Cape Town - The Constitutional Court has reserved judgment in a consolidated case involving a trust and a company connected to Cape Town financial adviser Petrus Louw, who was jailed in March for defrauding his clients of millions of rands.
During his trial earlier this year, Louw confessed that he had defrauded his clients of about R110 million, and the funds had been used in his company, Pholaco.
In the interim, his joint estate with his wife, Martha Louw, was declared insolvent.
Two cases were consolidated into one for the Constitutional Court to hear. The first was brought by Gert Burger, Anton Keet and Willem Cronje in their capacity as the trustees of a family trust known as the HNP Trust.
This case concerns an application for leave to appeal against an order for the final sequestration of the trust by the Western Cape High Court.
The second application was by Christian Bester, Legadimane Maisela and Thomas Van Zyl, who are the trustees of the Insolvent Estate Louw.
They sought leave to appeal against an order of the Western Cape High Court, which declined to grant a final order for the liquidation of a company known as Quintado 120 (Pty) Ltd.
The Louws were trustees of the HNP Trust, together with Cronje, who also happened to be Louw’s business partner. HNP held shares in two companies, Pholaco and Quintado. The other shares in Quintado were held by Markram Kellerman’s family trust. Kellerman is Louw’s brother-in-law.
In their High Court case to sequester the trust, the trustees of the Insolvent Estate Louw alleged that Louw advanced about R70m from the R110m to Pholaco through the trust, and this gave them a claim against the trust.
In his submissions to the Constitutional Court on behalf of the HNP Trust, Advocate Pieter van Eeden SC argued that the trustees of the Insolvent Estate Louw lacked locus standi to apply for the sequestration order.
Van Eeden said: “Louw was not authorised to bind the trust, as all three trustees are required to approve the transactions. Therefore, if a loan was advanced to the trust from Louw for Pholaco’s benefit, it was unauthorised.
“The loan must have come directly from Louw, and the creation of a loan account in favour of the trust against Pholaco was a fiction to hide the origin of the money.”
Appearing for the insolvent estate, Advocate Jannie van der Merwe argued that the High Court erred when it said that the money channelled through Quintado’s bank account was not Mr Louw’s money, but his clients’ stolen money.
“The High Court applied an incorrect legal test in determining when a director’s conduct may be attributed to the company for civil or criminal liability, the so-called directing mind of the company test, and had it used the correct test, Louw’s conduct could be attributed to Quintado,” said Van der Merwe.