]
On 4 September 2004 the Supreme Court of Appeal in the case of
Fourie
N.O. and others v Edeling N.O. and Others
2005(4) ALL SA 393
(SCA) at page 399d stated as follows with regard to fraudulent
investment schemes commonly known as pyramid
schemes and setting
aside of any payments made to investors:
“
Upon
receipt of a payment the scheme was liable promptly to repay it to
the investor who had a claim for it under the
condictio
ob iniustam causam
.”
[15] The Court at page
402 further held that
“’
All
actual payments, whether as profit or interest, from and after 1
March 1999 by the aforesaid investment scheme to the second,
third,
fourth, fifth and further respondents, in so far as they exceed the
investment of each particular investor are set aside
under
s26
of the
Insolvency Act as
dispositions without value by the scheme to
investors at times when liabilities exceeded its assets,…”
[16] The result of this
decision was firstly that after 1 April 2004 an investor who invested
monies in an illegal scheme would
repay monies he had received to the
extent of the investment made and secondly that a trustee was not
entitled to claim these monies
back. In other words, if an investor
invested R400 000,00 in the scheme and received R700 000,00 in return
for his investment,
he would be entitled to retain only the R400
000,00. A trustee representing the insolvent estate would be entitled
to get back
only R300 000,00. Not the whole R700 00.00.
[17] Mr Steyn, on behalf
of the plaintiffs, submitted that the defendants knew from the outset
when they were challenged with the
facts that they had to return a
certain percentage of the monies they had received from the
plaintiffs as those payments were dispositions
without value in terms
of
s26.
He submitted further that had the defendants not refused to
pay back the amounts as requested by the plaintiffs and before
interrogations
were conducted the plaintiffs would not have come to
court to enforce what was legally due to the estate.
[18] Mr Steyn also
submitted that until the day before the trial on 6 November 2012 the
third defendant was still opposing the application
and insisting that
he was entitled to the full returns of all his investment. He also
argued that in the light of the pleadings
and the settlement itself,
the plaintiffs had succeeded on all the issues raised; therefore
Spies should be declared a necessary
witness and the defendants
should pay the costs; such costs to include Spies’ costs to the
extent of his preparation of the
report, his time set aside to
testify in court before he was informed not to attend court.
[19] The plaintiffs also
argued that the defendants did not tender the amount for which they
ultimately settled, either through
the formal tender process provided
for in Superior Courts Practice Rules, in their pleadings or in their
plea. Instead they filed
counter claims which forced the plaintiffs
to continue with the applications and answer to those counter claims.
[20] Mr Pretorius, on
behalf of the defendants, urged this Court to order that each party
pay its own costs on the basis that the
matters were settled as
already discussed above. The appointment of Spies was not necessary.
In fact, as he submitted, by the time
the third defendant was
interrogated in June 2011, the plaintiffs had become well aware of
the total he had received in return
for his investment and the amount
which he ought to return in line with the
Fourie vs Edeling
principles, yet they insisted on the whole amount which forced
the third defendant and others to continue resisting the
applications.
[21] The first defendant
invested R250 000, 00 and received R280 000, 00 in return for his
investment from the Minnes. The first
defendant therefore received
R30 000, 00 more than what he had invested. The second defendant
invested R600 000, 00 and received
in return R730 000, 00. The second
defendant therefore received R130 000, 00 more than what he had
invested. The third defendant
invested R400 000, 00 and received R536
000, 00 in return for his investment from the Minnes. He therefore
received R136 000, 00
more than what he had invested.
[22] When one applies the
principles set out in
Fourie v Edeling
, the plaintiffs were
entitled to claim and receive back monies from defendants as follows:
22.1 In respect of the
first defendant - R30 000, 00.
22.2 In respect of the
second defendant - R130 000, 00.
22.3 In respect of the
third defendant – R 136 000, 00.
[23] Yet in their summons
the plaintiffs claimed R536 000, 00 from the third defendant without
making any reference to the amount
of R400 000, 00 which he had
invested originally. In other words the plaintiffs claimed what the
third defendant had invested (R400
000.00) plus what he had received
in return (R136 000.00).
[24] It is clear that
when the plaintiffs instituted these proceedings against the
defendants they were themselves, not certain
of the amounts they were
entitled to claim. They thus claimed all the monies, i.e. the
invested amount plus what the defendants
had received in return.
[25] In my view, had the
plaintiffs not insisted on the return of all the monies, but only the
monies that the defendants received
in addition to their investments;
in line with the
Fourie v Edeling
decision, the defendants
would not have contested the plaintiffs’ case as vigorously as
they did and correctly so.
[26] The negotiations
that were undertaken during the pre-trial meetings indicated that the
parties only came to a common understanding
on 12 September 2012
during the pre-trial conference. The plaintiffs’ case was not
as clear and crisp as on the day on which
the first, second and other
investors accepted their responsibility and undertook to return what
was due to the estate. I mean,
even in the third defendant’s
case, the plaintiffs were persisting with their claim for R536 000,
00 instead of claiming
only the returns regardless of his counter
claim to that effect.
[27] The general rule
applicable in civil matters is that the successful party should be
awarded its costs except in special circumstances.
It is trite law
that the award of costs is a matter which falls within the court’s
discretion, which must be exercised judiciously
and with due regard
to the facts of each case and fairness to the parties.
[28] It is correct that
the matter became settled but to the limited extent as set out in
paragraph [9] above. This is where this
matter differs from that
decided by
Revelas J
in
Stewart N.O. Michael Lawrence and
Another v P E Henry and 4 Others
, Case No 1431/2011; 1430/23011;
1824/2011 and 2196/201. In the
Revelas
matter the settlement
was an outright settlement between the parties. In this case the
settlements were reached piece-meal until
the day before the
commencement of the trial on 6 November 2012. The argument that, at
the end of the day, the defendants were
successful in their counter
claim cannot take away the reality that the plaintiffs had to come to
court to get the estate’s
money back. In the same breath, the
defendant had to come to court to protect their rights as plaintiffs
made claims contrary to
the
Fourie v Edeling
decision. In my
view both parties were relentless and not prepared to make
concessions as and when the correct information became
available.
Both are to blame for this protracted litigation. This is a classic
case where each party must bear its own costs.
[29] The issue of the
counter claims as well as the costs related thereto fell by the side
way as a result of the settlement set
out above in para [9].
[30] Lastly, in my view,
the appointment of Spies was necessary. These fraudulent pyramid
schemes come in different forms. Trustees
appointed to recoup the
monies from investors in pyramid schemes are not experts in pyramid
schemes. The schemes need to be thoroughly
investigated and
researched before the trustees can confidently say they have a claim
against anyone. The interrogation against
the third defendant was but
part of an investigation which still needed to be considered by an
expert in the field in order to
give the plaintiffs sound advice on
what step(s) to take.
[31] Furthermore, based
on the defendants’ not being prepared to settle the matter
soon, Spies had to be available for the
dates set down for trial.
Had, the third defendant, for example, not taken so long to settle
the matter, Spies would have been
released from the committed trial
dates as early as the pre-trial conference on 12 September 2012. It
is only fair that the defendants
bear these costs, i.e. costs of
preparing the report and his probable attendance for one day on
party-to-party scale.
ORDER
[31] In the result the
following order is granted.
1. The first defendant is
to pay the plaintiffs the sum of R30 000,00 together with interest
calculated from the date of issue of
summons.
2. The second defendant
is to pay the plaintiffs the sum of R130 000,00 together with
interest calculated from the date of issue
of summons.
3. The third defendant is
to pay the plaintiffs the sum of R136 000,00 together with interest
calculated from the date of issue
of summons.
4. The defendants to pay
the qualifying costs of the plaintiffs’ expert, Mr Jaco Spies,
including preparations of his report
and his attendance for one day,
6 November 2012.
_______________
B.C.
MOCUMIE, J
On behalf of plaintiffs:
Mr J W Steyn
Instructed by:
Honey Attorneys
BLOEMFONTEIN
On behalf of defendants:
Adv B Pretorius
Instructed by:
Christo Dippenaar
Attorneys
BLOEMFONTEIN
BCM/sp/em
2012/11/30
08:48 AM
1
“
Ponzi
schemes
are
ostensibly fraudulent investment operations that pay returns to
investors from the monies, which they invest rather than from
profit
earned. In order to entice unsuspecting investors, they typically
offer returns ─ in the form of short-term returns
that are
either extraordinarily high or peculiarly inconsistent ─ that
other investments cannot guarantee. The perpetuation
of the returns
that a Ponzi scheme advertises, and pays to investors, requires an
ever-increasing flow of money from credulous
investors in order to
keep the scheme going. The system is destined to collapse because
the earnings, if any, are less than the
payments.”
(
See
Paredes-Tarazona
v Cobalt Capital (Pty) Ltd
(2009/44215)
[2012] ZAGPJHC 75 (23 April 2012)
2
Section
2
of the
Insolvency Act provides
:
'disposition'
means any transfer or abandonment of rights to
property and includes a sale, lease, mortgage, pledge, delivery,
payment, release,
compromise, donation or any contract therefor, but
does not include a disposition in compliance with an order of the
court; and
'dispose'
has a corresponding meaning;