Pratt v First Rand Bank Ltd

• Jurisdiction: South Africa
• Judge: Harms ADP, Cloete JA, Heher JA, Jafta JA and Kgomo AJA
• Judgment Date: 12 September 2008
• Citation: 2009 (2) SA 119 (SCA)
• Docket Number: 416/07
• Hearing Date: 02 September 2008
• Counsel: CE Puckrin SC (with KW Luderitz) for the appellant. PF Louw SC (with MA Chohan) for the respondent.
• Court: Supreme Court of Appeal

Heher JA: A

[1] The appellant, Mrs Anne Pratt, would appear to be an astute and successful businesswoman. In 2001 she owned 30 % of the shares in Anne Pratt and Associates (Pty) Ltd. The balance was held by the Fast Track Trust, registered in the Isle of Man, of which the appellant was, at B least, a beneficiary and perhaps its controller. She wished to rearrange her affairs. For this purpose she consulted the respondent, a commercial bank and an 'authorised dealer' [1] in foreign exchange.

[2] Eventually a series of agreements was concluded. For present purposes they were designed to bring about, first, the acquisition of the C Trust's interest in the company by a close corporation, Classy Living CC, of which the appellant was to be the sole member, and, second, the payment for such acquisition. To this end the respondent agreed to lend the appellant the sum of R25 million. At her request it transferred that amount to an account held by the Trust at a bank in Jersey in the D Channel Islands.

[3] When the date for repayment of the loan fell due the appellant declined to honour the obligation. The respondent threatened proceedings to recover the debt but the appellant issued summons first. She claimed an order declaring that the agreements were null and void. E

[4] Her case as pleaded was that the agreements or their implementation constituted a transaction [2] whereby capital or a right to capital was directly or indirectly exported from the Republic of South Africa in contravention of exchange control reg 10(1)(c) [3] because no exemption F or permission to do so was granted by the Treasury or a person authorised by the Treasury, and the loan agreement, being part of that

Heher JA

A transaction, was illegal, null and void and unenforceable at the instance of the respondent.

[5] The respondent denied that the transaction embodied in the agreements fell within the ambit of reg 10(1)(c) as relied on by the appellant. It pleaded in the alternative that if it did so fall - Heher JA

(a)

B in terms of reg 22E, [4] the Minister of Finance may delegate to any person any power or function conferred upon the Treasury by any provision of the regulations;

(b)

pursuant to that power the said Minister delegated the powers and functions conferred upon the Treasury in respect of reg 10(1)(c) to C the Governor of the Reserve Bank or the South African Reserve Bank;

(c)

the Reserve Bank, through its exchange control department, acting in pursuance of such delegation, issued exchange control rulings applicable to authorised dealers, including the respondent;

(d)

in terms of exchange control ruling E5(C)(a) [5] the respondent was D permitted, in relation to reg 10(1)(c), to remit through normal banking channels the local sale or redemption proceeds of non-resident-owned assets in South Africa;

(e)

the respondent was accordingly permitted to conclude and implement the transactions reflected in the agreements.

E [6] The respondent counterclaimed for specific performance of the loan agreement in the form of payment. [6] The appellant pleaded a defence substantially founded on the facts set up in support of the claim in convention.

[7] The matter proceeded to trial. An order made in terms of rule 33(4) F confined the initial hearing (to the extent presently relevant) to the following questions:

(a)

whether the agreements constituted transactions falling within the ambit of reg 10(1)(c);

(b)

whether the respondent had permission to conclude such agreements G and/or was exempted from the provisions of that regulation;

Heher JA

(c)

if the respondent did not have permission or exemption, were the A agreements a contravention of that regulation;

(d)

if they were a contravention, was the result a nullity?

[8] Only the respondent led evidence. The witness was Mr Andreas Ribbens, its official in charge of exchange control and the person with whom the General Manager, Exchange Control in that department of B the Reserve Bank liaised in relation to any issue not dealt with through the normal day-to-day structures of their respective banks. I shall shortly consider the substance of his testimony.

[9] The trial judge, Mokgoatlheng AJ, answered the separated questions as follows: C

(a)

the agreements constituted transactions falling within the ambit of reg 10(1)(c); [7]

(b)

the respondent had permission to conclude the agreements;

(c)

the agreements did not contravene the aforementioned regulation D and were not null and void.

[10] The learned judge dismissed the plaintiff's summons and...