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[2016] ZAWCHC 114
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Absa Bank Limited and Others v Wolpe and Others; In Re: Wolpe v Absa Bank Limited and Others (9450/14, 20672/15) [2016] ZAWCHC 114 (31 August 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
Case
No.:
9450/14
In
the matter between:
ABSA
BANK
LIMITED
..................................................................................................
First
Applicant
(Registration
No. 1986/004784/06)
CHRISTO
JACOBUS
SMITH
...................................................................................
Second
Applicant
ANNARI
HARLEY
........................................................................................................
Third
Applicant
ALBERTUS
JOHANNES
ERASMUS
.......................................................................
Fourth
Applicant
PIETER
WILLEM
STEYN
............................................................................................
Fifth
Applicant
PIETER
SWART
.............................................................................................................
Sixth
Applicant
MARTIN
CHARLES
LEIGH
...................................................................................
Seventh
Applicant
LOUIS
LEON VON
ZEUNER
....................................................................................
Eighth
Applicant
WESSEL
ANDRIES DE
JAGER
..................................................................................
Ninth
Applicant
And
TESSA
MARGOT
WOLPE
........................................................................................
First
Respondent
MICHAEL
FITZGERALD SC
N.O
.......................................................................
Second
Respondent
(in
his capacity as the duly appointed Commissioner in the
Section
417, 418 enquiry in A Million Up Investments 105
(Pty)
Ltd (In Liquidation)
GAVIN
CECIL GAINSFORD
N.O
...........................................................................
Third
Respondent
(in
his capacity as one of the duly appointed joint liquidators
of
A Million Up Investments 105 (Pty) Ltd (In Liquidation)
MARIO
PAUL WALTERS
N.O
...............................................................................
Fourth
Respondent
(in
his capacity as one of the duly appointed joint liquidators
of
A Million Up Investments 105 (Pty) Ltd (In Liquidation)
STEPHEN
MALCOLM GORE
N.O
..........................................................................
Fifth
Respondent
(in
his capacity as one of the duly appointed joint liquidators
of
A Million Up Investments 105 (Pty) Ltd (In Liquidation)
GARY
NEIL
SHAFF
....................................................................................................
Sixth
Respondent
GLM
INVESTMENTS (PTY)
LTD
.......................................................................
Seventh
Respondent
(Registration
No. 2003/003980/07)
QUANTUM
PROPERTY GROUP
LIMITED
.......................................................
Eighth
Respondent
(Registration
No. 1984/002788/06)
LEONARD
HIMELSEIN
..........................................................................................
Ninth
Respondent
PROTEA
HOTEL GROUP (PTY)
LTD
...................................................................
Tenth
Respondent
(Registration
No. 1969/009272/07)
AND
Case
No.: 20672/15
In
the matter between:
TESSA
MARGOT
WOLPE
.....................................................................................................
Applicant
And
ABSA
BANK
LIMITED
..............................................................................................
First
Respondent
(Registration
No. 1986/004784/06)
CHRISTO
JACOBUS
SMITH
................................................................................
Second
Respondent
LOUIS
LEON VON
ZEUNER
..................................................................................
Third
Respondent
ANNARI
HARLEY
...................................................................................................
Fourth
Respondent
ALBERTUS
JOHANNES
ERASMUS
.......................................................................
Fifth
Respondent
PIETER
WILLEM
STEYN
........................................................................................
Sixth
Respondent
PIETER
SWART
.....................................................................................................
Seventh
Respondent
WESSEL
ANDRIES DE
JAGER
.............................................................................
Eighth
Respondent
MARTIN
CHARLES
LEIGH
...................................................................................
Ninth
Respondent
DIANE
EILEEN
VASKYS
.........................................................................................
Tenth
Respondent
PROTEA
HOTEL GROUP (PTY)
LTD
..............................................................
Eleventh
Respondent
MICHAEL
FITZGERALD SC
N.O
.......................................................................
Twelfth
Respondent
STEPHEN
MALCOLM GORE
N.O
................................................................
Thirteenth
Respondent
GAVIN
CECIL GAINSFORD
N.O
..................................................................
Fourteenth
Respondent
MARIO
PAUL WALTERS
N.O
...........................................................................
Fifteenth
Respondent
CORAM:
SALIE-HLOPHE, J
HEARD:
30 May 2016
DELIVERED:
31 August 2016
Case
No.: 9450/14
COUNSEL
FOR 1
ST
APPLICANT:
Adv. Leathern SC assisted by
Adv. Turner
COUNSEL
FOR 1
ST
RESPONDENT:
Adv. Duminy SC assisted by
Adv. Davis
COUNSEL
FOR 7
TH
-9
TH
RESPONDENTS:
Adv. du Toit SC assisted by
Adv. Wickins
COUNSEL
FOR 10
TH
RESPONDENT:
Adv. Pincus SC assisted by
Adv. Walters
Case
No.: 20672/15
COUNSEL
FOR APPLICANT:
Adv. Duminy SC assisted by
Adv. Davis
COUNSEL
FOR 1
ST
RESPONDENT:
Adv. Leathern SC assisted by Adv. Turner
COUNSEL
FOR 11
TH
RESPONDENT:
Adv. Pincus SC assisted by Adv.
Walters
JUDGMENT
TO BE DELIVERED ON 31 AUGUST 2016
SALIE-HLOPHE,
J:
INTRODUCTION
[1]
There are two related applications before this court, commonly
referred to as the 2014 application and the 2015 application.
The
issue common to both applications is whether an enquiry previously
ordered by this court in terms of Section 417
[1]
of
the Companies Act 61 of 1973 into the affairs of a private company
called A Million Up Investments 105 (Pty) Ltd (In Liquidation)
(“AMU”) should be allowed to continue or whether the
order authorising the enquiry (“the 417 order”) should
be
set aside and the enquiry terminated.
[2]
For the sake of convenience, the chief protagonists in these
proceedings are referred to simply as “Wolpe”, “Absa”
and “Protea”. The liquidators of AMU who are cited
as respondents in both applications are referred to as “the
liquidators”. Argument was also addressed on behalf of
GLM Investments (Pty) Ltd, Quantum Property Group Limited and
Leonard
Himelsein (“Himelsein”),
[2]
in opposing the termination of the enquiry.
[3]
In the 2014 application Absa Bank Limited (“Absa”) sought
a final order that the enquiry be terminated and the 417
order set
aside. It sought by way of interim relief that the enquiry be
suspended pending the determination of the final relief.
Protea
Hotel Group (Pty) Ltd (“Protea”) which is cited as a
respondent in both applications, made common cause with
Absa.
[4]
On 18 June 2014 Griesel J ordered that the enquiry be postponed
indefinitely pending the determination of the final relief (“the
Griesel order”). However, Absa did not proceed with the
final relief and the enquiry could not proceed by virtue of
this
order.
[5]
In the 2015 application Mrs. Tessa Wolpe (“Wolpe”) sought
an order authorising and directing the Commissioner to
comply with
the terms the 417 order and to continue with the enquiry (together
with incidental relief). Both applications were
set down by the
Registrar for hearing simultaneously.
BACKGROUND:
[6]
Welcoming incoming travellers to town via the Gardens area is a hotel
known as “15 on Orange”. Whilst opulent
and lavish,
it has formed the basis of a convoluted and tortuous background
stemming from various court applications and disputes.
The
hotel was owned by a company known as A Million Up (Pty) Limited
(“AMU”),
[3]
which
company was placed under an order of provisional winding-up at the
instance of Absa on 29 June 2012. The application
was brought
on the basis that AMU is unable to pay its debts as envisaged in
Section 344(f) of the Companies Act, 61 of 1973 (“the
1973
Companies Act”). The order was made final on 14 August 2012.
[7]
On 26 July 2012 Mrs Tessa Margot Wolpe (“Wolpe) brought an
ex
parte
application for an enquiry in terms of Section 417 and 418
of the 1973 Companies Act into the trade, dealings and affairs or
property
of AMU. She claimed the basis for her
locus standi
by reason that she is a creditor of AMU having a loan account therein
in approximately R5 million rands. Pursuant to the
application,
Koen AJ granted the order.
[8]
Wolpe caused subpoenas to be issued and served on a number of Absa
employees and Mr. Arthur Gillis of Protea. The enquiry
was
scheduled to commence on 3 September 2012.
[9]
On 28 August 2012 Absa launched an application under case number
16693/2012 for an order directing that a copy of the
ex parte
application be made available to Absa. It also sought that the
417 order be set aside as well as the subpoenas issued (“the
2012 application). Protea made common cause with Absa and
sought to intervene in the 2012 application. Wolpe opposed
the
2012 application. The parties entered into a settlement
agreement, which was made an order of court by the Hlophe JP
on 30
November 2012. The introduction to the settlement agreement
recorded that the “
applicants and Wolpe wish to settle the
application and to make mutually acceptable arrangements for the
conduct of the enquiry”.
At paragraphs 2.1 and 2.2 thereof
Absa withdrew its challenge and undertook not to institute any
further proceedings for the setting
aside of the enquiry and
obtaining a copy of the ex parte application.
[10]
In March 2013 Wolpe arranged for the commissioner to issue subpoenas
calling upon Messrs Gary and Peter Shaff (“the Shaffs’)
to attend the enquiry on 19 March 2013.
[4]
The enquiry did not proceed on the said date. Whilst the
reasons are in dispute, it can be accepted that the Shaffs
did not
attend.
[5]
[11]
In September 2013 Wolpe, acting in the name of the liquidators,
launched an application under case no: 15766/13 to have a
pre-liquidation transaction where AMU purchased Protea’s shares
in the company 15 on Orange Hotel (Pty) Ltd set aside on the
basis
that it amounted to a collusive disposition in terms of section 31(1)
of the Insolvency Act 24 of 1936 (“the section
31
application”).
[6]
Wolpe
alleged that Absa, Protea and the Shaffs were parties to or complicit
in the alleged collusion. Success in the form
of a final order
would arguably have resulted in Absa’s substantial secured
claim against AMU to be forfeited. This
in turn would probably
have resulted in Absa’s claim against Wolpe (qua surety for AMU
in favour of Absa) extinguished
and the loan account claim that
she had against AMU would revert to her.
[7]
[12]
Wolpe also sought an interim order directing Absa to repay to the
liquidators, pending the determination of the section 31
application,
the advance payment made to it as a secured creditor from the
proceeds of the sale of AMU’s property, the 15
on Orange Hotel
building.
[13]
The liquidators contended that the making of the advanced payment was
unexceptionable and in accordance with long established
insolvency
practice.
[8]
[14]
The judgment of Binns-Ward J found that Wolpe had failed to satisfy
that the liquidators’ act of making an advance payment
to Absa
was unreasonable or absurd He concluded in his judgment that the
facts supported a finding that the payment was made in
terms of the
standard practice. The learned Judge found that Wolpe had not
established a prima facie case of collusion and
expressed the view
that collusion was not apparent on the face of matters. Quoting from
his judgment:
[9]
“
A
collusive dealing in the relevant context entails an agreement
entered into by a company, before its winding up, with the fraudulent
purpose of prejudicing the rights of creditors. In other words,
it is not sufficient only that the effect of the transaction
is to
occasion such prejudice, there must also be a fraudulent intention by
the parties to the transaction to cause it. Having
regard to
the position in which AMU found itself in August 2011, when the
allegedly collusive transaction was concluded, it would
seem probable
on the evidence before me that the only creditor that stood to be
prejudiced by it would have been Absa itself.
In the absence of
any indication of there having been a likelihood of the possibility
that there would be a free residue after
the realisation of Absa’s
security should winding up intervene, the notion that prejudice to
the unsecured creditors of AMU
could be occasioned – never mind
have been intended to be caused – seems far-fetched on the face
of matters.”
[15]
In other words, it was not sufficient that the effect of the
transaction caused prejudice, since there must have been fraudulent
intent by the parties to the transaction to cause it. He
reasoned that having regard to the position in which AMU found
itself
in August 2011, when the allegedly collusive transaction was
concluded, it was probable on the evidence that the only creditor
that stood to be prejudiced by it would have been Absa itself.
This is so, he reasoned further, that in the absence of any
indication of a free residue after realisation of Absa’s
security should winding up intervene, the notion that prejudice
to
the unsecured creditors of AMU would be occasioned – never mind
have been intended to be caused – seemed unlikely.
Furthermore, Absa had contractually undertaken (in favour of the
liquidators) to repay the amount, together with interest at a
favourable rate, if it is directed to do so by the Master or by a
Court. In light of a concession on the part of Wolpe that
Absa
is well able to reimburse the amount, the prejudice alleged seemed to
bear no merit. Our law appreciates that moral
indignation, even
if genuinely maintained, does not establish a cognisable basis for
being aggrieved when prejudice cannot be shown.
[10]
[16]
On 25 February 2014, Wolpe withdrew the section 31 application, set
down to be heard on 19 May 2014.
[17]
In May 2014 Gary Shaff caused subpoenas to be served on a number of
Absa employees and representatives of Protea, to testify
at the
enquiry convened by him, scheduled to run from 21 to 25 July 2014.
In response, Absa launched the 2014 application
on 27 May 2014 as a
matter of urgency, seeking a
rule
n
isi
calling upon the respondents to show cause why: the 417 order
should not be set aside (“the enquiry terminated and
subpoenas
issued by Gary Shaff be set aside “the final relief”).
Pending the final relief, Absa sought
an order directing that
the holding of the enquiry on 21 July 2014 be stayed indefinitely
(“the interim relief”).
A similar application for
similar relief was launched by Protea under the same case number.
Wolpe filed a notice to abide
the decision of the court. She
filed a concise affidavit stating that the reason for her not having
participated or conducted
the enquiry is that she did not have the
funds required to do so and that she had not abandoned any reliance
on the
ex
parte
order. She also recorded her reliance on the settlement
agreement as a ground on which Absa should be precluded from applying
to set aside the enquiry. Griesel J however found that the
applicants were not precluded from bringing the application, either
by way of the settlement agreement entered in November 2012 or the
subsequent ruling by the commission during January 2014.
[11]
[18]
Griesel J handed down a judgment on 18 June 2014 (“the Griesel
judgment”) in terms whereof he held that whilst
“
Shaff
had raised certain legitimate aspects calling for an enquiry”
,
he found though that the subpoenas issued were overbroad,
unreasonable and amounted to an abuse. In the circumstances of
the case, he expressed that it was an irresistible inference that the
subpoenas had been issued in order to harass Absa and Protea.
He ordered that the holding of the enquiry be postponed indefinitely
and excused non-compliance of the subpoenas issued at the
behest of
Shaff pending the final determination of the relief sought for the
setting aside of the enquiry. It is worthy to
quote from the
judgment the following:
[12]
“
It
is obviously not possible in the time available to deal fully with
the comprehensive arguments addressed to me by counsel for
the
various parties. However, I regard it as important to announce
my decision as speedily as possible so as to enable the
parties to
know where they stand.”
[19]
After the granting of the interim order, Absa took no steps to
progress the 2014 application for the final relief which it
sought
for the setting aside of the s417 order and the termination of the
enquiry. The order for the holding over of the
s417 enquiry
therefore remained unchanged. In September 2015 Wolpe attempted
to reconvene the enquiry on the basis of the
settlement agreement.
Absa and Protea objected to the resumption of the enquiry on the
basis that the final relief of the
2014 application had not yet been
determined. The Commissioner indicated that, given the terms of
the Griesel order, he was
not inclined to resume the enquiry in the
absence of a court order authorizing and directing him to do so.
Wolpe thereupon
launched the 2015 application on 27 October 2015,
seeking an order authorising and directing the Commissioner to
proceed with the
enquiry and directing Absa and Protea to comply with
the terms of the settlement agreement.
20]
Absa and Protea opposed the 2015 application and the matter was
postponed by agreement to 8 March 2016, with a timetable for
the
filing of further affidavits. In November 2015 Wolpe applied
under Rule 6(5)(f) for the allocation of a date for the
hearing of
the 2014 application in respect of the final relief. As per her
further request, the 2014 application was set
down for hearing
together with the 2015 application. Absa did not object to the
simultaneous hearing of the two applications
and delivered a
composite affidavit serving as its replying affidavit in the 2014
application and its answering affidavit in the
2015 application. The
liquidators abide the decision of this Court.
[21]
Wolpe had applied at the hearing before this Court for the striking
out of a number of paragraphs in Absa’s founding
affidavit in
the 2014 application and its answering affidavit in the 2015
application (“the application to strike out”).
This
application is brought on the basis that the paragraphs sought to be
struck repeat allegations and raise disputes which were
finally
disposed of in the settlement agreement in relation to the 2012
application.
[22]
The case for Wolpe is that as the Court ordered an enquiry into the
affairs of AMU under s417, the Commissioner remains authorised
and
obliged to comply with his obligations in terms of the s417 order,
until the order is set aside or rescinded. Absa and
Protea
undertook to Wolpe in the settlement agreement that they would not
seek to set aside the enquiry and that they would co-operate
in
relation to it as agreed. Wolpe submitted that she never
abandoned the enquiry. She ran out of money to fund it
and
always intended to continue with the inquiry if she secured funds to
do so. Therefore, she argued, there is no basis
for Absa or
Protea to avoid complying with their obligations under the settlement
agreement. The Griesel order, she submits,
only intended to
suspend the holding of the enquiry pursuant to the Shaff subpoenas
pending the determination of the main relief
in the 2014 application
and not in perpetuity. Absa was under a duty to prosecute the
main relief expeditiously, which it
failed to do. She
highlighted that the case for Absa was that the enquiry ought to be
set aside on the basis of Shaff’s
conduct and no case against
Wolpe was made. Wolpe argued further that the Griesel order
should be seen as limiting Shaff
only from resuming the enquiry.
Wherefore it was not incumbent upon her to make out a fresh case for
the enquiry as it had
been made out in the
ex parte
application which led to the granting of the s417 order.
[23]
Absa advanced various arguments why the enquiry should not be
permitted to continue. It is simplified as follows:
i)
Abuse of process by Wolpe;
ii)
Abandonment of the enquiry by Wolpe;
iii)
Winding up of AMU is at an advanced stage;
iv)
Wolpe’s lack of
locus standi
;
v)
That claims against Absa or other creditors by AMU have prescribed;
vi)
Absa’s costs incurred in the enquiry are unreasonable.
[24]
Protea’s arguments were substantially common to those of Absa.
Its distinct grounds of opposition to the 2015 application
are that
the application is procedurally irregular because it involves
determination of the same question which is still pending
in the 2014
application. Furthermore, that the 2015 application amounts to
an application for a rescission, variation or
supplementation of the
Griesel order and ought therefore to have been brought in terms of
Rule 42. It also strongly contended
that Wolpe’s
institution and now pursuit of the s417 enquiry is to obtain
litigious advantage in the proceedings instituted
by QPG against ABSA
and Protea (“the QPG action”).
[13]
In other words, the argument is that Wolpe is abusing the enquiry for
an ulterior purpose and that she has deliberately concealed
material
information relevant to the continuation of the enquiry and the
enforcement of the Settlement Agreement.
DISCUSSION
OF APPLICABLE LAW AND FINDINGS
The
Settlement Agreement and the submission of res judicata and lis
pendens:
[25]
The settlement agreement in terms of which Absa agreed to the
continuation of the enquiry was made an order of court on 30
November
2012.
[14]
It is so that a
settlement or compromise has the same effect as
res
judicata
and accordingly excludes any legal proceedings in respect of the
original, disputed cause of action. The effect of a settlement
is summarised in the following terms by Caney:
“
Compromise,
in the sense of agreement for the settlement of a dispute, has the
effect of res judicata in that dispute unless there
is a reservation
of the right to proceed upon the original cause of action.
Unless and until set aside, and saving such reservation,
it
extinguishes the cause of action and ends litigation, and
crystallizes the rights and obligations of the parties in the matter
in issue; it founds an action for recovery of what has been promised
in the compromise.”
[15]
[26]
Whilst at first glance one would be inclined to agree that the
settlement agreement had the effect of entrenching the s417
enquiry,
it cannot mean that Absa was restrained from ever addressing it in
further litigation. This is so especially where
Wolpe changed
focus and opted to pursue different legal channels. I would go
so far as to say that in these circumstances
it does not behove of
Wolpe to shield herself against legal challenge in respect of the
enquiry where she did not deem it so necessary
to pursue the
enquiry. After all, the enquiry was ordered based on her
allegations and submissions.
[27]
However, this settlement agreement must not be seen as an agreement
settling litigation in isolation. It ultimately was
an
agreement to set out the parties’ conduct in the course of a
bigger objective, that being, the s417 enquiry. It
is trite law
that an enquiry remains an enquiry of the Court.
[28]
Absa relied on the fact that by virtue of the fact Griesel J
entertained its application in 2014, it must mean that the learned
Judge did not deem the settlement agreement as a bar to litigation on
the issue. On a reading of the judgment of Griesel
J, I am of
the view that the finding of a
prima
facie
right is the right of Absa not to
be subjected to unreasonable subpoenas. To that extent he found that
Absa had a right to approach
the court for relief,
notwithstanding
the settlement agreement
. This I
believe is the basis for which Griesel J entertained the
application. Whether Absa would be restrained from
again
applying for a setting aside of the enquiry was a determination to be
made by a different court hearing the final relief.
[29]
This brings me to the next issue for determination. Absa’s
success before Griesel J in June 2014 did not mean that
it could sit
back in the comfort of an interim order halting the enquiry.
Yet, that is exactly what it did seemingly with
the consequence that
in 2015 Wolpe launched yet another application, essentially asking
the court to authorise and direct the commissioner
to comply with the
s417 order as well as declaratory relief
vis-à-vis
the settlement agreement.
[16]
[30]
Considering the fact that the bulk of the 2014 application concerned
the conduct of the Shaffs, the averments necessary to
motivate for
the continuation of the enquiry would have had to be placed before
the court in the form further affidavits.
I believe though that
that could have been achieved through supplementing the papers in the
2014 application and joinder of parties
where necessary.
However, notwithstanding that finding, it is not my view that the
2015 application is “fatally defective”
or that the
matter is
lis
pendens
.
In any event Absa had not opposed the procedure adopted by Wolpe in
terms of Rule 6(f)(e) in setting down both matters for
simultaneous
hearing. Their acquiescence accordingly, in my view, disposes
of the argument that the application is defective
by virtue that it
deals with a similar question as per the 2014 application.
Protea agreed to the court order of 6 November
2015
[17]
in which the parties arranged a timetable for the filing of further
affidavits in the 2015 application and proceeded to file its
answering affidavit in accordance therewith. Protea had thus
acquiesced in the procedure adopted in that it had taken further
steps in the matter and it does not behove of it now to complain of
the alleged irregularity.
[31]
The order resulting from the 2014 application had not been granted in
perpetuity. It was clearly intended to be addressed
by another
court sooner rather than later. That is more so my view as
Griesel J found that “
certain
legitimate aspects [were raised] calling for an enquiry”.
[18]
He would not have intended in those circumstances to delay the
enquiry for a substantial period of time, let alone halt it
ad
infinitum
.
Absa chose to sit in the comfort of an interim order, compelling
other role players such as Wolpe to channel to court proceedings
with
a view to pronouncing on the viability and status of this enquiry as
it relates not only to the Shaffs but to enquiry overall.
Abuse:
[32]
Courts are empowered and obliged to curtail what would be abuse of an
enquiry or use of the enquiry for ulterior motives.
What
constitutes as an abuse had been the subject of various court cases.
The high water mark of the opposition to continuation
of the enquiry
is that Wolpe not only applied for the s417 order with ulterior
motive, but that she is persisting in using the
enquiry as a forum in
which she could pursue her own agendas. This ulterior motive,
Absa and Protea argue, is that she is
attempting to use the enquiry
for forensic advantage in respect of litigation which is pending
against Absa and Protea and which
she may benefit from in the form of
being released from Absa’s suretyship claim against her.
[33]
In
Kebble
v Gainsford
[19]
the
court held that the question whether an enquiry is an abuse must, in
all instances, depend on the particular circumstances of
the case.
In evaluating whether there is an abuse, the court is required to
cumulatively weigh up all the factors, both for
and against the
holding of an enquiry, and “
it
is the obligation of the party wishing to stop the enquiry to
demonstrate a clear abuse.”
[34]
In
Roering
and Another NNO v Mahlangu
,
[20]
the court held:
“
Once
it is accepted that a permissible purpose in causing a witness to be
summoned to an enquiry is to enable the liquidator to
make an
informed assessment of the merits of a potential claim or defence to
a claim, it must follow that the fact that the individual
concerned
is a potential witness in other civil litigation, actual or
contemplated, is neutral in determining whether the summons
is an
abuse. Something more must be identified as constituting an
abuse….”
[35]
In
Ferreira
v Levin
[21]
in considering whether interim relief staying an enquiry should have
been granted pending outcome of the determination of a constitutional
issue the Court held that said that such relief (i.e. stopping an
enquiry) must be “
absolutely
necessary”.
[36]
I could not on the papers find evidence of “
that something
more”
nor a case of “
clear abuse”
to
support the averments that Wolpe has an ulterior motive for pursuit
of the enquiry. Wolpe denied in detail the allegations
so
raised. Counsel for Protea submitted that it was very plain to
infer Wolpe’s abuse of the process from the way in
which
matters had unfolded. Clearly the entanglement between the
parties and the various role players are enmeshed with infighting.
The one to the other seeks to succeed in various battles. The
war between them is rampant and waging. However, whilst
it is
so that various theories can be possible, it certainly does not pass
the muster of being the only reasonable inference that
could be drawn
from the facts and it remains in my view a conjecture. Even
though Wolpe may hope to benefit from the enquiry,
this is not a
basis on its own to find that the enquiry is an abuse of process.
[37]
In
Roering
supra
the Court held that the fact that the issues canvassed in the course
of a s417 enquiry may overlap with issues in pending
or contemplated
civil litigation is not as such a ground for inferring abuse.
[22]
It may be that there is a possibility that the enquiry
and examination of witnesses could be advantageous in other
litigation. In these circumstances Wolpe’s denials of
improper motive and collusion with the Shaffs and Himelsein can
be
accepted by this Court.
[38]
In
Ferreira
supra
Justice Ackermann spelt out the purposes of an enquiry. One of
those purposes is to investigate the validity of claims
by the
company and to determine whether they should be pursued. It is
‘obviously in the interest of creditors that
doubtful claims
which the company may have against outsiders be properly investigated
before being pursued’.
[23]
[39]
The purpose of the enquiry is to discover facts beneficial to
creditors and shareholders of AMU, uncover activities which were
not
only detrimental but were concluded fraudulently to the detriment of
the company and to get to the bottom of the collapse in
circumstances
where allegations are strongly indicative thereof. The stance
of the liquidators must be taken into account
when a court considers
the further need (if at all) for a s417 enquiry previously ordered.
In their affidavits
[24]
they
drew the court’s attention to the fact that the winding-up is
at an advanced stage. A first liquidation and distribution
account was advertised without objection and confirmed by the
Master. An amended second liquidation and distribution and
account was advertised without objection and was confirmed by the
Master on 22 October 2015. Most of the funds available
from the
realisation of the assets have been distributed to creditors by way
of dividends in terms of confirmed accounts.
Approximately
R500 000 of free residue funds was carried forward to be dealt
with in a third liquidation and distribution
account.
[40]
The liquidators also raised the issue of the costs of the enquiry.
Their submission is that the Wolpe must be responsible
for the costs
necessary for the convening of the enquiry and the conduct thereof to
the extent that the enquiry is instigated and
concluded by her, which
costs ought to include the report by the Commissioner as per clause 5
of the s417 order. It had not
been disputed that Wolpe (in the
event of the enquiry continuing) would be liable for the costs of
convening and conducting the
enquiry to the extent that it is
conducted by her, and that such costs include the costs of
preparation of the Commissioner’s
report. I am concerned
that the affidavits by the liquidators do not indicate to what
extent, if at all, they had investigated
or looked into allegations
of dubious transactions and activities relating to the carrying on of
the business of the hotel as well
as the funding and management of
the hotel project including the conclusion of the amended and
restated loan agreement. No
reference is made to it and no
explanation is proffered as to their failure to have done so and why
they elected not to do so.
Certainly their input in this regard
would have assisted this Court, not to mention that its absence lends
circumspection.
In any event, the liquidators have indicated
that they abide the decision of this Court.
[41]
Notwithstanding the above findings, it remains to be decided whether
the enquiry should be allowed to continue. In 2012
the Court
ordered an enquiry on the strength of the facts and circumstances as
set out therein. Whilst the question before
me was whether the
enquiry ought to continue, the reality is that the enquiry never
started. I exercised what is referred
to as a judicial peep of
the
ex
parte
application. Though I am not at liberty to set out the
averments made in the
ex
parte
application, I am satisfied that the issues so raised and upon which
the
ex
parte
order was granted had not been altered by subsequent events and the
Commissioner remains obliged to comply with his obligations
in terms
of the s417 order. That the winding up is at an advanced stage
cannot be deemed to be good enough reason to terminate
the
enquiry.
[25]
Sufficient
cause for alarm had been raised in the
ex
parte
application which had caused the granting of an enquiry. That
time had been wasted in the course of the waging battle between
the
parties cannot prejudice what it is ultimately the Court’s
enquiry. Absa argued that various of the issues raised
before
the Court in the s417 application had since been addressed in various
affidavits. This I do not agree to be dispositive
of the
concerns so dealt and in any event it requires to be ventilated
through the medium of interrogation, which the form of statements
under oath cannot appease or appropriately satiate. Lastly,
whilst a Court had pronounced a view that the sale of the hotel
did
not amount to a collusive disposition, this respectfully, is not the
end of the matter. The need for the enquiry to my mind
remains
legitimate.
Wolpe’s
locus standi:
[42]
The question begs whether Wolpe had the
locus standi
to bring
the
ex parte
application in the first place? Reliance on
her being a “
creditor of AMU”
had been the focus
of strong submissions on the part of Absa. In February 2016
Wolpe delivered her replying affidavit to
Absa. In that
affidavit, she states that:
“
My
status as creditor of AMU and my locus standi to have brought the ex
parte application were dealt with extensively at the first
sitting of
the enquiry where it was unequivocally conceded by the liquidators
that I was “at least a contingent creditor
of AMU” and
that I in any event had sufficient interest and the requisite locus
standi to bring the ex parte application”.
[43]
It thus remains to be considered whether the s417 order would have
been granted had she brought the application as a
contingent
creditor instead of an ordinary creditor. It was Absa’s
submission that the Act does not permit it and the Court therefore
would not have entertained the application nor would it have granted
the order.
[44]
Section 417 (1) of the Companies Act reads:
“
In
any winding-up of a company unable to pay its debts, the Master or
the Court may, at any time after a winding-up order has been
made,
summon before him or it any director or officer of the company or
person known or suspected to have in his possession any
property of
the company or believed to be indebted to the company, or any person
whom the Master or the Court deems capable of
giving information
concerning the trade, dealings, affairs or property of the company.”
[45]
In
Miller
and Others v Nafcoc Investment Holding Co Ltd and Others
[26]
the court held
inter
alia
that the section does not envisage an application from a limited
category of persons. This reasoning is eminently sensible,
for
otherwise the Master or the Court, as the case may be, would be
unable to act unless he or it was given information from specified
persons.
[27]
[46]
In
Venter
v Williams and Another
[28]
the court found it was unlikely that a court will readily conduct an
examination or cause an examination to be conducted (by a
Commissioner to whom the Court’s powers are delegated in terms
of s418 of the Act) without first being satisfied that the
company is
likely to benefit from such an enquiry and that it will not, by doing
so, dissipate funds of the company which otherwise
would be available
to creditors. At page 313 of the judgment, paragraph H the
court stated the following:
“
But
that does not mean that, if in fact the person who bring the
irregularities or alleged irregularities to the Court’s
attention and asks for an enquiry is not a creditor or a person with
a financial interest, the Court is obliged to decline to make
an
order in the matter. “
[47]
The Court further held
[29]
that in terms of the Companies Act not only creditors but also
contingent and prospective creditors of a company may apply for
its
liquidation. That being the case, it is illogical to assume
that a person who could apply for an enquiry under s417 must
be any
greater than one who applies for a winding-up order. That the
purpose of a s417 enquiry is implemented with the anticipation
of
benefiting the company, it is arguably so that a person of a lesser
interest could satisfy the legal standing in terms of the
Act to
apply for the enquiry.
[48]
In
Lynn
NO and Another v Kruger and Ors
[30]
the court said the procedure provided by section 417 and 418 is aimed
at assisting officers of the court in the performance of
their duty
to the creditors of companies in liquidation, the Master and the
Court.
[49]
In
Pretorius
and Others v Marais & Others
[31]
the
court held that the purpose of the enquiry is to discover facts
beneficial to creditors and to uncover activities detrimental
to
wrongdoers.
[50]
South African Insolvency law had in recent years seen the creation of
a new corporate dispensation with the coming into being
of the new
Companies Act 71 of 2008
.
[32]
This legislation also introduced a new business rescue regime. With
the development of company law, policy considerations have
come into
play, such as providing a clear, facilitating, predictable and
consistently enforced law and a protective and fertile
environment
for economic activity.
[33]
Five points of economic growth were identified, namely enterprise
development, promoting investment, making companies more efficient,
encouraging transparency and high standards of
governance
and following best practice jurisdictions internationally.
[34]
Goal statements in reviewing corporate law included simplification,
flexibility, efficiency, transparency and predictability.
[35]
This rationale is clearly in line with our constitutional
dispensation, international trends and boosting confidence in our
economic
development and growth by way of corporate accountability.
Clearly the processes in the course of winding up of a company must
be in line with the aforesaid principles. These principles must
further form the basis and guidelines for determining the
need for an
enquiry and any subsequent quest for its termination.
[51]
Applicants wishing to set aside an order in terms of
section 417
must
prove that the statutory balance does not protect them properly. I
cannot find on the strength of the evidence before me that
the
statutory framework would not be able to protect Absa in these
circumstances. If anything subpoenas previously issued
in this
very enquiry against Absa had been successfully contested by it for
having been too broad, unreasonable and an act of abuse
of power.
This avenue remains open to Absa, or any aggrieved party as the case
may be, in respect of any future subpoenas
issued
[52]
A reading of the supporting papers in the
ex
parte
application satisfies why the enquiry was ordered. For
determining the question presently before this Court, I am satisfied
that the enquiry still serves a legitimate purpose and that
sufficient cause existed and continues to exist for the enquiry to
take place. In this matter an enquiry is patently indicated from the
averments supporting the
ex
parte
application, the relevance of which in my view had not been overtaken
by subsequent events. I am not persuaded that there
would be no
benefit to the Court, to the Master or to AMU by virtue of the
commencement of the enquiry. Nor am I persuaded
that a balance
of competing interests favours that of Absa and Protea. Whilst
Absa and the relevant witnesses may be inconvenienced
in having to
prepare for and attend the enquiry, it does not justify the inference
that the enquiry would cause undue prejudice
to it. The
prejudice to Absa and its employees and former employees as the case
may be is a relevant factor and indeed had
been taken into account in
the exercise of this Court’s discretion. In any event,
Absa and Protea have known of the
enquiry for two years and agreed to
the dates of its continuation in January 2014.
[36]
I am not persuaded that such inconvenience is so significant that it
negates their duty to attend the enquiry and testify. Furthermore,
if the rights of witnesses are infringed and the Commissioner fails
to act, the Court’s intervention can be sought.
Until
that occurs, however, it is premature for this Court to prevent the
Commissioner from executing his duties in accordance
with the order
of 26 July 2012 (as amended) and an order by agreement of 30 November
2012.
Application
to strike out:
[53]
The rationale behind the power of a Court to strike out is that it
promotes orderly ventilation of the issues before it, promotes
focus
on the real issues, presents proliferation of issues, unnecessary
prolix and irrelevancies that unduly burden records in
application
proceedings.
[37]
Wolpe’s
application for striking out essentially revolves the argument that
the complaints and averments raised by
Absa in the 2014 application
is a repeat of those made in the 2012 application. The argument
follows that as the substance
of the complaints are the same and in
light of the fact that the 2012 application culminated in an order by
agreement in November
2012, Absa is therefore legally barred since
the settlement agreement operates to exclude further litigation on
the same grounds
or causes of action. As such they are
irrelevant to the determination of the applications now before court.
[54]
I must stress that the
s417
enquiry ordered by Koen AJ is not
“Wolpe’s enquiry”. That she would have to
fund the costs of convening
and conducting the enquiry to the extent
that it is conducted by her including the costs of the Commissioner’s
report, does
not make it her enquiry. The enquiry remains that
of the Court, having delegated powers to the Commissioner. Her
conduct
or election, failure or neglect in pursuing the enquiry
promptly (and in circumstances where it was evidently available to
her
to do) cannot be decisive for termination or dispositive of the
enquiry. Moreover, the fact that there had in 2012 been a settlement
agreement is not a bar in these specific circumstances to allow a
Court to be fully informed in adjudicating whether the
enquiry
ought to proceed or not, let alone some two or more years later. The
effluxion of time and intervening events make it clear
that the
settlement agreement cannot be deemed to be binding on this Court in
exercising its discretion as to whether to permit
the enquiry to
proceed. The Court has an unfettered discretion to take into account
all matters relevant to the exercise of its
discretion.
Accordingly, I see no basis to exclude evidence that may be relevant
to the exercise of the discretion and the
application to strike out
falls to be dismissed. In view of the fact that the application
was not argued as a separate application
but was heard as part of the
main application, I see no need to deal with costs in respect thereof
separately.
Costs:
[55]
Having determined that circumstances justify the continuation of the
enquiry, it is worthy to refer to the manner in which
Wolpe conducted
herself in the course of litigation up to this point. In 2012
Absa brought an application for the setting
aside of the
ex
parte
order. The 2012 application was settled on terms recorded in a
written settlement agreement concluded on 28 November 2012
and made
an order of Court. Absa agreed to the continuation of the
enquiry and undertook not to institute any further proceedings
for
the setting aside of the enquiry. This order by agreement
clearly paved the way for the enquiry to proceed, which in
my view
would have had to and should have been proceeded
post
haste
.
Instead, approximately ten months later Wolpe surprisingly goes on
what can be called a frolic of her own and a costly one
too. On
25 September 2013 she brought an urgent application, in the name of
the liquidators, for a
rule
nisi
and an interdict to declare the purchase of the Protea Hotel Group
(Pty) Ltd’s shares by AMU as a collusive transaction within
the
meaning of
s31
of the
Insolvency Act.
[38
]
Binns-Ward J dismissed the interim relief on 13 December 2013.
Two months later she proceeded to withdraw the
main application set
down for hearing and tendered costs to the first to third applicants
and third and fourth respondents up to
and including Friday 13
December 2013 which were not already payable by her in terms of the
order of Binns-Ward J.
[56]
I have already indicated earlier in my judgment that resort to a
further application as opposed to applying for set down with
the
filing of supplementary papers would have been a more cost effective
approach.
[39]
But alas!
Launching of a new application was clearly designed to show the force
of power during this expensive and
explosive warfare.
[57]
For the reasons set out above and taking into account the manner in
which Wolpe chose to conduct herself
vis-à-vis
pursuance of the enquiry and the institution of the 2015 application,
I believe that I am justified in deviating from the general
rule that
costs follow the result. Wherefore, save for a costs order in respect
of the seventh to ninth respondents in the 2014
application, I do not
see fit to otherwise grant a favourable costs order.
[58]
In all circumstances of the case and for the reasons set out herein,
it is not necessary to deal with further submissions raised
in
argument and accordingly I make the following orders:
i)
Prayers 2.1 and 2.2 of the notice of
motion in case number
9450/2014
is dismissed with no order as to costs, save for costs in favour of
the seventh, eighth and ninth respondents which costs shall
include
the costs of two counsel;
ii)
The Commissioner is herewith
authorised and directed to comply forthwith with the terms of the
order issued in terms of
Section 417
;
iii)
The first to eleventh respondents
under case number
16693/2012
are declared to be bound to the terms of settlement agreement entered
into on 28 November 2012 and which agreement was made an
order of
court on 30 November 2012. It is further ordered that the
enquiry shall resume on a date to be determined in terms
of
sub-clause 3.2 of the settlement agreement.
iv)
No order as to costs in respect of
case number
20672/15
.
SALIE-HLOPHE,
J
JUDGE
OF THE HIGH COURT
[1]
An
enquiry in terms of s417 of the 1973
Companies Act into
the affairs
of A Million Up Investments 105 (Pty) Ltd (In liquidation)
before Adv. Michael Fitzgerald SC was sanctioned
by an order of
court granted by Koen AJ on 26 July 2012 and amended on 10
August 2012. Paragraph 9 of the original
order was amended so
as to provide that Wolpe would bear the cost for convening the
enquiry to the extent that it was instigated
and conducted by her,
as opposed to being costs in the liquidation of AMU as stipulated in
the original order.
[2]
Cited
as 7
th,
8
th
and
9
th
respondents in the 2014 application.
[3]
Registration
number 2003/000611207/07.
4
The Shaffs were directors
of AMU and directors and shareholders of Quantum Property Group
Limited (“QPG”) which held
100% of the shares in AMU).
[5]
Wolpe
alleged that the Shaffs refused to co-operate and threatened to
apply to set aside the enquiry, though they did not act
on their
threat. Absa submits that Wolpe was not able to secure the
Shaffs’ attendance and thereafter she took no
further steps to
convene the inquiry until 2015.
[6]
The
principal application was for an order that a pre-liquidation
transaction concerning the purchase of Protea Hotel Group (Pty)
Ltd’s shares in 15 on Orange (Pty) Ltd by AMU be declared to
have entailed a collusive transaction within the meaning of
section
31.
[7]
Wolpe’s
loan account against AMU had been ceded in
securitatem
debiti
to
ABSA as security for her suretyship obligation.
[8]
Mars,
The
Law of Insolvency in South Africa,
9
th
edition at pg 541 expresses that view that an exception to the rule
that dividends not be paid before confirmation of an account,
is
where a secured creditor who has realised his own security and who
has proved his claim. Premature payment is sometimes
made to a
secured creditor where the trustee has realised the security and
wishes to limit the estate’s liability for payment
of further
interest, but a prudent trustee would make such payment conditional
upon immediate repayment upon demand if for any
reason the Master
refuses to confirm the account in which payment is eventually
awarded to the creditor.
[9]
Page
262 – 2014 application, paragraph 20.
[10]
Record
page 263 / Paragraph 22 of the judgment of Binns-Ward J.
[11]
Griesel
J found that the prima facie right is established in respect of the
relief claimed in prayer 2.3 of the notice of motion
be set aside as
abuse.
[12]
As
it appears at paragraph 7.
[13]
Case
number 10491/14 – Gauteng Local Division
.
[14]
Order
granted by Hlophe JP.
[15]
Caney
the
Law
of Novation
,
p57.
[16]
On
15 September 2015 settlement negotiations between Absa and Wolpe
regarding the suretyship litigation was abandoned followed
by a
letter (2015 application page 173) from Wolpe’s attorney to
attorneys for Absa, Protea and the liquidators regarding
Wolpe’s
intention to resume the enquiry. The 2015 application by Wolpe
followed on 27 October 2015.
[17]
Brought
on the urgent roll before Erasmus J.
[18]
2014
application – record page 169 – paragraph 10 of the
judgment of Griesel J.
[19]
2010
(1) SA 561 (GSJ)
[20]
(581/20150
[2016] ZASCA 79
(30 May 2016) - paragraph 38.
[21]
1996
(1) SA 984 (CC).
[22]
Page
15, paragraph 26
[23]
See
Roering supra - paragraph 23 quoting from the judgment in
Moolman
v Builders and Developers (Pty) Ltd (in Provisional Liquidation):
Jooste Intervening
1990
(1) SA 954
(A) at 960G-I quoted with approval in
Ferreira
at
paragraph 123.
[24]
2015
Application – liquidator's affidavit – page 745.
[25]
Absa
argued that due to the advanced stage of the winding up of AMU an
enquiry will serve no purpose and will not benefit the
concursus
creditorum
as
Absa is the only secured creditor of AMU and that there is no chance
of any recovery by any unsecured creditor of AMU.
[26]
2010
(6) SA 390 (SCA)
[27]
Paragraph
9
[28]
1982
(2) SA 310
(N)
[29]
Page
314 C
[30]
1995
(2) SA 940
(N) at 944F.
[31]
1981(1)
SA 1051 (A) at 1062H – 1064B.
[32]
Judgment
by Griesel J – delivered 18 June 2014.
[33]
Memorandum
on the objects of the Companies Bill 2008 para 1.
[34]
Memorandum
on the objects of the Companies Bill 2008 para 1.
[35]
To
be or not to be? The role of private enquiries in the South African
Insolvency Law
by
.Joubert &Calitz.
[36]
Paragraph
3.2 of the settlement agreement provides:
“
in
the event that no agreement can be reached in terms of paragraph 3.1
then, subject to the provisions of paragraph 3.5(a) below,
the
parties agree that notification to their legal representatives by
the respondents legal representatives of the date and time
of the
enquiry, at least two months prior thereto, will constitute proper
and adequate notification thereof and that the
applicants
will be bound
by such notification as
if they had been specifically and individually summoned to attend
the enquiry on that day and time;”
[37]
Gold
Fields Ltd and Others v Motley Rice LLC
2015
(4) SA 200 (GJ).
[38]
This
application was brought by Wolpe in the name of the three
liquidators with herself as fourth applicant against the Shaffs
as
well as Protea and Absa as third and fourth respondent respectively
- Case No: 15766/13.
[39]
See
paragraph 30 supra.