Pratt v FirstRand Bank Ltd

• Jurisdiction: South Africa
• Judge: Fabricius J
• Judgment Date: 14 June 2013
• Docket Number: 27048/2003
• Court: North Gauteng High Court, Pretoria
• Hearing Date: 05 June 2013
• Citation: 2013 JDR 1335 (GNP)

Fabricius J:

1.

The only issue before me is whether or not to uphold par. 1 of First Defendant's replication (Pleadings Bundle 159.1 to 159.4) to the effect that par. 2 of Ms. Pratt's plea to First Defendant's counter claim is res judicata.

I was provided with various bundles of documents by agreement between the parties, and Counsel's very detailed heads of argument for which I am very grateful.

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Fabricius J

The relevant background facts are fully set out in a judgment of Mokgoatlheng AJ of 5 April 2007 under case no: 27048/03. I do not intend to repeat all of them. For present purposes however it is necessary to refer to some detail, and to have regard to the relevant pleadings.

3.

On 25 September 2003 Ms. Pratt instituted action against inter alia Firstrand, for an order declaring that "the agreement between Plaintiff and First Defendant, contained in annexure "AP1", "AP2" and "AP3" and in annexure "B" to annexure "AP6" to the particulars of claim, ab initio null and void." She had entered into, amongst others, a loan agreement with First Defendant, being the Bank, and, having pleaded the relevant background to that loan, she pleaded that the relevant amount lent to her "exceeded the fair value" of a certain shareholding and, that the relevant annexures referred to in her prayer for the relief sought, constituted a transaction or transactions whereby capital or a right to capital was directly or indirectly exported from the Republic of South Africa in contravention of Exchange Control Regulation 10(1)(c), and accordingly, the loan agreement was at all times null and void. This regulation was promulgated in terms of s9 of the Currency and Exchange Act 9 of 1933. I may just mention that her case based on Regulation 3(1)(e) was later abandoned. The other Defendants are not before Court.

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Fabricius J

On 16 November 2004 Firstrand pleaded to the particulars of claim, and also raised a counter-claim for the repayment of the loan advanced by it. Ms. Pratt then pleaded to Firstrand's counter claim, and denied liability to repay the loan advanced to her by Firstrand on the grounds that the loan agreement was void because it formed part of a suite of agreements that contravened Regulation 10(1)(c).

5.

The matter proceeded to trial on 31 January 2007, and the separated issues before the court were then the following (as formulated by the parties):

5.1

do the agreements as "AP1" to "APb" of the Plaintiff's particulars of claim constitute transactions falling within the ambit of Regulations 3(1)(e) and 10(1)(c)?

5.2

If so, did the First Defendant have permission to conclude such agreement and/or was the First Defendant exempted from the provisions of Regulation 3(1)(e) and 10(1)(c)?

5.3

If not, were the agreements a contravention of Regulation 3(1)(e) and 10(1)(c)?

5.4

If so, did the contravention of Regulation 3(1)(e) and 10(1)(c) result in the agreements being null and void?

Ms. Pratt gave no evidence during those proceedings, but Firstrand lead the evidence of Mr. Ribbens, who was the Bank's head of the foreign exchange division, and was also the bank's official representative at the quarterly

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Fabricius J

committee meetings of the South African Reserve Bank. He was not cross-examined.

I may just mention in the context of the questions posed to the court, that the learned acting judge was in agreement with the decision of Couve and Another v Reddot International (Pty) Ltd 2004 (6) SA 425 (W) to the affect that an agreement witch contravened the provisions of regulation 10(1)(c) was null and void. In Oilwell (Pty) Ltd v Protec International Limited and Others 2011 (4) SA 394 (SCA), the court disagreed with that decision, amongst others on the basis that the Treasury could consent to any transaction ex post facto, and because the relevant legislation contained a penalty clause.

Before concluding that the mentioned agreements constituted transactions falling within the ambit of regulation 10(1)(c), and that Firstrand had permission to conclude the agreements, and that they did therefore not contravene the said Regulations, and were therefore not null and void, the learned judge dealt with the evidence, and held in par. 143 of the judgment that Plaintiff had not proven on a balance of probabilities that the Bank knew that the amount of R25m significantly exceeded fair value of the particular 70% shareholding, and furthermore that the relevant transaction was concluded at arms-length.

Accordingly the learned acting judge dismissed Plaintiff's action. I must mention that the learned acting judge found, as a matter of fact, that the right to export capital accruing from the purchase of shares by a non-resident is a prior approved and committed transaction, and that therefore the present type of transaction was permitted in terms of Regulation 10(1)(c). The conclusion

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Fabricius J

of the court was based on the evidence received by it which was not challenged. In the context of the relevant transaction being concluded at arms-length, reference was made to the market related price as contemplated in Exchange Control Ruling E5(A)(i)(a).

6.

Ms. Pratt appealed to the Supreme Court of Appeal and on 12 September 2008 the appeal was dismissed with costs.

The judgment of the Supreme Court of Appeal also briefly sets out the relevant background, and I deem it important to repeat what the Court said regarding Plaintiff's case: "Her case as pleaded was that the agreements or the implementation constituted a transaction whereby capital or a right to capital was directly or indirectly exported from the Republic in contravention of Exchange Control Regulation 10(1)(c), because no exemption or permission to do so was granted by the Treasury or a person authorised by the Treasury, and a loan agreement, being part of that transaction, was illegal, null and void and unenforceable at the instance of the Respondent." There was no dispute in the appeal that regulation 10(1)(c) was engaged by the agreements or certain of them. The Supreme Court of Appeal then dealt with the onus of proof, and held that Ms. Pratt was at all times...