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2009
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[2009] ZAGPJHC 20
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Gainsford NNO v Gulliver's Travel (Bruma) (Pty) Ltd (07/ 5121) [2009] ZAGPJHC 20 (7 April 2009)
IN THE HIGH COURT OF SOUTH AFRICA
(WITWATERSRAND LOCAL DIVISION)
CASE NO: 07/ 5121
In the matter between:
GAINSFORD N.O., GAVIN CECIL
First Plaintiff
FOURIE N.O., JACQUELINE
Second Plaintiff
GROENEWALD N.O., BEATRIX ELIZE
Third Plaintiff
MASILO N.O., MICHAEL MMATHOMO
Fourth Plaintiff
(in their capacity as the duly appointed liquidators
of Tuscan Mood 1224 (Pty) Limited (in liquidation))
and
GULLIVER’S TRAVEL (BRUMA) (PTY) LTD
Defendant
J U D G M E N T
SALDULKER, J
:
A. INTRODUCTION
[1] The plaintiffs, the duly appointed joint liquidators of Tuscan
Mood 1224 (Pty) Limited (“
Tuscan
”), have
instituted an action against the defendant in terms of the provisions
of section 340 of the Companies Act, No. 61 of
1973 (“
the
Companies Act
”) read with section 26(1) (b) of the
Insolvency Act, No. 24 of 1936 (“
the
Insolvency Act
&rdquo
;),
for the setting aside of alleged dispositions not made for value.
[2] The plaintiffs alleged that during the period 5 January 2004 to
30 July 2004, Tuscan, duly represented by Roger Brett Kebble
(
Kebble
)and George William Poole (
Poole
) made the following payments
to the defendant:
3.1 5 January 2004 R 120 096,00
3.2 6 July 2004 R 650 000,00
3.3 30 July 2004
R4 000 000,00
TOTAL
R4 770 096,00
[3] The plaintiffs contend that these payments by Tuscan to the
defendant should be set aside as dispositions of the property of
Tuscan, not made for value.They were made within two years of
Tuscan’s
winding-up and fall to be set aside in terms of
section 26(1)(b)
of the
Insolvency Act read
with Section 340(1) of
the Companies Act in that Tuscan has been wound-up and is unable to
pay all its debts. It is not in dispute
that an application for the
winding-up of Tuscan was issued by the Registrar of the High Court
(South Gauteng High Court- Johannesburg),
on 2 November 2005.
[4] The defendant disputes the plaintiffs’ claims and raises
the issue of indemnity under
Section 33
of the
Insolvency Act.
[5
] In raising its defence, the defendant pleaded that in the event
of it being found that Tuscan made the dispositions as alleged,
and
that same were not made for value, that :
immediately after the (alleged) disputed dispositions were made,
the assets of Tuscan exceeded its liabilities, alternatively
the
liabilities of Tuscan at one or more times after the making of the
dispositions exceeded its assets by less than the value
of the
amounts disposed of;
in any event:
the defendant, in return for the alleged dispositions acting in
good faith, parted with its money by making payment of
disbursements
and rendering travel agency services on account of
which the dispositions had been made to the defendant;
the defendant is accordingly not obliged to restore the money
received under the alleged dispositions, unless the plaintiffs
shall have indemnified the defendant for parting with such money
as contemplated in
section 33
of the
Insolvency Act.
[6
] During the course of the trial, the defendant made the
following
admissions:
6.1 That an application for the winding up of Tuscan was issued by
the registrar of the above Honourable Court on 2 November 2005.
That
a final winding-up order of Tuscan was granted by the above
Honourable Court on 4 November 2005.
6.2 That the effective date of the winding-up of Tuscan is 2
November 2005.
6.3 That Exhibit “G” (pp 9 to 15) is a copy of the
application to open a bank account for Tuscan, but without admitting
the authenticity of Mr Bawden’s signature.
6.4 That Exhibits “G16” to “G118” are
copies of the bank statements of Tuscan as well as the entries
contained
therein.
6.5 That the plaintiffs were appointed as the joint liquidators
of Tuscan in terms of Annexure ”A” to the particulars
of
claim, and were duly authorised to institute and proceed with the
action against the defendant.
6.6 That the resolutions, copies of which are annexed to the
particulars of claim as Annexure ”B”, were duly adopted
at the second meeting of creditors and members of Tuscan held before
the Magistrate on Wednesday, 7 June 2006.
[7] It became common cause during the proceedings that Tuscan Mood CC
was converted to a company.
[8] Section 340 of the Companies Act reads as follows:
“
340
Voidable and undue preferences –
Every disposition by a company of its property which, if made by
an individual, could, for any reason, be set aside in the event
of
its insolvency, may, if made by a company, be set aside in the
event of the company being wound up and unable to pay all its
debts,
and the provisions of the law relating to insolvency shall mutatis
mutandis be applied to any such disposition.
”
(2) For the purpose of this section the event which shall be
deemed to correspond with the sequestration order in the case of an
individual shall be -
(a) in the case of a winding-up by the Court, the presentation of
the application …
”
[9]
Section 2
of the
Insolvency Act defines
“
property
”
as:
“
movable or immovable property, wherever situate within the
Republic, and includes contingent interests in property other than
the
contingent interests of a fideicommissary heir or legatee.
”
[10] “
Disposition
” is defined in
section 2
of the
Insolvency Act as
:
“
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 Court; and ‘dispose’
has a corresponding meaning.
”
[11]
Section 26(1)(b)
of the
Insolvency Act provides
as follows:
“
26.
Disposition without value
Every disposition of property not made for value may be set aside
by the Court if such disposition was made by an insolvent –
…
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.…
”
[12] What follows is a summary of the evidence that was presented
in court.
B.
THE EVIDENCE FOR THE PLAINTIFFS
[13] The following witnesses testified for the plaintiffs:
Ms T Veldtman;
Mr G C Gainsford; and
Mr B D Bawden.
[14] Ms Veldtman testified that the transcript of the record of the
Insolvency Enquiry held in terms of Section 417 of the Companies
Act
was transcribed accurately and that she did the recording in the
matter. Although she could not remember who the typist was,
she
checked the typed record and confirmed that the transcript is a true
reflection of what was said by the witnesses at the proceedings.
The
record was admitted as being a correct transcript of the evidence
given by Ms Fernandes at the enquiry.
[
15] Mr Gainsford testified that he is one of the appointed
liquidators of Tuscan and as a joint liquidator had conducted certain
investigations into the affairs of Tuscan. He explained that Tuscan’s
assets comprised a house in Inanda, over which a mortgage
bond was
registered in favour of Standard Bank , and that there was bank
account in the name of ”
Tuscan Mood 1224 CC”
at
Standard Bank in Alberton (bank account).
[16] The outcome of forensic investigations into the affairs of
Tuscan revealed that an amount of approximately R170 million was
deposited into the bank account. Of that amount, R125 million
constituted the proceeds of misappropriated shares. The balance of
approximately R45 million came from various other sources, and
included R20 million from Kebble.
[17] He identified the First Liquidation and
Distribution account of Tuscan as presented by the joint liquidators
in Exhibit B.
1
The deficiency in the estate of Tuscan as indicated in the
Liquidation and Distribution Account was R1 988 860 021,00. From
their
investigations, the joint liquidators “established”
that the bank account was that of Tuscan and that all transactions
related to Tuscan.
[18] He identified the various payments of R120
096,00, R650,000 and the R4 million made by Tuscan to the defendant
in Exhibit A
as follows:
With regard to the payment of R120 096,00:-
18.1.1 Exhibit “A17” is a copy of a tax invoice
addressed to JCI Resources
from Gulliver’s Travels dated 24 December 2003 for the amount
of
R120 096,00 .
18.1.2 Exhibit “A18” is a statement from the Standard
Bank of South Africa to the members of Tuscan dated 14 January
2004
and shows a payment, being a transfer to Gulliver’s Travels, in
an amount of R120 096,00 on 5 January 2005.
18.1.3 Exhibit “A32” is a Gullivers Travel’s
detailed debtors account listing, indicating receipt of the amount
of
R120 096,00 on the same date as the date of transfer from the bank
account. Exhibit “A97” is a statement of the defendant’s
bank account indicating receipt of this amount;
With regard to the payment of R650 000,00 :
As reflected in Exhibit “A24”, a bank statement dated
14 July 2004, indicating payment of R650 000,00 on 6 July
2004;
Exhibit “A23” is a statement of the defendant’s
bank account, indicating receipt of the aforesaid amount
on 6 July
2004;
With regard to the payment of R4 000 000,00 :
As reflected in Exhibit “A27”, a bank statement dated
14 August 2004 indicating a transfer to the defendant of
R4 000
000,00 on 30 July 2004;
18.3.2 The bank statement of the defendant at Exhibit “A152”
shows receipt of this amount. An extract from the books
of account
of the defendant indicates receipt of the R4 000 000,00 in respect of
the ANC Youth League Conference;
18.3.3 Gainsford identified that on 7 December 2004 there was an
entry indicating a payment of R231 763,89 into the bank
account.(Exhibit
A 143)
[19] Gainsford identified the certificate of indebtedness from
Standard Bank in respect of the mortgage bond over the property
and
identified a variety of payments made by Tuscan in respect of this
bond.
[20] In cross-examination he testified that he had never met or
spoken to Mr Bawden and acknowledged that, as a prudent liquidator,
he should have done so. He explained that he had understood that
Bawden knew nothing of the affairs of Tuscan. From affidavits and
his
enquiries it appeared that Bawden was merely a “front”
and that Tuscan’s affairs and management were conducted
by
Kebble and/or Poole. Bawden was the director of Tuscan and was paid
R2 000,00 per month for the use of his name. Forensic investigations
confirmed monthly payments of R2 000,00 were made to Bawden.
[21] He confirmed that “there is no evidence
of Tuscan Mood ever having done anything to generate money”
2
.
Tuscan’s only asset was the property registered in its name and
the bank account. The immovable property was registered as
a Close
Corporation on 2 April 2003 and converted to a company on 4 June
2004. The bank did not amend its records to reflect this.
The
liquidators found “absolutely no records, no financial
statements, no books of account, not a piece of paper evidencing
any
transactions in this entity”.
3
The indications were that the account was “used as a receptacle
into which to deposit the proceeds from thefts”.
4
He stated that Tuscan had a bank account because of the various bank
statements in the name of Tuscan. From his investigations,
although
Tuscan itself did not operate or trade and was not renting out the
house, there were a lot of payments that went into and
out of the
bank account.
[22] None of the payments on the list in Exhibit
A
5
could be related to anything that Tuscan itself did.
6
Tuscan only borrowed money for the mortgage bond on the house. The
R125 million which came into the bank account came from the proceeds
of the sale of stolen shares. Gainsford was also one of the
liquidators of the entity “Paradigm Shift” and as far as
he knew, “Paradigm Shift” did not have a bank account and
nor did Tuscan and Paradigm share a bank account.
[23] Gainsford accepted that Poole had forged the
signatures on the account opening forms at Standard Bank.
7
He believed that this was a “classic money laundering
situation” and acknowledged that the bank account had been used
merely “to wash the money through”.
8
From his investigations, the sole purpose of operating this bank
account was “to hide the true identity of where the money
came
from.”
[24] It was his understanding that the proceeds of
stolen shares which were deposited into the bank account constituted
a claim against
Tuscan and that as soon as any amount was paid out
from those proceeds, Tuscan would be insolvent.
9
On the assumption that the persons /entities entitled to monies
standing to the credit of the bank account are not creditors of
Tuscan,
Gainsford confirmed that the estate would in such event be
solvent. There was a surplus on the sale of the house.
10
[25] He was referred to a letter written by Ms
Klein to Mr Pearsey at RandGold and confirmed that an amount of R211
542,05 went into
the bank account.
11
In re-examination Gainsford confirmed with reference to a Supreme
Court of Appeal decision
12
that the Receiver of Revenue was a creditor of Tuscan, but stated
that as yet no such claim had been approved.
[26] The next witness for the plaintiff was Mr
Bawden who was called out of sequence after Mr Poole had already
testified for the
defendant.
[27] Bawden testified that he met Poole during
2000 when he started a Tomato farm in Bela-Bela, Limpopo Province.
Poole expressed
an interest in starting a company in a joint venture
which he called “Hot House Investments”
13
.
His role was to be that of a non-executive director. He was promised
a gratuity of R2 000,00 per month which he received electronically
from Poole. He signed a document, but “had no right to bank
accounts, authorising money or anything like that”.
[28] The first time he heard of Tuscan was a
number of years ago when he received a summons from the Johannesburg
City Council, in
the name of Tuscan, for “the lights and water
bill” of a property.
[29] He had only signed documents relating to Hot
House Investments and did not sign any documents relating to Tuscan.
He denied that
the signature purporting to be his on the Standard
bank account opening forms, in the name of “Tuscan Mood 1224
CC” at
Exhibit “G1” was his signature.
14
He was not aware that he was a member of Tuscan nor was he aware that
Tuscan had a business cheque account nor even that it existed.
15
Although a letter (Exhibit “G7”) addressed to Standard
Bank contained his particulars, he did not write it. The same
held
true regarding the “Resolution of Tuscan Mood 1224 CC” at
Exhibit “G8”. He testified that although
his particulars
appeared in the amended founding statement of Tuscan (CK2 form)
16
,
he did not consent thereto, nor did he sign it. He did not have
anything to do with Tuscan.
[30] Under cross-examination Bawden testified that
the R2 000,00 per month was a complimentary fee that was given to
non-executive
directors of Hot House Investments. However he did not
attend any board meetings for directors. It was put to him that the
bank statements
from the Standard Bank relating to the bank account
reflected stop orders of R2000,00 each month to him. He thought that
the R 2
000,00 per month was coming from Poole as this was reflected
on his First National Bank statements every month.
[31] He had no knowledge that his signature was
forged on the amended founding statement for the closed corporation
in the name of
Tuscan to reflect him as a member of Tuscan.
17
He also had no knowledge that the ‘CC’ had been converted
to a (Pty) Ltd. He did not give any authority to either Poole
or
Kebble to use an entity bearing his name. He was shocked a few years
ago when he was confronted by the police and the “Scorpions”
in regard to his forged signature reflecting him as a member of
Tuscan, of which he had no knowledge.
[32] The plaintiffs then closed their case.
C. THE DEFENDANT’S WITNESSES
[33] The following witnesses testified for the defendant:
33.1 Mr G W Poole; and
33.2 Ms K Fernandes.
[34] Poole testified that he had met Kebble during
1997 when JCI had acquired an interest in Consolidated African Mines
where Poole
was at the time employed. Kebble asked him to “open
various accounts with the idea that funds emanating from the sale of
shares
could be channelled through those accounts and in order to
maintain anonymity and that the outside world at large would not know
that those funds were emanating from Kebble/JCI , all the JCI group
of companies.”
18
[35] He was instructed to split the share
certificates of Rand Gold Resources (RGE) listed on ‘NASDAQ’
into more manageable
amounts because they were rather large
denominations of shares.
19
He sent those share certificates with the necessary transfer forms
and resolutions to T-Sec, a stockbroker. In order to do this,
he had
to falsify signatures on the transfer forms and on the resolutions
which were sent to T-Sec. T-Sec, then sent them to New
York, to a
firm called ‘Barnard Jacobs Mellett’, who in turn sold
parcels of the shares at various intervals.
[36] Poole testified that although it would
appear from the transfer forms that the sale of shares had been
authorised, in reality
the sale of shares had not been authorised.
All movement of shares and funds had to be kept confidential. For
that purpose it was
necessary to open up bank accounts to “channel
these funds through these bank accounts to various entities, and
wherever Brett
wanted these monies to be.”
20
[37] Poole, on the instructions of Kebble, then
opened the accounts and did the necessary administration and
paperwork to ensure
that this happened. He explained that “in
order to open a bank account, you have to have an entity to open an
account and that
entity whether it be a CC or company or whatever
would need a representative, either a member or a director.”
21
They
required a shadow director for this purpose. A meeting was held with
Bawden where it was agreed that he would be appointed as
a director
of Tuscan and that he would be paid a fee of R2000, 00 per month in
lieu of his name being used as a director. Bawden
was unaware of the
purpose for which his name was being used and Poole did not discuss
with him that a bank account was being opened.
[38] Poole obtained the necessary forms from the
Standard Bank in Alberton, completed the forms and, in doing so,
falsified Bawden’s
signature on the account opening documents.
22
He provided the bank with an address to ensure that the statements
were sent to him rather than to Bawden.
[39] Poole testified that ”Well essentially
Brett just needed an account to channel money through. And if you
really want to
be specific, it was money that was flowing through an
account a bank account”.
23
The bank account was also used for the funds that were transacted
through “Paradigm Shift” an entity which existed in
name
only and was used as an account at T-Sec.
[40] Poole conceded that he had misrepresented the
position to the bank and had perpetrated a fraud thereby. He
explained that “My
factual position was that I was opening a
bank account with the name Tuscan Mood and I basically falsified who
was the member of
that CC at the time”.
24
Although Bawden was the member of the ‘CC’, Poole was
opening the account on behalf of Kebble.
[41] Poole explained that Kebble had requested
that the immovable property at which Kebble resided also be
registered in the name
of an entity as Kebble did not want it to be
known that the property belonged to him. For this reason, Poole
caused the property
to be registered in Tuscan’s name, and also
arranged a bond in the name of Tuscan, in favour of Standard Bank.
The instalments
on such bond were funded “from the proceeds of
the sale of shares, wherever I could get money”.
25
[42] Poole testified that “The intention of
Tuscan Mood as I have said, was essentially to have a bank account
and channel money
through that account. The intention was certainly
not to conduct any business through Tuscan Mood or Paradigm Shift at
all”.
26
The funds in the bank account were not funds that belonged to Tuscan
but were proceeds from the sale of shares. He confirmed that
Tuscan
itself had no business and that the bank account was nothing other
than a ‘conduit’ through which to channel monies
derived
from the misappropriation of shares.
27
More than one bank account was opened so that the large amounts of
money would not attract attention. The names of some of the other
accounts were “New Heights” and “HotHouse
Investments.”
[43] Under cross-examination he testified that he
had been at some stage a director of the defendant. The R650 000,00
loan paid by
Tuscan to the defendant was paid for a share in the
defendant. This loan had not been repaid. The shareholder was the
Pacific Gas
Share Trust (PGST), of which he, his wife and a certain
Mr Burger were the trustees. Poole himself was a beneficiary of the
Trust.
[44] Poole explained that in addition to the
proceeds from stolen shares, the bank account held proceeds of
legitimate share transactions
of Kebble estimated at about R20
million, proceeds of shares of JCI Gold, and of Consolidated Mining
Management Shares (CMMS) shares.
[45] He confirmed the contents of his affidavit at
Exhibits “B74” to “B88” wherein he described
Tuscan as
a joint wrongdoer with other persons or entities in a grand
scheme of theft.
28
He explained that his reference to Tuscan in this manner was because
the bank account had been used as a “conduit”.
[46] Although Bawden was a member of Tuscan, he
did not sign any documents to become a member of the CC. Poole forged
Bawden’s
signature on the CK2 .
29
It was necessary to falsify the documents, because, although Bawden
had agreed that his name would be used, Bawden did not know what
Tuscan was going to be used for. Bawden had agreed to be a “shadow
director” and hold that “position on anonymity”.
30
[47] He stated that the controlling minds of
Tuscan or to manage the bank account was Kebble and himself.
31
He admitted that Tuscan acted as represented by himself or Kebble who
“hijacked and registered Tuscan for the purpose of channelling
the proceeds of stolen shares amongst legitimate transactions.”
32
Bawden never had anything to do with the control or the management of
Tuscan.
[48] Poole testified that the property was
purchased without Bawden’s knowledge and consent. Bawden did
not sign any documents
relating to the purchase of the property. The
property was registered in the name of Tuscan, as the company
“happened to be
there” and the bond documents were signed
not by Bawden, but by, either Poole or Kebble, “again
falsifying it.”
[49] Poole explained that he and Kebble had
understood that Tuscan was a bank account through which money was
going to be channelled
and that “Tuscan Mood was created and
utilised as an integral part of the scheme which were devised to
commit (sic) for the
misappropriation of the resources shares and for
the filtration of certain of the funds arising from the sale thereof
into its bank
account.”
33
[50] He confirmed the payment of the amount of
R120 096,00 by Tuscan to the defendant, which was a payment on behalf
of JCI Resources.
He also confirmed the payment of the amount of R650
000,00 and the payment of R4 000 000,00 by Tuscan to the defendant
which was
paid to facilitate an ANC Youth League Conference. At that
stage he was a director of Gullivers Travels and was aware that the
funds
were being channelled through the bank account. His
co-directors were unaware that the funds were from the proceeds of
stolen shares.
[51] Under re-examination he confirmed that the
payment of R650 000,00 was a loan and not a payment of shares. PGST
had lent and advanced
this amount to the defendant in the form of an
interest free loan account with no fixed terms of re-payment.
[52] Ms Fernandes testified that she is currently
the managing director of the defendant and as at the date of the
payments was the
travel consultant responsible for the reservations
in respect of which the monies were transferred. She was appointed
as a director
of the defendant on 1 June 2004 and became a 10%
shareholder at that point in time. Through Poole she met Kebble.
[53] She explained the relationship that formerly existed between
Poole and the defendant. Poole’s family trust, PGST was
a
co-shareholder together with Fernandes, MG Levitas (“
Levitas
”),
P Sharma (“
Sharma
”) and the Rusandar Trust (of
which Morris Joselowsky (“
Joselowsky
”) was a
trustee), in the defendant. This relationship was regulated by a
written shareholders’ agreement in terms of
which PGST was
required to lend and advance an amount of R650 000, in the form of an
interest free loan account to the defendant.
[54] The Rusandar Trust at that time held 35% of the shareholding,
PGST similarly 35% and Sharma, Levitas and Ms Fernandes, 10% each.
Poole was a non-executive director and was not involved at all in the
business or the day-to-day affairs. Joselowsky and herself
attended
Board meetings and Ms Klein was part of the management team.
[55] In approximately March 2004 the defendant (represented by
Fernandes) was invited to tender for the “account” of
Consolidated Mining Management Services (CMMS) which she understood
to be the “holding company or an umbrella company for a
whole
host of companies operated by one Brett Kebble”. This group
comprised, according to her recollection, the JCI Group,
Rand Gold
Holdings, Western Areas, Simmer and Jack and others. She explained
that ”…there were a whole lot of companies
that we
dealt with at that point, on getting the account, we dealt with many
such companies of Mr Kebble’s stable, if you will”.
34
[56] The tender was successful and the defendant thereafter from time
to time rendered travel agency services for Kebble and the
various
companies with which he was associated. The name of the account
through which such services were identified was “Consolidated
Mining Management Services”, abbreviated to “CMMS (Pty)
Limited”.
[57] The background to the transactions in issue in this action was a
telephone call received by Fernandes from Kebble on 27 July
2004 in
which Kebble told her that he needed her assistance in “sorting
out payments in respect of an ANC Youth League Conference
which was
to be held a little bit later in August”.
35
His words were “… please can you sort out the money
because I do not trust them with this. Inferring potentially that
it
was that maybe somebody in the ANC would not do as they had been
requested to do. Deposits needed to have been paid by, I believe
it
was Friday, 31 July”,
in respect of hotel
accommodation and other matters related to the conference. Mr Eddie
Xhosa had procured approximately 1000 beds.
She was given the task of
paying for those reservations procured by Xhosa and other
reservations still to be made.
[58] She told Kebble that they did not have
sufficient cash to facilitate payment of what was required and unless
they received payment,
they could not assist.
36
The defendant then received a payment from Standard Bank, Alberton.
Upon being directed to the schedule in Exhibit A (Exhibit “A152”),
she identified the payment of R4 000 000,00 from Lunga Ncwana of the
ANC Youth League.
[59] She had ‘huge respect’ for Kebble
and was honoured to assist. She was not aware where the money was
coming from
and did not question it. To her understanding Kebble was
arranging for the payments to be made. She knew nothing about the
name “
Tuscan Mood
”.
Such an entity was not her client. She had only dealt with CMMS.
[60] The defendant received monies to cover the disbursements and
charges, except for the amount of “R211 000,00 odd”
that
was refunded to Tuscan. She had seen the name “Tuscan Mood”
on a bank statement but had not dealt with a company
by that name.
She confirmed that the defendant had received payment of the R120
096,00 as well as the amount of R650 000,00. She
also confirmed
receipt of the R4 000 000,00 . The R650 000, 00 had come from PGST in
respect of a loan account. The Rusander Trust
had put in an equal
amount and it required that the payment from PGST be to the same
value. The R650 000, 00 was not repaid to Poole.
[61] The first occasion she was alerted to any
problem was upon receipt of the letter of demand from the plaintiff’s
attorneys
dated 17 August 2006.
37
As far as the defendant was concerned, they had disbursed monies
which they received, for travel arrangements. Fernandes explained
that a cheque had been drawn by JCI Resources (Pty) Limited in favour
of the defendant on 24 December 2003 in the amount of R120
096,00
after a credit card payment for the same amount had been declined.
[62] A cheque was then deposited but it was
dishonoured. Fernandes then telephoned Poole for advice. He informed
her that she was
not to worry and that he would “sort out the
payment”. A transfer of such amount was made into the
defendant’s
bank account.
[63] Fernandes stressed that unless money had been
received in advance the defendant would not have proceeded to make
the reservations
and disburse amounts payable in respect thereof.
38
She had no idea that there would be any difficulty or that any
creditor would be prejudiced by virtue of the payments being made
to
the defendant.
39
She relied on Kebble in whom she had faith and that was “good
enough for (her)”.
40
[64] Under cross-examination she stated that the dealings in respect
of the ANC Youth League Conference were with Kebble as it was
a
completely independent reservation. The money for this conference had
not come from CMMS. She was unaware that it had come from
Tuscan. She
had understood that in respect of all the relevant payments “that
the monies were coming from Mr Kebble”
or one of his ‘stable’
of companies and “it was not her job at the time to find out
from which bank account things
were coming’’.
[65] She admitted to inflating an invoice “to
cover for where we were not making on the other side”.
41
She was aware of an application for summary judgment issued against
the defendant, but denied being involved in the drawing up of
the
affidavit and had no knowledge of the contents of such an affidavit.
D.
THE
ISSUES
[66] In order to succeed in its claim, the
plaintiffs are required to prove :
66.1 that there was a disposition by the company
of its property;
66.2 that the company is being wound up and
unable to pay all its debts;
66.3 that in the case of a claim based on
Section
26(1)(b)
of the
Insolvency Act
, that such dispositions were made by
the company within two years of the liquidation of the company;
that the alleged dispositions were not made for value.
[67] It is only if the plaintiffs discharge the
onus
of
establishing all these requirements that the provisions of
section 33
of the
Insolvency Act arise
.
[68] In terms of
section 26(1)(b)
of the
Insolvency Act the
defendant
has the
onus
to prove that, immediately after each disposition
was made, the assets of Tuscan exceeded its liabilities,
alternatively
that the liabilities of Tuscan exceeded its
assets by an amount less than the amount of each disposition. The
defendant also has
the
onus
of proving its defence based on
section 33
of the
Insolvency Act.
[69] Both counsel, Mr Pretorious for the plaintiffs and Mr Subel for
the defendant have submitted incisive and detailed Heads
of Argument
for the assistance of the court. I am grateful to both of them.
[70] Mr Pretorious argued that the plaintiffs as liquidators were
obliged to collect the assets of Tuscan and distribute it amongst
its
proved creditors. There was a court order winding up Tuscan and a
Liquidation and Distribution Account. According to Mr Pretorius,
Tuscan, was acquired as a shelf close corporation to own a property
“anonymously “ and channel the proceeds of the sale
of
shares so that they could not be traced back to Kebble and /or JCI.
The monies received from the sale of shares were used to pay
various
debts including the mortgage bond on the property. Kebble and Poole
acted on behalf of Tuscan, and Tuscan controlled by Kebble
and Poole
was a joint wrongdoer, in that it had participated in the stealing of
shares. It was always the intention of Tuscan to
have a bank account
and even though Bawden’s signature was forged on the bank
account opening forms, this forgery according
to Mr Pretorious, had
no effect as Bawden was in fact a director of Tuscan. The bank
account was opened by Tuscan controlled by Kebble
and Poole and
neither Poole nor Kebble were entitled to the money in that account
but Tuscan was.
[71] Mr Subel for the defendant contended that the bank account was
created by virtue of a misrepresentation. This was not Tuscan’s
bank account but an account intended by Kebble and Poole to be their
bank account to receive the proceeds of misappropriated shares.
Both
Kebble and Poole misrepresented to the Standard Bank that Tuscan was
a customer of the bank when it was not. Tuscan could not
assert a
right to the monies standing in the bank account as it was not the
account holder and only its name was used. But even if
Tuscan was the
account holder, it did not mean that it alone was entitled to assert
a claim to the funds standing in the bank account.
[72] Both counsel were agreed that the real
question in this case is whether Tuscan is entitled to assert a claim
to the funds standing
to the credit of the bank account.
[73] Mr Subel has argued that a not too
dissimilar situation was considered by the Supreme Court Of Appeal in
the case of
Nissan South Africa (Pty) Ltd v Marnitz NO and
Others (Stand 186 Aeroport (Pty) Ltd Intervening
)
42
,
and that the case before this court was an
a fortiori
case.
In
Nissan
it was contended on behalf of the liquidators that
the funds had fallen into the payee’s insolvent estate and that
the appellant
was not entitled to such funds. The Supreme Court of
Appeal had little difficulty in rejecting these contentions and held
that a
bank which had unconditionally credited its customer’s
account with an amount received was not liable to pay the amount to
the customer on demand where the customer came by such money by way
of fraud or theft.
At 446, paragraph 16 Streicher JA stated :
“
I agree with Thirion J that our law
would be deficient if it did not provide a remedy for recovery of
stolen money direct from the
bank which received that money to the
credit of the thief’s account, for as long as the amount stands
to the credit of the
thief.
”
43
And at 448, Streicher JA stated :
“
[23] It follows that the submission by first and second
respondents’ counsel that, once the bank has unconditionally
credited
a customer’s account with an amount received, the bank
is required to pay the amount to the customer on demand, even where
the customer came by such money by way of fraud or theft, is not
correct. If stolen money is paid into a bank account to the credit
of the thief, the thief has as little entitlement to the credit
representing the money so paid into the bank account as he would
have
had in respect of the actual notes and coins paid into the bank
account.”
“
[25] The position can be no different where A, instead of
paying by cheque, deposits the amount into the bank account of B.
Just
as B is not entitled to claim entitlement to be credited with
the proceeds of a cheque mistakenly handed to him, he is not entitled
to claim entitlement to a credit because of an amount mistakenly
transferred to his bank account. Should he appropriate the amount
so
transferred, i.e should he withdraw the amount so credited, not to
repay it to the transferor but to use it for his own purposes,
well
knowing that it is not due to him, he is equally guilty of theft.
”
[74] According to Mr Subel, paragraph (23) of
Nissan (supra)
is the
ratio decidendi
of
the case. However Mr Pretorious submitted that this was not a
ratio
but an
obiter dictum
and that the legal difficulty with the
obiter
,
to the effect that
stolen money in a bank account of a thief
does not form part of his assets is, that it cannot be reconciled
with a long line of other
cases. Mr Pretorious relied on Professor JC
Sonnekus’ criticism of the
Nissan
judgment for this
submission. The fundamental basis of Sonnekus’ criticism is
that South Africa has an abstract system for
the acquisition of
property. Professor JC Sonnekus
44
addresses this in some detail, and writes:
“
By virtue of the abstract principle the legal validity of
the underlying agreement has no causal connection with the fortunes
or misfortunes
of the real agreement that constitutes the source of
the duties to fulfil the obligations to convey and receive ownership.
Since
Commissioner of Customs and Excise v Randles Brothers and
Hudson Ltd
1941 AD 369
this principle has been repeatedly confirmed
in South African judgments, among others in Bank Windhoek Bpk v Rajie
1994 (1) SA 115
(A) 141C-E; Krapohl v Oranje Kooperasie Bpk
[1990] ZASCA 53
;
1990 (3)
SA 848
(A) 864E-H; Kriel v Terblanche NO
2002 (6) SA 132
(NC) 144C-D.
In view of this overwhelming body of authority, the decision in
Nissan South Africa (Pty) Ltd v Marnitz NO (Stand 186
Aeroport (Pty)
Ltd Intervening)
2005 (1) SA 441
(SCA) should be approached with some
circumspection, as it may possibly create the impression that the
court applied the supposed
turpitude attached to the underlying
obligatory agreement to the question whether the bank, as bona-fide
recipient of even stolen
money, could for that reason not have
acquired an original right to the transferred funds. This will be
reverted to when the decision
is discussed hereunder, but it cannot
be accepted that by this formulation Streicher JA intended to deviate
from the trite legal
position on this point. “
And further on pg 374-375 he writes:
“
It has been stated repeatedly that by virtue of its
underlying relationship with its client, a bank has an obligation
towards the
customer with regard to the funds appearing to the credit
in the client’s account. It was in fact pointed out earlier
that
this principle formed the crux of the correct decision by Nugent
J, among others, in Nedcor Bank Ltd v Absa Bank
45
.
That is the position irrespective of which relationship underlies the
client’s acquisition of the money deposited in the account”.
46
[75] According to Mr Pretorious, the
Nissan’s
judgment
should be seen in its context. It is distinguishable from the facts
in this case. If the defendant is directed to repay
the amount of
the disposition to the plaintiffs, it is not without a remedy as it
could claim the monies paid by way of an enrichment
action, as it had
rendered services. He submitted that no doubt a person from whom
monies have been stolen can claim payment from
the thief of a sum
equal to the amount stolen from him provided it was traceable.
[76] Mr Pretorious contended that monies paid from the bank account
to third parties, whether they were bona fide or not, constitute
a
disposition of Tuscan’s property as contemplated by the
Insolvency Act,
>
47
and that, furthermore, monies standing to the credit of an insolvent
estate in a bank account constitute property within the meaning
of
the
Insolvency Act.
48
E
. ASSESSMENT OF THE EVIDENCE
[77] Tuscan was a non-trading entity. It was
acquired to channel the proceeds of misappropriated shares so that it
could not be traced
to Kebble and/or JCI.
Tuscan did not
operate any business, the liquidators found “absolutely no
records, no financial statements, no books of account,
not a piece of
paper evidencing any transaction in this entity”.
[78]
It owned Kebble’s immovable property
“anonymously” in Inanda, had a mortgage bond in favour of
Standard Bank registered
over the property and had a credit balance
in the bank account with Standard Bank.
The instalments on
such bond were funded by the proceeds derived from the unauthorised
realisation of the shares.
[79] Poole had been instructed to sell the shares in RGE, split
these shares, give effect to the transfer of the shares and procure
the remission of funds derived from the unauthorised realisation of
such shares, to South Africa. In order to maintain confidentiality
and secrecy, Kebble had instructed Poole to open a bank account which
was a “conduit” to channel monies derived from
the
misappropriated shares.
[80] From Gainsford’s testimony an amount of approximately R170
million had been deposited into the bank account and an amount
of
approximately R125 million constituted the proceeds of
misappropriated shares. The balance of approximately R45 million was
from
various other sources and included R20 million from Kebble
himself. However he stated that
”there are
certain monies there, I do not know where it came from, if they were
entitled to it or not but the proceeds of stolen
shares, I do not
believe they were entitled to receive the funds”.
49
Tuscan had no money to start with nor did it have any basis on which
to receive money.
[81] Gainsford testified that the payment into the bank account did
not relate to the business of Tuscan. Gainsford acknowledged
that the
bank account had been used merely for money laundering to “wash
the money through”.
Poole testified that apart from the
proceeds of the misappropriated shares, the bank account held the
proceeds of legitimate share
transactions of Kebble, JCI Gold and
CMMS and that the entity Paradigm Shift had also shared this bank
account.
[82] According to Gainsford there was no indication that any of the
funds deposited or transferred into the bank account at any
time were
intended to be monies belonging to Tuscan. Although
the
proceeds were received in the bank account under the name of “Tuscan
Mood 1224CC”, this bank account was operated
by Kebble and
Poole as a “conduit” through which funds would be
channelled.
[83] In order to give an appearance of the account being properly
opened, Kebble and Poole enlisted Bawden who agreed to be a director
in consideration for a monthly payment of R2 000,00.
However, Bawden testified that he was not enlisted as a director of
Tuscan, but of HotHouse Investments. Bawden the sole registered
member of Tuscan did not sign any documents on behalf Tuscan, nor the
amending founding statement of the company.
Nor was he aware
that Tuscan was to be used for any purpose, represented by either
Poole and/or Kebble in any manner. Nor was he
aware that his
signature was falsified to open the bank account.
[84]
Bawden
was unaware that the Tuscan had
even been established and was clearly unaware that there had been a
falsification of documents both
in relation to the establishment of
Tuscan and the opening and operation of a bank account by Poole.
[85] Mr Pretorious has argued that Kebble and Poole were the
controlling and directing minds of Tuscan. As to who is the
controlling
mind of a company, it is necessary to identify the
natural person or persons having management and control on behalf of
the company
in relation to the transactions in question. In
Tesco
Supermarkets Ltd v Nattras
50
Lord Diplock identified those who are to be treated in law as being
the company as “
those natural persons who by the memorandum
and articles of association or as a result of action taken by the
directors, or by the
company in general meeting pursuant to the
articles are entrusted with the exercise of the powers of the
company
”.
[86] The learned authors of
Blackman
51
write:
“
The act will be considered to be that of the directing mind
as long as it is performed by the person in question within the
sector
of the company operation assigned to him by the company, which
sector may be the functional or geographic, or be the entire
undertaking
of a company.
”
[87] However, in casu, Bawden was unaware that he was a director of
Tuscan nor was he aware that there was an entity acquired for
the
purpose of channelling misappropriated shares and for which entity
there was a bank account.
[88] There is no question of Bawden having delegated any authority
to Kebble or Poole with regard to the company’s business
operations (there was no business). On all the evidence, there can be
no question of Kebble and Poole being lawful “
directing
minds
” of Tuscan because they could not by their own
unlawful conduct constitute themselves as the directing or
controlling minds
of Tuscan.
[89] They also cannot be regarded as de facto directors of Tuscan. A
de facto director in law and practice has a defined and ascertainable
meaning.
52
Both Kebble and Poole were in fact and deed the “brains”
controlling the bank account.
[90] The directing mind of a company has to be a lawful directing
mind. Implicit in this, is that it would be in accordance with
the
law. In terms of the Companies Act a company is formed for a lawful
purpose.
53
Axiomatically, only a lawful body of directors can delegate authority
to persons who then become the controlling and directing minds
of the
company. There are no facts to support the conclusion by Poole that
he and Kebble were the directing and controlling minds
of Tuscan.
[91] It does not matter that Kebble and Poole purported to be
representatives of Tuscan. The question in casu is not who are the
controlling minds of Tuscan, but what was the intention of Kebble and
Poole in having monies transferred into the bank account. Was
it ever
their intention that Tuscan would be the entity entitled to the
monies in the bank account or was the monies there for Kebble
and
Poole?
[92] In
Nissan,(supra)
the appellant
(Nissan)
had
erroneously caused its bank to transfer an amount in excess of R12
million from its account to an account held by a company,
(Maple),
which was not entitled to such payment, when it actually intended to
make payment to TSW. Upon receipt of the funds into
the wrong bank
account, the amounts were immediately withdrawn and Maple was
liquidated.
Nissan
claimed that of the amount paid erroneously to Maple, an amount of at
least R9 750 000,00 could be traced to the amount transferred
erroneously by it to Maple’s account and that such amount did
not form part of Maple’s insolvent estate. Maple’s
liquidators contended that the money formed part of Maple’s
property. It was held that a bank that had unconditionally credited
its customer’s account with an amount received was not liable
to pay the amount to the customer on demand where the customer
came
by such money by way of fraud or theft. The Court held that the
amount of R9 750 000,00 plus the interest accrued thereon did
not
form part of the insolvent estate of Maple and directed that the
liquidators of Maple release such amount and the interest accrued
thereon to
Nissan
,
as the insolvent had not become entitled to the funds erroneously
credited to its account.
[93] The approach of the Supreme Court of Appeal in the
Nissan
decision was followed by the Full Court of this Division in
Pestana v Nedbank Ltd
54
and by the Supreme Court of Appeal in
Joint Stock Company
Varvarinskoye v Absa Bank Ltd and Others
55
.
In that decision Navsa JA stated as follows :
“
[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,
56
said the following:
‘
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.
”
[42] In the Nissan (supra) 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.
”
[94] In the
Joint Stock
decision the first respondent (the
Bank) had appropriated money standing to the credit of one of its
client’s (the sixth respondent’s)
accounts, in a set-off
of the money due by the sixth respondent to the Bank. The appellant
had instituted an application for an
order declaring that the right
to the monies appropriated vested in the appellant and ordered the
Bank to pay to the appellant an
amount equal to the amount
appropriated. The appellant had used the account exclusively for the
purpose of warehousing monies to
meet the claims of sub-contractors
on a certain mining project abroad for which the appellant was
responsible. Subsequent to the
appropriation of the monies, the
appellant had, out of its own resources, paid the sub-contractors
their due. The respondents resisted
the application on the basis
that the money deposited into a bank account of a client became the
property of the Bank, so that only
the sixth respondent had any right
to contest the appropriation. On appeal it was held that it was not
correct, as contended for
by the Bank, that only an account-holder
could assert a claim to money held in its account with the Bank. The
funds in an account
could also “belong” to someone other
than the account-holder of the Bank.
[95] Furthermore Navsa JA stated that :
57
“
[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 moneys 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 Mortimer’s
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 (supra) this court accepted the basic proposition
that when the money was deposited with the Building Society it passed
into ownership of the latter. 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:
‘
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
insolvent’s creditors to reap the benefit of that which was in
truth never legally vested in the insolvent
himself.’
The funds in an account may also ‘belong’ to someone
other than the account holder or, for that matter the bank or
institution
holding the money.
”
[96] The finding by the Supreme Court of Appeal in
Joint Stock
is particularly significant and applicable to the present matter. It
recognises in the first instance that even the account-holder
itself
is not necessarily entitled to the monies standing to the credit of a
bank account.
[97] That decision as too the decision of the Supreme Court of
Appeal, over 4 decades ago, in
McEwen NO v Hansa
58
makes it plain that the account-holder does not necessarily have
exclusive rights to claim money in an account.
[98]
In my view what was said by Streicher JA in
Nissan
is not
obiter dictum
but
ratio.
What in effect
Streicher JA was stating was that when money is paid erroneously into
your bank account and you know that you have
no right to it, you have
no right to say to the bank “I want you to pay out the money to
me, I demand that you pay the credit
balance standing to the credit
on that account”. The
ratio
is clearly that the money
was not paid into the bank account with the intention that it be for
the benefit of the designated account
holder. Should the amounts that
have been so transferred be withdrawn knowing that it is not due to
the account holder, he is guilty
of theft.
[99] Navsa JA in
Joint Stock
endorsed the approach in
Nissan.
What Navsa JA was postulating in
Joint Stock
was who was
intended to be beneficially entitled to the monies in the bank
account. That is the enquiry. It does not matter if the
account is
in customer X’s name. The mere fact that you are the account
holder does not mean that you are entitled to assert
against the bank
your entitlement to the money standing to the credit of that account.
That is the ratio. In simplistic terms because
you are the account
holder does not mean that you can claim. The monies paid into the
account is not necessarily money to which
the account holder is
entitled to. The funds in an account may also “belong” to
someone other than the account holder
or, for that matter the bank or
institution holding the money.
59
[100] Even though it is well recognised that the legal relationship
between a banker and customer is one of debtor and creditor
in terms
of which the banker becomes owner of money deposited in the client’s
account,
60
it must nonetheless be established that the company had a right of
action against its banker for the payment of the money standing
to
its credit in its banking account. However, the Standard Bank in the
case before me is not a disputant. Tuscan not only has no
right of
action for payment to it of any of the amounts standing to the credit
of the bank account but it has also not been established
that it was
Tuscan’s account that was opened and operated with the bank. As
the learned authors of
Henochsberg on the Companies Act
61
write:
“
Where an amount standing to the credit of a customer’s
account with his banker represents monies obtained by theft or fraud,
the customer has no entitlement to the credit representing such
monies and accordingly has no claim against the bank for payment
thereof. Nor is there any such entitlement in respect of monies
erroneously credited to the customer’s account and the customer
has no right to such monies (Nissan South Africa Case supra at 448)
.”
[101] Before the insolvency act applies, Tuscan must be shown to be
unable to pay its debts. If it is unable to pay its debts then
the
question is, were the payments made to the defendant, dispositions by
Tuscan of its property?
[102] Mr Subel has argued that before section 340(1) of the Companies
Act is triggered, the plaintiffs must establish that Tuscan
is
“
unable to pay all its debts
”. The relevant time
for determining whether the company which is being wound up as being
unable to pay its debts is not at
the time of the application for
winding-up nor at the time of the grant of the winding up order. It
is not necessarily the date when
it was placed in liquidation.
62
The relevant time is at the date of the institution of the
proceedings in the course of winding-up. The plaintiff’s
reliance
on the order of court winding up Tuscan, as proof that
Tuscan is unable to pay its debts, therefore, is misplaced.
[103] In addition, the confirmation of the Liquidation and
Distribution account does not relieve the plaintiffs of having to
establish
that Tuscan is unable to pay its debts. The liquidators
reliance on the claim forms by alleged creditors does not establish
that
such “creditors” are indeed the creditors for the
purposes of these proceedings.
63
These alleged creditors cannot constitute creditors of Tuscan, as it
has not been proven that Tuscan was party to any misappropriation
of
shares nor liable for any misconduct. Their claims lie against the
wrongdoers / perpetrators of the thefts, and not against Tuscan.
[104] At all material times Tuscan was a non-trading entity, and, at
most, was a property owning company in whose name the Inanda
residence of Kebble was registered. The only creditor of Tuscan was
the Standard Bank of South Africa in whose favour a mortgage
bond was
registered over such property. The value of the property exceeded the
balance owing on the mortgage bond and the liquidation
and
distribution account reflects that the proceeds from the realisation
of the property exceed the indebtedness to Standard Bank.
[105] Tuscan, therefore, had no liabilities and, accordingly, has not
been shown to be a company unable to pay its debts within the
meaning
of section 340 of the Companies Act. It must be shown by the
liquidators that Tuscan had debts when the action was instituted
and
this they failed to do, notwithstanding the proof of claim forms.
Having regard to the evidence (including that of Gainsford),
it has
not been established that Tuscan has debts.
[106] Section 33(1) of the Insolvency Act provides:
“
(1) A person who, in return for any disposition which is
liable to be set aside under section twenty six, twenty nine, thirty
or
thirty one, has parted with any property or security which he held
or who has lost any right against another person, shall, if he
acted
in good faith, not be obliged to restore any property or other
benefit received under such disposition, unless the trustee
has
indemnified him for parting with such property or security or for
losing such right.
”
[107] Accordingly, three requirements must be met:
107.1 the defendant must have parted with property or security or
lost a right;
such parting must be “
in return for
” the
disposition liable to be set aside; and
the defendant must have acted in good faith (
bona fide
).
[108] “
Good faith
” is defined in
section 2
of the
Insolvency Act as
“
… in relation to the disposition
of property, means the absence of any intention to prejudice
creditors in obtaining payment
of their claims or to prefer one
creditor above another
”.
[109] In
Ruskin NO v Barclays Bank DCO
64
the Court (adopting the approach of the Appellate Division in
National Bank of South Africa Ltd v Hoffman’s Trustee
1923. AD 247)
said:
65
“
I do not think that the phrase ‘in good faith’
is confined to the action merely of parting with property or security
or
losing a right. In my view ‘good faith’ is required
in the whole operation giving rise to the parting of property, or
security or losing right.
”
[110] Fernandes’ evidence clearly demonstrates that the
defendant parted with money in making payment of disbursements and
expenses “in return for” the payments that are sought to
be set aside (other than the sum of R650,000 for the loan) and
that
the defendant acted “in good faith”. There was clearly an
absence of any intention to prejudice creditors of Tuscan
or to
prefer any creditor of that entity. It is inconceivable that the
defendant would have proceeded to incur large disbursements
if it had
any reason to doubt that the monies had been safely and lawfully
transferred to it by or at the instance of Kebble into
its bank
account.
66
There is no reason to reject Fernandes’ testimony that she had
trusted Kebble implicitly.
[111] Even had the plaintiffs succeeded in establishing that the
dispositions to the defendant were liable to be set aside, (which
they did not do), this court would have made an order that the
defendant was not obliged to restore any of the amounts unless the
plaintiffs have indemnified the defendant for parting with such
monies as the defendant disbursed and paid in respect of the services
for which the defendant was engaged.
[112] The plaintiffs have argued that there was
an important difference between Bawden’s evidence and that of
Poole. Poole’s
version was that they had approached Bawden and
got his consent to use him as a shadow director for Tuscan. Bawden’s
evidence
was to the contrary. According to Mr Pretorious, Poole was
not cross-examined on this issue because they had not consulted on it
at that stage with Bawden. In my view this made little difference.
Even though Bawden’s evidence of his state of knowledge about
Tuscan is approached with caution, nevertheless, both from his
evidence and that of Poole, Bawden at no stage authorised any
transactions on behalf of Tuscan nor was he aware of any business
conducted by or on Tuscan’s behalf. Nor was he aware that his
signature was forged on the company documents
and
the account opening forms.
[113] According to Mr Pretorious, the forgery had no ‘effect’
as Bawden was the director of Tuscan on the company’s
documents. In my view the plaintiff’s reliance on this forgery,
is destructive of its case. In such circumstances, there
could
never have been a genuine intention for the monies paid into the bank
account to belong to Tuscan, nor was there any intention
for Tuscan
to acquire title to the monies deposited into the bank account.
[114] Gainsford’s testimony and the views expressed by him
with regard to the affairs of Tuscan has been less than satisfactory.
In the course of his investigation as a joint liquidator he did not
interview Bawden, the person reflected as the sole member of
the
company of which he was a liquidator. Fernandes’ evidence was
satisfactory in all material respects and was consistent.
Furthermore, the only witness upon whom this court can rely for a
factual version as to what was intended by Kebble, was Poole.
[115] That Kebble and Poole used Tuscan’s name, does not make
Tuscan liable unless Tuscan itself was a party to the wrongful
conduct. It has not been alleged or proved that Tuscan itself was
knowingly a party to the unlawful misappropriation of the shares.
Even had Tuscan received the proceeds from misappropriated shares
into its banking account, this would not in itself render Tuscan
liable. There was no evidence from any alleged creditors or from the
liquidators that there are “earmarked” or “traceable”
funds in that bank account to which they would have a claim.
67
The mere fact that the money was paid into the bank account does not
make Tuscan liable to any person or entity. It would only be
liable
if it knowingly participated in the receipt of monies knowing it to
be stolen or in regard to monies that have been ‘earmarked’
from an identifiable theft. In these circumstances, no weight can be
attached to Poole’s conclusions that Tuscan was a joint
wrongdoer and that both he and Kebble were the controlling minds of
Tuscan. There are no facts to justify such conclusions.
F. CONCLUSIONS:
[116] In view of all the aforegoing, I find that what both Kebble and
Poole in fact intended and did was use the name Tuscan and
give the
appearance that it was in fact the bank account of Tuscan (when in
fact it was not), so that they could open, as Mr Subel
argued, a
‘phantom’ bank account to launder money. They simply
misused its name. But, even if the bank account was established
to
have been the bank account of Tuscan, the evidence establishes that
Tuscan was never entitled to any money paid into that account.
It was
not seriously in dispute that the account was used as a conduit for
the purpose of the receipt and payment/transfer of monies
derived
from the misappropriation of shares.
[117] A litany of falsehoods was created by Kebble and Poole by the
misuse of the Tuscan name. The registration documents to set
up
Tuscan to reflect Bawden as a director was false. Poole
misrepresented that Tuscan had in fact opened an account when in fact
it did not. Bawden’s signature on the account opening forms was
forged. The bank account was never intended to be the account
of
Tuscan. It was intended by Poole and Kebble to be their bank account,
a shelter for their nefarious activities. The property in
Inanda,
(which Kebble also did not want to be connected to him), was the only
asset owned by Tuscan and registered in the name of
Tuscan, was
another “cover up” to give their money laundering
operations a semblance of legitimacy. In truth Tuscan was
not a
customer of the bank and it could therefore not assert a right to the
monies in the bank account.
[118] I am therefore in agreement with Mr Subel’s argument that
the plaintiffs’ reliance on legal authority to the effect
that
the underlying cause for the transfer (i.e. into the bank account) is
irrelevant, is misplaced. The real question is whether
there had
been any intention on the part of Tuscan to acquire title or right to
the funds standing to the credit of the bank account
or to make any
payment therefrom.
[119] The bank account and the credits to that account were clearly
apart from and independent of Tuscan which had neither knowledge
of
the account nor any participation in the operation of the account.
This is apparent from the evidence of the sole registered member
Bawden who testified that he was never aware of nor authorised the
opening and operation of the bank account on behalf of Tuscan.
[120] There was no intention on the part of either Kebble or Poole
that Tuscan have an entitlement to the funds. Nor could there
conceivably have been any intention on their part that Tuscan make
payment from any monies belonging to it.
[121] Furthermore, at no time was Tuscan the customer of Standard
Bank either at the opening or operating of the bank account.
Therefore
whatever monies were deposited into that account could not
become monies to which Tuscan could assert a title. As in
McEwen,
(supra)
, the funds in the bank account quite clearly did not
belong to the ostensible account holder. Similarly the monies were
never the
property of Tuscan.
[122] Even if Kebble and Poole had been the so called “controlling
minds” these “controlling minds” did not
intend
that Tuscan have any title or right to such funds. Poole’s
evidence that the “root intention” of the bank
account
was intended to permit of anonymity and prevent the world at large
knowing that the funds emanated from Kebble and the JCI
Group of
Companies, cannot be rejected.
[123] Apart from the fact that Tuscan was not entitled on any
showing to the funds deposited or transferred to the bank account,
I
find that it was never the intention on the part of Tuscan to receive
the funds as its property. The funds had to belong to either
Kebble,
JCI Gold, CMMS and/or persons/entities from whom it was stolen. The
one entity it did not belong to was Tuscan. Even if it
was the
account holder, it does not mean that only it was entitled to assert
a claim to those funds.
68
It was never the intention of Tuscan or a “meeting of minds”
between Tuscan and anyone else to receive the funds as its
property.
On the uncontroverted evidence, it was never the intention of Kebble
and Poole that the monies become the property of Tuscan.
[124] Furthermore, although one cannot say whether these payments
came from the lawful or unlawful proceeds in the bank account,
in my
view it does not matter, as it was never intended by Kebble or Poole
that the large sums of monies (be it lawful or unlawful),
deposited
into the bank account be Tuscan’s monies. Thus, Tuscan, a
dormant entity, enjoyed no title or claim against the bank
to the
funds standing to the credit of the bank account at any time and any
transfer or payment out of the account cannot be regarded
as a
disposition by Tuscan of its property.
[125] All the evidence points to the intention of Kebble and Poole
being that the bank account was independent of Tuscan. It was
simply
the name that was used to designate the account. Clearly there was
never any transaction or
causa
which would have justified
Tuscan having any claim to monies deposited into the account as being
its “property”.
[126] The bank account from which monies were paid was not the
account of the company in liquidation and at no time nor on any
basis
did Tuscan have any claim to any of the monies in that
account. On no basis can the transfer from that account to the
defendant
be regarded as a disposition by the company nor by Tuscan
of its property. It has further not been established that Tuscan is
unable
to pay its debts.
[127] In my view, the following excerpt from Poole’s testimony
encapsulates the ”fate of the money in the bank account”:
“What was the fate of the money that was in the account,
where was it then paid out, to whom?-- It was paid to whoever Brett
told me to pay it out to. Whether it be political parties or to
people who he was seeking favour with or people he wanted to buy
gifts for, or investments in other businesses. Or basically just to
keep JCI cash flow going”.
69
[128] In
McEwen
, the Supreme Court of Appeal stressed the
importance of giving effect to “
the realities of the
situation
” so as not to “
permit the insolvent’s
creditors to reap the benefit of that which was in truth never
legally vested in the insolvent himself”
.
70
[129] What the liquidators are doing in the case before me is
“trying to reap the benefits” of which Tuscan was never
itself legally entitled to assert. In order for Tuscan to assert
title to the monies standing to the credit of the account there
must
have been some intention on someone’s part that it be its
account and that it be entitled to payment. Clearly from all
of the
aforegoing
Tuscan had no legal entitlement to the
funds standing to the credit of the bank account.
For two
reasons it cannot be entitled. Firstly, it was a misrepresentation,
its name was simply used and secondly, the bank account
was opened by
Kebble and Poole to channel funds to launder money. In these
circumstances it was not for the benefit of Tuscan which
clearly had
no reason to have it. It had no business, it did not trade.
[130] In my view the decisions in
McEwen
,
Nissan
and
Joint Stock
are wholly destructive of the plaintiffs’ cause
of action. This case is an
a fortiori
case of the principles
referred to in these cases.
[131] In view of all the aforegoing, the plaintiffs have failed to
establish the elements of their cause of action. In the result,
I
find that Tuscan is not entitled to assert a claim to the funds
standing to the credit of the bank account. The plaintiffs’
action must therefore fail.
G. ORDER
[132] The plaintiffs’ action is dismissed with costs, costs to
include the costs of senior counsel.
_________________________
H SALDULKER
JUDGE OF THE HIGH COURT
COUNSEL FOR PLAINTIFFS ADV G C PRETORIUS SC
J W STEYN
INSTRUCTED BY BROOKS & BRAND CC
COUNSEL FOR DEFENDANT A SUBEL SC
1
Exhibit B, p112-143
2
Record 1/ 35, lines16-19
3
Record, 1/37, lines14-25
4
Record, 1/38, lines 10-13
5
Record1/39,lines 1-25;Exhibit A,page75-76 –
List of Debtors Files
6
Record, 1/48, line25;1/ 49, lines1-6
7
Record, 1/48,lines 2-7
8
Record, 1/49,lines 7-20
9
Record1/60,lines3-14
10
Record, 1/55, lines 5-6
11
Exhibit A pg 29
12
MP Finance Group CC (In Liquidation) v
Commissioner, South African Revenue Services
2007 (5) SA 521
(SCA)
13
Record 2/146,lines15-25;2/147,lines1-10
14
Record2/148,lines 20-25;2/149,lines 1-14
15
Record 2/149,line20 -25; 2/150,lines1-21; Exhibit
G6
16
Exhibit G, G11 to G15
17
Record 2/158, lines 9-13; 2/159,lines 9-25;
2/160, lines1-25
18
Record 1/67, lines 15-20
19
Record 1/69, lines1-25
20
Record 1/70, lines 8-13
21
Record 1/71, lines 1-8
22
Record 1/71, lines 21-24
23
Record 1/75, lines 22-25
24
Record 1/76,lines 8-17
25
Record 1/76,lines18-23;1/77, lines1-6
26
Record 1/77, lines 9-12
27
Record 1/77,lines 16-21
28
Record 1/86, lines 4-25 ; 1/87, lines
1-18;Exhibit B74,para1.4
29
Record 1/87,lines19-25; 1/ 88, lines 1-12; 1/99,
lines 22-25 ; Exhibit A, pg 12
30
Record 1/93, lines 1-18
31
Record 1/89, lines1-17
32
Record 1/92,lines17-25
33
Record 2/103, lines 10-23; Exhibit B,p 83, para32
34
Record 2/111, lines 17-20.
35
Record 2/114,lines 7-25
36
Record 2/116, lines 1-25
37
Exhibit A 88
38
Record
2/128, lines 5-9
39
Record
2/128,lines 14-25
40
Record
2/129, lines 5-7
41
Record 2/134, lines 10-15
42
2005 (1) SA 441 (SCA).
43
This is a reference to Thirion J in Commissioner of Customs and
Excise v Bank of Lisbon International Ltd and Another 1994(1) SA
205
(N), where money was fraudulently obtained by one “Reob”
from the commissioner of Customs and Excise by way of
cheques that
were deposited into Reob’s bank account with the Bank of
Lisbon. It was held that the circumstances under which
Reob obtained
the monies were such as to deprive delivery to Reob of any legal
effect. See 208 I-J.
44
See:
Unjustified
Enrichment in South African Law
; Lexis
Nexis 2008 at p 22;footnote 121.
45
1995 (4) SA 727 (W)
46
Page 374-375 , Prof Sonnekus, Unjustified
Enrichment.(supra)
47
Geyser NO v Telkom SA Ltd 2004(3) SA 535 (T) and
at p546, para27,28,and 30
48
Ormerod v Deputy Sheriff, Durban 1965(4) SA 670(D) at 673D-E; Ex
Parte Estate Kelly
1942 OPD 265
, at 272. See also De Villiers NO v
Kaplan
1960 (4) SA 476
( C ), at 477 E to F; De Hart NO v Kleynhans
and Others
1970 (4) SA 383(O)
at 387 D-E;Rousseau NO v Standard
Bank of SA Ltd 1976(4) SA 104 (C ) at 106A-C
49
Record,1/ 41, lines 7-25
50
[1971] 2 ALL ER 155
at h-I
51
Commentary on the Companies Act, Blackman et
al,Vol 1
,
4-130 citing Canadian Dredge & Dock Co Ltd v R (1985) at 330/1.
52
Francis v Sharp and Others 2004(3) SA 230 (C) at
243.
53
Henochsberg , Company Law Vol 1, Chapter IV, page
53
54
[2007] ZAGPHC 283
;
2008 (3) SA 466
(W), 473,para15
55
2008 (4) SA 287 (SCA), 297-298.
56
i.e.
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.
57
At paragraphs [31], [32] and [33] at 294H-I and
295D-E
58
1968 (1) SA 465
(A) at 472 D-E
59
Joint Stock, para 33
60
Joint Stock, para[37], ;Rousseau NO v Standard
Bank of SA Limited
1976 (4) SA 104
(C)
61
Vol 1, 680.
62
Henochsburg Vol 1, page 670 ; Blackman,
Commentary on the Companies Act, Vol 3, 14-23, See Taylor and Steyn
NNO v Koekemoer 1982(1)
SA 374 at 377- 379
63
Exhibit B, p124-125; Rulten v Herald Industries
(Pty) Ltd 1982(3) SA 600(D)
64
1959 (1) SA 577
(W)
65
At 584H-585A ;See also Gore NO and Others V
Shell South Africa (Pty) Limited
[2003] 4 ALL SA 370
(C), 376 –
summarising the position as set out by the Supreme Court of Appeal
in Cooper & Another NNO v Merchant Trade
Finance Ltd 2000(3) SA
1009(SCA).
66
Fourie NO and Others v Edeling NO and Others
[2005] 4 ALL SA 393
(SCA); Geyser NO and Another v Telkom SA Ltd
2004 (3) SA 535 (T)
67
Joint Stock para 35 ;First National Bank of
Southern Africa Ltd v Perry No and Others
2001 (3) SA 960
(SCA) para
18
68
Joint Stock, para[31]; McEwen v Hansa, page12
69
Record 1/80, lines 17-21
70
McEwen v Hansa p 12;
Joint Stock para 33