Case No:  442/98
In the matter between:
ABSA BANK LIMITED
Appellant
and
LEECH, SHEILA FRANCES
1stRespondent
CREASE, GRAHAM

2nd Respondent
GISHEN, MARTIN CHARLES
3rd Respondent
Coram:
Vivier, Zulman, Streicher, Cameron and Navsa, JJ A
Heard:
4 May 2001
Delivered:
23 May 2001
Condictio indebiti – mistaken belief that amount paid was owing not established.
__________________________________________________________________
J U D G M E N T
__________________________________________________________________
STREICHER J A:

[1] The respondents are the trustees of the Kon Leech Trust (the Trust). The Trust
paid an amount of R4,125m to the appellant. Thereafter the respondents instituted action
against the appellant in the Witwatersrand Local Division for the repayment of a portion
of that amount on the basis that it had been paid by the Trust in the mistaken belief that
it was owing. The court a quo found that R1 762 931 had been paid by the Trust in the
mistaken belief that it was owing, dismissed the defences raised by the appellant and
granted judgment in favour of the respondents in that amount. With the leave of the court
a quo the appellant appeals against the court a quos judgment.
[2] The events which led to the payment of the amount of R4,125m were the
following.  During April 1993 and under case number 11257/1993 the appellant launched
an application in the Witwatersrand Local Division against the trustees of the Trust and
Konrad Leech in his personal capacity, in terms of which it claimed, against the Trust

and Leech jointly and severally, payment of R2 956 231,86 plus interest at a rate of
21,25% p.a. from 22 May 1992 to date of payment. In addition the appellant asked for
an order against the Trust that the immovable property, known as Remaining Extent of
Portion 23 (a portion of portion 9) of the Farm Witkoppen (“the Remaining Extent of
Portion 23”), be declared executable.  In the founding affidavit the appellant alleged that
the amount was due by virtue of a credit facility, payable on demand, granted by the
appellant to the Trust; that the Trust had, as security for the debt, registered two
mortgage bonds over the Remaining Extent of Portion 23; and that Leech had bound
himself as surety and co-principal debtor in respect of the Trusts indebtedness. The
Trust and Leech opposed the application. On 13 August 1993 the appellant withdrew the
application. By agreement each of the parties to the application was to pay its own costs.
[3] During the period May to October 1993 there were ongoing discussions between
the Trust and various companies represented by Leech, on the one hand and the

appellant on the other hand.  The discussions resulted in an agreement (the second
agreement) being concluded on 7 October 1993 between the appellant and the trustees
of the Trust; Konsheil (Pty) Ltd, Needwood (Pty) Ltd, TFC Cruise Lines (Pty) Ltd,
Growth Equity (Pty) Ltd, Leonard Mansions (Pty) Ltd, Dashwood Wild Coast CC (all
represented by Leech); Singin (Pty) Ltd  represented by Leechs wife (Mrs Leech),
who, in her capacity as trustee of the Trust, is the first respondent; Leech and Mrs Leech
in their personal capacities. The companies and the close corporation are hereinafter
referred to as Konsheil, Needwood, TFC, Growth Equity, Leonard Mansions, Dashwood
and Singin respectively.  From the second agreement it appears that the Trust was the
owner of the Remaining Extent of Portion 23 and that Konsheil was the owner of Portion
180 of that farm; that there were three mortgage bonds registered over the Remaining
Extent of Portion 23 of which two were in favour of the appellant and one in favour of
Nedcor Bank Ltd (Nedcor); that there was a mortgage bond registered in favour of the
appellant over Portion 180; that the parties agreed that the Trust would purchase Portion

180 from Konsheil, consolidate it with the Remaining Extent of Portion 23 into the
proposed Portion 297, re-subdivide Portion 297, sell the Remaining Extent of Portion
297 to Needwood and retain the other portion of Portion 297 which was to be known as
Portion 298. It appears furthermore that the house occupied by Leech stood on the
proposed Portion 298 and that Needwood wished to develop the Remaining Extent of
Portion 297 as Needwood Village, a cluster housing development.
[4] In terms of the second agreement the appellant agreed to lend to Needwood an
amount of R5,7m (“the loan”) together with certain transfer costs to pay an amount of
R5,7m to the Trust on account of the purchase price of the Remaining Extent of Portion
297. The full amount of R5,7m was to be retained by the appellant as payment of debts
owing to the appellant by the Trust, Dashwood, Growth Equity, Leonard Mansions, TFC
and also as payment of the amount owing by the Trust to Nedcor in terms of its
mortgage bond over the Remaining Extent of Portion 23. Against payment of these

amounts the mortgage bonds over the Remaining Extent of Portion 23 were to be
cancelled.  In addition the appellant undertook to lend to Needwood the balance of the
purchase price in respect of the Remaining Extent of Portion 297, being R1,3m, and to
grant to Needwood a loan facility for an amount of R7,5m (“the development loan”) to
enable Needwood to procure, construct and install all the services for the purpose of
constructing the Needwood Village on the Remaining Extent of Portion 297.  The capital
amount of the loan and development loan to Needwood was to be repaid from the
proceeds of the sale of stands in Needwood Village.
[5] In regard to the payment of the debt owing by the Trust to the appellant, clause
9.2 of the second agreement provided that the appellant was to retain an amount of
R4,125m as a payment by Needwood to the Trust on account of the purchase price of
R/E Portion 23 and in turn, a payment by the Trust to Absa in full and final settlement
of the claim by Absas Trust Bank Division against the Trust and Kon Leech (as surety

for the Trust), in terms of case number 11257/1993 in the Witwatersrand Local Division
of the Supreme Court of South Africa.  The reference to R/E Portion 23 is wrong.  It
should have been R/E Portion 297.
[6] The appellant advanced R5,7m to Needwood by, inter alia, retaining R4,125m
as payment by the Trust to the appellant in full and final settlement of the aforesaid
claim, as agreed. It is that payment that gave rise to the action in the court a quo.  In their
particulars of claim, as amended, the respondents alleged that the R4,125m was to be
paid in full and final settlement of the appellants claim against the Trust in terms of a
previous agreement (the first agreement) concluded on 7 October 1987. In terms of
that agreement Trust Bank, whose assets and liabilities were subsequently taken over by
the appellant, lent and advanced R468 000 to the Trust, and the Trust undertook to
furnish suretyships in favour of Trust Bank in respect of the indebtedness of Konsheil
to Trust Bank in the sum of R152 000,00 and the indebtedness of Leech to Trust Bank

in the sum of R230 000,00. The sum of these amounts is R850 000. The respondents
alleged furthermore:
8.
In terms of the in duplum rule interest on the loan made by the Trust Bank
to the Trust and on the capital amounts due by Konsheil and Leech under
the first agreement and the suretyships signed in respect of such
indebtedness by the Trust ceased running once the unpaid interest was
equal to the unpaid capital amounts thereof.
9.
Accordingly, the maximum amount of the indebtedness of the Trust to
Trust Bank was limited to the sum of R1 700 000,00.
10.
In the mistaken and bona fide belief that in terms of the first agreement the
indebtedness of the Trust in respect of the loan and the amounts for which
the Trust had bound itself as surety for Konsheil and Leech with interest
was the sum of R4 125 000,00, the Trust paid the said amount to the
Defendant as provided for in the second agreement.
11.
In consequence of the aforegoing, the Trust has overpaid the Defendant the
sum of R2 425 000,00 being the difference between the payment of R4
125 000,00 under the Second Agreement and the amount of R1 700
000,00 referred to in paragraph 9 above.
12.
In the premises the Defendant is indebted to the Trust in the sum of R2
425 000,00 and despite demand fails, refuses and/or neglects to repay
the said sum or any part thereof.

[7] The appellant pleaded that in terms of the first agreement the Trust became
indebted to the Trust Bank in an amount of R850 000,00 together with interest thereon
at the Trust Banks prime lending rate from 1 October 1987 to date of payment.  It
alleged that the indebtedness of the Trust to the appellant, in October 1993, arose out of
an oral agreement of novation concluded during or about August 1989 in terms of which
it was agreed that the appellant would consolidate the debts in the accounts of Leech
(R243 470.92), Krophile Investments (Pty) Ltd (R268 638.29), Konsheil (R202 126.68),
the Trust  (R637 415.02)  and Leech  (R129 863.86), a total amount of         R1 481
515.77, in one account in the name of the Trust.  The appellant denied that the amount
of R4 125 000,00 was paid in the belief that, in terms of the first agreement, the
indebtedness of the Trust was the sum of R4 125 000 and alleged that it was paid in full
and final settlement of the claim by the appellant against the Trust in terms of the
aforementioned application. It alleged furthermore that the obligation to pay the sum of

R4,125m was assumed by the Trust in consideration for the appellant conferring on the
parties to the second agreement the rights, advantages and benefits defined more fully in
the second agreement; that the Trust entered into the second agreement with the full
knowledge of the force and effect of the in duplum rule; and that the Trust for sound
commercial reasons, for a substantial consideration and for the mutual benefit of itself
and the other parties to the second agreement waived and renounced the benefits of the
in duplum rule or compromised or novated its indebtedness.  In summary, the appellant
denied that the indebtedness of the Trust was limited as alleged; that the Trust was
labouring under any mistaken belief when the payment was made; that the payment was
made indebite;  that the appellant had been enriched and that the respondents were
entitled, in the absence of a tender of restitution, to succeed in the relief claimed.
[8] From the aforegoing it is clear that the respondents claim is based on the
condictio indebiti. In order to succeed the respondents had to prove that a payment was

made in the mistaken belief that it was owing (Voet 12.6.6;  Union Government
(Minister of Finance) v Gowar 1915 AD 426 at 445;  Union Government v National
Bank of South Africa Ltd 1921 AD 121 at 140;  Recsey v Reiche 1927 AD 554 at 557;
Lawsa 1st Reissue Vol 9 para 79;  De Vos Verrykingsaanspreeklikheid  in die Suid
Afrikaanse Reg 3rd ed p 23;  Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue
1992 (4) SA 202 (AD)). They alleged and therefore had to prove that the Trust i.e. the
trustees of the Trust, believed that the amount of R4,125m was owing in terms of the
first agreement but that they were mistaken, in that, by virtue of the operation of the in
duplum rule, a portion of the amount paid was not owing.
[9] What has been referred to as the in duplum rule is part of our law. It provides that
interest stops running when the unpaid interest equals the outstanding capital (see
Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in liquidation)
1998 (1) SA 811 (SCA) at 827H). In argument in the court a quo respondents counsel
accepted that the capital amount to be utilised in the application of the in duplum rule

amounted to R1 181 034,33. The appellant contended that the correct capital amount for
purposes of the application of the in duplum rule was R1 481 515,75. It is therefore
common cause that the sum of R4,125m included ultra duplum interest.
[10] At the trial in the court a quo the respondents tendered the evidence of Gishen,
who is the third respondent, Mr Gordon and Leech.  Gishen, who is an attorney,
Gordon, who is an accountant, and Mrs Leech, as the trustees, at the time, of the Trust,
concluded the second agreement with the appellant.  Mrs Leech did not give evidence.
It is clear from the evidence of Leech, Gishen and Gordon that the Trust did not pay the
amount of R4,125m because of any belief on the part of the trustees of the Trust that the
amount was due to the appellant in terms of the first agreement.  In fact, their evidence
was to the opposite effect.
[11] Leech conducted the negotiations on behalf of the Trust. He testified that, in his

view, due to prescription and also to the fact that he believed that the Trust was being
overcharged in respect of interest, the Trust owed only R2,3m to the appellant and that
he informed the trustees that the amount claimed by the appellant was not due.
According to him he did, however, at a later stage accept what Steele, who represented
the appellant, said, namely that R4,1m odd was owing. Strangely enough, what
persuaded him was, inter alia, the fact that a deal had been struck and that he believed
that the purchase price of the land was a good and a fair price. In the light of this
evidence it seems doubtful whether he in fact accepted that the amount of the debt was
R4,125m.  In any event, on the evidence he never conveyed his acceptance of the
correctness of the figure claimed to the trustees.
[12] Gishen testified that there was some dispute with the appellant in relation to the
amount owing. He thought the dispute was about an overcharging of interest (not in the
sense that ultra duplum interest was being charged). The difference, as he recalled it, was

in the order of R1,3m. The following are extracts from his evidence:
"[W]hy did it pay that amount, that full amount that the bank claimed? - -Well it
is simple because the bank, we owe the amount, whether it be R3,6m or R4,1m,
whatever it may be, we were not in a position to pay it, we stood to lose
everything we had, and that is the property, that is all the trust had, and this deal
would ensure that the bank would be paid and the trust would hold this property
basically bond free.
What was advantageous to the trust to pay more than was due to the bank?
Perhaps R1,3m more than was due to the bank? - - No, no, the bank disputed that
amount. Rather than get involved in litigation with the bank, you see if we dont
settle with the bank what happens? If we dont agree to a figure with the bank?
They contend that R4,1 is owing, we say it is less, just say. The bank then say we
are not prepared to accept it and we proceed with proceedings against you. What
advantage is that to the trust? Rather concede the amount, concede that the
amount that they are claiming is due and get right out of the problem. We sell the
land, we pay the debt, we are free of any, we have still got that portion of the
property that we had left. Very advantageous to the trust.
[B]ut assuming that the difference was as high as R1,3m surely the trust
wouldnt just pay that not to have litigation? - - In my view it was still worth it
because here we stand to end up with something, otherwise we go to court and if
we dont succeed we end up with nothing, we lose the property.
So the trust was prepared to pay what was a disputed debt in order to avoid the

problem? - - Definitely.
[13] Gordons evidence was to the same effect. Leech mentioned to him that the
amount was a bit too high and that he was not happy with the interest being charged
(once again the challenge to the interest being charged did not relate to ultra duplum
interest). The following are extracts from his evidence:
Yes, so he [that was Leech) was telling you that the trust was not legally obliged
to pay that full amount? - - No he claimed that it was a dispute as to the rates.
Yes. - - But the bank at the time was adamant that that was the balance owing,
which we then agreed to accept because it suited the trust to liquidate that loan.
So despite the fact that the trust maintained that the interest was too high because
the wrong rate might have been used . . . - - Yes.
It was prepared to pay the full amount because of advantages it foresaw in this
agreement? - - Correct.
…
. . . we were prepared to pay it even though we believe that the amount was
overstated.
And then I put to you that it would not be correct to say that the trust would not
have paid the amount if it knew that the amount was not correct because in fact
it was prepared to pay an incorrect amount? - - Yes.

Well did Mr Leech tell you that he contended that only R2,3m was due? - - He
did not mention any figures as to the exact amount.
[14] Notwithstanding this evidence the court a quo found that the respondents had
discharged the onus resting on them, in proving that the payment in excess of R2 362
068,66 was made in the bona fide and reasonable, but mistaken, belief that it was
owing. The court a quo arrived at this finding on the basis that although the evidence
established that the trustees were prepared to go along with the agreement because of the
benefits it had for the Trust and  although the amount of the debt was disputed, the
dispute related to the applicable rate of interest and prescription, not to the application of
the in duplum rule. In my view the court a quo erred in this regard.  If an amount is paid
although it is considered not to be owing for reason A and at a later stage it becomes
apparent that it was not owing for reason B it remains a payment made in the belief that
it was not owing.

[15] The evidence established conclusively that the reason the sum of R4,125m was
paid was not because of a belief on the part of the trustees of the Trust that it was owing.
The trustees agreed to pay that amount and paid the whole of it in order to benefit the
Trust.  It is true that a portion of the sum of R4,125m was considered to be owing but,
on the evidence, it cannot be said that that portion was more than R2 362 068,66, being
the amount which, according to the respondents, was the maximum amount which could
have been owing by the Trust in view of the operation of the in duplum rule.  It cannot
therefore be said that any portion of the amount in excess of R2 362 068,66 was paid in
the belief that it was owing.
[16] The respondents counsel argued that, had the trustees of the Trust been aware
that the amount claimed by the appellant included ultra duplum interest, they would not
have agreed to pay R4,125m to the appellant. In this regard it was pointed out that both

Gishen and Gordon testified to this effect and that this evidence was not challenged in
cross-examination.  It is not surprising that appellants counsel never pertinently
challenged this evidence.  The case which the appellant had to meet was that the
payment of R4,125m was made in the belief that it was owing in terms of the first
agreement.  As I have already indicated both Gishen and Gordon conceded under cross
examination that that was not the case. There was no need for appellants counsel to
take the matter any further.
[17] In the light of the aforegoing it is not necessary to deal with the other defences
raised by the appellant.
[18] In the result the appeal succeeds with costs including the costs of two counsel.
The following order is substituted for the order of the court a quo:
The plaintiffs action is dismissed with costs including the costs of two counsel."

__________
P E Streicher
Judge of Appeal
Vivier,
JA)
Zulman
JA)
Cameron
JA)
Navsa
JA)
Concur