P U Injection Manufacturing (Pty) Ltd v Nebank Limited and Another (28794/05) [2006] ZAGPHC 184 (4 May 2006)

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

Date: 4/5/2006

Case no: 28794/05

UNREPORTABLE

In the matter between:

P.U. INJECTION MANUFACTURING (PTY) Applicant

and

NEDBANK LIMITED First Respondent

SOUTH AFRICAN RESERVE BANK Second Respondent

JUDGEMENT

1] The applicant sues the first respondent for payment of the sum of R4 342 817,16 with interest at the rate determined by the Reserve Bank from time to time and capatalised on a month-to-month basis from 22 October 1992 to date of payment together with attorney and own client costs including the costs of two counsel.

2] It bears mentioning that the second respondent is cited insofar as it may have an interest in the application and no relief is sought against it.

3] THE FACTS

3.1 On 30 November 1988 a company known as Olympus Investments Limited ("Olympus") applied to the first respondent, as an authorised dealer in terms of regulation 2(3) and 14A(1) of the Exchange Control Regulations, for the release of financial rands to the approximate value of R12 500 000,00 the beneficiary of which was the applicant.

3.2 On 12 January 1989 Exchange Control approval was obtained by the first respondent for the release of the financial rands.

3.3 A financial rand suspense account was opened in the name of the applicant at Standard Corporate and Merchant Bank, Bramley and between February and April 1989 amounts totalling approximately R8 146914.37 were deposited into that account which together with the balance on that account of R2 497793,80 totalled R10 644 708,17.

3.4 During the same period, the amount of R7 728 523,48 was paid out on behalf of the applicant for the purchase of goods and services upon the production of auditors' certified invoices.

4] On 5 May 1989 the Financial Rand Controlling Officer in Standard Bank's International Division was ordered by the Exchange Control Department of the Reserve Bank to freeze all funds held in the name of "PU Injections Manufacturing/Olympus Ltd” pending an investigation into the account by the second respondent. This was done in terms of Exchange Control Regulation 22A(1)(a)(i)

and the amount attached was R2 912 812,34 which was made up as follows:

4.1 an amount of R2 497 793,80 in the financial rands suspense account; and

4.2 R415 027,54 in the applicant's account held at the Bramley branch of Standard Corporate and Merchant Bank.

5] In accordance with these instructions, these funds were transferred to the second respondent's account at Standard Bank's treasury division where they were held pending further instructions from the second respondent.

6] On 22 October 1992 and on the instructions of the second respondent these funds, with interest, were transferred as financial rands to the first respondent with Olympus Limited as the beneficial customer. This was done in terms of Exchange Control Regulation 22A(3)(a) and appears from a letter from Bell Dewar and Hall dated 16 August 2001 and which is attached as Annexure "F"

to the founding papers. The difficulty is that Olympus no longer existed at that stage, it having being deregistered on 20 September

1990. In any event, the transfer was effected by a Society for World Wide Interbank Financial Telecommunication ("SWIFT') which reflected the beneficiary customer as Olympus.

7] The applicant alleges that the instructions from second respondent should have read that the funds were to be transferred to the account of PU Injections Manufacturing / Olympus Ltd and not only Olympus Ltd. This is denied by the first respondent.

8] Be that as it may, it appears that, contrary to the instructions of the second respondent, the funds were not transferred to the account of Olympus, but to a company known as Manaaz International and from there to a company known as Dhaboor SA (Pty)Ltd. The first respondent also states that cheques were then drawn against these funds and the amounts of the cheques were debited against the account of Dhaboor SA (Pty)Ltd. What is interesting is that no explanation for this discrepancy is given by the first respondent which would explain why this transfer took place in contravention of the SWIFT instruction which it alleges is final and binding.

9] On its own version, the first respondent is no longer in possession of any of these documents as the cheques themselves have been (legitimately) destroyed and the other documentation cannot be located by virtue of the lapse of 13 years.

10] On 2 April 2002 the applicant's attorney wrote a letter of demand to the first respondent in response to which the first respondent replied on 26 July 2002 setting out the facts applicable to the matter and specifically the fact that the funds were paid into the accounts of Manaaz International and then Dhaboor SA (Pty)Ltd. This letter also refers to the fact that cheques were drawn on this account between 30 October 1992 until 4 March 1993.

11] What is of importance regarding the correspondence attached to the founding papers is that it appears that the applicant and the second respondent entered into negotiations regarding the release of these funds to the applicant. Of particular importance are the following letters:

11.1 the letter from Julian Pokroy, the applicant's attorney I dated 30 August 2002 which records an agreement to pay the second respondent 25% of any amount received from the first respondent;

11.2 the letter from the second respondent to the first respondent dated 25 September 2002 specifically authorising the release of the funds to the trust account of Julian Pokroy, the applicant's attorney of record;

11.3 the letter of the applicant dated 30 September 2002 undertaking that none of the unblocked funds will be expatriated without the official authority of the second respondent; and

11.4 most importantly, the letter of the second respondent dated 22 May 2003 stating that no financial rands may have been released without prior approval granted by the second respondent.

12] The burning question is therefore whether the applicant is entitled to the funds released.

AD POINTS IN LIMINE

13] The first respondent has taken 2 points in limine:

13.1 Firstly, that the applicant's claim has become prescribed; and

13.2 Secondly, that the applicant was aware, or should have anticipated, that there would be material disputes of fact relating to the relief. The submission is that the relief sought in motion proceedings is inappropriate and that the application should be dismissed. It is also submitted by the first respondent that there are various factual issues which fall particularly within the knowledge of the deponents to the founding affidavit and that the first respondent should be given an opportunity to cross­ examine these witnesses.

14] AD PRESCRIPTION

The submission by Mr Rood on behalf of the first respondent is that

14.1 the second respondent ordered the release of the funds on 22 October 1992. He submitted that the attachment of these funds was subject to the provisions of Regulation 22A(3) which provides as follows:

“(3) The Treasury shall­-

(a) return any money or goods attached under paragraph (a) of subregulation (1), including any money or goods accrued therefrom, to the person in whose possession it has been found or the person entitled thereto, on a date not later than 12 months as from the date on which such money or goods have been attached;

(b) cancel any order issued or made under paragraph (b) or (c) of subregulation (1), on such date,

unless such money or goods or money or goods to which such order relates are forfeited under regulation 228 before that date.”

14.2 The submission further went that, in terms of Regulation 22A(3), by 5 May 1990, which was 12 months after the date of attachment, the funds were required to be returned to the person in whose possession the funds were found or the person entitled thereto unless the funds had been forfeited.

14.3 I pause here to interject that nowhere does the first respondent deny (with any degree of particularity or firmness) that the funds were found in the possession of the applicant.

14.4 Mr Rood submits that on 22 October 1992 the funds under attachment, with interest, were transferred to first respondent as financial rands with Olympus as the beneficiary. (This is common cause).

14.5 Mr Rood then submits that had applicant been entitled to the funds, then upon receipt of the funds by the first respondent, the debt would have become due as is defined in the Prescription Act, 1969.

14.6 The fact that a letter of demand was only addressed to the first respondent on 2 April 2002 (some 9 years and 6 months after the funds had been released), means that the claim has already prescribed. In any event, the submission continued:

14.6.1 the applicant was notified on 26 July 2002 that the funds had been paid out by first respondent during October 1992 to March 1993;

14.6.2 more than 3 years had passed since that date which would be the latest date upon which the applicant would be aware of the facts from which the alleged debt arose; and

14.6.3 more than 3 years had passed since date of demand.

14.6.4 This application was only served on 22 August 2005 on first respondent.

14.7 Mr Rood also submitted that the letter from the second respondent regarding the authorisation to the applicant to claim the released

funds does not assist the applicant as it does not state the date upon which the. settlement was reached.

14.8 According to Mr Rood, irrespective of which formulation you place upon this claim, it has become prescribed.

15] In answer to this, Mr de Vos, on behalf of the applicant, submitted the following:

15.1 that it can only be said that the debt became "due" (vide the Prescription Act,1969) when the applicant became entitled to claim the funds from the first respondent;

15.2 that, as the funds were in the currency of financial rands, it required the prior approval of the second respondent before the first respondent would have been entitled to release the funds to the applicant and that this approval was only granted by the second respondent on 25 September 2002;

15.3 that, prior to 25 September 2002, any attempt to claim these funds (in an action) would have met with an objection that the approval of the second respondent had not yet been obtained.

16] Mr de Vos further submitted that this approval of the second respondent would form an essential allegation in any action against the first respondent and that it is "...a necessary condition of success in its claim.” Big Rock (Pty}Ltd v Hoffman 1983 1 SA 534 (T); Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd (in F Liquidation) [1997] ZASCA 94; 1998 (1) SA 811 (SCA) which states that every fact required to be proved by the plaintiff to support his right to judgment had to be in existence. (at 596A1B-F, 597G-H and 5971-598A.) Mr de Vos also submitted that consent from the second respondent for the release of the funds (they being financial rands) could only be obtained once the facts had been obtained from first respondent.

17] The fact that the date of the settlement between the applicant and the second respondent is not mentioned in the letter, Mr de Vos submits is no bar to the grant of this application as it is for the respondent to prove prescription. Whilst I do not agree with the submission in its entirety, I am not inclined to dwell on this aspect in light of the finding I make in paragraph 17 below.

18] In my opinion, it is clear from the correspondence, and particularly the letter from the second respondent dated 22 May 2003, that

irrespective of whether the funds had been transferred to the first respondent in 1992, the consent of the second respondent had to first be obtained prior to the applicant being able to draw the funds legitimately. This agreement is only recorded in a letter dated 30 August 2002 by Julian Pokroy and the actual instruction from the second respondent to the first respondent to pay over the funds held by the first respondent only took place on 25 September 2002.

19] However, what is not clear is the precise date upon which the agreement between the applicant and the second respondent was reached but this too is no bar to the application as the funds were held in an account on behalf of Olympus and therefore, in order to complete any potential cause of action, the last component was the confirmation by Olympus that it has no claim to the funds which took place by letter on 20 September 2002. Thus the last component of the claim was on that date and it is from that date that I find prescription commenced.

20] Accordingly this point is dismissed.

21] AD DISPUTES OF FACT AND REFERRAL TO EVIDENCE

Mr Rood's submissions regarding this were the following:

21.1 that the first respondent is confronted with a substantial claim which is made against a backdrop of extremely suspicious activities involving suspected exchange control irregularities;

21.2 that due to the lapse of time the first respondent is confronted with a situation where it is no longer in possession of relevant documents and records and that there are further relevant documents which are in the possession or under the control of the applicant but which have not been disclosed, such as documentation between applicant and/or Olympus and the Reserve Bank;

21.3 that there are certain issues which fall within the exclusive knowledge of deponents to the applicant's affidavits and that the first respondent requires investigation of these issues by way of cross-examination of these deponents;

21.4 Standard Bank may have crucial documents which bear upon this matter; and

21.5 it is in the interests of justice that the true facts be revealed.

22] I cannot allow a fishing expedition to be conducted by the first respondent in the hope that the so-called "big fish" be caught and, in my opinion, a referral to evidence would be no more than this. Firstly, in light of the submission made in 21.4 supra, it is incomprehensible why Standard Bank was not approached or joined to shed light on this matter. Secondly, if the first respondent has no documents which can shed light on why this application should not be granted then I see no reason why this matter should be referred. Furthermore, the so-called "suspicious activities" seem to be no bar to the second respondent who has authorised the release of the funds to the applicant.

23] In my opinion the true difficulty in this matter is that the first respondent released the funds to parties who were not entitled

thereto and those funds are no longer in the account designated for their safe-keeping.

24] I am therefore not inclined to uphold the second point in limine and that too is dismissed.

25] I find that there is no cogent reason adduced by the first respondent to show why the applicant is not entitled to payment of the sum claimed by it and, in fact, it appears quite clear, in light of the history of the matter, that the applicant is entitled to these funds on all the facts before me.

AD COSTS

26] This matter is a complicated one and I am indebted to both counsel for their comprehensive heads of argument and their assistance.

27] That being said I find that there is no reason to deviate from the norm of the usual order that costs follow the event.

28] The applicant has asked for a special order as to costs. I find that there is no sound reason for this order as the first respondent was entitled to defend the matter and raise the question of prescription, and in this regard placed good argument before this Court.

29] Although the heads of argument submitted on behalf of the applicant are signed by both Mr de Vos and his junior Mr van der Merwe, it was only Mr de Vos who appeared at the hearing of this matter to argue it and I intend to reflect this in the order granted.

ORDER

In the result I make the following order:

1. Prayer 1 of the Notice of Motion dated 19 August 2005 is granted;

2. The first respondent is ordered to pay the costs of the application, including the costs of two counsel save that the costs of employment of only one counsel for the applicant is allowed in respect of the appearance on 1 March 2006.

NEUKIRCHER AJ

2 May 2006