Absa Ltd v Moore and Another

• Jurisdiction: South Africa
• Judge: Lewis JA, Ponnan JA, Pillay JA, Saldulker JA and Van Der Merwe AJA
• Judgment Date: 26 November 2015
• Citation: 2016 (3) SA 97 (SCA)
• Docket Number: 20719/2014 [2015] ZASCA 171
• Hearing Date: 06 November 2015
• Counsel: AR Gautschi SC (with GW Amm) for the appellant. W Trengove SC (with PMP Ngcongo; heads of argument also prepared by O Ben-Zeev) for the respondents.
• Court: Supreme Court of Appeal

Lewis JA (Ponnan JA, Pillay JA, Saldulker JA and Van der Merwe AJA B concurring):

[1] This appeal concerns a fraudulent scheme devised and implemented by Brusson Finance (Pty) Ltd (Brusson), and to which many individuals and various banks have fallen victim. Brusson has been liquidated and C the fallout has left individuals to litigate against banks in an attempt to preclude sales in execution of their homes. Courts in the Free State and in Gauteng, where Brusson seems to have defrauded most of their victims, have dealt with matters in different ways and Brusson transactions have, to some extent, been differently structured in respect of each victim.

[2] In the matter before us, the respondents Ms Christine Moore and her D husband Mr Jacques Moore, live in a home in Vereeniging, on Erf 116, Three Rivers East, Gauteng. The street address is 6 Egret Avenue, Three Rivers East, Vereeniging. The property was registered in the name of Ms Moore. She is married in community of property to Mr Moore. E The property was subject to five mortgage bonds in favour of the appellant, Absa Bank Ltd (the bank), and the amount owing to the bank in May 2009 was some R145 000. The Moores were in arrears in the payment of the instalments on the bond. They were unable to pay other debts as well. When they applied for an extension of their home loan the bank declined to grant it because of their poor credit rating. They were F in dire financial straits.

[3] The Moores chanced upon an advertisement in the local newspaper for Brusson financing. The advertisement appears as follows: G

[4] The Moores required a loan of some R220 000. Mrs Moore contacted Brusson on the telephone number set out in the advertisement, J

Lewis JA (Ponnan JA, Pillay JA, Saldulker JA and Van der Merwe AJA concurring)

A and spoke to a representative. She was apparently keen to assist the Moores provided that they had property to use as security for the loan. Brusson faxed to the Moores various documents that they were required to fill in to facilitate their application for a loan. They subsequently went to a Brusson office and signed three documents which they believed gave B effect to a loan to them and provided security for repayment of the loan in the form of a bond over their property to Brusson. I shall return to the terms of the documents and what the Moores were led to believe was their effect. In summary, the first of the three documents was an 'Offer to Purchase' in terms of which a person (the name of the purchaser, Mr Sunnyboy Kabini, was later inserted, but not by the Moores) offered C to buy the Moores' home for R686 000, payable on transfer of the property to him. The second was a 'Deed of Sale' in terms of which Mr Kabini sold the property back to the Moores, the price to be paid in instalments. The third was a 'Memorandum of Agreement' between Brusson, the Moores and Mr Kabini, that regulated their tripartite D relationship.

[5] The Moores signed all three documents on 12 May 2009. On 30 June 2009 Mr Kabini applied to the bank for a home loan, secured by a mortgage bond over the property. The loan was granted. On 24 August 2009 the property was transferred to Mr Kabini and a E mortgage bond over it was registered in favour of the bank. Five bonds, all in favour of the bank where the Moores were the mortgagors, were simultaneously cancelled. The Moores were unaware that the property was transferred and that a new bond was registered in favour of the bank.

[6] Before then, and soon after their visit to the Brusson office, an F amount of R157 651 was paid into their bank account. They believed this to be the loan from Brusson that would tide them over their financial plight. Brusson informed them that this amount would be repayable in monthly instalments of R6907 that would include interest.

[7] The Moores could not pay these monthly instalments, and on G 2 November 2009 Ms Moore applied for debt review under the National Credit Act 34 of 2005. A debt counsellor was appointed and he applied to the magistrates' court, Vereeniging, for a restructuring of their debt obligations. He recorded the debt owing to Brusson as a 'bond'. In terms of the court order the Moores were required to repay Brusson only H R3058 a month.

[8] In July 2010 the Moores received a letter from an attorney, Mr TC Hitge, written on behalf of Brusson, advising that they were in breach of their obligation to pay to Brusson the monthly instalment of R6907. Significantly, Mr Hitge advised that the instalments were payable in terms of the 'Offer to Purchase and Instalment Sale Agreement' with I Mr Kabini. The arrears said to be owing to Brusson at that stage amounted to R43 597. He threatened the Moores with legal action.

[9] The Moores reacted to the letter by instructing an attorney, Mr W van Vuuren, who, on 13 October 2010, wrote a letter of complaint to the National Credit Regulator. Mr Van Vuuren advised the Regulator that J the Moores had approached Brusson when they experienced financial

Lewis JA (Ponnan JA, Pillay JA, Saldulker JA and Van der Merwe AJA concurring)

difficulty, and were under the impression that an investor, Mr Kabini, A would lend them money and that the property would be the security for the loan. He referred to the letter from Mr Hitge, and advised that it was the first time that the Moores had received notice that they had apparently sold their property to Mr Kabini. He also advised that the Moores had applied for debt review, that the monthly instalments B payable to Brusson had been reduced and that Brusson had been told of this.

[10] Mr Van Vuuren referred the Regulator to the decision of Jordaan J in Ditshego v Brusson Finance (Pty) Ltd [2010] ZAFSHC 68 (FB 5144/2009; 22 July 2010), in which the court had held that similar C contracts with Brusson were invalid. He asked the Regulator for advice on how to proceed on behalf of the Moores. Apparently no response to this letter was received, and the Moores said they could not afford to pay a lawyer to represent them any more.

[11] On 23 March 2011 the bank issued summons against Mr Kabini, D who was in default of his obligations under the bond. It took judgment by default on 12 July 2011 for payment of R500 067 plus interest and costs. The court declared the property specially executable. On 3 August 2011 the bank issued a writ of execution, and a notice of attachment of the property was served at the property of the Moores. It was addressed to Mr Kabini, but it referred specifically to 6 Egret Ave, Three Rivers E East, Vereeniging, which was of course occupied by the Moores. The sheriff noted that it was received on 26 August 2011. The Moores knew then that the property was attached in execution of Mr Kabini's debt to the bank.

[12] No further steps were taken after that by the Moores. It was only F when the Moores received a letter from Resque Financial Solutions, that was sent to Mr Kabini at their address, that they realised that their home was going to be sold in execution of someone else's debt. The letter was dated 17 May 2013 and was received on 23 May. It was then that the Moores took action. They approached the Legal Resources Centre (LRC) for legal advice. The LRC had been approached by several other victims G of the Brusson scam and it wrote immediately, on 27 May 2013, to the sheriff, Vereeniging, and to the attorneys for the bank, requesting the stay of the execution, and stating that, if not stayed, the Moores would bring an urgent application to prevent the sale.

[13] On 28 May 2013 the Moores brought an urgent application to H interdict the sale of the property in the South Gauteng High Court, and for the rescission of the default judgment against Kabini. The application for the interdict was granted on 30 May 2013. And on 24 June 2013 they applied for declaratory orders that the three agreements be declared invalid, that Ms Moore was entitled to restitution of the property and I that the mortgage bond over the property was invalid and should be set aside. The applications were brought against the sheriff for the district of Vereeniging, Mr Kabini, the bank (as third respondent), the liquidators of Brusson and the Registrar of Deeds.

[14] Only the bank opposed...