Mhlari NO and Others v Nedbank Limited

Nedbank advanced R14 million to the Patrick Malabela Family Trust in terms of a purported loan agreement concluded on 7 May 2013 and secured by a covering mortgage bond and suretyships. At the time, the Trust did not have the minimum number of trustees required by its trust deed, rendering it legally incapable of contracting. The Trust nonetheless received the funds, serviced the loan for several years, and repaid more than half the capital before defaulting. Nedbank sued on the contract. The trustees pleaded lack of capacity, rendering the contract and bond void, and raised prescription against Nedbank’s alternative unjust enrichment claim.

The appeal against the contractual judgment was upheld and the cross-appeal on unjust enrichment was upheld. The High Court order was set aside and substituted with an order directing the trustees of the Patrick Malabela Family Trust to repay R5 436 347.57 with mora interest from 12 September 2019, cancelling the mortgage bond, authorising the sheriff to effect cancellation if necessary, and awarding costs to Nedbank.

The case clarifies the interaction between trust capacity defects and unjust enrichment claims, confirms the application of prescription principles to enrichment actions, and provides authoritative guidance on pleading and proving the condictio indebiti versus the condictio sine causa specialis in cases involving void contracts.