Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Selikowitz J
• Judgment Date: 10 February 1995
• Citation: 1995 (4) SA 510 (C)
• Docket Number: 14378/90
• Court: Cape Provincial Division

Selikowitz J:

INTRODUCTION I

Plaintiff is a company carrying on business as a commercial banker at Long Street, Cape Town and elsewhere within the Republic. Defendant is an investment company with its registered office and main place of business at Dorp Street, Cape Town. For ease of reference plaintiff will, on occasion, hereinafter be referred to as 'the bank' and the defendant as J 'Oneanate'. In this action plaintiff claims payment from defendant of the

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A sum of R1 654 889,66, together with interest and costs of suit. Plaintiff claims the money on the basis that the amount was lent and advanced to defendant on overdraft. In an alternative claim plaintiff alleges that during March 1989 defendant acknowledged its indebtedness to plaintiff and undertook to liquidate the amount owing. Defendant contends that the money B which it admits borrowing from the plaintiff has all been repaid. Defendant has, in addition, filed a special plea in which it contends that certain of the amounts which were debited against its account with plaintiff are prescribed and that they cannot be recovered by plaintiff. Certain further defences are raised which relate to the quantification of any amount for which the defendant might be liable to plaintiff. These C defences raise questions as to the bank's so-called practice of 'capitalising' the interest on the overdraft on a monthly basis; the effect of the in duplum rule in regard to the amounts claimed by plaintiff and the appropriation of any payments made by defendant. A defence of 'account stated' was also pleaded but, quite correctly, not pursued at the D trial.

THE REVERSAL OF THE DISPUTED DEBT OF R643 282,21

The factual background

At the beginning of 1988 defendant was one of a number of companies E effectively controlled by one Gerald Lubner, a foreign resident. Defendant maintained a current account with plaintiff at its Long Street branch, but this account does not seem to have been an active account. One of the other companies in the Lubner group, namely Crest Enterprises (Pty) Ltd, banked actively at the Long Street branch of plaintiff. Early in February F 1988 the bank agreed to lend defendant an amount of R1,2 million on overdraft at plaintiff's Long Street branch. This loan was intended to be a bridging loan for a short period. It is common cause that the overdraft would attract interest on the outstanding balance at the annual rate of 2% above plaintiff's ruling prime rate of interest and that such interest would be calculated daily and debited monthly until repayment of the G amount owed on overdraft. It was a tacit term of the agreement that interest would be calculated daily on the debit balance of the account from time to time and that such debit balance would be computed with reference, inter alia, to the interest duly debited to the account in accordance with the stated agreement. The bank was also entitled to charge H its customary bank fees and charges in respect of the account. The loan was expected to be of short duration - 30 days or until the proceeds of a certain sale of shares became available - but, as was pleaded in the alternative, it was, in any event, repayable on demand or within a reasonable period after demand. As a condition for the advance of the I funds under the agreement, plaintiff required defendant to furnish it with a power of attorney to pass a continuing covering mortgage bond over certain of defendant's immovable property.

The necessary power of attorney was signed and, indeed, on 12 December 1990 the bond was passed over defendant's immovable property. Defendant admits the demand and admits that, if any amount is owing to plaintiff on J the overdraft account, a reasonable period for the repayment

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A thereof has elapsed since the demand. The purpose for which defendant borrowed the R1,2 million from plaintiff was fully stated at the time when the overdraft was granted, but is of little relevance to the facts in issue in this matter.

Pursuant to the agreement and on 9 February 1988 the plaintiff advanced B the sum of R1 100 127 to defendant. The amount advanced was paid out on defendant's directions and debited to its account at the Long Street branch. The bank statements of the Oneanate account show that the account was not actively operated over the next few years. Save for certain specific items which will be referred to, Oneanate admits the debits which were passed, including the rates of interest and other amounts charged by C the bank as its customary charges. Oneanate also admits the arithmetic correctness of the interest calculations. The material disputes relating to the actual debiting and crediting of amounts on Oneanate's account relate primarily to two items. Firstly, a credit of R627 079,69 on 23 May 1988 and the reversal of that credit by means of a debit on 1 July 1988 D and, secondly, the credit of an amount of R221 570,31 on 5 January 1989 and debits totalling the same amount the following day. The issues raised in respect of the credit on 23 May 1988 and its reversal by a debit on 1 July 1988 are extremely important inasmuch as the parties have agreed that, if the debit reversing the credit was not lawfully made, then defendant is not indebted to plaintiff at all. In other words, if E plaintiff was not in law entitled to make the reversing entry which it made on 1 July 1988, the effect thereof would have been that no further amount would be owing to plaintiff.

On 15 February 1988 a written agreement was concluded between Oneanate and the Karen Lubner Trust as sellers, on the one hand, and Union Discounting F Corporation (Pty) Ltd as duly authorised agents for Jeffrey Hirsch Lurie and Kalman Isaac Lurie as buyers. In terms of this agreement ('the Agserve agreement') the sellers sold not less than four million shares and not more than 4,75 million ordinary shares in a company known as Agserve to the Luries at a price of 14c per share. The purchase price was, therefore, G somewhere between R560 000 and R665 000. No evidence was led as to precisely how many shares were in fact sold to the Luries and consequently the final purchase price cannot be determined. In terms of clause 4.1 of the agreement the purchase price was to be paid by way of a credit note for R250 000, with the balance together with interest to be paid on or before 28 February 1989. The interest in question would appear to have H become payable from the time of delivery of the shares in question to the Luries. The agreement also provided that if the sellers did not wish to receive a credit note, they could on 14 days' notice call upon the purchasers to make payment in cash. It was recorded in the agreement that in this event the Luries would be obliged to borrow the purchase price from a financial institution and Oneanate undertook to sign as surety and I co-principal debtor in respect of such borrowings.

Shortly thereafter, and after an introduction by Lubner, the Lurie brothers arranged with the bank's Long Street branch for a loan on overdraft of R600 000 for which Oneanate would sign a suretyship. At the same time they applied to open a current account in the name of Mooi River J Valley Farm (Pty) Ltd. Formal resolutions by Mooi River to

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A open the current account at the bank were duly lodged and these resolutions provided that the signatories on the Mooi River account would be any one of its three directors, namely the two Lurie brothers and their sister, a Mrs Burman. The bank was fully apprised of the Agserve agreement and the purpose for which the Lurie brothers were seeking the loan of B R600 000. It should be noted in passing that there is no evidence that the Agserve shares were ever delivered to the Luries or that Oneanate and the Karen Helen Lubner Trust as sellers became entitled to payment of the purchase price. Jeffrey Lurie, who testified at the trial, stated that the purchasers were never called upon to pay for the shares. It is probable C from the evidence before this Court that the shares were, in fact, never delivered to the Luries. Although the Luries' attorney in his initial letter cancelling the agreement tendered return of the shares, there is no reference whatsoever to the return of the shares in the subsequent formal written agreement of settlement which effectively set aside the D transaction ab initio. There is also evidence that shortly after the sale Lubner offered to pledge two million of the approximately four million shares which he controlled to the bank so as to secure the Luries' intended overdraft with the bank. Lubner himself was unable to state in his evidence whether or not the shares had been delivered to the Luries or whether they had been pledged for security for the intended indebtedness. E There is no evidence which indicates that agreement was ever reached between the sellers and the buyers as to how many shares were being sold or what the final purchase price would be.

Lurie also testified that at no time was anyone authorised to debit the bank account of Mooi River and that Lubner was not advised that the account could be so debited.

F One Thomas Francois Erlank, who was at the time in question the manager of plaintiff's Long Street branch, testified that on 22 May 1988 Lubner telephoned him and instructed him to debit the Mooi River account and to credit the Oneanate account with R600 000 together with certain interest thereon. Erlank then proceeded to give the necessary instructions to debit G the Mooi River account and to credit the Oneanate account. He says that he did so because he trusted Lubner and because, as he stated, ''n kliënt wat goed is kan ek nie sy woord in twyfel trek nie'. He assumed that Lubner and the...