Thorpe and Another v BOE Bank Ltd. and Another (302/2002) [2003] ZASCA 89; 2006 (3) SA 427 (SCA) (19 September 2003)

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[2003] ZASCA 89
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Thorpe and Another v BOE Bank Ltd. and Another (302/2002) [2003] ZASCA 89; 2006 (3) SA 427 (SCA) (19 September 2003)

THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
REPORTABLE
Case no: 302/2002
In
the matter between
ROBIN
PATRICK THORPE 1
ST
APPELLANT
ROBIN
PATRICK THORPE N.O. 2
ND
APPELLANT
and
BOE
BANK LIMITED 1
ST
RESPONDENT
G
L ABRAHAMS, ADDITIONAL MAGISTRATE 2
ND
RESPONDENT
Coram: ZULMAN, BRAND, NUGENT, HEHER JJA and SOUTHWOOD AJA
Heard:
11
SEPTEMBER 2003
Delivered: 19
SEPTEMBER 2003
Summary: Bank
– Banks Act 94 of 1990 – meaning of s 54(1) – agreement to
transfer assets and liabilities – enforceability.
_____________________________________________________________________
JUDGMENT
__________________________________________________________________
HEHER
JA
HEHER
JA:
[1]
The
first respondent is a bank as defined in s 1(1) of the Banks Act 94
of 1990. It successfully sued the appellant in his personal
capacity
and as sole trustee of the Wentworth Trust in the magistrate’s
court at Durban for payment of R2 504 982,00. The appellant
appealed
to the Natal Provincial Division of the High Court which altered the
order but dismissed the appeal. It granted the appellant
leave to
appeal to this Court.
[2]
The
only issue argued before us (as had been the case in the Court below)
was the
locus standi
of the first respondent to claim payment
of money lent to the Trust by NBS Bank Limited pursuant to an ‘NBS
Action Bond Agreement’
concluded in February, 1995. (The appellant
was a surety for the obligations of the Trust.)
[3]
The
first respondent alleged in its particulars of claim that it had
taken transfer of all the assets and liabilities of NBS Bank
Limited
in term of the provisions of s 54 of the Banks Act. Whether it did
so effectively is the question in the appeal.
[4]
The
appellant pleaded an absence of knowledge of the alleged transfer and
put the first respondent to the proof. That required the
first
respondent to establish compliance with all the factual and legal
steps necessary to vest in it the rights formerly held by
NBS Bank
Limited.
[5]
Section
54(1) of the Banks Act provides as follows-
‘
No
compromise, amalgamation or arrangement referred to in Chapter XII of
the Companies Act and which involves a bank as one of the
principal
parties to the relevant transaction, and no arrangement for the
transfer of all or any part of the assets and liabilities
of a bank
to another person, shall have legal force unless the consent of the
Minister, conveyed in writing through the Registrar,
to the
transaction in question has been obtained beforehand.’
[6]
The
first respondent called its company secretary, Mr Acutt, to testify.
He told the Court that approval for the transfer of the
assets and
liabilities of NBS Bank Ltd to Boland Bank PKS Ltd had been duly
granted at general meetings of both banks held on 19
September 1997.
He produced an agreement for the transfer of the assets and
liabilities, signed on behalf of the respective banks
at Paarl on 29
September 1997 and at Durban on 30 September 1997. It contained only
four executory clauses of which ‘6. (Change
of Name)’ can be
ignored for present purposes:
‘
3. TRANSFER
3.1 Subject
to the fulfilment of the conditions precedent contained in clause 5
below:
NBS
hereby agrees to transfer to BOLAND its entire assets and liabilities
in terms of Section 54 of the Banks Act, Act No 94 of 1990,
effective
from 1 October 1997 (“the Effective Date”), hereinafter referred
to as “the transfer”
3.2 BOLAND
hereby agrees to and accepts the transfer from NBS of its entire
assets and liabilities.
4. CONSIDERATION
The
consideration in respect of the transfer of the assets and
liabilities will be as follows:
4.1 A
loan account will be created in the books of account of NBS,
reflecting BOLAND’s loan obligation in respect of the
consideration;
4.2 The
amount of the loan account will be the net asset value of NBS, as at
the Effective Date.
4.3 BOLAND
accepts the obligations in terms of the aforementioned loan account
and the transfer.
5. CONDITIONS
PRECEDENT
This
agreement is subject to the fulfilment of the following conditions
precedent:
5.1 The
consent of the Minister of Finance, conveyed in writing through the
Registrar of Banks is obtained, in terms of Sections 54(1)
and 54(8A)
of the Banks Act, Act No 94 of 1990.
5.2 The
transfer of the assets and liabilities in terms of this agreement are
approved, ratified and adopted in general meetings of
BOLAND and
NBS.’
[7]
The
same witness also testified about various changes of name which took
place in terms of s 56(5)(b) of the Act:
Boland
Bank PKS Ltd to NBS Boland Bank Ltd on 12 February 1998;
NBS
Boland Bank Ltd to BOE Bank Ltd, the respondent, on 30 September
1998.
[8]
Mr
Acutt identified a letter dated 13 October 1997 from the Registrar of
Banks to the Chief Executive Officer of NBS Boland Bank
Limited which
stated:
'AMALGAMATION
OF BUSINESS INTERESTS AND TRANSFER OF ASSETS AND LIABILITIES OF NBS
BANK LIMITED (“NBS”) TO BOLAND BANK PKS LIMITED
(“BBL”) IN
TERMS OF THE PROVISIONS OF SECTION 54 OF THE BANKS ACT, 1990
Your
letter dated 25 August 1997 and various telephonic discussions refer.
In
terms of the provisions of section 54(1) of the Banks Act, 1990 (Act
No. 94 of 1990 – “the Act”), permission is hereby granted
for
the transfer of all assets and liabilities of NBS to BBL.
Kindly
note that the Minister of Finance, in terms of the provisions of
section 54(1) of the Act, has granted permission for NBS to
transfer
all its assets and liabilities to BBL.
Furthermore,
please note that, in terms of the provisions of section 54(6)(b) of
the Act, the registration of NBS is deemed to be
cancelled and will
subsequently be withdrawn, as effected by the registration, by this
Office, of the notices referred to in section
54(5) of the Act. In
this regard please find enclosed, registered copies of the said
relevant notices. It would subsequently (sic)
be appreciated if you
could furnish this Office with the certificate of registration as a
bank of NBS, for purposes of cancellation.
Finally,
please be advised that the Minister of Finance, on the recommendation
of the Registrar of Banks and after consultation with
the
Commissioner for Inland Revenue, in terms of the provisions of
section 54(8A) of the Act, has given his consent to waive the
relevant tax liabilities flowing from the above-mentioned transfer.’
The
letter was received by the addressee on the date thereof.
[9]
The
appellant called no witnesses to testify on his behalf.
[10]
Counsel
for the appellant submitted that the clear meaning of s 54(1) is that
the legal enforceability of any transaction referred
to in the
section is dependent upon the consent of the Minister being obtained
prior to the conclusion of the transaction in question.
In the
context of this case, ‘transaction’, he said, was to be equated
with ‘arrangement for the transfer’. Since every
word in a
statute must be given a meaning to avoid surplusage,
Attorney-General, Transvaal v Additional Magistrate, Johannesburg
1924 AD 421
at 436, the word ‘beforehand’ should be accorded its
full weight, ie meaning therefore that Ministerial consent had to be
obtained
prior to entering into the arrangement. He emphasised that
the section speaks of an arrangement having no legal force
unless
(and not ‘until’) the consent of the Minister has been obtained.
Consent cannot, consistent with such an interpretation, he submitted,
be effective if given after the arrangement has been entered into.
Since the agreement for the transfer of assets and liabilities
had
been signed on 30 September 1997 providing for an effective date of 1
October 1997 and the Minister’s consent had been obtained,
at the
earliest, on 13 October 1997, it followed that the agreement could
never have come into force. As the respondent obtained
no title to
the claim of NBS Bank against the appellant, the defence of absence
of
locus standi
should have succeeded.
[11]
This
superficially attractive argument does not survive the test of the
facts or the law.
The
suspended agreement
[12]
The
whole contract between NBS Bank Ltd and Boland Bank PKS Ltd was
expressly made subject to due compliance with the provisions of
s 54
(1). Neither the transfer of the assets nor the action necessary to
give effect to the consideration clause were to have any
effect
unless the Minister’s consent was duly obtained. In
Tuckers Land
and Development Corporation Ltd v Strydom
1984 (1) SA 1
(A) this
Court reaffirmed the law applied since the decision in
Corondimas
and Another v Badat
1946 AD 548
that when a contract of purchase
and sale is entered into subject to a suspensive condition no
contract of sale is then and there
established and the binding
contractual relationship which does arise is not a contravention of a
statute prohibiting the conclusion
of a contract of purchase and sale
and only matures into such a contract on fulfilment of the condition.
Those principles apply equally
to the contract under consideration in
this appeal. Because the obligations relating to the transfer of
assets were not enforceable
by the parties until due statutory
compliance had taken place the contract was not in conflict with the
statute. The suspensive condition
was fulfilled on 13 October 1999
and NBS Bank Ltd could and did thereafter lawfully transfer its
assets and liabilities, including
its claims against the Trust and
the appellant, to its successor-in-title.
[13]
That
conclusion is predicated on an assumption that s 54(1) renders
unenforceable an agreement for the transfer of assets and liabilities
of a bank unless the Minister’s consent is obtained before the
conclusion of the agreement. The assumption is, however, based on
an
incorrect interpretation of that section.
The
interpretation of s 54(1)
[14]
Compromises,
amalgamations and arrangements in Chapter XII of the Companies Act
all involve changes in relationships between companies,
members or
creditors which are inevitably preceded by proposals and agreements
which require to be put into effect in various ways
such as the
transfer of shares, assets and liabilities or rights of action. So
also an arrangement for the transfer of assets will
usually be
initiated by an agreement which requires implementation.
[15]
The
narrow dispute between the parties is whether the ‘transaction’
which is referred to in s 54(1) is to be construed as the
underlying
agreement or the implementation of that agreement. The appellant’s
case depends upon a finding that the first is the
correct
construction since it is common cause that the parties to the
agreement withheld implementation until the Minister had given
his
consent.
[16]
According
to the Shorter OED 3 Ed 2344, ‘transact’ means:
‘
2. To
carry through, perform (an action, etc); to manage (an affair); now
especially to carry on, do (business)’,
and
‘transaction’ means
‘
2.
The action of transacting or fact of being transacted’;
‘
3.
That which is or has been transacted; a piece of business.’
It
would seem, therefore, that ‘transaction’ is capable of
sustaining either of the meanings which the parties seek to attach
to
the word. The answer must be sought in the language of the section in
the context of the legislative purpose.
[17]
There
are clear indications in the language used that the legislature had
in mind the implementation of an agreement to compromise,
amalgamate
or arrange and of an arrangement to transfer assets and liabilities.
Section 54(1) is directed against the conferring
of ‘legal force’,
ie giving legal effect; in s 54(3) the phrases ‘a transaction
effecting the amalgamation … or effecting
the transfer of all or
part of the assets and liabilities’ recognise that a transaction is
an act which brings about consequences
and not merely an agreement to
do so.
[18]
The
purpose of requiring the Minister’s consent before legal force can
attach to a compromise, amalgamation or arrangement or an
arrangement
to transfer assets and liabilities is discernible from s 54 and other
parts of the statute.
[19]
Section
54(2) provides –
‘
The
Minister shall not grant his consent referred to in
subsection (1) unless -
(a) he
is satisfied that the transaction in question will not be detrimental
to the public interest;
(b) in
the case of an amalgamation referred to in subsection (1), the
amalgamation is an amalgamation of banks only; or
(c) in
the case of a transfer of assets and liabilities referred to in
subsection (1) which entails the transfer by the transferor
bank of
the whole or any part of its business as a bank, such transfer is
effected to another bank or to a person approved by the
Registrar for
the purpose of the said transfer.’
[20]
As
counsel for the respondent pointed out, a factor which will
undoubtedly weigh heavily with the Minister in reaching his decision
is the need to preserve the asset base, reserves and liquidity of a
bank for which provision is made in ss 70, 70A and 72 of the
Act.
[21]
The
Minister is, in all these instances, enjoined to consider not merely
the existence of an agreement per se but, more important,
the
consequences of its implementation upon the parties to the agreement
and the public. The dangers which the Minister’s consent
is
intended to avoid are thus clearly the effects of any agreement in
question and there seems no obvious reason why his consent
should be
required before mere formal consensus can validly be reached on the
terms of a compromise, amalgamation or arrangement
under Chapter XII
or an arrangement to transfer the assets and liabilities of a bank.
[22]
For
these reasons I conclude that what s 54(1) means is that unless the
Minister consents before any implementation of an agreement
of the
specified nature takes place, that agreement will be regarded as
without force in law. For the reasons I have given the respondent
did
not fall foul of this provision.
[23]
The
appeal is dismissed with costs.
___________________
J
A HEHER
JUDGE OF
APPEAL
ZULMAN
JA )Concur
BRAND
JA )
NUGENT
JA )
SOUTHWOOD
AJA )