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[2016] ZAWCHC 209
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Absa Bank Limited v Patel NO and Others (21851/2016) [2016] ZAWCHC 209 (13 December 2016)
IN THE HIGH COURT OF SOUTH
AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
(Coram:
Holderness, AJ)
[Not
Reportable]
Case number: 21851/2016
In
the matter between:
ABSA
BANK LIMITED
Applicant
and
MOHAMED
ISMAIL PATEL N.O.
First
Respondent
MOHAMED
ISMAIL PATEL
Second
Respondent
ZITULELE
CLAUDIA TWALA N.O.
Third
Respondent
THE
STANDARD BANK OF SOUTH AFRICA LIMITED
Fourth
Respondent
THE
MASTER OF THE HIGH COURT, CAPE TOWN
Fifth
Respondent
REASONS FOR THE ORDER MADE ON 17 NOVEMBER 2016
DELIVERED ON 13 DECEMBER 2016
[1]
These are the reasons for the order granted in default of appearance
of the respondents, in particular the first and second
respondents,
on 17 November 2016, pursuant to an application for reasons in terms
of Rule 49(1)(C) delivered by the first respondent
on 23 November
2016.
[2] On 17 November 2016 the
application came before me as an urgent application, brought on
notice to the respondents, in terms
of which
inter alia
the
following relief was sought:
2.1 That the
first respondent be removed as a joint trustee to the insolvent
estate of the Coe Family Trust (Master’s reference
number
C20032/14) (“the Trust”);
2.2 That the
fifth respondent be directed forthwith to appoint a joint trustee to
the insolvent estate of the trust in terms of
section 57(5) of the
Insolvency Act No. 24 of 1936 (“the Act”);
2.3 That the first respondent
and the second respondent deliver to the third respondent all books
and documents (including bank
statements) relating to the insolvent
estate of the Trust within three days of the service of this order on
the first and second
respondents;
2.4 That, in
the event that the first respondent and the second respondent fail to
deliver to the third respondent, the books and
documents referred to
in paragraph 5 above, that the Deputy Sheriff of the relevant
jurisdictions be authorised to attend at the
premises of the first
and second respondents and to seize and remove the books and
documents referred to above and to deliver same
to the third
respondent;
2.5 That the
fourth respondent be directed to furnish to the applicant, the third
respondent and to the fifth respondent copies
of all documents
relating to the insolvent estate of the Trust and the dealings
between the insolvent estate of the Trust and Good
Hope Trustees
(Pty) Ltd (“GHT”) within 5 days of service of this order
on the fourth respondent; and
2.6 That the
costs of the application be borne by the first and second respondents
de
bonis propriis
on
the attorney and client scale.
[3]
Prior to the hearing on 17 November 2016, the applicant caused an
amended notice of motion to be filed, in terms of which it
no longer
included the prayer for an order directing the fifth respondent to
appoint a joint trustee to the insolvent estate of
the Trust in terms
of
section 57(5)
of the
Insolvency Act No. 24 of 1936
.
[4]
At the hearing of the matter on 17 November 2016 the first and second
respondents were represented by Mr. Zimmerman.
[5]
When the matter was called in open court and Mr. Zimmerman placed on
record that the first and second respondents consented
to an order
incorporating paragraphs 2, 3 and 4 of the notice of motion, but that
his client required further time to file an answering
affidavit
opposing the application for his removal as a trustee of the joint
insolvent estate of the Trust.
[6]
I informed Mr. Zimmerman that, in light of the serious allegations of
misconduct levelled against Patel, and the fact that it
appeared that
a significant sum of trust monies had possibly been misappropriated,
I required independent confirmation of where
the monies were being
held, and an undertaking that the monies would be held in a separate
trust account or some other safeguard
would be put in place to ensure
that the funds were preserved until Patel had an opportunity to file
papers and the matter could
be finally determined.
[7]
The matter stood down for Patel’s counsel to obtain
instructions regarding the whereabouts of the funds, the safeguards
to be put in place pending the finalisation of the matter, and for
the parties to attempt to agree to the terms of a draft order
regarding the further conduct.
[8]
When the hearing of the matter resumed in open court, Patel’s
counsel informed me that he had spoken to Patel who had
instructed
him to withdraw the agreement concluded earlier that day. Patel
dis not disclose the whereabouts of the funds
of give any undertaking
regarding the funds pending the further hearing of the matter.
Patel’s counsel then informed the
court that he had been
instructed to withdraw from the matter.
[9]
Mr Zimmerman duly withdrew and excused himself. After hearing
argument by Mr. Woodland SC, who appeared for the applicant,
an order
was granted in terms of prayers 2,4,5,6 and 7 of the notice of
motion.
[10]
As I was not prepared to grant costs
de bonis propriis
against
Patel without affording him a further opportunity to address me in
this regard, the first and second respondents were directed
to show
cause, on Thursday, 1 December 2016, why the costs of the application
should not be borne by them
de bonis propriis
on the attorney
and client scale.
[11]
After receiving the request for reasons and the application by Patel,
now acting in person, I advised Mr Woodland that there
would be
little point hearing the costs argument on 1 December 2016 and
dealing with the matter on a piecemeal basis and that I
would deliver
reasons by no later than 12 December 2016, and the application for
leave to appeal could be heard on 15 December
2016.
[12] Mr. Woodland assured me that
Patel would be given proper notice of the date of hearing of the
application for leave to appeal,
and I will ensure that these reasons
are transmitted to Patel by email to the email address as stipulated
in the
Rule 49
(1) (c) application.
FACTUAL
BACKGROUND
[13]
The first respondent is cited in his capacity as the joint trustee of
the insolvent estate of the Trust.
[14]
Patel is a director of GHT which carries on or carried on business as
insolvency practitioners.
[15] GHT previously carried on
business from 22
nd
Floor, Golden Acre Office Towers,
Adderley Street, Cape Town (“the Adderley premises”). It
appears that they have ceased
trading from these premises, and their
office telephone number appears to be out of order.
[16]
The second respondent is
MOHAMED ISMAIL PATEL (also known as PATEL
MUHAMED).
[17]
The third respondent is
ZITULELE CLAUDIA TWALA
(“Twala”)
in his capacity as the joint trustee of the Trust. Twala is an
attorney with Dentons, South Africa.
[18]
It appears that Patel attended to the administration of the insolvent
estate of the Trust on his own.
[19]
The Trust was provisionally sequestrated on 15 April 2014, and
finally sequestrated on 15 May 2014.
[20]
On 26 June 2014, the Master appointed Patel and the third respondent
as joint trustees.
[21]
The applicant is a proved creditor of the trust in the amount of R17
371 143.45, plus interest from the date of sequestration.
[22]
The applicant held securities in the form of mortgage finance
registered ever certain properties owned by the Trust.
[23]
These securities were realised in 2014 and 2015. The proceeds
of the realisation amounted to R9 350 000 and R3 628 590.
[24]
Numerous requests were made by the applicant to Patel for payment of
an advanced dividend to it as a secured creditor. Patel
refused to
make such a payment.
[25]
After numerous enquiries were made by the applicant regarding the
lodging of the first account, in July 2015 a copy of an unsigned
first account was sent to the applicant’ attorneys, Edward
Nathan Sonnenbergs (“ENS”), by Patel.
[26]
It appeared from the account that the applicant is the only secured
creditor, however several issues arose from this account,
including
that no provision was made for the payment of interest to the
applicant and payments of the proceeds of realised assets
were
captured as “deposits” and were reflected as being paid
months after they had in fact been paid.
[27]
As at date of the application, two and a half years since the final
order of sequestration was granted, no liquidation and
distribution
account has been confirmed by the Master and the applicant has not
received any payment at all.
[28]
On 5 May 2016 the applicant’s attorney addressed a letter to
Ronel Stofberg (“Stofberg”), who was in the
employ of
GHT, querying the confirmation of the first account and further
enquiring about the funds due to be paid to the applicant,
as by that
stage it had come to the applicant’s attention that Patel’s
trust accounts had been placed under the control
of the Cape Law
Society (“CLS”).
[29]
Stofberg assured the applicant’s attorney that all the monies
were being held in the insolvent estate account.
[30]
Numerous further enquiries were addressed to Stofberg regarding the
confirmation of the account. The last email, dated
20 June
2016, went unanswered. It has since emerged that Stofberg left the
employ of GHT on 15 June 2016.
[31]
On 21 October 2016, a comprehensive letter was addressed to Patel,
setting out the issues and concerns which the applicant
had with
Patel’s conduct as a liquidator or trustee of various entities
in which the applicant is a creditor. The contents
of this letter are
quoted in the founding affidavit. The import of what is stated
herein, for the purposes of the present application,
is that:
31.1 In a
number of the matters the applicant has not received its secured
awards, notwithstanding that liquidation accounts have
been
confirmed;
31.2 Patel’s
law practice was placed under curatorship and the CLS has brought an
application for him to be struck from the
roll of attorneys, which
application is presently pending before this Court;
31.3 Patel
appears to have obtained an interdict restraining the Chief Master of
the High Court from removing him from the national
panel of
liquidators, pending the finalisation of a review application that
Patel has brought against the Chief Master for that
decision; and
31.4 In breach
of various provisions contained in the Insolvency Act 25 of 1936
(“the Act”), including those
contained in sections
70, 71 and 92 of the Act, Patel appears to have failed to properly
invest or account for the trust monies
under his control.
[32]
Based on the above, the applicant, understandably, had grave
reservations as to the propriety of Patel’s conduct, and
in
light of the facts set out above, it was genuinely concerned that
Patel had improperly utilised the proceeds of the applicant’s
securities.
[33]
The applicant requested copies of the insolvent estate bank
statements for the Trust for the period from 15 April 2014 to date,
and for proof of where the proceeds of the realisation of its
securities were held, failing which it would apply to Court for
urgent relief. Once again no response was received from Patel.
[34] Stofberg has confirmed under
oath that Patel never invested any estate funds, as he was of the
view that such investment was
not compulsory, and for this reason no
provision was ever made for interest on the liquidation and
distribution. As Patel’s
employee, Stofberg was never
permitted access to the estate bank account statements, and was
therefore never able to include bank
charges in the accounts which
she drew up for Patel.
[35]
Even more alarmingly, the broker with whom Patel took out the
security bond for the insolvent estate of the Trust confirmed
that
Patel had not paid any bond premiums relating thereto.
[36]
After Patel failed to respond to the letter from ENS referred to
above, the applicant launched this application. On 8
and 9
November 2016 copies of the papers were served on Patel by
email to
patel@ghtrustees.co.za
and
patel.m@gmail.com
, at the
Adderley premises by affixing a copy on the principal doors, and at
Patel’s residence.
[37]
On 8 November 2016, after this application had been issued, the
offices of the fifth respondent (“the Master”)
forwarded
a letter to the applicant’s attorney, Mr. Leonard Katz
(“Katz”), recording that, in light of Patel’s
failure to provide a proper response in respect of the availability
of estate funds, the Master was of the view that he is no longer
a
fit and proper person to act as a liquidator or trustee or in any
fiduciary capacity in relation to any insolvent estate, and
he was
removed from all estates where he has been appointed as such. The
Master did not specify in respect of which estates Patel
was removed.
[38]
In the additional affidavit filed by Katz, he points out that in
terms of section 60(e) of the Act, the Master may remove a
trustee
from his office on the ground that, in the Master’s opinion,
the trustee “
is no longer suitable to be the trustee of the
estate concerned.”
[39]
On 11 November 2016 the CLS served further affidavit in the
application to strike Patel off the roll of attorneys of this Court.
Michael Bellairs, who has deposed to various affidavits on behalf of
the CLS in the striking off application, states as follows:
“
the
respondent
(Patel)
has
utilised trust funds to pay his own debts, thereby committing theft
of trust funds. In this regard the respondent paid an amount
of R102
030.34 in respect of rates due by him to the City of Cape Town…
in addition, the respondent also paid an amount
of R38 200 to the
advocate who was briefed by, and represented him, in the application
brought by the applicants to interdict him
from practice. It is
respectfully submitted that by doing so the respondent
misappropriated trust funds.”
[40]
Annexed to the founding papers are various orders and affidavits in
similar or related applications involving Patel, such as
the
Soudena
CC
(“Soudena”) matter (in which Absa is also a
secured creditor) and the Insolvent
Estate Crimson Moon 32 CC
(“Crimson Moon”) matter.
[41]
In the
Crimson Moon
matter, according to an affidavit by
Patel’s joint liquidator, Daniel Terblanche, it appears that
Patel has failed to account
for, and in all likelihood has
misappropriated, trust monies in the sum of R3,400,000. Terblanche
has confirmed that he intends
filing criminal charges against Patel.
[42]
Patel is no stranger to this Court. There are two judgments by
Traverso DJP, and by Binns-Ward J, where his conduct as a liquidator
has been strongly criticised.
[43] Lastly, on the evidence
before the Court, it appears that Patel has two identity numbers, and
that he may not have a law degree
(UWC has no record of a B Proc
degree certificate ever having been issued to an individual with
either of Patel’s identity
numbers), which would of course have
the result that he was fraudently admitted as an attorney and as a
liquidator.
BASIS
FOR ORDER SOUGHT FOR THE REMOVAL OF PATEL AS JOINT TRUSTEE
[44]
The primary relief sought by the applicant was for the removal of
Patel as a joint trustee of the insolvent estate of the Trust.
[45]
Ex facie
the affidavits filed in this application, including
the additional affidavit by Katz, it appears that Patel has conducted
himself
in a truly egregious manner.
[46]
In
Fey
& Whiteford NO v Serfontein and Another
[1]
,
the
Appellate Division held that at common law, the Court retained the
power to remove a trustee in an insolvent estate on the grounds
of
the trustee’s misconduct, which grounds include abuse of trust,
dishonesty and recklessness.
[47] Hoexter JA described the
positions as follows:
“
it
may be that by entrusting the statutory removal of a trustee to the
Master, the legislature sought to provide a remedy which
is cheaper
and more expeditious. In my judgment, however, it is not an exclusive
remedy and the Court’s common-law power
of removal remains.”
[48]
The Master has filed a report stating that there is no objection to
the relief sought by the applicant, and has informed Patel
in writing
that he is to be removed as trustee and liquidator from all estates
where he has been appointed as such.
[49]
On the facts before this Court, which have not been placed in dispute
by Patel, it is abundantly clear that the misconduct
by Patel
constitutes grounds for his removal.
[51] In summary, as set out in
the heads filed on behalf of the applicant, the affidavits establish
that Patel is not a fit and
proper person to occupy any office of
trust:
51.1 Patel has
been interdicted from practicing as an attorney on the application of
the CLS, and an application for his striking
off is pending before
this court. From the affidavits filed by the CLS, it appears that
Patel has utilised trust funds to pay of
his personal debts, thereby
committing theft of trust monies. The CLS asserts that Patel stole
the amount of R3,4 million from
the insolvent estate of
Crimson
Moon
and that he dishonestly sought to cover up the theft by producing a
“
concocted
bank statement”;
51.2 Patel’s
law practice has been placed under the supervision of a curator by
order of Court;
51.3 All the evidence points to
Patel not having a law degree, and to his application for admission
as an attorney being fraudulent;
51.4 The Chief
Master has convened an enquiry, in terms of section 381 of the 1973
Companies Act, into Patel’s conduct as
a liquidator of
Kingsfield Aviation Leasing One (Pty) Ltd (In liquidation) (“KALI”).
His alleged misconduct is that
he cost the estate a significant
amount of money, he aligned himself with the fraudulent conduct of a
creditor of the estate, he
delayed its winding up and he
misrepresented his identity;
51.5 There are
numerous insolvent estates where the applicant is a secured creditor
but has not received any liquidation dividends
notwithstanding.
Details of these estates are set out in the founding affidavit;
51.6 Patel’s
conduct as a trustee in the insolvent estates of
KALI
,
Crimson
Moon
,
Soudena
and the Trust has been contrary to the interests of creditors. Patel
has delayed the confirmation of accounts and it is apparent
that he
has stolen funds from the liquidation account of Crimson Moon by
transferring funds from the liquidation bank account to
the account
of GHT;
51.7 Patel has
perjured himself in several affidavits to which he has deposed;
51.8 In
several matters Patel has not paid secured dividends to the applicant
in breach of section 113(3) of the Act in breach of
his obligation to
distribute dividends immediately after confirmation of the
liquidation account;
51.9 Criminal charges have been
laid against Patel by the joint liquidators of
Crimson Moon
against Patel, and he has been removed as the liquidator due to his
misconduct;
51.10 In
previous liquidations Patel has excluded his co-liquidators from
acting jointly in the administration of estates;
51.11 In the
present matter, Patel has failed to disclose the whereabouts of the
trust funds due to be paid to the applicant; and
51.12 Patel’s
conduct as a liquidator has been severely criticised in two separate
judgments of this Court.
[52]
I cannot imagine a clearer case for the removal of a trustee than the
present one.
[53]
Patel has been given numerous opportunities to account for the funds
which have been entrusted to him as the trustee of the
insolvent
estate of the Trust. He has simply ignored these requests.
[54]
When this application was served on him, Patel did not file a notice
of opposition, nor did he endeavor to contact the applicant’s
attorneys to advise them that he was unavailable to give proper
instructions and required further time to file any opposing papers.
[55]
It must have been conveyed to Patel by his counsel that he would be
afforded an adequate opportunity to file papers, but that
for the
reasons elucidated above he was required to provide adequate proof of
the whereabouts of the trust funds (in the form of
a letter from a
bank official, or similar documentary proof) pending the further
hearing of the matter. He declined to do
so.
[56]
After his counsel withdrew, Patel did not attempt to contact the
applicant’s attorneys to advise them of the steps he
intended
taking to oppose the relief sought. He simply allowed the matter to
proceed on an unopposed basis, and then filed an application
for
reasons with a view to applying for leave to appeal.
[57]
The respondent had ample opportunity to oppose the relief sought, and
at the very least to file a preliminary answering affidavit
asking
for more time and explaining his default of appearance. As an
admitted attorney, Patel has full knowledge of the court rules
and
procedure, and his conduct, both prior to and subsequent to the
granting of the order, appears to be nothing more than a carefully
planned stratagem to buy himself more time in order to continue with
what appears on the face of it to be a nefarious course of
conduct.
[58]
One would have expected an honest practitioner to have stated upfront
that the trust funds were being held in an interest bearing
insolvent
estate account, and to explain his failure to respond to the numerous
enquiries made by the applicant’s attorneys,
which ultimately
led to the necessity for launching this application.
[60]
Patel elected, after receiving due, albeit short, notice of the
application, not to file any affidavits, despite having legal
representation and despite being fully aware that in the absence of
any such affidavits being filed and in circumstances where
he was in
default of appearance, an order would in all likelihood be granted
removing him as the trustee and granting the ancillary
relief sought
by the applicant.
[61]
As a trustee Patel stands in a fiduciary relationship towards
creditors. He is required always to act openly and in good faith,
and
to exercise his powers for the benefit of the insolvent estate, and
not for his personal benefit.
[62]
Patel’s conduct has been neither open nor honest. The only
inference which can be drawn from his failure to communicate
with the
applicant or to place his version on record, either through
correspondence or by filing affidavits, is that he has in
all
probability improperly utilised such funds for his own benefit.
[63]
Regarding urgency, Patel is in the process of selling his residential
property in Rylands, and in light of the pending litigation
against
him in this and in various other matters, the applicant’s fear
that he intends leaving the country is well founded.
This is
particularly so in circumstances where the applicant does not even
have the comfort ordinarily derived from the bond of
security, as the
premiums for such bond have not been paid by Patel or by GHT.
[64]
It cannot be stated more simply than it was in the applicant’s
heads of argument: Patel simply cannot be trusted.
[65] In the circumstances, a
proper case was made out for the removal of Patel as a trustee of the
insolvent estate of the Trust,
and for the ancillary relief granted
in terms of the order dated 17 November 2016.
________________
HOLDERNESS, AJ
ACTING JUDGE OF
THE HIGH COURT
APPEARANCES
For
the Applicant:
Adv G Woodland
For
the First and Second Respondent(s):
Adv Zimmerman
Date(s)
of Hearing:
17
November 2016
Judgment
delivered on:
13
December 2016
[1]
1993 (2) SA 605
(A) at 612I-614F