Redlex 226 (Pty) Ltd v Standard Bank of South Africa and Others [2008] ZAGPHC 449; 58/04/01 (7 November 2008)

NOT REPORATABLE

IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISIONS JOHANNESBURG

DATE: 07/11/2008

CASE NO:5858/04

In the matter between

REDLEX 226 (PTY) LIMITED...................................................................................... Applicant

and

THE STANDARD BANK OF SOUTH AFRICA & OTHERS.................................... Respondents

JUDGMENT

WILLIS J.: The applicant seeks payment of the total amount in a suspense account held by the first respondent. A fraud was perpetrated upon the applicant by one Graham Masondo, who glories in the same surname as the executive mayor of Johannesburg. He held out that he was the son of a Mr Masondo, the executive mayor of Johannesburg, and that he was mandated by the City to sell properties in the city of Johannesburg.

The applicants made a payment by way of a cheque drawn in favour of "Masondo Trust" for R800 000. This was in respect of a certain property that the applicant thought it had bought

The cheque was collected by the first respondent, the bank, in favour of an account conducted under the name of ''Masondo Home Builder".

The applicant learned of Masondo's fraud on 31 October 2004. The following facts appear from the document which the applicant has

relied upon. The deposit of R800 000, as I have already indicated was made into the account of Masondo Home Builder on 3 October 2005. At that stage the balance (after the deposit of R800 000 00) was R848 845.76.

Another deposit was made to the same account on 6 October 2005 in an amount of R220 000. On 11 October a payment made by the sixth respondent to Masondo was deposited into the same account bringing the balance in the account to R1 988 105.04.

There was a further deposit of R235 000 made to the same account on 14 October 2005. Another deposit of R22 000 on 19 October 2005, a further deposit of R5 000 on 20 October 2005, yet another of R60 000 on 25 October 2005.

On 26 October 2005, through a series of transactions R1.2 million was transferred into an account under the name of Obose ("the Obose account"). The balance in the account of Masondo Home Builder, after this transfer to the Obose account was R478 589.

Essentially this is the amount which the applicant claimed as alternate relief to the full amount in the sum of R800 000.00.

Obose, whose whereabouts are unknown, did not make an1 appearance in this application. It is common cause that Obose held thi funds for Masondo.

On 30 November 2005 the applicant successfully brought ai application before my brother Jajbhay J, in terms of which he ordered a follows:

"1. The interim order granted under case number 2793/05 on 23 November 2005 by his lordship Mr Justice Maluleke is discharged.

2. The first respondent (Obose) is to transfer the amount of R800 000 (eight hundred thousand Rand) to an interest-bearing account to be created and held with the second re (the bank - i.e the first respondent in this particular application before me now) under the name of "Masondo suspense account", which account is to bear interest ...

3. The aforesaid amount is to be held in the Masondo suspense account pending determination of an action which the applicant must institute within ten days from the date of this order.

4. The said funds will only be paid from the suspense account should the parties agree thereto in writing, alternatively upon the authority of a court order.

5. Costs are reserved for determination by the trial court."

It is common cause that paragraph 3 of Jajbhay J's order has been complied with. The applicant accordingly seeks the relief of the

funds from the suspense account in terms of paragraph 4 of Jajbhay J:s order.

The sixth respondent is also a victim of the fraud perpetrated by Masondo. The sixth respondent attained judgment against him in an amount of R1.5 million, and a balance of some R1.3 million remains payable.

As a result of the unsatisfied judgment referred to immediately above, the sixth respondent (Superseed) applied for the sequestration of Masondo's estate on 12 May 2006. A final order was granted on 8 August 2006. The third, second and fourth respondents were appointed

as the trustees of the Masondo insolvent estate.

The bank and Obose do not oppose the relief sought. It should be noted that the sixth respondent is a proven creditor of Masondo Of not inconsiderable significance is indeed the fact that the sixth respondent opposes this application.

Counsel for both sides both relied very strongly on the case of Nissan South Africa (Pty) Limited v Marnitz NO and others 2005 (1) SA 441 (SCA). Mr Louw also relied on the case of First National Bank of Southern Africa Limited v Perry N.O. 2001 (3) SA 960 (SCA). Mr Louw's Heads of Argument were replete with authority and I am indebted to him for referring me to the following cases, State v Graham 1975 (3) SA 569 (a), McEwen N.O. v Hunter 1968 (1) SA 465 (A), Swadif (Pty) Limited v Dyke N.O. 1978 (1) SA 928 (AD), Fedlife Assurance v Worldwide African Investment Holdings 2003 (3) SA 268 (W), Barnard Jacob Mellet Securities (Pty) Limited v Matuson N.O. 2005 CLR 1 (w), an article Credit Transfers in South African Law by F R Malan (who happens to be a judge in this division) and J T Pretorius appearing in the THRHR, the full reference will have to be given later on. I was also referred to an article on Electronic Funds Transfer by W G Schulze the Supreme Court of Appeal takes the second bite of the cherry, appearing in SA Merc LJ (2004) Volume 16 at page 667; An article Following the Money Across Cyber Highways: a Herculean Task or international challenge, some thought on money laundering on the internet by Izelde van Jaarsveld, and case notes appearing in the Journal for Juridical Science volume 26 number 1 of April 2001 headed "onbillikheid en skelms, hoe sommige banke hulself teen benadering beskerm teen koste van onbetrokke derdes vir wie geen blaam tref nie", and various other learned articles.

In the case of Nissan South Africa (Pty) Limited v Marnitz N.O. (supra) Streicher, delivering the unanimous judgment of the court said at paragraph 23:-

"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 monies so paid into the bank account as he would have had in respect of the actual notes and coins paid into the bank account." At paragraph 23 he says:-

"The claim against the bank is based on enrichment."

Mr Louw submitted strenuously on the basis of this authority that his client should not have to participate in the concursus creditorum

which concursus the second, the third and fourth respondent are clearly seeking to favour in terms of their interests

It is not necessary for me to decide whether these funds are available to the concursus creditorum or not although I believe it only fair to record that there may be certain attractions in Mr Louw's argument that they are not.

I also accept that if the funds remain in the suspense account the bank (the first respondent) will have been enriched. On the basis of the authority of Nissan South Africa (Pty) Limited I accept that Mr Louw has succeeded to this extent in persuading me that if his client's claim is to succeed it will succeed on the basis of enrichment action in respect of which there is a most illuminating discussion, in my respectful opinion, by Schutz JA in the case of First National Bank of Southern African Limited v Perry (supra).

In my respectful opinion Mr Louw presented a dazzlingly brilliant argument. I was enthralled, captivated and fascinated by it. However,

as Mr Morrison was shrewd to point out, the glittering edifice of his argument has one fatal flaw. The foundation of fact rests upon cotton soil. As every schoolboy knows building a structure on cotton soil is hazardous because it is so plastic.

In my opinion the facts in this particular case are indeed plastic .... and do not support the structure which Mr Louw has so skilfully

built. (The imagery is mine and not Mr Morrison's and I accept full responsibility therefore).

Mr Louw submitted in ringing tones at the end of his Heads of Argument the following:-

"Insofar as the element of factual causation is concerned, but for the fraud by which the Africanslost its R800 000, the account of Obotse could never have contained R1.2 million. Factual causation has been established."

I do not agree with him. There has been far too much movement on the account in respect of deposits (including that of the sixth

respondent) and withdrawals from the date upon which Masondo received the money and deposited it into the account to the date upon which the order from Jajbhay J was obtained.

In other words I am unpersuaded on the facts that it can be said that the enrichment of the first respondent, the bank, was "at the 20 expense of the applicant.

Accordingly the application must fail. The following is the order of the court:-

The application is dismissed with costs.

COUNSEL FOR THE APPLICANT: P F Louw SC

ATTORNEYS FOR THE APPLICANTS: Chatiras Attorneys

NO APPEARANCE FOR THE 1st RESPONDENT

COUNSEL FOR 2nd, 3rd. 4th AND 6th RESPONDENT: l Morrison

ATTORNEYS FOR THE 1st. 2nd. 3rd. 4th AND 6th RESPONDENT: Harrisons Attorneys.

NO APPEARANCE FOR 5th RESPONDENT

DATE OF HEARING: 25 APRIL 2007

DATE OF JUDGMENT: 25 APRIL 2007