THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 854/2020
In the matter between:
SOUTH AFRICAN RESERVE BANK

APPELLANT

and

RENETTE LEATHERN N O

FIRST RESPONDENT
WILLIAM DAVID LEATHERN N O

SECOND RESPONDENT
JERIFANOS MASHAMBA N O

THIRD RESPONDENT
[In their capacities as duly appointed trustees of the
insolvent estate of Ahmed Dawood Bhorat (T2450/16)]
GROBANK LIMITED

FOURTH RESPONDENT
Neutral citation: South African Reserve Bank v Leathern N O and Others (Case no
854/2020) [2021] ZASCA 102 (20 July 2021)

Coram:
MAYA P, MBHA and MAKGOKA JJA and GORVEN and UNTERHALTER
AJJA
Heard:
20 May 2021
Delivered:
This judgment was handed down electronically by circulation to the parties’
representatives by email, and by publication on the Supreme Court of Appeal website
and release to SAFLII. The time and date for hand down is deemed to be 10h00 on the
20th day of July 2021.
Summary: Insolvency law – funds in bank accounts blocked in terms of Regulation 22A
and/or 22C of the Exchange Control Regulations – whether the requirements to set aside
blocking order satisfied – whether such funds vested in an insolvent estate – whether
sequestration order invalidates blocking order.

______________________________________________________________________
ORDER
______________________________________________________________________
On appeal from: Gauteng Division of the High Court, Pretoria (Holland-Müter AJ sitting
as court of first instance):
1 The appellant’s application to adduce further evidence is dismissed with costs
including the costs of two counsel.
2 The appeal is upheld with costs including the costs of two counsel.
3 The order of the high court is set aside and replaced with the following:
‘The application is dismissed with costs including the costs of two counsel.’
______________________________________________________________________
JUDGMENT
______________________________________________________________________
Makgoka JA (Maya P, Mbha JA and Gorven and Unterhalter AJJA concurring):
[1] On 15 June 2017 the appellant, the South African Reserve Bank (the Reserve
Bank) issued a blocking order against two bank accounts of Mr Ahmed Dawood Bhorat,
trading as R & R Traders and Brokers (R and R Traders) held with the fourth respondent,
Grobank Limited (formerly the Bank of Athens). The accounts were blocked on suspicion
that Mr Bhorat had used them in contravention of certain provisions of the Exchange
Control Regulations (the regulations); promulgated in terms of s 9 of the Currency and
Exchanges Act 9 of 1933 (the Act).1 At the time, the funds standing to his credit in the two
accounts were R13 132 887.98 and R1 868 995.05, respectively.

1 In terms of s 9(2)(b)(i) the President may make any regulation affecting currency, banking or exchanges
for-
‘the blocking, attachment and obtaining of interdicts for a period of [36 months] . . . and the forfeiture and
disposal by the [National] Treasury of any money or goods referred to or defined in the regulations or
determined in terms of the regulations or any money or goods into which such money or goods have been
transformed by any person, and-
(aa)
which are suspected by the [National] Treasury on reasonable grounds to be involved in an offence
or suspected offence against any regulation referred to in this section, or in respect of which such
offence has been committed or so suspected to have been committed;
(bb)
which are in the possession of the offender, suspected offender or any other person or have been
obtained by any such person or are due to any such person and which would not have been in
such possession or so obtained or due if such offence or suspected offence had not been
committed; or

[2] Five days later, on 20 June 2017, Mr Bhorat’s estate was provisionally
sequestrated at the instance of the South African Revenue Services (SARS), pursuant to
an unsatisfied judgment obtained against Mr Bhorat in March 2015 for outstanding tax
liability of over R40 million. The first, second and third respondents were provisionally
appointed co-trustees of Mr Bhorat’s estate on 11 July 2017, and finally appointed on 24
October 2018, following confirmation of the provisional sequestration order on 5 March
2018.
[3] The trustees asserted that in terms of s 20(2)(a) of the Insolvency Act 24 of 1936
(the Insolvency Act) the funds formed part of Mr Bhorat’s estate, and as such, vested in
them as the trustees of his insolvent estate with effect from the date of Mr Bhorat’s
provisional sequestration, 20 June 2017. Accordingly, they demanded that the funds be
paid over to them. The Reserve Bank declined for Grobank to do so, and contended that
according to its investigations, the funds did not ‘belong’ to Mr Bhorat and accordingly did
not accrue to his insolvent estate.
[4] Consequently, the trustees launched an application in the Gauteng Division of the
High Court, Pretoria (the high court) seeking a declaratory order that the funds vested in
them as the trustees of the insolvent estate of Mr Bhorat. Ancillary thereto, they sought
an order lifting the ‘blocking’ order; and for Grobank to pay over the funds to them. The
Reserve Bank opposed the application. Grobank did not oppose the application, and has
adopted the same stance in this appeal by filing a notice to abide the decision of this
Court.
[5] The thrust of the trustees’ application was that: (a) the Reserve Bank did not have
reasonable grounds to block Mr Bhorat’s accounts; (b) neither the regulations under which
the accounts were blocked, nor the common law, exclude or exempt the funds from
vesting in the insolvent estate; (c) the blocking of the accounts did not divest Mr Bhorat’s
insolvent estate of the ownership of the funds, nor did it grant the Reserve Bank a

(cc)
by which the offender, suspected offender or any other person has been benefited or enriched as
a result of such offence or suspected offence -
Provided that, in the case of any person other than the offender or suspected offender, no such money or
goods shall be blocked, attached, interdicted, forfeited and disposed of if such money or goods were
acquired by such person bona fide for reasonable consideration as a result of a transaction in the ordinary
course of business and not in contravention of the regulations.’

preferent right to the funds above the rights of the creditors in the insolvent estate. The
trustees’ assertions prevailed in the high court, which issued a declaratory order that the
funds vested in Mr Bhorat’s insolvent estate. The high court accordingly lifted the blocking
order and ordered Grobank to immediately pay over the funds to the trustees. The
Reserve Bank was also ordered to pay the costs of two counsel.2  In addition, the high
court extended the blocking order on the following terms:
‘1 That the blocking order issued by the [Reserve Bank] on 15 June 2017 in respect of the
accounts numbers 30000001640 and 20000441617 of Mr Ahmed Bhorat (trading as R and R
Traders and Brokers) standing to his credit at Grobank be extended in terms of section 9(2)(g) of
the Currency and Exchanges Act 9 of 1933 to date of a final determination of the main application
(including any appeal); unless the [Reserve Bank] is ultimately successful, in which event the
order shall be extended with a period of 90 days from the date of the final determination.
2 The [Reserve Bank] is directed to take such steps as may be necessary to procure that the
accounts identified in prayer 1 above be converted into interest-bearing accounts.
3 That the [trustees’] rights to challenge the validity of the blocking order is not prejudiced by the
extension.’
[6] The Reserve Bank appeals against that order, with the leave of the high court, on
four grounds, namely: (a) that the relief sought by the trustees was not competent as the
blocking order was a final administrative order which should have been challenged under
the Promotion of Administrative Justice Act 3 of 2000 (PAJA); (b) that the high court was
incorrect in its evaluation as to  whether the Reserve Bank had established a reasonable
suspicion that Mr Bhorat had contravened the regulations; (c) that the funds deposited
into Mr Bhorat’s accounts did not ‘belong’ to him as he was merely a collection agent; (d)
and that the sequestration order did not invalidate the blocking order.
[7] There are three key issues on appeal. First, whether the high court was correct to
set aside the blocking order. Secondly, whether the funds standing to the credit of Mr
Bhorat’s bank accounts ‘belonged’ to him and fell into his insolvent estate, thus vesting in
the trustees. Thirdly, and closely linked to the second issue, is whether a sequestration
order invalidates a blocking order by operation of law. To determine these issues, it is

2 The high court order granted an order ‘in terms of prayers 1 – 4’ of the Notice of Motion. Those prayers
included a prayer for costs against Grobank, which did not oppose the application. In the body of the
application, the trustees stated that, if Grobank did not oppose, no costs order would be sought. Therefore,
to the extent the costs order was made against Grobank, it was made per incuriam.

necessary to set out the provisions of the regulations under which the accounts were
blocked, as well as the factual background underpinning the decision to block them.
[8] Amongst other things, the regulations prohibit various financial transactions,
including the transfer of money from South Africa to any person outside the country, save
within their ambit. In terms of the regulations, where a designated functionary of the
Reserve Bank, on reasonable grounds, suspects a person to be involved in the
contravention of any provisions of the regulations, the functionary is empowered, under
the provisions of regulations 22A and/or 22C, to issue a blocking order in respect of a
banking account suspected of being used for illegal purposes.  The effect of the order is
to prohibit any person from withdrawing, or causing to be withdrawn any money standing
to the credit of the bank account in question. If the Reserve Bank is satisfied that
contraventions indeed occurred, it may ultimately declare the attached funds forfeit to the
State.
[9] Regulation 22A deals with the blocking or attachment of ‘tainted’ goods and
money, ie goods and money which may be the subject of a contravention of the
regulations. On the other hand, regulation 22C deals with the blocking or attachment of
‘untainted’ money to the value of the contravention perpetrated by the exporting of
‘tainted’ money. In the present case, the Reserve Bank placed reliance on both
regulations, albeit in the alternative. Regulation 22D provides, among others, for the
review of an attachment or an order made in terms of regulation 22A or regulation 22C. It
provides that any person who feels himself aggrieved by such attachment or order may
bring an application in a competent court for the review thereof. Such court may set aside
any such attachment or order or decision, as the case may be, on the grounds set out in
the provisions of s 9(2)(d)(i) or (iii) of the Act. Sub-section (i) provides that:
‘(i) [a]ny person who feels aggrieved by any decision made or action taken by any person in the
exercise of his powers under a regulation…which has the effect of blocking, attaching or
interdicting any money or goods, may lodge an application in a competent court for the revision
of such decision or action or for any other relief, and the court shall not set aside such decision
or action or grant such other relief unless it is satisfied—
(aa) that the person who made such decision or took such action did not act in accordance with
the relevant provisions of the regulation; or
(bb) that such person did not have reasonable grounds to make such decision or to take such

action…’
(cc) that such grounds for the making of such decision or the taking of such action no longer exist.
(Emphasis added.)
[10] The factual basis for blocking the accounts was set out in the Reserve Bank’s
answering affidavit, deposed to by Mr Andre Malherbe, a manager and an investigator in
its Financial Surveillance Department. Mr Malherbe stated that during May 2017, the
Reserve Bank commenced an investigation into the affairs of several entities and persons
suspected of being involved in illicit financial flows from the country. Its investigation had
revealed that R and R Traders and other persons or entities were suspected of having
contravened several provisions of the regulations between September 2016 and June
2017. The alleged contraventions involved a scheme in respect of foreign currency,
importation of goods and exportation of capital from the country, totaling more than
R700 000 000. Mr Bhorat was identified as part of a group of persons and entities
designated as ‘forex transferring entities’, who were suspected of having used their bank
accounts as conduits for illicit transfer of money to various foreign beneficiaries, in China
and Hong Kong.
[11] On 13 June 2017, the Reserve Bank identified a transfer of R3 320 709 into one
of Mr Bhorat’s bank accounts (the first account). The examination of the account and the
foreign exchange transaction records, revealed that the account was mainly utilised as a
foreign exchange trading account. Twenty-six deposits totalling R12 601 794.41 were
made into this account mainly by three companies between 14 June 2017 and 15 June
2017. All the funds were ‘booked’ by authorised dealers as foreign exchange transactions.
[12] The investigation further revealed that R and R Traders had, allegedly in
contravention of the regulations, transferred approximately R201 000 000 abroad since
June 2016 as advance import payments, whereas goods to the value of approximately
R78 400 000 had been received in South Africa. There appeared to be an almost ten-fold
increase in foreign exchange turnover within two months preceding the R3 320 709
transaction referred to above. There were also a number of advance import payments in
respect of which R and R Traders had failed to clear goods through customs within four
months from the date of payment made on account of such goods.

[13] Mr Malherbe further stated that one of the foreign beneficiaries of the foreign
exchange transferred by R and R Traders was an entity controlled from South Africa,
which acted as an agent in China or Hong Kong for transfers from a number of the forex
transferring entities to the ultimate beneficiaries, against payment of commission. Mr
Bhorat’s second account appeared to have been funded by cash deposits between 13
and 14 June 2017, save for one transfer from the first account. The bulk of these funds
were utilised for purposes of foreign exchange transactions.
[14] It was on the basis of the above information that Mr Malherbe, on behalf of the
Reserve Bank, suspected that Mr Bhorat’s accounts had been used as conduits for illicit
financial flows from the country, hence the action taken to put in place the blocking orders.
In the light of the Reserve Bank’s explanation, it must first be determined whether the
Reserve Bank’s suspicion, which triggered the invocation of regulation 22, was
reasonable. As already stated, the absence of reasonable suspicion is one of the three
bases for setting aside a blocking order in terms of regulation 22D, read with
s 9(2)(d)(i)(bb) of the Act.  The high court was not persuaded that there was reasonable
suspicion. It said:
‘The [Reserve Bank] argues that the monies blocked do not vest in the trustees as it is the fruit of
either theft of fraudulent action. There are only vague unsubstantiated allegations in this regard
and no proof of any kind was before the court…’
[15] The high court applied the wrong test by requiring the Reserve Bank to provide
some ‘proof’ that the regulations had, in fact, been contravened. The high court also failed
properly to assess the explanation and evidence provided by the Reserve Bank. This
Court has endorsed Lord Devlin’s formulation of the meaning of ‘suspicion’:3
‘Suspicion in its ordinary meaning is a state of conjecture or surmise where proof is lacking; “I
suspect but I cannot prove”. Suspicion arises at or near the starting point of an investigation of
which the obtaining of prima facie proof is the end.’4

3 Duncan v Minister of Law and Order 1986 (2) SA 805 (A) at 819I; Minister of Law and Order v Kader 1991
(1) SA 41 (A) at 50H-I; BTR Industries South Africa (Pty) Ltd and Others v Metal and Allied Workers’ Union
and Another 1992 (3) SA 673 (A) at 690G-H; Powell N O and Others v Van der Merwe N O and Others
[2005] 1 All SA 149 (SCA); 2005 (5) SA 62 (SCA) para 36.
4 Shabaan Bin Hussien and Others v Chong Fook Kam and Another [1969] 3 All ER 1626 (PC); [1970] AC
942 (PC) at 948B.

[16] Thus, all that was required of the Reserve Bank was a suspicion based on
reasonable grounds, which had to be objectively assessed. When one considers the
Reserve Bank’s detailed explanation, supported by an excerpt from Mr Bhorat’s bank
statement, the suspicion is overwhelming. For example, in just one day, 14 June 2017,
there were alarming movements of large sums of money in and out of the first account: a
total amount of R7 525 442 was debited in payment of foreign entities. In all the
circumstances, the Reserve Bank’s suspicion was well-founded and reasonable. The high
court was thus not entitled to set aside the blocking order, as the provisions of regulation
22D, read with those of s 9(2)(d)(i)(bb) of the Act, discussed earlier, were not satisfied.
[17] I turn now to consider whether Mr Bhorat was the owner of the funds standing to
his credit. The high court correctly referred to the general position in our law, which is this.
Generally, where money is deposited into a bank account of an account holder it mixes
with other money and, by virtue of commixtio, it becomes the property of the bank.5 The
account holder has no real right of ownership of the money standing to his credit6 but
acquires a personal right to payment of that amount7 from the bank, arising from their
bank-customer relationship. The bank’s obligation, as owner of the funds credited to the
customer’s account, is to honour the customer’s payment instructions.8 Once ownership
passes to the bank it immediately incurs the obligation to account to its customer.
[18] Based on this general position, the high court concluded that Mr Bhorat had
acquired a personal right against Grobank in respect of the funds. The court reasoned as
follows:
‘It is only when a credit in the account was obtained by theft or fraud, or erroneously paid into the
account that the client will have no claim against the bank for that money. See Nissan South Africa
(Pty) Ltd v Marnitz N O 2005 (1) SA 441 (SCA) at 448-449.9 The necessary proof is lacking in this
matter.’

5 Commissioner of Customs and Excise v Bank of Lisbon International and Another 1994 (1) SA 205 (N) at
208I; Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 (C) at 530G-532D; ABSA
Bank Bpk v Janse van Rensburg 2002 (3) SA 701 (SCA) at 709A-B.
6 S v Kearney 1964 (2) SA 495 (A) at 503; S v Graham 1975 (3) SA 569 (A) at 577; Trustees, Estate
Whitehead v Dumas and Another [2013] ZASCA 19; 2013 (3) SA 331 (SCA) para 13.
7 Louw N O and Others v Coetzee and Others 2003 (3) SA 329 (SCA) para 12.
8 Muller N O and Another v Community Medical Aid Scheme [2011] ZASCA 228; 2012 (2) SA 286 (SCA);
[2012] 2 All SA 252 (SCA) para 13.
9 The full and correct citation is Nissan South Africa (Pty) Ltd v Marnitz N O and Others (Stand 186 Aeroport
(Pty) Ltd Intervening) 2005 (1) SA 441 (SCA); [2006] 4 All SA 120 (SCA).

[19] With respect to the learned Judge, Nissan is no authority for the proposition that
theft, fraud, or erroneous payment are the only circumstances in terms of which an
account holder will have no claim against the bank for the money standing to their
account. While those instances might be the obvious ones, this is certainly not a closed
list. As Du Plessis explains:
‘The question whether funds “belong” to a particular person, in the sense that such a person
enjoys a right to claim the credit balance in the account, depends on the agreement governing
the operation of the account. The name of the account holder is not decisive. The agreement may
for example determine that a party may deposit funds into the account as agent, and also withdraw
funds as agents, but without personally enjoying the right to claim the credit balance in the
account…’10 (Footnotes omitted.)
[20] Indeed, in Joint Stock Company Varvarinskoye v Absa Bank Ltd and Others [2008]
ZASCA 35; [2008] 3 All SA 130 (SCA); 2008 (4) SA 287 (SCA) para 31, this Court
explained that the rule that only an account holder may assert a claim to money held in
its account with a bank, is not a universal and inflexible one.  In that case, it was held that
where to the knowledge of the bank and the account holder, the account holder had
limited control over the funds, the right to claim the funds standing to the credit of the
account, did not accrue to the account holder but to the depositor.  I shall revert to this
decision.
[21] Counsel for the respective parties referred to Muller N O and Another v Community
Medical Aid Scheme [2011] ZASCA 228; 2012 (2) SA 286 (SCA); [2012] 2 All SA 252
(SCA). There, Humanity, a medical aid scheme, had agreed to transfer its members to
another medical aid, Commed, with effect from 1 September 2008. Humanity was wound
up later that month. The September 2008 contributions, were, however, paid into
Humanity’s account and its liquidators laid claim to them. This Court held that but for the
provisions of s 63(14) of the Medical Schemes Act 131 of 1998 (Medical Schemes Act),
in terms of which the contributions vested in Commed on confirmation by the Council of
Medical Schemes of the transfer of the membership of Humanity’s members to Commed,

10 J E du Plessis The South African Law of Unjustified Enrichment (2012) p 237. See also McEwen N O v
Hansa 1968 (1) SA 465 (A).

the contributions would have formed part of Humanity’s estate. At para 13, the following
was said:
‘[T]he September contributions were not kept separately in an earmarked account, with the
agreement of the bank, for payment to Commed or repayment to Humanity’s members. They
were “mixed” with other funds in the account resulting in an amount standing to the credit of
Humanity. To call Humanity a “custodian” of the September contributions deposited into its bank
account, as the court below did, adds nothing to the issue. The contributions paid were not trust
funds. Nor was Humanity’s bank party to any agreement between Humanity and Commed. There
is no evidence to suggest that Humanity’s bank had agreed to hold the September contributions
as agent or custodian for Commed, whether disclosed or undisclosed, or that it had knowledge of
such arrangement. Nor is there any evidence to suggest that Commed had acquired any personal
rights against Humanity’s bank in respect of the contributions. Moreover, there is no evidence to
the effect that Humanity’s rights to operate upon its bank account had in any way been limited by
reason of the payment of the September contributions into it. The fact that Humanity undertook
to pay the amount of the September contributions to Commed had no effect on its powers as
account holder and did not fetter or restrict them.’ (Footnotes omitted.)
[22] Counsel for the trustees relied on these findings, and submitted that they were
applicable in this case. Counsel emphasised that: Mr Bhorat opened and operated the
accounts in his own name; none of the deposits were kept in a separate earmarked
account on behalf of any of the depositors and the funds were mixed with Mr Bhorat’s
other funds; there was no evidence that Grobank had agreed to hold the funds as agent
for the depositors; there was no evidence to suggest that Mr Bhorat’s rights to operate on
his bank account were in any way limited.
[23] Counsel also relied on Trustees, Estate Whitehead v Dumas and Another [2013]
ZASCA 19; 2013 (3) SA 331 (SCA), where an investor had transferred funds to the
account of a fraudster after he had been induced to enter into an agreement by the
fraudster’s misrepresentation. This Court concluded that the investment transaction
between the investor and the fraudster, though tainted by fraud, nevertheless constituted
a causa for the payment. The investor intended to pay the fraudster and voluntarily made
the payment into the latter’s account, who had no restrictions to operate his bank account
once the funds were deposited into his account. The fraudster had a valid claim against

the bank in respect of those funds. Thus, upon the sequestration of his estate, the funds
fell into the estate of the fraudster.
[24] It must be emphasised that the account holders in both Muller and Dumas
(Humanity and the fraudster) had unfettered discretion in respect of the funds deposited
into their respective accounts. To the contrary, in this case, on the uncontroverted version
of the Reserve Bank, Mr Bhorat did not have such right in respect of the funds deposited
into his accounts, and could only deal with them as directed by the depositors. It is
instructive that although in a position to do so, the trustees did not procure an affidavit
from Mr Bhorat to refute the Reserve Bank’s assertion. This would not have been an
onerous task, as one of their first obligations as provisional trustees was to interview Mr
Bhorat to determine, among other things, exactly what the assets and liabilities of the
insolvent estate were.11 In the absence of any explanation by Mr Bhorat, the Reserve
Bank’s uncontradicted version must therefore be accepted. There is nothing clearly
untenable or palpably implausible about its version to justify its rejection on the papers.12
[25] Therefore, this case has to be approached on the footing that there was an
understanding between the depositors and Mr Bhorat that his control of the accounts was
restricted to the extent he could deal with the funds only as directed by the depositors.
Viewed in this light, Muller and Dumas are distinguishable from the present case. It should
be stressed that this can only apply to the present matter since, at a later stage, the
question might need to be determined by recourse to oral evidence if the Reserve Bank
seeks a forfeiture order and this is opposed by the trustees. The further comments
hereunder must be understood in this provisional light.

11 Section 81(1)(a) of the Insolvency Act.
12 This is in accordance with the well-known principle enunciated in Plascon-Evans Paints Ltd v Van
Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634E-635C, which is this: in motion proceedings where
disputes of fact arise on the affidavits, a final order can be granted only if the facts averred in the applicant's
affidavit, which have been admitted by the respondent together with the facts alleged by the respondent,
justify such an order. This is so, unless the respondent’s version consists of bald or uncreditworthy denials,
raises fictitious disputes of fact, is palpably implausible, far-fetched or so clearly untenable that the court is
justified in rejecting them merely on the papers.

[26] The restricted right of an account holder to deal with funds in its account was also
a defining feature in Joint Stock. There, Joint Stock had deposited funds into the bank
account of an entity whose account was held with Absa. The funds were earmarked for
payment of building contractors for the establishment of a mine and processing facilities.
Absa knew about the purpose of the account and that the account holder had limited
rights in respect of those funds.  Absa had also agreed with the account holder that the
funds could only be withdrawn upon a particular procedure being followed; and that the
account holder had no interest in or control over the funds. Despite knowledge of the
above, Absa appropriated the funds, asserting a right of set-off in respect of monies owed
to it by the account holder. In these circumstances, this Court held that Absa could not
rely on set-off and could not justify the appropriation of the funds, as the right to claim the
funds did not accrue to the account holder.
[27] This brings me to the latest pronouncement by this Court on the issue. In FirstRand
Bank Limited v Spar Group Limited [2021] ZASCA 20; [2021] 2 All SA 680 (SCA) the
following were the pertinent facts. A franchisee had defaulted on the terms of a franchise
agreement between it and Spar. Spar decided to operate the franchisee’s outlets at its
own cost and for its own benefit. The funds generated from operating the outlets went
through speed-point facilities operating in the outlets, which were linked to the franchisee’
three bank accounts held with First Rand Bank (FirstRand). Both FirstRand and the
franchisee declined Spar’s request to alter the receiving bank accounts so as to allow it
to have control of the funds. The result was that the funds generated by Spar were paid
into the franchisee’s accounts. Both FirstRand and the franchisee knew that the personal
right to the deposited funds accrued to Spar, and not to the franchisee. Despite this
knowledge, FirstRand subsequently used the funds to set-off the monies owed to it by the
franchisee, and also allowed the controlling mind behind the franchisee to withdraw funds
from two of the accounts.
[28] After a survey of the authorities, including Joint Stock, this Court held as follows.
Even in the absence of an agreement between an account holder, the bank and a third
party in terms of which the account holder has no right to the funds in their account, as
was the case in Joint Stock, where a bank owes a personal obligation to a third party
which has credited the account of bank’s customer, such funds cannot be used to set off

the customer’s debts against the Bank. In such circumstances the rights in respect of
those funds accrued to a third party, and not to the account holder. Mere knowledge of
the personal right accruing to a third party by the bank gives rise to an obligation to the
third party (para 58-60). Relevant to the present case is the following part of the court’s
summary of the position in our law at para 86:
‘A customer, with no entitlement to moneys deposited into their account, who knows that they
enjoy no such entitlement, may not make disbursements from the account in respect of credits
deriving from these moneys. To do so amounts to theft…’

[29] As I see it, the position can be no different where, as in this case, there seems to
be an understanding between the depositor(s) and the account holder that the latter is
only entitled to deal with the funds as directed by the depositor(s).  The payment of the
monies by the depositors into Mr Bhorat’s account were bilateral juristic acts requiring the
meeting of minds between the depositors and Mr Bhorat (See Burg Trailers SA Pty Ltd &
Another v Absa Bank Ltd and Others 2004 (1) SA 284 (SCA) para 7; Nissan para 24).
Although there is no suggestion that Grobank was aware of this arrangement, the
understanding between the depositors and Mr Bhorat meant that for the duration of the
Reserve Bank’s investigation, and for as long as the accounts are subject to a blocking
order, Mr Bhorat had no right to claim those funds. This is based on the fact that there is
reasonable suspicion that the accounts were used for purposes of contravening the
regulations.

[30] The reasonable suspicion of the Reserve Bank may never amount to anything
more and the blocking order may lapse. In that event, Mr Bhorat may press a claim to the
funds which, for the reasons given, may well be contested. In addition, Mr Bhorat may
ultimately be found to have no claim against Grobank in respect of the funds, if the
accounts were simply being used as a conduit by recourse to which persons other than
Mr Bhorat sent their funds abroad. I make no finding on this score, but simply indicate
that the high court’s conclusion that Mr Bhorat enjoyed a personal right to the funds as
against Grobank could not be made on the evidence before it and on the basis of the law
that now governs these matters.

[31] On the other hand, if the Reserve Bank’s investigation leads to a conclusion that
indeed the accounts were used in contravention of the regulations, a forfeiture order could
ensue, in which case, Mr Bhorat or the depositors would have no claim to the funds,
subject to a right to challenge the forfeiture order. Consequently, whether the funds are
subject to a concursus creditorum and thus vest in the trustees, can only be determined
once either of the two scenarios occurs.
[32] The effect of the above is that, at this stage, the trustees have no better claim than
Mr Bhorat as against the Reserve Bank. Provided the Reserve Bank’s blocking order
complies with the regulations, it may block the funds and the trustees cannot enjoy access
to them, whatever is ultimately proven as to who has a claim to the funds. Viewed in this
light, the trustees’ application to the high court was premature and should not have
succeeded.

[33] This brings me to the trustees’ contention that a blocking order lapses by operation
of law once a sequestration order is granted, and that the assets subject to such an order
vest in the insolvent estate. It is trite that all the property of the insolvent on the effective
date vests in the Master and after appointment, in the trustees of the insolvent estate.
The Insolvency Act13 excludes certain property from the insolvent estate, as do other
statutes.14 The trustees contended that because the regulations do not contain a similar
provision, the blocking order lapses once a provisional sequestration order is granted,
and the funds vest in the insolvent estate. This contention found favour with the high court,
which held:
‘[I]n my view the regulations should contain similar exclusions as in other statutes, particularly as
in s 35 of POCA to warrant the desired outcome. To argue that monies subject to a blocking order
do not vest in the trustees in the absence of an exclusion is not convincing and should be rejected.
It is not for the court to read into regulations what is not included. There is no ambiguity with
regard to the regulations and the argument on behalf of the [Reserve Bank] cannot succeed.’

13 In terms of s 23 of the Insolvency Act, remuneration for work done; compensation for personal injuries,
and pensions are expressly excluded from the insolvent estate. Section 82(6) of the Insolvency Act
excludes wearing apparel, bedding etc.
14 For example, compensation payable under the Occupational Injuries and Diseases Act 130 of 1994;
Unemployment Insurance Benefits; Section 35(1) of the Prevention of Organised Crime Act, 121 of 1998
(POCA).

[34] Other than considering the absence of an express exclusionary provision, the high
court did not engage in any interpretive exercise of the regulations. Although the text is
often the starting point of any statutory construction, the meaning it bears must pay due
regard to context.  This is so even when the ordinary meaning of the provision to be
construed is clear and unambiguous. 15  The high court erred in its approach and
reasoning.
[35] A general principle of statutory interpretation is that the words in a statute must be
given their ordinary grammatical meaning, unless to do so would result in an absurdity. In
Cool Ideas 1186 CC v Hubbard and Another [2014] ZACC 16; 2014 (4) SA 474 (CC) para
28 the Constitutional Court put three interrelated riders to this general principle, namely
that: (a) statutory provisions should always be interpreted purposively; (b) the relevant
statutory provision must be properly contextualised; and (c) all statutes must be construed
consistently with the Constitution.16
[36] Applying the injunction in Cool Ideas to interpret statutory provisions purposively,
I read the purpose of the regulations, among others things, to be three-fold: (a) to prevent
loss of foreign currency resources through the transfer abroad of financial capital assets
held in South Africa; (b) to ensure effective control of the movement of financial and real
assets into and out of South Africa; and (c) to avoid interference with the efficient
operation of the commercial, industrial and financial system of the country. In sum, the
purpose of a blocking or attachment order in terms of the regulations is to secure assets
which may be liable to forfeiture in terms of the regulations. This adds to the general
context of the regulations in that a blocking order is provisional only and the final position
can only be determined if the Reserve Bank seeks a forfeiture order. Context includes,
amongst others, the mischief which the regulations are aimed at, that is, the prevention
of illicit flow and influx of foreign capital from the country risk of damage to the economy
of the country as a result.

15 Department of Land Affairs v Goedgelegen Tropical Fruits (Pty) Ltd [2007] ZACC 12; 2007 (6) SA 199
(CC) para 53; Road Traffic Management Corporation v Waymark (Pty) Limited [2019] ZACC 12; 2019 (5)
SA 29 (CC) para 29; Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism [2004]
ZACC 15; 2004 (4) SA 490 (CC) para 90.
16 Constitution of the Republic of South Africa Act, 1996.

[37] A blocking or attachment is therefore a prerequisite for a valid forfeiture of the funds
to the State.  If a blocking order is terminated by the grant of a subsequent sequestration
order, the forfeiture of the assets used in the contravention of the regulations might never
be realised. The effect would be that assets which legitimately ought to be forfeited to the
State in terms of the regulations, would vest in the insolvent estate and be subject to
distribution by the trustees. The remedy of forfeiture, a sanction of public law imposed to
protect the currency and the economy, would be lost by operation of the law of insolvency.
That is an absurdity so glaring that the legislature could not have contemplated it.
[38] Just as a solvent person must suffer the lawful attachment of funds in his or her
bank account, with the possible imposition of forfeiture in due course, the trustees of the
insolvent estate of that person can be in no better position. Seen in this context, the reach
of the regulations is such that a sequestration order must yield to a blocking order. This
interpretation is consistent with s 224 of Constitution, in terms of which the primary object
of the Reserve Bank is to protect the value of the currency ‘in the interest of balanced and
sustainable economic growth in the Republic.’ The regulations constitute mechanisms,
among others, to assist the Reserve Bank to execute its Constitutional mandate.
[39] To sum up, when the estate of a person is sequestrated, and an account held in
the name of a person is subject to a blocking order, for the duration of the Reserve Bank’s
investigations or the allowed 36-month period, it cannot be determined whether the funds
vest in the trustees of the insolvent estate. This depends on proof of whether the funds
‘belong’ to the account holder. This can only be finally determined if a forfeiture order is
sought. As such, a blocking order functions to temporarily delay a determination whether
the funds in a blocked account vest in the trustees. For that reason, in the interim, the
trustees are not entitled to demand that the funds be paid out to them for distribution.  As
to the legal consequences of a forfeiture order after sequestration, should this occur, this
issue need not be determined in this appeal.
[40] It remains to furnish the reasons for our order dismissing the Reserve Bank’s
application to adduce further evidence on appeal, which we heard separately. Given that
the Reserve Bank is victorious in the appeal, the reasons for refusing its application to

adduce further evidence on appeal pales into insignificance. The trustees won the battle
but lost the war. The only real relevance thereof is in respect of costs. Because of that,
the reasons for the order are stated pithily.
[41] The Reserve Bank sought to introduce further evidence in the form of two affidavits
by Mr Malherbe and Mr Bhorat. The upshot of the affidavits is two-fold. The first is that,
after the judgment in the high court had been handed down, Mr Bhorat approached Mr
Malherbe and essentially ‘confessed’ that he was involved in illicit flow of money from the
country in contravention of the regulations, and that he was not the ‘owner’ of the funds
in his accounts. Secondly, the Reserve Bank furthermore sought to establish that the
trustees knew about Mr Bhorat’s version a month prior to the hearing in the high court,
but failed to disclose that fact to the court.
[42] As to the first, I have already mentioned that the regulations do not require proof
of contravention thereof – only a reasonable suspicion. To the extent that the affidavit of
Mr Bhorat is meant to prove the truthfulness of the Reserve Bank’s allegations, it will
achieve nothing more than enhance an already established case. Simply put, the Reserve
Bank did not need the new evidence to establish its case. Regarding the alleged failure
to disclose the information to the court by the trustees, whilst it might be relevant to the
trustees’ professional conduct, it is totally irrelevant to the issue in dispute. For these
reasons the application to adduce further evidence was dismissed.
[43] In the result the following order is made:
The appellant’s application for leave to adduce further evidence is dismissed with
costs including the costs of two counsel.
The appeal is upheld with costs including the costs of two counsel.
The order of the high court is set aside and replaced with the following:
‘The application is dismissed with costs including the costs of two counsel.’

____________________
T Makgoka
Judge of Appeal

APPEARANCES
For Appellant:
K W Lüderitz SC (with him E Muller and J Hlongwane)

Instructed by:

Gildenhuys Malatji Inc., Pretoria,
Honey & Partners, Inc., Bloemfontein.

For Respondents:
C E Puckrin SC (with him M Coetzee)

Instructed by:
Tintingers Inc., Pretoria,

Cooper Bezuidenhout (BFN) Inc., Bloemfontein.
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY: JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM
The Registrar, Supreme Court of Appeal

DATE
20 July 2021

STATUS
Immediate

Please note that the media summary is for the benefit of the media and does not form part of
the judgment of the Supreme Court of Appeal.

South African Reserve Bank v Leathern NO and Others (854/2020) [2021] ZASCA 102 (20
July 2021)
Today, the Supreme Court of Appeal (the Court) upheld an appeal against an order of the
Gauteng High Court, Pretoria, which had issued a declaratory order that the funds blocked by
the South African Reserve Bank (the Reserve Bank) in terms of regulations 22A and 22C of
the Exchange Control Regulations (the regulations); promulgated in terms of s 9 of the
Currency and Exchanges Act 9 of 1933 (the Act), vested in the insolvent estate of the account
holder, Mr Bhorat, who had been sequestrated at the instance of the South African Revenue
Services (SARS), pursuant to an unsatisfied judgment. A week before the sequestration of his
estate, the Reserve Bank had issued a blocking order in terms of the regulations against Mr
Bhorat’s two accounts held with Grobank Limited (Grobank). The high court accordingly lifted
the blocking order and ordered Grobank Limited, to pay over the funds to the trustees of the
insolvent estate.
Amongst other things, the regulations prohibit various financial transactions, including the
transfer of money from South Africa to any person outside the country, save within their ambit.
In terms of the regulations, where a designated functionary of the Reserve Bank, on
reasonable grounds, suspects a person to be involved in the contravention of any provisions
of the regulations, the functionary is empowered, under the provisions of regulations 22A
and/or 22C, to issue a blocking order in respect of a banking account suspected of being used
for illegal purposes.  The effect of the order is to prohibit any person from withdrawing, or
causing to be withdrawn any money standing to the credit of the bank account in question. If
the Reserve Bank is satisfied that contraventions indeed occurred, it may ultimately declare
the attached funds forfeit to the State.
On the Reserve Bank’s investigations, Mr Bhorat was identified as part of a group of persons
and entities designated as ‘forex transferring entities’, who were suspected of having used
their bank accounts as conduits for illicit transfer of money to various foreign beneficiaries, in
China and Hong Kong. As a result, the accounts were blocked.

The Court considered three issues. First, whether the high court was correct to set aside the
blocking order. Secondly, whether the funds standing to the credit of Mr Bhorat’s bank
accounts ‘belonged’ to him and fell into his insolvent estate, thus vesting in the trustees.
Thirdly, and closely linked to the second issue, was whether a sequestration order invalidates
a blocking order by operation of law.
The Court found that the high court was not entitled to set aside the blocking order, as the
provisions of regulation 22D, read with those of s 9(2)(d)(i)(bb) of the Act, were not satisfied,
as the trustees could not gainsay the Reserve Bank’s reasonable suspicion that the accounts
were used for the contravention of the regulations. As to whether the funds vested in the
insolvent estate of Mr Bhorat, the Court considered the general position that where money is
deposited into a bank account of an account holder it mixes with other money and, by virtue
of commixtio, it becomes the property of the bank, and the account holder acquires a personal
right to payment of that amount from the bank, arising from their bank-customer relationship.
However, the Court pointed out, with reference to various decisions of this Court, the latest
being FirstRand Bank Limited v Spar Group Limited [2021] ZASCA 20; [2021] 2 All SA 680
(SCA), that this is not a universal and inflexible rule.
The Court held that where an account held in the name of a person is subject to a blocking
order, for the duration of the Reserve Bank’s investigations or the allowed 36-month period, it
cannot be determined whether the funds vest in the trustees of the insolvent estate. This can
only be finally determined if a forfeiture order is sought. As such, a blocking order functions to
temporarily delay a determination whether the funds in a blocked account vest in the trustees.
For that reason, in the interim, the trustees were not entitled to demand that the funds be paid
out to them for distribution. As to whether a sequestration order invalidates a blocking order
by operation of law, the Court held that, on a proper interpretation of the regulations, the reach
of the regulations was such that a sequestration order must yield to a blocking order, which
interpretation is consistent with s 224 of Constitution, in terms of which the primary object of
the Reserve Bank is to protect the value of the currency in the interest of balanced and
sustainable economic growth in the Republic.
Accordingly, the Court, per Makgoka JA (with Maya P, Mbha JA and Gorven and Unterhalter
AJJA concurring), upheld the appeal with costs of two counsel.

END