ABSA Bank Ltd v Leech and Others (442/98) [2001] ZASCA 65; [2001] 4 All SA 55 (A) (23 May 2001)

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[2001] ZASCA 65
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ABSA Bank Ltd v Leech and Others (442/98) [2001] ZASCA 65; [2001] 4 All SA 55 (A); 2001 (4) SA 132 (SCA) (23 May 2001)

Case No: 442/98
In the matter between:
ABSA
BANK LIMITED
Appellant
and
LEECH, SHEILA FRANCES
1
st
Respondent
CREASE, GRAHAM
2
nd
Respondent
GISHEN,
MARTIN CHARLES
3
rd
Respondent
Coram
:
Vivier, Zulman, Streicher, Cameron and Navsa, JJ A
Heard
:
4 May 2001
Delivered
:
23
May 2001
Condictio indebiti
– mistaken belief that
amount paid was owing not established.
__________________________________________________________________
J U D G M E N T
__________________________________________________________________
STREICHER J A
:
[1]
The respondents are the trustees of the Kon
Leech Trust (“the Trust”). The Trust paid an amount of R4,125m to
the appellant.
Thereafter the respondents instituted action against
the appellant in the Witwatersrand Local Division for the repayment
of a portion
of that amount on the basis that it had been paid by the
Trust in the mistaken belief that it was owing. The court
a quo
found that R1 762 931 had been paid by the Trust in the mistaken
belief that it was owing, dismissed the defences raised by the
appellant
and granted judgment in favour of the respondents in that
amount. With the leave of the court
a quo
the appellant
appeals against the court
a quo
’s judgment.
[2]
The events which led to the payment of the
amount of R4,125m were the following. During April 1993 and under
case number 11257/1993
the appellant launched an application in the
Witwatersrand Local Division against the trustees of the Trust and
Konrad Leech in his
personal capacity, in terms of which it claimed,
against the Trust and Leech jointly and severally, payment of R2 956
231,86 plus
interest at a rate of 21,25% p.a. from 22 May 1992 to
date of payment. In addition the appellant asked for an order against
the Trust
that the immovable property, known as Remaining Extent of
Portion 23 (a portion of portion 9) of the Farm Witkoppen (“the
Remaining
Extent of Portion 23”), be declared executable. In the
founding affidavit the appellant alleged that the amount was due by
virtue
of a credit facility, payable on demand, granted by the
appellant to the Trust; that the Trust had, as security for the debt,
registered
two mortgage bonds over the Remaining Extent of Portion
23; and that Leech had bound himself as surety and co-principal
debtor in
respect of the Trust’s indebtedness. The Trust and Leech
opposed the application. On 13 August 1993 the appellant withdrew the
application. By agreement each of the parties to the application was
to pay its own costs.
[3]
During the period May to October 1993 there
were ongoing discussions between the Trust and various companies
represented by Leech,
on the one hand and the appellant on the other
hand. The discussions resulted in an agreement (“the second
agreement”) being
concluded on 7 October 1993 between the appellant
and the trustees of the Trust; Konsheil (Pty) Ltd, Needwood (Pty)
Ltd, TFC Cruise
Lines (Pty) Ltd, Growth Equity (Pty) Ltd, Leonard
Mansions (Pty) Ltd, Dashwood Wild Coast CC (all represented by
Leech); Singin (Pty)
Ltd represented by Leech’s wife (“Mrs
Leech”), who, in her capacity as trustee of the Trust, is the first
respondent; Leech
and Mrs Leech in their personal capacities. The
companies and the close corporation are hereinafter referred to as
Konsheil, Needwood,
TFC, Growth Equity, Leonard Mansions, Dashwood
and Singin respectively. From the second agreement it appears that
the Trust was
the owner of the Remaining Extent of Portion 23 and
that Konsheil was the owner of Portion 180 of that farm; that there
were three
mortgage bonds registered over the Remaining Extent of
Portion 23 of which two were in favour of the appellant and one in
favour
of Nedcor Bank Ltd (“Nedcor”); that there was a mortgage
bond registered in favour of the appellant over Portion 180; that the
parties agreed that the Trust would purchase Portion 180 from
Konsheil, consolidate it with the Remaining Extent of Portion 23 into
the proposed Portion 297, re-subdivide Portion 297, sell the
Remaining Extent of Portion 297 to Needwood and retain the other
portion
of Portion 297 which was to be known as Portion 298. It
appears furthermore that the house occupied by Leech stood on the
proposed
Portion 298 and that Needwood wished to develop the
Remaining Extent of Portion 297 as Needwood Village, a cluster
housing development.
[4]
In terms of the second agreement the
appellant agreed to lend to Needwood an amount of R5,7m (“the
loan”) together with certain
transfer costs to pay an amount of
R5,7m to the Trust on account of the purchase price of the Remaining
Extent of Portion 297. The
full amount of R5,7m was to be retained by
the appellant as payment of debts owing to the appellant by the
Trust, Dashwood, Growth
Equity, Leonard Mansions, TFC and also as
payment of the amount owing by the Trust to Nedcor in terms of its
mortgage bond over the
Remaining Extent of Portion 23. Against
payment of these amounts the mortgage bonds over the Remaining Extent
of Portion 23 were
to be cancelled. In addition the appellant
undertook to lend to Needwood the balance of the purchase price in
respect of the Remaining
Extent of Portion 297, being R1,3m, and to
grant to Needwood a loan facility for an amount of R7,5m (“the
development loan”)
to enable Needwood to procure, construct and
install all the services for the purpose of constructing the Needwood
Village on the
Remaining Extent of Portion 297. The capital amount
of the loan and development loan to Needwood was to be repaid from
the proceeds
of the sale of stands in Needwood Village.
[5]
In regard to the payment of the debt owing by
the Trust to the appellant, clause 9.2 of the second agreement
provided that the appellant
was to retain an amount of R4,125m as a
payment by Needwood to the Trust on account of the purchase price of
R/E Portion 23 and in
turn, a payment by the Trust to Absa in full
and final settlement of the claim by Absa’s Trust Bank Division
against the Trust
and Kon Leech (as surety for the Trust), in terms
of case number 11257/1993 in the Witwatersrand Local Division of the
Supreme Court
of South Africa

.
The reference to R/E Portion 23 is wrong. It should have been R/E
Portion 297.
[6]
The appellant advanced R5,7m to Needwood by,
inter alia
, retaining R4,125m as payment by the Trust to the
appellant in full and final settlement of the aforesaid claim, as
agreed. It is
that payment that gave rise to the action in the court
a quo
. In their particulars of claim, as amended, the
respondents alleged that the R4,125m was to be paid in full and final
settlement
of the appellant’s claim against the Trust in terms of a
previous agreement (“the first agreement”) concluded on 7 October
1987. In terms of that agreement Trust Bank, whose assets and
liabilities were subsequently taken over by the appellant, lent and
advanced R468 000 to the Trust, and the Trust undertook to furnish
suretyships in favour of Trust Bank in respect of the indebtedness
of
Konsheil to Trust Bank in the sum of R152 000,00 and the indebtedness
of Leech to Trust Bank in the sum of R230 000,00. The sum
of these
amounts is R850 000. The respondents alleged furthermore:
“
8. In terms of the
in duplum
rule
interest on the loan made by the Trust Bank to the Trust and on the
capital amounts due by Konsheil and Leech under the first
agreement
and the suretyships signed in respect of such indebtedness by the
Trust ceased running once the unpaid interest was equal
to the unpaid
capital amounts thereof.
Accordingly,
the maximum amount of the indebtedness of the Trust to Trust Bank
was limited to the sum of R1 700 000,00.
In
the mistaken and
bona fide
belief that in terms of the first
agreement the indebtedness of the Trust in respect of the loan and
the amounts for which the
Trust had bound itself as surety for
Konsheil and Leech with interest was the sum of R4 125 000,00, the
Trust paid the said amount
to the Defendant as provided for in the
second agreement.
11. In consequence of the aforegoing, the Trust has
overpaid the Defendant the sum of R2 425 000,00 being the difference
between the
payment of R4 125 000,00 under the Second Agreement and
the amount of R1 700 000,00 referred to in paragraph 9 above.
In
the premises the Defendant is indebted to the Trust in the sum of R2
425 000,00 and despite demand fails, refuses and/or neglects
to
repay the said sum or any part thereof.”
[7]
The appellant pleaded that in terms of the
first agreement the Trust became indebted to the Trust Bank in an
amount of R850 000,00
together with interest thereon at the Trust
Bank’s prime lending rate from 1 October 1987 to date of payment.
It alleged that
the indebtedness of the Trust to the appellant, in
October 1993, arose out of an oral agreement of novation concluded
during or about
August 1989 in terms of which it was agreed that the
appellant would consolidate the debts in the accounts of Leech (R243
470.92),
Krophile Investments (Pty) Ltd (R268 638.29), Konsheil (R202
126.68), the Trust (R637 415.02) and Leech (R129 863.86), a total
amount of R1 481 515.77, in one account in the name of the
Trust. The appellant denied that the amount of R4 125 000,00
was
paid in the belief that, in terms of the first agreement, the
indebtedness of the Trust was the sum of R4 125 000 and alleged
that
it was paid in full and final settlement of the claim by the
appellant against the Trust in terms of the aforementioned
application.
It alleged furthermore that the obligation to pay the
sum of R4,125m was assumed by the Trust in consideration for the
appellant
conferring on the parties to the second agreement the
rights, advantages and benefits defined more fully in the second
agreement;
that the Trust entered into the second agreement with the
full knowledge of the force and effect of the
in duplum
rule;
and that the Trust for sound commercial reasons, for a substantial
consideration and for the mutual benefit of itself and the
other
parties to the second agreement waived and renounced the benefits of
the
in duplum
rule or compromised or novated its indebtedness.
In summary, the appellant denied that the indebtedness of the Trust
was limited
as alleged; that the Trust was labouring under any
mistaken belief when the payment was made; that the payment was made
indebite
; that the appellant had been enriched and that the
respondents were entitled, in the absence of a tender of restitution,
to succeed
in the relief claimed.
[8]
From the aforegoing it is clear that the
respondents’ claim is based on the
condictio indebiti
. In
order to succeed the respondents had to prove that a payment was made
in the mistaken belief that it was owing (Voet 12.6.6;
Union
Government (Minister of Finance) v Gowar
1915 AD 426
at 445;
Union Government v National Bank of South Africa Ltd
1921 AD
121
at 140;
Recsey v Reiche
1927 AD 554
at 557;
Lawsa
1
st
Reissue Vol 9 para 79; De Vos
Verrykingsaanspreeklikheid in die Suid Afrikaanse Reg
3
rd
ed p 23;
Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue
[1991] ZASCA 163
;
1992 (4) SA 202
(AD)). They alleged and therefore had to prove
that the Trust i.e. the trustees of the Trust, believed that the
amount of R4,125m
was owing in terms of the first agreement but that
they were mistaken, in that, by virtue of the operation of the
in
duplum
rule, a portion of the amount paid was not owing.
[9]
What has been referred to as the
in
duplum
rule is part of our law. It provides that interest stops
running when the unpaid interest equals the outstanding capital (see
Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd
(in liquidation)
[1997] ZASCA 94
;
1998 (1) SA 811
(SCA) at 827H). In argument in
the court
a quo
respondents’ counsel accepted that the
capital amount to be utilised in the application of the
in duplum
rule amounted to R1 181 034,33. The appellant contended that the
correct capital amount for purposes of the application of the
in
duplum
rule was R1 481 515,75. It is therefore common cause that
the sum of R4,125m included
ultra duplum
interest.
[10]
At the trial in the court
a quo
the
respondents tendered the evidence of Gishen, who is the third
respondent, Mr Gordon and Leech. Gishen, who is an attorney, Gordon,
who is an accountant, and Mrs Leech, as the trustees, at the time, of
the Trust, concluded the second agreement with the appellant.
Mrs
Leech did not give evidence. It is clear from the evidence of Leech,
Gishen and Gordon that the Trust did not pay the amount
of R4,125m
because of any belief on the part of the trustees of the Trust that
the amount was due to the appellant in terms of the
first agreement.
In fact, their evidence was to the opposite effect.
[11]
Leech conducted the negotiations on behalf
of the Trust. He testified that, in his view, due to prescription and
also to the fact
that he believed that the Trust was being
overcharged in respect of interest, the Trust owed only R2,3m to the
appellant and that
he informed the trustees that the amount claimed
by the appellant was not due. According to him he did, however, at a
later stage
accept what Steele, who represented the appellant, said,
namely that “R4,1m odd” was owing. Strangely enough, what
persuaded
him was,
inter alia
, the fact that a deal had been
struck and that he believed that the purchase price of the land was a
good and a fair price. In the
light of this evidence it seems
doubtful whether he in fact accepted that the amount of the debt was
R4,125m. In any event, on the
evidence he never conveyed his
acceptance of the correctness of the figure claimed to the trustees.
[12]
Gishen testified that there was some dispute
with the appellant in relation to the amount owing. He thought the
dispute was about
an overcharging of interest (not in the sense that
ultra duplum
interest was being charged). The difference, as
he recalled it, was in the order of R1,3m. The following are extracts
from his evidence:
"[W]hy did it pay that amount, that full amount that the bank
claimed? - -Well it is simple because the bank, we owe the amount,
whether it be R3,6m or R4,1m, whatever it may be, we were not in a
position to pay it, we stood to lose everything we had, and that
is
the property, that is all the trust had, and this deal would ensure
that the bank would be paid and the trust would hold this
property
basically bond free.”
“What was advantageous to the trust to pay more than was due to the
bank? Perhaps R1,3m more than was due to the bank? - - No,
no, the
bank disputed that amount. Rather than get involved in litigation
with the bank, you see if we don’t settle with the bank
what
happens? If we don’t agree to a figure with the bank? They contend
that R4,1 is owing, we say it is less, just say. The bank
then say we
are not prepared to accept it and we proceed with proceedings against
you. What advantage is that to the trust? Rather
concede the amount,
concede that the amount that they are claiming is due and get right
out of the problem. We sell the land, we
pay the debt, we are free of
any, we have still got that portion of the property that we had left.
Very advantageous to the trust.”
“
[B]ut assuming that the difference was as high as
R1,3m surely the trust wouldn’t just pay that not to have
litigation? - - In my
view it was still worth it because here we
stand to end up with something, otherwise we go to court and if we
don’t succeed we
end up with nothing, we lose the property.”
“So the trust was prepared to pay what was a disputed debt in order
to avoid the problem? - - Definitely.”
[13]
Gordon’s evidence was to the same effect.
Leech mentioned to him that the amount was a bit too high and that he
was not happy with
the interest being charged (once again the
challenge to the interest being charged did not relate to
ultra
duplum
interest). The following are extracts from his evidence:
“Yes, so he [that was Leech) was telling you that the trust was not
legally obliged to pay that full amount? - - No he claimed
that it
was a dispute as to the rates.
Yes. - - But the bank at the time was adamant that that was the
balance owing, which we then agreed to accept because it suited the
trust to liquidate that loan.”
“So despite the fact that the trust maintained that the interest
was too high because the wrong rate might have been used . . .
- -
Yes.
It was prepared to pay the full amount because of
advantages it foresaw in this agreement? - - Correct.
…
. . . we were prepared to pay it even though we believe that the
amount was overstated.”
“And then I put to you that it would not be correct to say that the
trust would not have paid the amount if it knew that the amount
was
not correct because in fact it was prepared to pay an incorrect
amount? - - Yes.”
“Well did Mr Leech tell you that he contended that only R2,3m was
due? - - He did not mention any figures as to the exact amount.”
[14]
Notwithstanding this evidence the court
a
quo
found that the respondents had “discharged the
onus
resting on them, in proving that the payment in excess of R2 362
068,66 was made in the
bona fide
and reasonable, but mistaken,
belief that it was owing”. The court
a quo
arrived at this
finding on the basis that although the evidence established that the
trustees were prepared to go along with the
agreement because of the
benefits it had for the Trust and although the amount of the debt
was disputed, the dispute related to
the applicable rate of interest
and prescription, not to the application of the
in duplum
rule. In my view the court
a quo
erred in this regard. If an
amount is paid although it is considered not to be owing for reason A
and at a later stage it becomes
apparent that it was not owing for
reason B it remains a payment made in the belief that it was not
owing.
[15]
The evidence established conclusively that
the reason the sum of R4,125m was paid was not because of a belief on
the part of the
trustees of the Trust that it was owing. The
trustees agreed to pay that amount and paid the whole of it in order
to benefit the
Trust. It is true that a portion of the sum of
R4,125m was considered to be owing but, on the evidence, it cannot be
said that that
portion was more than R2 362 068,66, being the amount
which, according to the respondents, was the maximum amount which
could have
been owing by the Trust in view of the operation of the
in
duplum
rule. It cannot therefore be said that any portion of the
amount in excess of R2 362 068,66 was paid in the belief that it was
owing.
[16]
The respondents’ counsel argued that, had
the trustees of the Trust been aware that the amount claimed by the
appellant included
ultra duplum
interest, they would not have
agreed to pay R4,125m to the appellant. In this regard it was pointed
out that both Gishen and Gordon
testified to this effect and that
this evidence was not challenged in cross-examination. It is not
surprising that appellant’s
counsel never pertinently challenged
this evidence. The case which the appellant had to meet was that the
payment of R4,125m was
made in the belief that it was owing in terms
of the first agreement. As I have already indicated both Gishen and
Gordon conceded
under cross examination that that was not the case.
There was no need for appellant’s counsel to take the matter any
further.
[17]
In the light of the aforegoing it is not
necessary to deal with the other defences raised by the appellant.
[18]
In the result the appeal succeeds with costs
including the costs of two counsel. The following order is
substituted for the order
of the court
a quo
:
“The plaintiffs’ action is dismissed with costs including the
costs of two counsel.”
__________
P E Streicher
Judge of Appeal
Vivier, JA)
Zulman JA)
Cameron JA)
Navsa JA) Concur