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[2016] ZAWCHC 176
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Premium & Claims Administrators (Pty) Ltd v Sheriff for the Districts of Stellenbosch and Kuils River South and Another (10391/2016) [2016] ZAWCHC 176 (29 November 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
29 November 2016
CASE NO: 10391/2016
REPORTABLE
In
the matter between:
PREMIUM & CLAIMS
ADMINISTRATORS (PTY) LTD
Applicant
and
SHERIFF FOR THE DISTRICTS
OF STELLENBOSCH
AND
KUILS RIVER
SOUTH
First
Respondent
NEW
NATIONAL ASSURANCE COMPANY LTD
Second
Respondent
JUDGMENT
GAMBLE, J:
INTRODUCTION
[1]
In January 2005 the applicant issued summons against the second
respondent in the High Court in Pietermaritzburg for damages
flowing
from the alleged cancellation by the latter of an agency agreement
between those parties, such damages alleged to be of
the order of R
57m. The matter has preceded in fits and starts for a variety of
reasons which are not relevant to this application.
Suffice it to say
that there have a number of delays occasioned by procedural problems
on both sides.
[2]
The matter was eventually set down for trial in the Pietermaritzburg
High Court from 4 to 16 March 2013 but could not run because
of late
discovery on the part of the applicant. As a consequence Steyn J
postponed the matter
sine die
and directed the applicant to
pay the second respondent's wasted costs arising out of the
postponement on the scale as between attorney
and client, such costs
to include the costs of two counsel and the costs of the application
to postpone. The second respondent
thereafter prepared its bill of
costs in relation to the postponement and eventually on 3 March 2015
taxed a massive R632 024,86
which, it is common cause, is due and
payable by the applicant but remains unpaid. Pursuant to the
applicant's failure to settle
that bill, the second respondent
commenced execution steps against the applicant.
[3]
A writ of execution for the attachment of movables was issued by the
Registrar in the Pietermaritzburg court on 11 March 2016.
In light of
the fact that the applicant's registered office is in Stellenbosch,
the writ was made out for the attention of the
first respondent
herein. It directs the first respondent to act as follows –
"YOU
are
hereby directed to attach and take into execution the movable goods,
including (in terms of rule 45 (8)) the incorporeal property
of the
abovementioned Judgment debtor (sic) comprising the Judgment Debtors
right, title and interest in its action instituted
against the
above-
mentioned Judgment Creditor in the above Honourable Court
under case number 508/2005 to the value of R 632 024.86, which the
Plaintiff
recovered in taxed costs granted by the Taxing Mistress of
the above Honourable Court on 3 March 2016, besides all your costs
hereby
incurred."
[4]
The first respondent acted accordingly and on 31 May 2016 rendered a
return of service in the following terms –
"Subsequently,
after I demanded payment of the amount due, I was informed by the
abovementioned that the Judgment Debtor was
unable to pay the amount
claimed or any sum. The Judgment Debtor's claim under case number
508/05 was accordingly placed under
judicial attachment."
THE
APPLICATION TO STAY
[5] The applicant now
requests this court to exercise its discretion under Rule 45A to stay
the execution process. It bases its
application on the contention
that the attachment constitutes an abuse of the court's process which
should not be tolerated. The
applicant's sole shareholder and
director, Mr Stefanus Visser, says the following in the founding
affidavit –
"26. [The second
respondent] is a large and profitable insurance company. [It's]
latest available Statement of Financial Position
as at 31 December
2014 ... records that [its] total assets exceed R816.6 million, which
include cash and cash equivalents exceeding
R262.6 million. By
contrast, [the applicant] is impecunious, it has ceased to trade and
has no assets other than the claim against
[the second respondent].
It is submitted that any alleged prejudice that [the second
respondent] may suffer if the stay application
is granted would be
negligible compared to the severe prejudice that [the applicant]
would suffer if the stay is refused and [it's]
right to claim damages
from [the second respondent] is acquired by [the second respondent]
or a third party."
Elsewhere in the
affidavit Mr Visser contends that the financial collapse of the
applicant's business is as a direct result of the
second respondent's
repudiation of the agency agreement with it. As I understand the
position, in terms of that agreement the applicant
was,
inter
alia,
contracted to conclude short term insurance policies and
settle claims on behalf of the second respondent.
[6] The first respondent
has filed a notice to abide while the second respondent opposes the
application to stay. In the answering
affidavit Mr Azim Mahomed
Bacus, a manager in the legal department of the second respondent,
complains that one of the consequences
of granting a stay is that the
applicant will be in a position to litigate
"without fear of
any cost consequences"
and that the applicant "
wants
to proceed with the action without paying a cent towards a
substantial costs order."
He denies that the attachment of
the claim is an attempt to
"out-litigate"
the
applicant and he goes on to say that the second respondent is merely
doing what it is fully entitled to do in seeking to satisfy
a validly
granted costs order.
[7] Mr Bacus confirms
that it is the intention of the second respondent to sell the
applicant's claim against it to settle the costs
order and after
referring to the plea filed in the main action, he makes the
following allegation:
"31 ..
.../
respectfully contend that there is no merit whatsoever in the
applicants claim against the second respondent in the action."
[8] In the reply, Mr
Visser observes that the second respondent's admission that it
intends to sell the applicant's contractual
claim (allegedly worth
R57 million) to satisfy a costs order for R632 024.86 has the effect
that the claim will be sold for a maximum
of 1,1% of its alleged
value. He says further -
"6. The
sale in
execution will severely prejudice the Applicant
as
it will
lose its entire right to claim damages caused by the Second
Respondent's unlawful repudiation of the agreement. By contrast,
any
prejudice by
a
temporary stay to the Second Respondent, which
has vast cash reserves, will be minimal.
7. The Second
Respondent is in fact attempting to use
a
process designed to
obtain satisfaction of
a
costs order for the ulterior purpose
of putting an end to the litigation against it. This amounts to an
abuse of the process of
Court.
8. The sale in
execution in (sic)
a
public auction of
a
claim for R57
million in order to recover costs amounting to 1.1
%
of the
value of the claim, would not be in keeping with the constitutional
values of justice and fairness. It would also prevent
the Applicant
from exercising its constitutional right in terms of section 34 of
the Constitution to have its dispute with the
Second Respondent
decided by the Court.......
12. I deny the Second
Respondent's unsubstantiated allegation that the Applicant's claim
has 'no merit whatsoever', which allegation
is contradicted by its
stated intention to sell the claim in execution in (sic) public
auction to recover the taxed costs."
THE APPROACH IN AN
APPLICATION TO STAY
[9]
Rule 45A grants this court a wide discretion to suspend an order for
execution, which discretion is limited only by the consideration
that
it must be exercised judicially. The authorities in this regard are
clear: the court will grant a stay of execution where
a real and
substantial injustice would otherwise eventuate.
[1]
An obvious instance where an injustice might eventuate is where the
execution process is utilized by a creditor for an ulterior
purpose.
The leading case in that regard is
Brummer
[2]
where similarly an
attachment was made by a judgment creditor of a judgment debtor's
interest in his own action against the judgment
creditor with the
clear intention of limiting the judgment debtor's further right of
recourse at trial against the judgment creditor.
[10]
In
Brummer
,
the Supreme Court of Appeal was not, as a matter of principle,
opposed to such a tactic being persued. Rather, the majority of
the
court held that the mere application of a particular court procedure
for a purpose other than that for which it was primarily
intended was
typical, but not complete proof of,
mala
fides
on
the part of the judgment creditor. In order to prove
mala
fides
the
further inference that an improper result was intended was required.
The court held that the application of a particular court
procedure
(for a purpose other than that for which it was primarily intended)
was thus considered to be a characteristic, rather
than a definition,
of
mala
fides
on
the part of the party seeking to execute.
[11]
Counsel for the applicant urged the court to find that the attachment
of that party's right, title and interest in its claim
against the
second respondent was indeed an abuse of the court process. He
referred to
National
Potato Co-Op
[3]
where
Southwood AJA dealt in detail with relevant authorities on the point
-
"[50].......
It has long been recognised in South Africa that a court is entitled
to protect itself and others against the
abuse of its process (see
Western Assurance Co v
Caldwell's Trustee
1918
AD 262
at 271;
Corderoy v
Union Government (Minister of Finance)
1918
AD 512
at 517;
Hudson v
Hudson and Another
1927
AD 259
at 268;
Beinash v
Wixley
[1997] ZASCA 32
;
1997 (3) SA 721
(SCA) at 7340;
Brummer v
Gorfil Brothers Investments (Pty) Ltd en Andere
1999
(3) SA 389
(SCA) at 412 C-0), but no all-embracing definition of
'abuse of process' has been formulated. Frivolous or vexatious
litigation
has been held to be an abuse of process (per Innes CJ in
Western Assurance v
Caldwell's Trustee
(supra)
at 271 and in
Corderov v
Union Government (Minister of Finance)
(supra)
at 517) and it has been said that- 'an attempt made to use for
ulterior purposes machinery devised for the better administration
of
justice' would constitute an abuse of the process (Hudson v Hudson
and Another (supra) at 268). In general, legal process is
used
properly when it is invoked for the vindication of rights or the
enforcement of just claims and it is abused when it is diverted
from
its true course so as to serve extortion or oppression; or to exert
pressure so as to achieve an improper end. The mere application
of a
particular court procedure for a purpose other than that for which it
was primarily intended is typical, but not complete
proof, of
mala
fides
. In order to prove
mala fides
a
further inference that an improper result was intended is required.
Such an application of a court procedure (for a purpose other
than
that for which it was primarily intended) is therefore a
characteristic, rather than a definition, of mala fides. Purpose
or
motive, even a mischievous or malicious motive, is not in general a
criterion for unlawfulness or invalidity. An improper motive
may,
however, be a factor where the abuse of the court process is in
issue. (
Brummer v Gorfil
Brothers Investments (Pty) Ltd en Andere
(supra)
at 412 1-J; 414 1-J and 4168). Accordingly, a plaintiff who has no
bona fide claim but intends to use litigation to cause
the defendant
financial (or other) prejudice will be abusing the process (see
Beinash and another v
Ernst & Young and others
1999(2)
SA 116 (CC)... in para [13].) Nevertheless it is important to bear in
mind that courts of law are open to all and it is
only in exceptional
cases that a court would close its doors to anyone who wishes to
prosecute an action (per Solomon JA In
Western
Assurance Co v Caldwell's Trustee
....at
273-4). The importance of the right of access to courts enshrined by
s 34 of the Constitution has already been referred to.
However, where
a litigant abuses the process this right will be restricted to
protect and secure the right of access for those
with bona fide
disputes (
Beinash and
Another v Ernst & Young and Others
(supra)
in para [17])."
[12] Earlier in that
judgment Southwood AJA commented generally on the importance of
access to justice in the context of s 34 of
the Constitution:
"[43] In my view
this approach is consistent with the right enshrined in s 34 of the
Constitution: Everyone has the right to
have any dispute that can be
resolved by the application of law decided in a fair public hearing
before a court, or, where appropriate,
another independent and
impartial tribunal or forum. On a number of occasions the
Constitutional Court has emphasised the importance
of this right: It
is of cardinal importance and requires active protection and courts
have a duty to protect bona fide litigants
(
Beinash and Another v
Ernst & Young and Others
1999 (2) SA 116
(CC)...in para
[17]); the 'untrammelled access of the courts is a fundamental right
of every individual in an open and democratic
society based on human
dignity, equality and freedom' (
Moise v Greater Germiston
Transitional Local Council: Minister
of Justice and Constitutional
Development Intervening (Women's Legal
Centre as Amicus Curiae
)
[2001] ZACC 21
;
2001 (4) SA 491
(CC)...in para [23]); it
is the foundation for stability of an orderly society and it 'ensures
the peaceful, regulated and institutionalised
mechanisms to resolve
disputes, without resorting to self-help': it is a 'bulwark against
vigilantism, and the chaos and anarchy
which it causes' (
Chief
Lesapo v North West Agricultural Bank and Another
[1999] ZACC 16
;
2000 (1) SA 409
(CC)...in para [22]; it is fundamental to a democratic society that
cherishes the rule of law (
First National Bank of South Africa Ltd
v Land and Agricultural Bank of South Africa and Others; Sheard v
Land and Agricultural
Bank of South Africa and Another
[2000] ZACC 9
;
2000 (3) SA
626
(CC
) ... in para [6]).
[13] Relying on these
authorities, counsel for the applicant argued that it was not in
dispute that the applicant was using the
legal process properly in
the pending action proceedings in Pietermaritzburg having invoked a
just claim for a significant amount
of damages based on a breach of
contract allegedly perpetrated by the second respondent. Further,
counsel submitted that the second
respondent had abused the process
of its execution by diverting the legal process from its true course
so as to achieve an improper
end, namely, to terminate the action
proceedings instead of satisfying the costs order already granted and
taxed in its favour.
[14] As to the existence
of
mala fides,
it was argued that this criterion is to be
found in the fact that the second respondent had applied the
execution process for a
purpose other than that for which it was
primarily intended i.e. to satisfy the costs order. It was further
submitted that the
second requirement for
mala
fides
can
be found to have been established by inferring from the answering
affidavit of the second respondent that it intended an improper
result by pursuing execution proceedings, namely, its declared
intention to sell the applicant's claim against it in circumstances
where, to the knowledge of the second defendant, the proceeds of any
such sale would manifestly not satisfy the costs order granted
in its
favour: the sole purpose being to terminate the action proceedings
against it without affording the applicant an opportunity
to
ventilate the merits of the dispute in a court of law.
[15] Accordingly, it was
argued that since an abuse of the court process is placed in issue by
the applicant in the present case,
second respondent's improper
motive is a factor which must be taken into account in determining
whether its intended sale of the
applicants claim indeed constitutes
an abuse of the process of court.
[16]
The decision by the second respondent to direct the sheriff to
specifically attach the applicant's claim against it raises
the
anterior question, why? It must be that the second respondent knows
that the applicant has no other assets, whether movable
or immovable,
capable of attachment. The claim itself is said by the applicant to
be worth many, many millions and therefore worth
persuing. But the
claim only has value if proved on a balance of probabilities. And, to
achieve that end the cooperation of
the applicant (and Mr Visser
in particular as a witness) is critical. How else is the second
respondent likely to establish, for
instance, the facts relevant to
the breach which the applicant will need to prove, or the substantial
loss of income alleged by
the applicant in the particulars of claim?
[17] It does not require
much by way of imagination to conclude that the second defendant does
not have a realistic prospect of
acquiring any co-operation from Mr
Visser, the very person that accuses it of destroying his business.
And, one must therefore
ask rhetorically whether there is any
realistic prospect either of the second respondent permitting a
genuine third party to bid
successfully at the auction of the right?
It is, in my view, unlikely that the second defendant would ever wish
to allow a claim
against it to be successfully persued and so the
only realistic scenario is that the second respondent will ensure
that it acquires
effective control of the applicant's claim against
it so as to remove a significant thorn in its side.
[18] The second
respondent's tactic is therefore designed to occasion permanent
financial prejudice to the applicant - a situation
which Southwood
AJA stressed was to be judicially deprecated. In the circumstances I
am persuaded that the attachment by the second
respondent in this
case is
mala fide
and a manifest abuse of process.
[19] In conclusion I
would add that it is uncontested that the applicant has commenced
proceedings for recovery of substantial damages
which it says
effectively wiped out its business. The second respondent does not
suggest that the applicant's claim is ma/a
fide,
or that
the initiation of those proceedings is tainted by improper motive. By
all accounts, the claim is properly brought and the
applicant
deserves the opportunity (of course within its means to finance such
litigation
[4]
) to ventilate the
issues and bring the matter to finality. In addition, the second
respondent has not demonstrated that there are
any exceptional
circumstances which justify the closing of the doors of the court to
the applicant by permitting the attachment
to stand, the sale in
execution to proceed and its right of access to court so jealously
guarded under the Constitution to be eliminated
in the process.
[20]
In my view the applicant is entitled to have its right to
bring its claim to finality protected, particularly in the
circumstances
where there is a possibility (as alluded to by Mr
Visser in the replying affidavit) that the repudiation of the agency
contract
was intentional and designed to bring the applicant to its
knees. Unless the second respondent can attach other assets belonging
to the applicant, the right to recover its taxed costs will
necessarily have to be held in abeyance pending the trial. This will
not operate unduly harshly against a company with the sort of
resources to which Mr Visser has referred and, at the end of the
day,
if the applicant is successful in the main claim the second
respondent will be able to apply a set-off of the costs award
against
any damages that are proved against it.
ORDER OF COURT
IT
IS ORDERED THAT:
A. Execution of the writ
dated 11th of March 2016, including the judicial attachment and/or
sale in execution of the applicant's
claim in case number 508/2005
(Kwazulu-Natal Division, Pietermaritzburg) and payment by the
applicant of the second respondent's
taxed costs dated 3 March 2016,
is stayed pending a date not less than 14 days after the final
determination of case number 508/2005.
B. The respondent shall
pay the costs of this application.
________________
GAMBLE J
Appearances
:
For
the Applicant:
Mr J van Dorsten
Instructed
by: Marais Muller Hendricks Inc (P Niemann)
For
the Second Respondent
: Ms S Mahomed
Instructed
by:
Larson Falconer Hassan Parsee Inc.
(Y Hassan)
[1]
Graham
v Graham
1950
(1) SA 655
(T) at 658;
Strime
v Strime
1983
(4) SA 850
(C) at 852 A-C;
Whitfield
v van Aarde
1993
(1) SA 332
(E) at 337F.
[2]
Brummer
v Gorfil Brothers Investments (Pty) Ltd en Andere
1999
(3) SA 389 (SCA).
[3]
Price
Waterhouse Coopers Inc and Others v National Potato Co-Operative Ltd
2004 (6) SA 66
(SCA) at
[50].
[4]
The papers show that the applicant is being assisted by legal
representatives who are acting in terms of a contingency fee
arrangement and it is fair to conclude that they are satisfied as to
the existence of a
prima
facie
case.