THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case no: 199/2012
Reportable
In the matter between:

GLENRAND MIB FINANCIAL SERVICES (PTY) LTD       First Appellant
DAVID JAMES HARPUR

Second Appellant
ALLAN WALTER MANSFIELD

Third Appellant
AON SOUTH AFRICA (PTY) LTD

Fourth Appellant

and

THEODOR WILHELM VAN DEN HEEVER NO
First Respondent
CHRISTIAAN FREDERIK DE WET NO
Second Respondent
DEIDRE BASSON NO

Third Respondent
PROTECTOR GROUP HOLDINGS (Pty) Ltd
Fourth Respondent

Neutral citation: Glenrand MIB Financial Services (Pty) Ltd & others v Theodor
Wilhelm van den Heever NO & others (199/2012) [2012] ZASCA 195
(30 November 2012)

Coram:
MTHIYANE DP, MHLANTLA and THERON JJA and
SWAIN and SALDULKER AJJA

Heard:

12 November  2012

Delivered
30 November 2012

Summary:
Company Directors – misappropriation of company funds –
dishonesty and subjective intention to steal not proved

Breach of fiduciary duty – insufficient evidence to prove
dishonesty and collusive dealings

Company - Insolvency - Disposition without value in terms of s 26
of the Insolvency Act 24 of 1936 – after disposition the assets of the
company exceeded its liabilities

Contract – written sale of shares agreement – purchaser signed as
agent for non-existent principal – agreement not valid

Enrichment – General enrichment action – claimant’s funds
transferred without legal ground to B – B transferred the funds to
C without legal ground – claimant has a claim against C – chain of

causation linking C’s enrichment with claimant’s impoverishment
not broken.

___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from: South Gauteng High Court, Johannesburg, (Monama J
sitting as court of first instance):
1 The appeal of the first appellant is dismissed.
2 The appeal of the second and third appellants is upheld.
3 As against the first, second and third appellant, the judgment of the high
court is set aside and replaced with the following:
‘(a) The claim against the fourth and fifth defendants is dismissed with
costs.
(b)
The first defendant is ordered to make payment of the sum of R50
million together with interest at the rate of 15, per cent per annum from 15
March 2004, to date of payment to the plaintiffs.
(c)
The first defendant is ordered to pay the plaintiffs’ costs.’
4 The respondents are ordered to pay the costs of appeal of the second and
third appellants.
5 The first appellant is ordered to pay the costs of appeal of the
respondents.
6 The respondents are ordered to pay the costs of appeal of the fourth
appellant.

___________________________________________________________________
JUDGMENT
___________________________________________________________________
THERON JA and SWAIN AJA (MTHIYANE DP, MHLANTLA JJA and
SALDULKER AJA concurring):

[1] This is an appeal from the South Gauteng High Court (Monama J)
dealing with misappropriation of money, unjust enrichment, setting aside of a
disposition under s 26 of the Insolvency Act 24 of 1936 (the Insolvency Act)
and a breach by directors of their fiduciary duties. The appellants appeal to this
court with the leave of the high court.

[2] The fourth respondent, Protector Group Holdings (Pty) Ltd (In
Liquidation), (Protector), was wound up by the high court on 1 December 2004.
The application for its winding-up was presented to the high court on 9 July
2004 and this is the date when the winding-up is deemed to have commenced,
in terms of s 348 of the Companies Act 61 of 1973 (the Companies Act).
Protector was placed in liquidation because it was unable to pay its debts, as
contemplated in s 345 of the Companies Act. The Master of the High Court
appointed the first, second and third respondents as joint liquidators of
Protector, and they act in their official capacity as liquidators in these
proceedings.

[3] The first appellant, Glenrand MIB Financial Services (Pty) Ltd,
(Financial Services), was a wholly owned subsidiary of Glenrand MIB Ltd
(Glenrand MIB). At all relevant times, Financial Services, held 65 per cent of
the issued share capital in Protector, while the remaining 35 per cent was held
by Protector Group Management Company (Pty) Ltd (PGMC).  David Harpur,
the second appellant, was a director of Protector, Financial Services and a

director, shareholder and chief executive officer of Glenrand MIB Ltd. Allan
Mansfield, the third appellant, was a director of Protector and the chairperson of
its board of directors, a director of Financial Services and a director, shareholder
and chairperson of the board of Glenrand MIB.

[4] During 2003, the board of Glenrand MIB decided to dispose of its
interests in Protector. Marc Seelenbinder and Leon Janse van Rensburg, sixth
and seventh defendants in the court a quo respectively, both directors of
Protector and PGMC, made offers to purchase Financial Services’ 65 per cent
shareholding in Protector. On 10 November 2003, the board of directors of
Financial Services adopted a resolution to dispose of its 65 per cent
shareholding in Protector by entering into an agreement with ‘Newco or its
nominee’. Pursuant to this resolution, an agreement with ‘Newco or its
nominee’ was signed on 15 December 2003. Financial Services was represented
by Harpur and Mansfield while Van Rensburg represented the purchaser. It was
later suggested that Freefall Trading 65 (Pty) Ltd (Freefall) was the purchaser.
Van Rensburg and Seelenbinder, were, through their family trusts, the sole
shareholders of Freefall. PGMC disposed of its 35 per cent shareholding in
Protector to Freefall. Protector sold its entire business as a going concern to a
new established company New Protector Group Holdings (Pty) Limited, (New
Protector), comprising an empowerment partner, Tradeworx, holding 51 per
cent of New Protector and Freefall holding 49 per cent. The funding for the
transaction was provided by the Industrial Development Corporation (the IDC).

[5] New Protector and the IDC concluded a loan agreement on 4 March 2004
to enable New Protector to acquire the business of Protector as a going concern.
The sale of the business by Protector to New Protector was considered and
approved at a board meeting of Protector on 2 March 2004. The Financial
Services representatives on the board of Protector, including Harpur and

Mansfield, resigned as directors after the approval of the sale of the business.
The sale of business agreement was implemented and the business and assets of
Protector were transferred to New Protector.

[6] The IDC released the funds to New Protector on 5 March 2004, pursuant
to a written request from Seelenbinder dated 3 March 2004. An amount of
R69 188 647 was transferred from the IDC into New Protector’s bank account
held with Nedbank. On 8 March 2004, an amount of R63 382 254 was
transferred out of the Nedbank account to an account in the name of Protector
held with Standard Bank. The latter account was opened by Seelenbinder and
Van Rensburg, who were the only directors of Protector at that stage. On 10
March 2004, and on the instructions of these two directors, an amount of
R63 382 254 was transferred out of the Standard Bank account to an account in
the name of Fehrsen, Harms & Associates (FHA) in Namibia. On 15 March
2004, from the funds held in the Namibian account, an amount of R50 million
was paid into the trust account of Edward Nathan & Friedland (ENF). On 22
June 2004, the amount of R50 997 468.57 was transferred from the said
attorneys’ trust account to Glenrand MIB’s bank account. It was common cause
that the R50 million paid by ENF to Glenrand MIB was to settle Freefall’s debts
to Financial Services in respect of the sale of the latter’s shareholding in
Protector to Freefall.

[7] The respondents instituted action in the court a quo against Financial
Services (first defendant), Glenrand MIB Ltd (second defendant), Freefall (third
defendant),
Harpur
(fourth
defendant),
Mansfield
(fifth
defendant),
Seelenbinder (sixth defendant) and Janse Van Rensburg (seventh defendant). In
the action the respondents claimed, inter alia, payment of various sums of
money from the respondents. There were six causes of action pleaded by the
respondents, namely: (1) collusive dealings contemplated by s 31 of the

Insolvency Act (claim A); (2) unlawful and intentional misappropriation of
funds (claim B);  (3) unjust enrichment (claim C); (4) an alleged disposition
without value liable to be set aside under s 26 of the Insolvency Act (claim D);
(5) a fraud perpetrated on the body of creditors of Protector (claim E); (6)
breach by certain directors of Protector, namely Harpur, Mansfield,
Seelenbinder and Van Rensburg, of their fiduciary duties owed to the company
(claim F).

[8] By the time of the commencement of the trial on 16 February 2011,
Freefall had been deregistered, the estate of Seelenbinder sequestrated, resulting
in the trial proceeding only against Financial Services, Glenrand MIB, Harpur,
Mansfield and Van Rensburg. By arrangement between the respondents and
Van Rensburg, the latter did not oppose the matter and testified for the
respondents.  Judgement was however sought and granted against Van
Rensburg. At the conclusion of the trial, claims A and E were abandoned by the
respondents and the court was also advised that no relief was sought against
Glenrand MIB.

[9] The court a quo upheld claims B (misappropriation of money), C (unjust
enrichment), D (setting aside of a disposition without value in terms of s 26 of
the Insolvency Act) and F (breach of fiduciary duty). It also found against the
appellants on the basis of a contravention of s 38 of the Companies Act. The
judge granted judgment against Glenrand MIB, Financial Services, Harpur,
Mansfield and Van Rensburg. The appellants appeal against the judgment of the
court a quo, with the leave of that court.

[10] Subsequent to the trial and prior to judgment being handed down,
Glenrand MIB merged with the fourth appellant, AON South Africa (Pty) Ltd
(AON). In terms of this merger AON assumed all property and obligations of

Glenrand MIB. Following the merger, Glenrand MIB was deregistered. AON
applied for and was granted leave to intervene in the application for leave to
appeal and in the appeal itself, by the high court. Thereafter the respondents
abandoned the judgment against Glenrand MIB, leaving only the question of the
wasted costs of the application  for determination. At the hearing of this appeal,
counsel for the respondent could advance no reason why the respondent should
not be ordered to pay these costs.

Contravention of s 38
[11] As mentioned above, the high court found against the appellants on the
basis of a contravention of s 38 of the Companies Act.1 This was not a cause of
action pleaded or relied upon by the respondents in the action in the high court.
It was not an issue that was specifically traversed by the parties during the trial.
This was in fact conceded by the respondents on appeal. The finding by the high
court, that ‘the assistance given to the fourth plaintiff [payment of R50 million]
violates the provisions of section 38(1) of Act 61 of 1973’ was ill-conceived
and cannot stand.

Claim B – misappropriation of money (theft)
[12] The IDC knew that Glenrand MIB was selling its 65 per cent
shareholding in Protector and the IDC intended, when its board approved the
financing on 25 November 2003, that the proceeds of that loan would be applied
towards settling the purchase price of the sale of shares of Glenrand MIB and
PGMC.  The IDC’s recognition that the proceeds of the loan would immediately
be applied towards paying for Glenrand MIB’s shares in Protector, was in full
knowledge of the IDC’s decision that ultimately the business of Protector would
be located within a new vehicle, which would represent a consortium led by a
BEE shareholder.

1 Section 38 reads: A winding-up of a company by the Court shall be deemed to commence at the time of the
presentation to the Court of the application for the winding-up.

[13] There is no evidence to suggest that the IDC, and all the other relevant
parties, in agreeing or arranging that the proceeds of the loan should be paid to
the shareholders of Protector, intended to defraud the creditors of Protector. The
common intention of Glenrand MIB, the IDC, and of Seelenbinder and Van
Rensburg, was that the money should be applied to discharge Freefall’s
indebtedness arising from the sale of shares by Glenrand MIB and PGMC. In
the circumstances, the respondents have not made out a case for dishonesty on
the part of Harpur and Mansfield. It was not established that, in arranging that
part of the proceeds of the IDC loan be paid to Financial Services, they had the
subjective intention to steal the money. It follows that the claim of theft cannot
be sustained.

Claim F - Breach of Fiduciary Duty
[15] Counsel for the respondents was constrained to concede, and rightfully
so, that in the event of the respondents failing to prove the theft claim, then the
claim for breach of fiduciary duty must also fail.

Claim C – Unjust Enrichment
[16] The respondents also claim payment of the sum of R50 million from
Financial Services on the basis of unjust enrichment. Although there is no
general action based on enrichment in our law, it is generally accepted that for
enrichment liability to arise there are a minimum of four requirements, namely:
(1) the defendant must be enriched; (2) the plaintiff must be impoverished; (3)
the defendant’s enrichment must be at the expense of the plaintiff and (4) the
enrichment of the defendant must be unjustified or sine causa.2 This was the
basis on which the case was argued by both counsel.

2 9 Lawsa 2 ed para 209.

[16] The third and fourth requirements for enrichment liability can give rise to
difficulties where three or more parties are involved. The difficulties arise from
the fact that the general requirement for liability is that the defendant’s
enrichment must be at the expense of the plaintiff; and it must be unjustified.
Where there is the intercession of a third party between the plaintiff and the
defendant, and the value is transferred not directly from the plaintiff to the
defendant, but from the plaintiff to the third party, and then in turn from the
third party to the defendant, the question arises of whether the defendant’s
enrichment has occurred at the expense of the plaintiff.

[17] In Buzzard Electrical (Pty) Ltd v 158 Jan Smuts Avenue Investments (Pty)
Ltd & another 1996 (4) SA 19 (A) at 25H-26A the court discussed two types of
multi-party enrichment claims. The first type of claim arose where A, in terms
of an agreement with B, improves the property of a third party, C, and A then
seeks to hold the owner C liable on the grounds of unjust enrichment because B
has not paid A. The second type of claim applied in a situation where the owner
C contracted with B to improve his property and B in turn subcontracted A to
do the work. A did the work and later relied on the liability of the owner C on
the grounds of unjust enrichment. The second type of enrichment claim was
considered by the court in Buzzard. The court held that the main difference
between the two types of claims was that in the second type of claim, the
performance of the work by A could be traced to an agreement between the
owner C and B in terms of whereof that specific work had to be performed by
B. The court further held that neither a direct nor an indirect enrichment liability
could arise in the second type of case. In all cases of the second type of liability
the owner C contracted with B on a specific basis, and it would be unfair that
his counter-performance, if any, were to increase in effect or that he should
incur an obligation which did not arise out of the contract with B, simply
because B had engaged A to comply with his contractual obligations.  The

reasoning of the court was that there was no contractual relationship between A
and the owner C and, when A performed the work, he complied with his
obligations towards B. At the same time, however, A also gave effect to B's
obligation to the owner C and thus also performed indirectly with respect to the
owner. The agreement between the owner C and B was the primary source of
the performance of the work and any possible enrichment of the owner; the
owner C received no more as a result of A's performance than that which he had
contracted for with B. For that reason, the court concluded, the enrichment was
not sine causa. On the contrary, his agreement with B was the cause of his
enrichment. In McCarthy  Retail Ltd v Shortdistance Carriers CC 2001 (3) SA
482 (SCA) Schutz JA, with reference to the reasoning adopted by the court in
Buzzard, said it may be a question of semantics whether the owner’s enrichment
had been at the expense of A or B. The learned judge put the matter thus:
‘For myself, I think there is much to be said for the justice of the lien cases, an
unsophisticated justice though it may be, but with which we have lived for a long time. A
improves a car at the instance of B, wrongly believing him to be owner. C claims the car by
virtue of his ownership. Is he to get it scot-free? Or is he to first pay A his necessary and
reasonable expenses; A's claim being moderated by the increase in market value cap, by the
limitation to expenses to the exclusion of the market price and by the operation in the last
resort of the jus tollendi (the right to compel removal of materials)? The question whether C
is enriched at the expense of A or of B in the example given is in any event a matter of
semantics (I do not dispute that the manner in which the question is answered can have
practical consequences). When A improves C's vehicle the ownership in the improvements
passes at once to C's estate by accession and it seems to me to pass there directly from A's
estate. Is it not a fiction that it passes through the estate of B, even though A owes a
contractual obligation to him to effect the repairs?’3

[18] It was argued, on behalf of Financial Services that in this matter there had
been no transfer of property from the impoverished party, Protector, to the
enriched party (Financial Services). The enrichment, if there was any, was not

3 Para 23.

at the expense of the claimant (Protector) and for this reason the claim must fail.
It has been suggested by the author Jacques Du Plessis The South African Law
of Unjustified Enrichment (2012) at 300 that the purpose of the ‘at the expense
of’ requirement is to indicate that a sufficiently strong causal link exists
between the plaintiff and the defendant’s enrichment. The ultimate issue for a
court to determine when considering the question of causation or the ‘at the
expense of ‘requirement in a multi-party situation is whether the defendant has
been unjustifiably enriched vis-a-vis the claimant.4

[19] On the facts of this case, it is clear that not only has Financial Services
been unjustifiably enriched, but that such enrichment has been at the expense of
the impoverishment of Protector. The funds in the Standard Bank account that
had been opened by Van Rensburg and Seelenbinder, was the property of
Protector, representing the purchase price paid by New Protector for the sale of
Protector’s business. The funds remained the property of Protector. There was
no legal relationship between Protector and FHA justifying the transfer of the
funds to the latter.

[20] It was further contended by the appellants that the fourth requirement had
also not been met in that the enrichment of Financial Services was not
unjustified (sine causa). The argument advanced was that the proceeds of the
IDC loan received by New Protector were applied by Seelenbinder and Van
Rensburg for the benefit of Freefall to discharge the liabilities of Freefall. There
was a deliberate intention on the part of Freefall to pay a debt that it owed to
Financial Services and an acceptance by ENF, on behalf of Financial Services.
In these circumstances it cannot be said that Financial Services’ enrichment
would have been sine causa.

4 Daniel Visser Unjustified Enrichment  (2008) at 215.

[21] In support of this argument, reliance was placed on Commissioner for
Inland Revenue v Visser 1959 (1) SA 452 (A) and John Bell & Co Ltd v Esselen
1954 (1) SA 147 (A) where it was held by this court that where a third party
(even unlawfully) used money which initially belonged to the plaintiff in order
to discharge a true liability owed to the defendant (no matter by whom), and the
defendant received that money, bona fide, intending for it to be applied to
discharge the liability concerned (whether the liability was that of the third party
or another party), then the plaintiff could not recover the funds from the
defendant; the defendant’s enrichment would not have been sine causa; and it
would have not been at the expense of the plaintiff.

[22] Essential to the question of whether the payment by Freefall to Financial
Services had been unjustified (sine causa) is a determination of whether the sale
of shares agreement between Financial Services and Freefall, in terms of which
Financial Services sold its shareholding in Protector to the former with effect
from 1 December 2003, for the purchase price of R50 million is valid.  If the
agreement is valid then the payment made by Freefall was one in discharge of a
true liability, it would not be sine causa, and would serve to interrupt the
enrichment claim.

[23] We turn now to consider the validity of the sale of shares agreement.
Seelenbinder signed the document on behalf of the purchaser and qualified his
signature as being ‘duly authorised thereto’. He clearly purported to act as an
agent. The purchaser was described as ‘Newco or its nominee’. According to
Van Rensburg, Seelenbinder did not, at the time, act on behalf of Freefall or any
company in particular. Van Rensburg was pointedly asked, during his evidence
in chief, as to who Seelenbinder had represented when he signed the document
and his response was:
‘As a minimum he would have represented himself and me at that stage.’

He was later asked to explain the reference to Newco in the document and this
is what he said:
‘Your Lordship, at that stage we thought that a good name for Newco would have been L&M
(Pty) Limited. We tried our best to register a company with that name but we were
unsuccessful, but that was part of the process. When we were not successful with that we
went to a shelf company which was called Freefall 65 or something in that line. Eventually it
became the nominee.’
Harpur agreed that Freefall was not nominated and nothing was done to make
Freefall the purchaser.

[24] In Heathfield v Maqelepo 2004 (2) SA 636 (SCA) the court recognised
that an agreement signed on behalf of a non-existent principal is invalid.5 It was
also noted, with reference to Burroughs Machines Ltd v Chenille Corporation of
SA (Pty) Ltd 1964 (1) SA 669 (W) that a court should not lightly hold that an
agreement is invalid.6 Southwood AJA, writing for the court, quoted the
following passage from Burroughs with approval:
‘In so doing I must, I think, have regard to the fact that exh ''A'' is a commercial document
executed by the parties with a clear intention that it should have commercial operation. I must
therefore not lightly hold the document to be ineffective. I need not require of it such
precision of language as one might expect in a more formal instrument, such as a pleading
drafted by counsel. Inelegance, clumsy draftmanship or the loose use of language in a
commercial document purporting to be a contract, will not impair its validity as long as one
can find therein, with reasonable certainty, the terms necessary to constitute a valid
contract.’7

[25] In McCullogh v Fernwood Estate Ltd 1920 AD 204 this court held that a
company can by adoption or ratification obtain the benefit of a contract made on
its behalf before it came into existence where such contract has been made by a
person acting individually and not as agent of the company. Innes CJ stated that

5 Para 13.
6 See also Legator McKenna Inc v Shea 2010 (1) SA 35 (SCA).
7 Heathfield v Maqelepo 2004 (2) SA 636 (SCA) para 14.

‘the rule that there can be no ratification by a principal not in existence at the
date of the transaction is recognised by our law as well as by the law of
England’.8 However the situation would be different where the contract is for
the benefit of a third party and such benefit is obtained by a party who is acting
individually and not as agent for the beneficiary.9 The court further held that the
distinction between a promise made to an agent for his principal and a promise
made to a principal for the benefit of a third party, was a real one and ought to
be maintained. In Natal Land & Colonisation Co Ltd v Pauline Colliery and
Development Syndicate Ltd [1904] AC 120 the promisee purported to act as
agent for a company to be formed (and was therefore at the time of the contract
non-existent) whereas in McCullogh although the company was non-existent,
the promisee acted as trustee for it and therefore acted as dominus of the relative
subject matter. Thus a promisee who purports to contract as principal not as
agent, may validly contract for the benefit of a non-existent third party such as a
company to be formed.10

[26] This distinction was done away with by s 35 of the Companies Act.
Section 35 removed the anomaly that a contract made by a trustee for an
undisclosed principal was valid (McCullogh) while one made by an agent was
not (Natal Land).11 In any event, the factual situation in the matter under
consideration does not fall within s 35 of the Companies Act in regard to pre-
incorporation contracts and the formalities required by that section have not
been satisfied.

8 At 207.
9 At 209
10 See generally R H Christie and G B Bradfield The Law of Contract 6 ed (2011) at 272; 1 Lawsa 2 ed paras
185 and 189.
11 Christie and Bradfield, supra, at 272.

[27] The appellants’ argument is that the company which was renamed
Freefall was in existence at the time because it was registered on 6 May 2002
and consequently the agreement was one where the principal existed but was
simply unnamed at the time. The submission is made that the agreement is
enforceable on the authority of  Springfield Omnibus Service Durban CC v
Peter Maskell Auction CC 2006 (4) SA 186 (N) at 193A-E which deals with the
principal of the undisclosed principal which applies where the one party
believes that the other is acting personally, whereas he is acting on behalf of a
principal. It also provides that once the party is aware that the other party is
acting on behalf of a principal, his intention can only be that he wishes to
contract with the principal through the agent.

[28] In this matter, Seelenbinder had qualified his signature and indicated that
he had signed the agreement as agent. Seelenbinder acted as agent and not as
principal and therefore the doctrine of a contract for the benefit of a third party
does not apply. At the time of signature, both Seelenbinder and Van Rensburg
were unsure as to the identity of the principal. Seelenbinder purported to act as
agent for Newco, which was in existence at the time. Van Rensburg said that
Seelenbinder, at a minimum would have been representing the two of them,
namely Van Rensburg and  Seelenbinder. It is therefore clear that Seelenbinder
had no authority to act on behalf of Newco and the principle of the undisclosed
principal cannot apply.

[29] It was argued, on behalf of the appellants, that Freefall had, by its conduct
adopted or ratified the authority of Seelenbinder. There is no evidence that
Seelenbinder and Van Rensburg acting as the sole directors of Freefall ratified
Seelenbinder’s
conduct
and
retrospectively
conferred
authority upon
Seelenbinder to conclude the agreement. On 4 March 2004, the directors of
Freefall adopted a resolution nominating Freefall as purchaser in respect of the

15 December 2003 agreement. In this regard the crucial issue is that the
resolution says that Freefall is nominated as the purchaser and contracting party
which is the appropriate resolution for the nomination of Freefall by Newco as
the purchaser. The terms of the resolution refute any suggestion that up to that
stage Freefall had ratified the authority of Seelenbinder. It had nothing to do
with the lack of authority of Seelenbinder or the ratification of his conduct, as
the first paragraph of the resolution is simply a recital of the provisions of the
agreement. In the view we take of the matter, the document signed on 15
December 2003, relating to the sale of Financial Services’ shares in Protector,
does not constitute a valid agreement and is therefore unenforceable.

[30] We return to the question of unjust enrichment. As has been mentioned in
paragraph 19 above, it is clear from the evidence that the funds in the Standard
Bank account belonged to Protector. These funds were paid by New Protector to
Protector for the sale of the latter’s business. The account was opened in the
name of Protector by Van Rensburg and Seelenbinder, the only two directors of
Protector at that stage. When the funds were moved to FHA it was still the
funds of Protector and they were paid over without true liability. Counsel for the
appellants conceded, that at that stage, the money still belonged to Protector and
that it could, successfully have applied for a rei vindicatio for a return of the
money.

[31] It was argued by the respondents that this was not a case of ‘indirect
enrichment’ with Freefall interceding between Protector and Financial Services
because there was no valid sale of shares to Freefall and the funds in question
did not belong to Freefall, it throughout remained Protector’s money. In light of
the finding that the sale of shares agreement was invalid,  Visser and Esselen are
distinguishable and not applicable to this matter as there was no true liability
which Freefall, by paying Financial Services, intended to settle.

[32] It is useful to refer to the writings of the author, Niall R Whitty Indirect
Enrichment in Scots Law 1 (1994) 200 Juridical Review at 250 where he deals
with a scenario where no legal relationship exists between I and T (Protector
and Freefall) and T and E (Protector and Financial Services). He writes:
‘One would expect that, a fortiori, where I pays T in error and E takes the money from T
wrongfully or without T’s authority, I has an enrichment claim against E. On one view, since
the transactions between I and T and between T and E are vitiated by error and wrongfulness
respectively, there is no reason to construe them as juridical acts transferring wealth from I to
E.’
There was no legal ground for the money to have been transferred from
Protector to Freefall and neither was there a legal ground for it to have been
transferred from Freefall to Financial Services. Put differently, in these
circumstances the enrichment did not leave Protector’s estate in terms of a valid
legal ground, nor did it enter Financial Services’ estate in terms of a valid legal
ground, as the payment to Financial Services was without causa.12 In the view
we take of the matter, the chain of causation linking Financial Services’
enrichment with Protector’s impoverishment, is not broken.

[33] It was further argued by Financial Services, in the alternative, and in the
event of the court finding that all the requirements for enrichment liability are
satisfied, that Financial Services had, bona fide, disgorged any enrichment
before the action was instituted on 1 March 2007. It was the testimony of Sanet
Uys, the group financial director of Glenrand MIB, that Financial Services had
expended the proceeds it received, first, by discharging its debt to Glenrand
MIB on 22 June 2004 when the money went into Glenrand MIB’s bank account,
in the amount of R38,1 million; and second, by declaring a dividend on 13 June
2005 in favour of Glenrand MIB for the balance of R11,7 million. For these
reasons, it was contended by Financial Services, that this claim should fail.

12 J du Plessis The South African Law of Unjustified Enrichment (2012) at 305.

[34] Financial Services’ liability is confined to the amount of its actual
enrichment at the time of the commencement of the action. Enrichment may be
constituted by a decrease of liabilities which would otherwise not have taken
place.13 As regards the payment of the loan, the enrichment of Financial
Services was still in existence at the time of the action, because of the decrease
in its liabilities which would otherwise not have taken place. In respect of the
payment of the dividend, on the face of it, it would appear that Financial
Services was not enriched at the time of the action, because the payment of the
dividend was purely a distribution of profits to shareholders. However, from the
moment that Financial Services became aware, or ought to have been aware,
that it had been enriched sine causa at the expense of Protector, its liability is
reduced or extinguished, only if Financial Services is able to prove that the
diminution or loss of its enrichment, was not due to its fault.14

[35] Harpur testified that Dr Clarence Mini, a director of Tradeworx, met with
him on 23 August 2004 and accused him of stealing the R50 million. As a result
Harpur met with Seelenbinder and the latter drew a chart, explaining to Harpur
how the money had been transferred. It was then that Harpur questioned
Seelenbinder about why the money was transferred via Namibia and
‘his response was there was some concern that in some of the structure there might have been
something that touched on s 38 of the Companies Act, and by structuring this deal through an
offshore company outside of South Africa that would have avoided any problems with that
particular section.’

[36] Harpur said he did not think there was anything untoward about the flow
of the funds that he could remember.  He conceded that Protector was entitled
to and would own the money it received for the sale of its business. He agreed
that Protector was not obliged to pay the R50 million to Financial Services.

13 9 Lawsa 2 ed para 209
14 ibid.

Harpur disputed the assertion that after he had met with Seelenbinder he should
have been alerted that something was amiss and from that point must have
realised that Financial Services was not entitled to retain the money. His answer
was that he would have acted if he thought action was required and by the fact
that he had not taken action, he did not think it was necessary. Harpur agreed, in
the context of the admission made on the pleadings, that in terms of s 38 of the
Companies Act, Protector could not directly or indirectly, give financial
assistance for the purpose of, or in connection with the purchase of the shares
and that Protector could not in any way give assistance to Freefall to pay the
R50 million.

[37] Harpur had been the CEO of Glenrand MIB since 1997, which became a
listed company on the JSE in June 1998.  It is quite clear that Harpur, as an
experienced CEO, should have been alerted to a possible contravention of s 38
of the Companies Act. When Seelenbinder pertinently drew Harper’s attention
to the possibility of a breach of s 38, Harpur should have investigated the
validity of Seelenbinder’s claim that this had been averted by directing the
funds through Namibia. At that stage, Financial Services and Harpur should
have been aware that Financial Services had been enriched sine causa at the
expense of Protector. Financial Services was accordingly obliged to prove that
the loss of the enrichment by payment of the dividend to Glenrand MIB was not
due to its fault. It is quite clear however, that Financial Services failed to do this
and consequently it is obliged to repay the dividend.

[38] It seems that the appellants’ alternative argument is that Financial
Services was not enriched, because the assets it owned before the sale of shares
agreement was concluded, namely the shares in Protector and indirectly the
business of Protector, were without value by the time of the action and the
shares were the equivalent in value of the payment made. In other words,

Financial Services was not enriched, because it was not better off financially,
after the invalid sale of the shares. This argument is without merit because it
seeks to consider whether Financial Services was enriched, in isolation from a
consideration of whether Protector was impoverished by the transaction. A
plaintiff’s claim is the amount by which it has been impoverished, or by which
the defendant has been enriched, whichever is the lesser.15 Every enrichment
action must therefore embrace an enquiry not only into the defendant’s
enrichment, but also into the plaintiff’s impoverishment.16 It is quite clear that
Protector was impoverished by the payment of the amount of R50 million and
that Financial Services was enriched by this amount. The fact that the assets
which Financial Services parted with, in terms of the void agreement for the
sale of shares, were valueless at the time of the action is irrelevant. In the
circumstances, Protector should be successful in its enrichment claim against
Financial Services.

Claim D – Disposition without value in terms of s 26 of the Insolvency Act
[39] It was alleged by the respondents that the payment of R50 million to
Financial Services, which payment can be traced back to the banking account of
Protector, constitutes a disposition without value within the context of s 26 of
the Insolvency Act.17 The disposition took place within two years before the
commencement of Protector’s winding-up, which was wound up due to its
inability to pay its debts. In the circumstances, Financial Services bore the onus

15 9 Lawsa 2 ed para 209.
16 9 Lawsa 2 ed para 209.
17 Section 26(1) reads:
(1) Every disposition of property not made for value may be set aside by the court if such disposition was made
by an insolvent-
(a) more than two years before the sequestration of his estate, and it is proved that, immediately after the
disposition was made, the liabilities of the insolvent exceeded his assets;
(b) within two years of the sequestration of his estate, and the person claiming under or benefited by the
disposition is unable to prove that, immediately after the disposition was made, the assets of the insolvent
exceeded his liabilities:
Provided that if it is proved that the liabilities of the insolvent at any time after the making of the disposition
exceeded his assets by less than the value of the property disposed of, it may be set aside only to the extent of
such excess.

to show that, immediately after the disposition was made, the assets of Protector
exceeded its liabilities.

[40] The uncontested evidence of the appellants’ expert witnesses, Neeraj
Shah and Riana Fourie, both chartered accountants, was that at the time of
payment of the sum of R50 million into the trust account of ENF on 15 March
2004, the assets of Protector exceeded its liabilities. The guarantees or
indemnities furnished by New Protector to Protector against all claims and
liabilities did constitute assets of Protector.18  The court a quo misconstrued
Shah’s evidence and took into account factors prevailing at a time not material
to the enquiry. For these reasons, the finding of the high court in this regard
cannot be supported. Counsel conceded, and rightly so, that this claim had not
been proved.

[41] The following order is made:
1 The appeal of the first appellant is dismissed.
2. The appeal of the second and third appellants is upheld.
3 As against the first, second and third appellant, the judgment of the high court
is set aside and replaced with the following:
‘(a) The claim against the fourth and fifth defendants is dismissed with costs.
(b)
The first defendant is ordered to make payment of the sum of R50 million
together with interest at the rate of 15, 5 per cent per annum from 15 March
2004, to date of payment to the plaintiffs.
(c)
The first defendant is ordered to pay the plaintiffs’ costs.’

18 Millman & another NNO v Masterbond  Participation Bond Trust Managers (Pty) Ltd (Under Curatorship) &
others 1997 (1) SA 113 (C) at 123C-D.

4 The respondents are ordered to pay the costs of appeal of the second and third
appellants.
5 The first appellant is ordered to pay the costs of appeal of the respondents.
6 The respondents are ordered to pay the costs of appeal of the fourth appellant.

__________________
L V THERON
JUDGE OF APPEAL

___________________
K SWAIN
ACTING JUDGE OF APPEAL

Appearances
Appellants:

WG Van Der Linde (with AO Cook)
Instructed by:
Norton Rose South Africa, Johannesburg
Webbers: Bloemfontein

Respondents:

PF Rossouw SC

Instructed by:
De Vries Incorporated, Johannesburg

Matsepes Incorporated: Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
30 November 2012
Status:
Immediate

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

Glenrand MIB Financial Services (Pty) Ltd & others v Theodor Wilhelm van
den Heever NO

Today the Supreme Court of Appeal (SCA) dismissed an appeal by Glenrand MIB and
upheld the appeal of the second and third appellants.

This is an appeal from the South Gauteng High Court (Monama J) dealing with misappropriation of
money, unjust enrichment, setting aside of a disposition under s 26 of the Insolvency Act 24 of 1936
(the Insolvency Act) and a breach by directors of their fiduciary duties. The appellants appeal to this
court with the leave of the high court.

The fourth respondent, Protector Group Holdings (Pty) Ltd (In Liquidation), (Protector), was wound
up by the high court on 1 December 2004. The first appellant, Glenrand MIB Financial Services
(Pty) Ltd, (Financial Services), was a wholly owned subsidiary of Glenrand MIB Ltd (Glenrand MIB).
At all relevant times, Financial Services, held 65 per cent of the issued share capital in Protector,
while the remaining 35 per cent was held by Protector Group Management Company (Pty) Ltd
(PGMC).  David Harpur, the second appellant, was a director of Protector, Financial Services and a
director, shareholder and chief executive officer of Glenrand MIB Ltd. Allan Mansfield, the third

appellant, was a director of Protector and the chairperson of its board of directors, a director of
Financial Services and a director, shareholder and chairperson of the board of Glenrand MIB.

During 2003, the board of Glenrand MIB decided to dispose of its interests in Protector. Marc
Seelenbinder and Leon Janse van Rensburg, sixth and seventh defendants in the court a quo
respectively, both directors of Protector and PGMC, made offers to purchase Financial Services’ 65
per cent shareholding in Protector. New Protector and the IDC concluded a loan agreement on 4
March 2004 to enable New Protector to acquire the business of Protector as a going concern. The
sale of business agreement was implemented and the business and assets of Protector were
transferred to New Protector. The IDC released the funds to New Protector on 5 March 2004. R50m
from these funds was paid to Protetcor, but the funds were deviated and ended by being paid by
Freefall to Financial Services in respect of the sale of the latter’s shareholding in Protector to
Freefall.

[The respondents instituted action in the court a quo against Financial Services (first defendant),
Glenrand MIB Ltd (second defendant), Freefall (third defendant), Harpur (fourth defendant),
Mansfield (fifth defendant), Seelenbinder (sixth defendant) and Janse Van Rensburg (seventh
defendant). In the action the respondents claimed, inter alia, payment of various sums of money
from the respondents. There were six causes of action pleaded by the respondents, namely: (1)
collusive dealings contemplated by s 31 of the Insolvency Act (claim A); (2) unlawful and intentional
misappropriation of funds (claim B);  (3) unjust enrichment (claim C); (4) an alleged disposition
without value liable to be set aside under s 26 of the Insolvency Act (claim D); (5) a fraud
perpetrated on the body of creditors of Protector (claim E); (6) breach by certain directors of
Protector, namely Harpur, Mansfield, Seelenbinder and Van Rensburg, of their fiduciary duties
owed to the company (claim F).

The court a quo upheld claims B (misappropriation of money), C (unjust enrichment), D (setting
aside of a disposition without value in terms of s 26 of the Insolvency Act) and F (breach of fiduciary
duty). It also found against the appellants on the basis of a contravention of s 38 of the Companies
Act. The judge granted judgment against Glenrand MIB, Financial Services, Harpur, Mansfield and
Van Rensburg. The appellants appeal against the judgment of the court a quo, with the leave of that
court.

On appeal it was found that claim B (misappropriation of money), claim C (unjust enrichment), claim
D (setting aside of a disposition without value in terms of s 26 of the Insolvency Act) and claim F
(breach of fiduciary duty) had not been proved. For this reason the appeals by the second and third

appellants were upheld. The court further found that Protector was impoverished by the payment of
the amount of R50 million and that Financial Services was enriched by this amount. The court also
found that the sale of shares agreement between Financial Services and Freefall was not valid
therefore the money was transferred from Freefall to Financial Services without a true liability and
thus did not interrupt the chain of causation linking Financial Services’ enrichment with Protector’s
impoverishment.