THE REPUBLIC OF SOUTH AFRICA                 
REPORTABLE

IN THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

CASE NO: 10528/2003

In the matter between:

BAREND PETERSON N.O.                                              First Plaintiff
BRIAN ST CLAIR COOPER N.O.                                Second Plaintiff

and

KARIN ELIZABETH CLAASSEN                                 First Defendant
ABSA BANK LIMITED                                            Second Defendant
BOTHA BARNARD                                                    Third Defendant
THE REGISTRAR OF DEEDS, CAPE TOWN             Fourth Defendant
THE MASTER OF THE HIGH COURT, 
BLOEMFONTEIN                                                        Fifth Defendant
THE MASTER OF THE HIGH COURT, 
CAPE TOWN	                                                             Sixth Defendant

JUDGMENT  :  20 JUNE 2005

BOZALEK, J:

This is an exception to the particulars of claim in this matter brought on the basis that they are vague and embarrassing and do not disclose a cause of action. 

The excipient is the second defendant, ABSA Bank Limited, in its capacity as the bondholder over certain immovable properties. The plaintiffs, the joint liquidators and trustees in a number of interlinked insolvent estates, seek to set aside the transfer of these properties. As against second defendant the plaintiffs seek, inter alia, an order declaring that the transfers of the relevant erven, four in all, are void, that the relevant deeds of transfer stand to be cancelled in the records of the fourth defendant, the Registrar of Deeds, Cape Town, that the bonds registered in favour of second defendant over the properties similarly stand to be cancelled and that second defendant holds no real right in respect of any of the aforesaid immovable properties. 

Besides the excipient and the fourth defendant, the plaintiffs sued one Karin Claassen as first defendant, both in her personal capacity and in her capacity as sole trustee of seven trusts. The third defendant, Botha Barnard, is described as an “asset protector and financial advisor”. Three of the trusts of which first defendant is the sole trustee are, pursuant to the transfers which the plaintiffs seek to set aside, the apparent owners of the four erven. The particulars set out in some detail the background to the transfers. Central to this background was Claassen Vervoer CC, presently in liquidation (“the corporation”), the vehicle through which first defendant’s erstwhile husband, one Christo Claassen (“Claassen”) conducted business as a merchant and transporter of grain and feed. During 2001, it is alleged, the corporation’s financial position deteriorated to such an extent that, as of 1 December of that year, it was commercially insolvent pursuant to which it was placed into final liquidation on 30 April 2002. Claassen was sequestrated in August 2002, also in his capacity as the sole trustee of the Christo Claassen Family trust (“the Family trust”). Prior to December 2001 the Family trust had been the registered owner of two erven in Hartenbos, whilst Claassen and first defendant (his wife) were the registered co-owners of a further two erven in Oudtshoorn.

The particulars allege further that by December 2001 the liquidation of the corporation had become inevitable as had the sequestration of Claassen, the first defendant, to whom he was married in community of property, and the Family trust by reason of the financial relationship between these individuals and the trust. 

The particulars of claim allege further that in December 2001 Claassen, first defendant and third defendant devised a scheme which was intended to defraud their personal creditors and those of the Family trust and the corporation by dissipating the assets of the insolvent entities to new trusts. The scheme also involved the Claassens obtaining a divorce so as to separate their joint estate. To this end seven new trusts were created and were duly registered on 10 December. It was alleged that the sole purpose for their creation was to further the fraudulent, immoral or illegal purpose of the scheme. Immediately after the registration of the seven new trusts the Claassens sold one of the two immovable properties registered in their name to the CC trust and the other to the KCG trust, two of the seven newly created trusts. Simultaneously with the transfer of each property, a mortgage bond was registered over them in favour of the second defendant and the proceeds of the loans were paid to the trustee of the relevant trust, in the person of the first defendant. 

At around the same time the two erven previously owned by the Family trust were sold to another of the new trusts, the Twee Kuilen trust. Simultaneously with the transfer of these erven to the trustee of the Twee Kuilen trust, mortgage bonds in favour of second defendant were registered over the properties and the proceeds of the loans were paid to the trustee thereof, again in the person of the first defendant.

The plaintiffs allege that the intended effect of the scheme was to divest the insolvent entities of their assets and to place them beyond the reach of creditors and that it constituted a fraud on the creditors of the estates of the insolvent entities. The following important allegations were made as a basis for the relief sought against the second defendant:
“44.1	The trusts were created for an immoral and/or illegal and/or fraudulent purpose and the agreements in terms whereof the trusts were created are thus contra bona mores, void and unenforceable;
44.2	the agreements concluded between the trustees of the           	respective Trusts with any other party for the acquisition or 	disposal of assets pursuant to the scheme are void, in that the	agreements were concluded by void and thus non-existing 	trusts;
44.3	by virtue of the aforegoing the trustees of the trusts were 	incapable of receiving or holding ownership of any of the assets 	that were purportedly disposed of to them pursuant to the 	scheme.
45.	 	The disposition of assets pursuant to the scheme were thus	dispositions made to invalid and/or void entities and such	alienations are therefore similarly void. 
46.	 	Ownership accordingly never passed from any of the insolvent	entities to the new trusts in relation to any of the purported	alienations and dispositions in terms of the scheme. 
47.	 	The bonds that were accordingly registered by the invalid and/or 	void entities over the relevant immovable properties in favour of	second defendant are therefor also void and are liable to be 	expunged from the title deeds of the immovable properties…”

It appears to be common cause that, against the security of the bonds over the properties, second defendant advanced a total of R925 000,00 to the first defendant in her capacity as trustee of the three new trusts which took transfer of the immovable properties.

The second defendant filed an exception citing six separate grounds of complaint. By the time of hearing the exception had narrowed to one ground, expressed as follows:
	“In paragraph 44 it is alleged that the CC trust, the KCG trust and the 	Twee Kuilen trust were created for an immoral and/or illegal and/or	fraudulent purpose and are therefor void as against plaintiffs. In 	paragraph 45 it is alleged that the dispositions pursuant to the scheme	were made to invalid and/or void entities and such alienations are	therefore, similarly, void as a result whereof ownership never passed	from any of the insolvent entities. The bonds which were registered in	favour of second defendant by the invalid and/or void entities are 	therefor void. No ground is pleaded upon which the contractual nexus 	between the relevant contracting party and second defendant could be 	avoided. It is not alleged that second defendant had knowledge of the 	alleged fraudulent scheme and it is further not alleged that the bonds 	were registered without cause, or for no consideration.”

In the heads of argument initially filed on behalf of the excipient it was assumed that the plaintiffs’ claims were founded upon the actio Pauliana and, in the alternative, on the provisions of section 31 of the Insolvency Act, 1936 (the “Act”). It was contended that inasmuch as there was no allegation of any alienation by the relevant insolvent to the excipient, nor that there was any fraud in regard to the bonds which were registered and that the excipient gave value for the bonds, the actio Pauliana was not available to defeat the excipient’s real rights over the properties. In regard to the plaintiffs’ perceived reliance, in the alternative, on section 31 of the Act, the excipient argued that the plaintiffs had alleged no collusion on the part of the excipient in the disposition of the immovable property. Furthermore, the plaintiffs had not offered the excipient any indemnity in terms of section 33(1) of the Act in circumstances where it had acted in good faith in advancing the proceeds of the loans to the first defendant, in her capacity as a trustee of the three trusts, against the security of bonds registered over the relevant immovable properties. 

Adv. Muller, who appeared for the respondents, conceded, however, that neither the actio Pauliana nor the provisions of section 31 of the Act allowed for the effective recovery of property from a party who obtained same in good faith and for value. He stated that the respondent’s claim was based neither on the actio Pauliana nor on the provisions of the Insolvency Act. Instead, he contended, the cause of action was based, in essence, upon the principles applying to the establishment of trusts and those underlying the system of the property registration which obtains in this country. He argued that since the new trusts were created for a fraudulent purpose they were void ab initio. Further, since a trust is established by contract and one of the essentials for the creation of a valid trust is that the trust object must be lawful, it follows that a trust is void if created with a fraudulent, illegal or immoral purpose. That being the case, the argument continued, the purported trustee of the new [fraudulent] trusts could not validly take transfer of the properties and nor could she consent to the registration of a bond over such properties thereby permitting the registration of limited real rights in favour of the excipient. Relying on a line of cases dealing, inter alia, with our system of deeds registration, it was argued that a crucial feature of our negative system is that it provides no protection to a bona fide third party [in casu excipient] at the expense of the true owner [the insolvent entities prior to their insolvencies and now the plaintiffs nomine officio]. Thus, argued the plaintiffs, the excipient enjoyed no rights in terms of the mortgage bonds registered over the properties although it might well have other remedies, albeit far less effective. 

In seeking to counter this reasoning Adv. Olivier raised two main arguments on behalf of the excipient. He contended in the first place that the purpose for which a trust is used, as opposed to its object, does not render it void but only may render a specific transaction void. Secondly, he contended that the plaintiffs, in their capacities as liquidators and trustees, had no locus standi to launch an action to have the disputed transaction set aside for and on behalf of the creditors other than by means of the actio Pauliana or under the Insolvency Act. 

It would appear that the plaintiffs’ case rests on two pillars:  firstly, that the new trusts, those which purported through their sole trustee to take transfer of the immovable properties, were void ab initio; secondly, that the liquidators/trustees enjoyed the right to reclaim property from bona fide third parties without indemnifying such party for the value given arising out of the loan agreement underlying the registration of the bond, or put differently, without restoring the status ante quo. Each of these arguments must be examined more closely.

THE EFFECT OF CREATING A TRUST WITH AN UNLAWFUL PURPOSE
A trust is usually created by a contract and one of the essentials for the creation of a valid trust is that the trust object must be lawful. 

Administrators, Estate Richards v Nichol 1996 (4) SA 253 (C) 258E –G. 

However, the contractual basis for the establishment of most trusts does not mean that such entities and their relations with third parties are invariably dealt with in terms of contractual principles. Thus, in the context of observing that trusts inter vivos, having been established by contract can be revoked or varied in the same manner as a contract, the authors of Honore’s Law of Trusts, fifth edition, page 35, make the following pertinent remarks: 

“Hence the creation and revocation of such trusts and the acquisition of rights by the beneficiaries under them are regulated by the rules of contract law. But this does not establish that trusts inter vivos are contracts or a species of contract, and the suggestion that ‘in our law a consensual trust is nothing but a contact’ suggests an unfortunate reductionism that ignores the subtlety of two hundred years of historical development, while threatening to impoverish our law of obligations. A contract is not a public-law institution and the courts have no general protective supervisory jurisdiction over contracting parties. What is more, the courts cannot replace one contracting party by another, as they can one trustee by another, or provide for gaps in succession of trustees”. 

Building nonetheless on the contractual foundations of trusts, the next leg in the plaintiffs’ argument is that, insofar as a contract having an illegal purpose is unenforceable, so too an agreement to form a trust having an illegal purpose is similarly unenforceable and any purported trust arising therefrom is void. Whilst it is correct that one of the essentials for the creation of a valid trust is that the trust object must be lawful, it does not follow, however, in my view, that a trust is void if it is created with a fraudulent, illegal or immoral purpose. Counsel for the plaintiffs cited no authority for this far-reaching proposition nor is support for this view to be found in Honore. There is, in my view, a material difference between the object of a trust and the purpose thereof. The object is openly proclaimed and ascertainable and all parties who have dealings with that trust will be held to have knowledge of the trust’s object. In the present case the objects of the three new trusts which took transfer of the properties were entirely lawful, the primary object being in each case “om bates en inkomste te bekom en aan te wend tot uiteindelike voordeel van die begunstigde”. 

By contrast where a trust is formed for an illegal or unlawful purpose this knowledge is jealously guarded by those who harbour such purpose. This is but one reason, although an important one,  why the purpose of a trust, where it is an illegal or immoral purpose but is known only to the founder and to the trustees, cannot be equated in all circumstances with that trust’s (lawful) object. This view receives some additional indirect endorsement in Lawsa, Volume 31 (first re-issue, 2001) JJ Gauntlett and RC Williams at par. 501 where the authors state:  

“The institution of the trust is not to be equated with the legal instruments used in the creation of a trust. Thus, a trust inter vivos may be established by a stipulatio alteri and revoked in the same manner, but it is not simply a contract.” 

The plaintiffs’ argument continues that a trust has no legal personality and any property accruing to it is registered in the name of the trustees for the time being, nomine officio. Furthermore, since only the true owner of property may consent to the registration of a bond over property and since the allegedly fraudulent trusts are void, the purported trustee, her appointment being invalid, could not validly take transfer of the properties in her aforesaid capacity. Similarly, since only the true owner of property may consent to the registration of a bond over such property, the purported trustee of the void trusts was never legally capable of agreeing to or permitting the registration of real rights in favour of the excipient, in the form of mortgage bonds, over the properties.

At common law an agreement is unenforceable if the ultimate purpose of the parties is prohibited by common law. It must be borne in mind, however, that to the extent that such agreements are unenforceable they are unenforceable at the instance of the parties thereto, a situation not encompassed by the facts of the present matter. It is noteworthy, furthermore, that this general rule has been relaxed to some extent in the situation where one party enters into the contract for an illegal purpose but the other knows nothing of that purpose and is entirely innocent. In such a case  the innocent party can enforce the contract but the guilty party cannot. 

Ericsen v Germie Motors (Edms) Bpk 1986 (4) SA 67 (A). Although the courts do not lend their aid to the enforcement of an illegal contract, the unenforceability of the contract does not however prevent the court looking at it for any purpose whatsoever. Zuvaradoka v Franck 1981 (1) SA 226 (ZA) 229E 230A. Although it is a principle of our law that the stronger the law’s condemnation of the illegal contract, the further will the condemnation spread to include transactions which, although not indirect attempts at enforcement, tend to facilitate or encourage the performance of the illegal contract (Gibson v Van der Walt 1952 (1) SA 262 (A) 269H), the following remarks by Coetzee J in Pick ‘n Pay Stores v Trek Petroleum (Pty) Ltd 1976 (2) SA 302 (W) at 306 are apposite: 

“The present contract is an ordinary one between wholesaler and retailer for the supply of stock to the latter’s perfectly lawful garage business. If a retailer so conducts his retail trade as to attract penalties under some of the myriad Acts, Ordinances, regulations and bylaws which impinge on the particular trade, but which do not directly concern his contracts with his suppliers, the Court should be slow to hold that these penalties interfere with rights and remedies given by the ordinary law of contract in respect of such contracts. The criminal law is always available to prevent breaches of such enactments by the retailer and public policy does not demand that bargains which are not directly or sufficiently closely connected with those breaches should necessarily be nullified. On the contrary bargains should be carried out.” 

I pause to observe that in the present situation, assuming the factual correctness of their case, upholding the basis of the plaintiffs’ case against the excipient would, if anything, serve as indirect encouragement for similar dishonest schemes by persons seeking to use trusts as instruments of fraud. Having purported to alienate property through a trust and having obtained value therefor, they can, relying on the voidness of the trust, reclaim the alienated property or stand by whilst it is reclaimed by the original owner, without tendering to return the valuable consideration received in the impugned transaction. 

In my view, the fact that a trust is created for an unlawful purpose does not automatically render it void. Such an approach has anomalous and unfair results, not least of which is that where transfers of properties are effected for a fraudulent purpose using a trust, a different result will obtain depending on whether the trust is created with that purpose in mind or whether that purpose pre-exists the establishment of the trust. In the former case, on the respondents’ argument, the trustees could never take or give transfer of immovable property pursuant to the fraudulent scheme since the trust would be regarded as never having come into existence and the trustees would not be regarded as having ever been validly appointed. By contrast, were the trustees, with the complicity of the founder and beneficiaries of an existing trust to later conceive of a fraudulent scheme involving the transfer of property, any such transfer would, as against bona fide third parties, be unimpeachable. 

To my mind the better view is that where a trust is created for an illegal purpose, agreements which it thereafter purports to conclude may be void or voidable in accordance with ordinary contractual principles and depending on the circumstances surrounding the conclusion of each such agreement.

It is important to bear in mind that the trusts in question were created by agreement and duly registered. The object of the trusts, as stipulated in the trust deeds, is lawful. The trustee of the new trusts was registered as the owner of the property in such capacity and she apparently had the power and authority to conclude the agreements to accept transfer of the properties and to sign and execute all documents in this regard. Furthermore, the trustee (first defendant) executed authorities pursuant whereto bonds were registered over the properties in favour of the excipient. The bonds are, on the face of it, valid and enforceable. It is common cause, furthermore, that the excipient was unaware of the alleged illegal purpose pursuant to which the new trusts were allegedly created and utilized. 

Should new trusts so created be held to be void and the appointment of the purported trustees invalid, this would lead to inequitable and incongruous results. Thus, for example, unsecured creditors of an insolvent entity would be preferred above a secured creditor whose security, if not his claim, would simply vanish into thin air. It would potentially lead to great hardship for innocent third parties dealing with the apparent registered owner of immovable property. It would unquestionably lead to legal uncertainty, since ownership of immovable property apparently vesting in the trustees of a newly created trust would be dependent upon the subjective intention of such trustees and the founders of the trust. Acceptance of such an approach would, moreover, not only frustrate the system of registration in respect of immovable property but bedevil the field of estate planning. Where the new trusts had entered into agreements not directly related to the illegal transaction, for example contracts entered into in the ordinary course of its business, these would arguably be similarly unenforceable, leaving innocent third parties with limited remedies. 

The respondents called into aid of their argument the negative or abstract registration system relating to immovable property which prevails in our system of law. It is correct that under our system, registration of title to immovable property in the deeds office is not proof or guarantee of ownership. Knysna Hotel CC v Coetzee N.O. 1998 (2) SA 743 (SCA) at 753B – D. Notwithstanding the nature of this system, a real right is, generally speaking, adequately protected by its registration in the deeds office. Frye’s (Pty) Ltd v Ries 1957 (3) SA 575 (A) at 528A.

In Cape Explosive Works Ltd v Denel (Pty) Ltd 2001 (3) SA 569 at 577D – H, in the context of the transfer of ownership of immovable property, the following dictum was approved from Commissioner of Customs and Excise v Randles, Brothers and Hudson Ltd 1941 AD 369 at 398, where Watermeyer JA stated the following in respect of the passing of ownership of immovable property:  

“Ownership of movable property does not in our law pass by the making of a contract. It passes when delivery of possession is given accompanied by an intention on the part of the transferor to transfer ownership and on the part of the transferee to receive it… If the parties desire to transfer ownership and contemplate that ownership will pass as result of the delivery, then they in fact have a necessary intention and the ownership passes by delivery.” 
This decision was earlier followed in Trust Bank van Afrika Beperk v Wes Bank Beperk en Andere N.N.O. 1978 (4) SA 281 (A). 

It matters not then, in the circumstances of the present matter, that the underlying causa for the sale of the property allegedly arose, and as must be accepted at the exception stage, pursuant to a scheme to defraud creditors. As was pointed out by Adv. Olivier on behalf of the excipient, at the time when ownership in the property was transferred by the alienators thereof, they had the necessary authority and contractual capacity to do so. There was no prohibition per se against the transfer or alienation of the properties concerned. Similarly, on the face of it, the alienee had the necessary authority and certainly the intention to take transfer of the property into her name on behalf of the new trusts. These trusts were created by agreement, were duly registered and had a lawful object. Again, on the face of it the trustee had the power to and did execute authorities pursuant whereto bonds were registered over the properties in favour of second defendant. The plaintiffs’ case rests upon first defendant’s lack of authority to take transfer of or mortgage the property consequent upon her invalid appointment as trustee of the new trusts themselves void as a result of the illegal purpose its creators had in mind upon their establishment. If it is accepted that first defendant’s appointment as trustee of the new trusts was valid, at least for the purposes of taking transfer on behalf of the new trusts of the four immovable properties and registering mortgage bonds thereover in favour of the excipient, then, of course, any challenge to the validity of the excipient’s real rights over the immovable property based on the validity of the process of registration of the excipient’s rights must fail. 

To sum up on this point, I find that the alleged illegal purpose cannot be equated with, or be regarded as interchangeable with, the object of the new trusts. As a result, it cannot be said that the appointment of first defendant as trustee was ipso jure invalid and thus that the alienation or burdening of the immovable properties had no force or effect in law. 

THE REMEDIES AVAILABLE TO THE PLAINTIFFS
Even if I am incorrect in reaching the above conclusion, and in any event, the merits of the exception can also be determined in the light of the remedies available to and relied on by the plaintiffs in pursuing the relief claimed against the excipient. As previously mentioned, the plaintiffs disavow any reliance on the actio Pauliana or section 31 of the Insolvency Act inasmuch as these remedies do not provide for the effective recovery of property from a party who acquired it in good faith and for value. 

The first requirement of the actio Pauliana is proof that there was an alienation of such a nature that the debtor’s assets were diminished thereby. This requirement, in the present circumstances, does not square with the plaintiffs’ arguments that there was in effect no disposition since the purported trustee could neither take ownership nor burden the immovable property by reason of her lack of capacity arising from her invalid appointment. 

Probably for this reason, in order to recover the immovable property unburdened by the right of security thereover claimed by the excipient, the plaintiffs are driven to rely on some general and unnamed common law right. The question which arises is whether the plaintiffs, in their capacities as co-trustees and liquidators, enjoy any such right. In Mars, eighth edition, Law of Insolvency in South Africa, Juta, page 233, it is stated that although the Act provides certain specific grounds on which a disposition of property made by an insolvent before sequestration may be set aside, it does not deprive a trustee or creditor of any rights they may have at common law consistent with the Act. Cited as authority for this proposition is the case of Fenhalls v Ebrahim 1956 (4) SA 723 (N). There Holmes J was called upon to decide whether the actio Pauliana was available as a remedy before sequestration of a debtor’s estate. He held that the actio’s requirements had been authoritatively set out in Hockey, N.O. v Rixom N.O. and Smith 1939 SR 107 as follows:
1.	the alienation should be of such a nature that the debtor’s assets are diminished thereby;
2.	that the person who receives from the debtor does not receive his own property;
3.	that there should be the intention to defraud;
4.	that the fraud should have its effect.
Significantly, Holmes J stated as follows:  

“There is good authority for the first submission, namely that creditors are not deprived by the Insolvency Act of any rights which they may have at common law which are not inconsistent with the Act”. 

Where a trustee succeeds in proceedings to set aside a disposition the court will declare him entitled to recover the property, or if recovery is impossible, to its value, if improperly disposed of by the debtor. Importantly, however, no such declaration by the court can in any way affect the rights of any person who has, in good faith and for value, acquired the property in question or a real right over it such as a mortgage, from some person other than the insolvent. (Mars supra at page 241, Siebert’s Trustee v Siebert 6 EDC 218 and section 33(2) of the Insolvency Act.) Mars also points out that the underlying purpose of section 33(1) of the Act is to ensure that when a disposition is set aside and the person who received it in good faith parted with any property or security or lost any rights, both parties will be restored to their position before the disposition was made. Where a trustee fails to give restitution, the court will restrain him by interdict from enforcing a judgment given for the return of the property received by the creditor. (Thorne’s Trustee v Friedlander 1875 Buch 167. )

In Swadif (Pty) Ltd v Dyke N.O. 1978 (1) SA 928 (A) at 938A Trengrove AJA stated as follows:  

“There is, of course, ample authority for the proposition that a trustee, and for that matter, a liquidator is not deprived by the Act of any rights which he may have at common law, provided that they are not inconsistent with the Act.” 

See too Wolpe v Gale 1980 (3) SA 259 (W) at 262D – E, which also endorsed this principle stating: 

“The Insolvency Act does not deprive creditors of any rights which they may have under the common law, which are not inconsistent with the Act and where an act has been done in fraud of creditors the provisions of our common law regarding the revocation of such an act will apply. … Such alienation in fraud of creditors can be set aside at common law under the actio Pauliana…”. 

Adv. Muller disavowed reliance on the actio Pauliana but declined to specify the precise source of the action in terms whereof the plaintiffs sought return of the property on behalf of the creditors unencumbered by any right of security held by the excipient. Three difficulties arise for the plaintiffs in this regard. 

Firstly, according to various authorities quoted above, any common law action to set aside a disposition and recover property cannot be inconsistent with the provisions of the Insolvency Act. That Act, through the provisions of section 33(1), protects the rights of those who acquire such property or security in good faith by requiring the trustee to indemnify such person for parting with such property or security. In the present case the plaintiffs tender no such indemnity.

Secondly, the provisions of Section 33(2) limit the applicability of proceedings to set aside dispositions of property to those instances where the property was acquired from someone whose estate was subsequently sequestrated. In the present case the excipient acquired its right of security in the four properties from new trusts which were not subsequently sequestrated. 

Finally, any common law right sought to be exercised by the plaintiffs, other than the actio Pauliana, can conceivably only be an action whereby restitutio in integrum is sought pursuant to nullification of the transfers and registrations of the mortgage bonds. The insolvent entities and, for that matter, the trustee of the trusts were not defrauded since their allegedly fraudulent scheme depended on their cooperation and consent. In these circumstances it is difficult, if not impossible, to see how they could have set aside the transfers and the mortgage bonds without tendering to restore the status ante quo in regard to the monies advanced by the excipient to the new trusts pursuant to the underlying loan obligation and corresponding mortgage bonds. This being the case, it is equally difficult to comprehend how the plaintiffs, having stepped into the shoes of the insolvent entities, can escape the full consequences of the allegedly void contracts. In short, it is unclear how the plaintiffs could acquire greater rights than the insolvent entities ever had. (See in this regard Dalrymple Frank and Feinstein v Friedman 1954 (4) SA 643 at 646.) 

At best for the plaintiffs, in order to obtain the relief they seek vis à vis the excipient, namely, the declaration that the mortgage bonds were of no force and effect, they have to tender repayment to the excipient of the monies advanced by it as an innocent third party in terms of the underlying loan agreements and any further monies owing in terms of such agreements. To hold otherwise would be to permit the insolvent entities to benefit from their own fraud in breach of the principle that no one is allowed to improve his own condition by his own wrongdoing. (See Wimbledon Lodge (Pty) Ltd v Gore N.O. and Others 2003 (5) SA 315 at 321F – H.) 

For these reasons I have come to the conclusion that, even if the illegal purpose contended for by the plaintiffs rendered the new trusts void, the excipient, as an innocent third party, was not thereby stripped of the rights of security in the properties which it acquired for fair value. If the plaintiffs’ cause of action against the excipient is held to be sound, an untenable result follows. The insolvent entities, which fraudulently participated in the scheme to transfer the properties and bond them for value, regain ownership of the properties, unbonded, whilst the excipient loses its real right of security against the properties and has, at best, a claim against first defendant or, arguably, a concurrent claim against the insolvent entities. Furthermore, upholding such a cause of action would have far-reaching and commercially impracticable consequences for all parties who unknowingly contract with a trust created for a fraudulent purpose. 

For these reasons, I hold that the exception is well founded. As they presently stand, the plaintiffs’ particulars of claim, in relation to the relief claimed in paragraphs 49.3(b) and (c), are vague and embarrassing and disclose no cause of action against the excipient. 

ORDER
The following order is made:

1.	The exception is upheld with costs. 
2.	Paragraphs 44 to 47 inclusive of plaintiffs’ particulars of claim as amended, dated December 2003, are struck out. 
3.	Plaintiffs are granted leave to amend their particulars of claim within 3 [three] weeks of date hereof.

_________________
LJ BOZALEK, J