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[2016] ZAWCHC 197
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Searll NO and Others v Hough and Others (9670/2016) [2016] ZAWCHC 197 (19 December 2016)
REPORTABLE
THE REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Case
No: 9670/2016
Before
the Hon. Mr Justice Bozalek
Hearing: 20 –
21 September 2016
Judgment Delivered:
19 December 2016
In
the matter between:
LAUREN
SEARLL
N.O. 1st
Applicant
ELIOT
OSRIN
N.O. 2nd
Applicant
JEFFREY
FLAX
N.O. 3rd
Applicant
DAVID
FRIEDLANDER
N.O. 4th
Applicant
QUINTIN
HONEY
N.O. 5th
Applicant
In
their capacities as joint executors of
Estate
Late AARON SEARLL (Masters Ref. 6360/2010)
and
HENDRIK
PETRUS
HOUGH 1st
Respondent
EUGENE
NEL
N.O. 2nd
Respondent
GORDON
NOKHANDA
N.O. 3rd
Respondent
In
their capacities as the trustees of the
First
Respondent’s insolvent estate
THE
MASTER OF THE WESTERN CAPE HIGH COURT 4th
Respondent
JUDGMENT
BOZALEK J
[1]
The issue in this application is
essentially whether the estate of the late Dr Aaron Searll (‘the
estate’ or ‘estate
Searll’) who died in May 2010,
can be wound up by his executors without further objection from first
respondent who seeks
to assert, thus far unsuccessfully, a claim
against the estate.
THE PARTIES
[2]
Applicants are the five joint executors of
estate Searll (‘the executors’) whilst first respondent
is Mr Hendrik Petrus
Hough (‘Hough’). Second and third
respondents are the trustees in Hough’s insolvent estate whilst
fourth respondent
is the Master. Hough opposes the application
brought by the executors and has filed a counter-application. By
agreement he has
joined a further respondent, namely, Seardel
Investment Corporation Ltd (‘Seardel’). Neither the
Master nor Hough’s
trustees have played any active part in the
application and counter-application.
THE RELIEF SOUGHT
[3]
In the application the executors seek a
wide range of relief in the following broad terms:
1.
a declaration that Hough does not have
locus standi to lodge an objection with the Master in respect of any
liquidation and distribution
account in estate Searll;
2.
a declaration that Hough’s objection
to the first and final liquidation and distribution account in the
estate is not a valid
objection as contemplated by the Administration
of Estates Act, 66 of 1965 (‘the Act’);
3.
interdicting Hough from lodging any further
objections to any liquidation and distribution account in the estate;
4.
authorising the executors to pay the
creditors and distribute the estate amongst the heirs in accordance
with a final account;
5.
directing that in terms of the Vexatious
Proceedings Act, 3 of 1956 (‘the VPA’) Hough may
institute no legal proceedings
in any superior or lower Court without
the leave of that court or any Judge of the High Court.
[4]
In addition to a punitive costs order, the
executors sought certain ancillary relief which is not presently
relevant.
[5]
In his counter-application Hough seeks the
following relief:
1.
the reviewing and setting aside of
decisions taken by the Master on 16 March 2016, namely, refusing a
postponement of the second
meeting of creditors of Hough’s
insolvent estate, allowing that meeting to proceed and recording
certain resolutions by the
creditors;
2.
setting aside the aforesaid resolutions
which directed the trustees of Hough’s insolvent estate to
withdraw civil proceedings
instituted by him in five separate High
Court cases;
3.
setting aside the trustees’ decision
to carry out those resolutions and/or the withdrawal of the civil
proceedings in question.
[6]
In the alternative Hough seeks a
declaration that the creditors’ resolutions and trustees
actions in question are null and
void and of no force and effect.
[7]
The voluminous set of papers to which the
application and counter application have given rise covers a broad
sweep of events including
considerable litigation but ultimately
there are a few, if any, material disputes of fact, the issues being
largely of a legal
nature. It is necessary to give a brief chronology
of events in order to make sense of the parties’ submissions.
CHRONOLOGY
[8]
In May 2009 Seardel and two related
entities, which I shall refer to collectively as Seardel, instituted
action against the late
Dr Aaron Searll (‘Searll’), a
former director of Seardel. The action related to five claims which
Seardel alleged they
had against Searll, inter alia, for the alleged
theft of corporate opportunities by him in breach of fiduciary duties
he owed to
Seardel at the time that such opportunities were allegedly
unlawfully appropriated by him.
[9]
By agreement between the parties, the
action was referred to a confidential arbitration which commenced in
May 2011.
[10]
One of the claims related to a property
known as Reeds House in Observatory, Cape Town, and itself had a
lengthy history going back
to 1967 when Searll acquired indirect
control of a company, Desiree Lingerie Holdings Ltd (‘Desiree’).
In that same
year Searll acquired a controlling interest in Reeds
House (which later became Reeds House CC), the then owner of the
Reeds House
property.
[11]
At that time the property was being used by
a subsidiary of Desiree and the shares would, in the normal course,
have been purchased
by it. The opportunity to acquire the Reeds House
property belonged to Desiree but, allegedly in breach of his
fiduciary duty as
a director of Desiree, Searll acquired the property
for himself. By 1978 Seardel had acquired 100% of the issued shares
in Desiree,
which then became its wholly owned subsidiary.
Accordingly, any claim of Desiree, including the claim against Searll
for the theft
of the opportunity to acquire the Reeds House property,
vested in Seardel and/or its subsidiaries.
[12]
When Seardel asserted its claim against
Searll it was concerned that he might contend that its claim in
respect of the Reeds House
property was still held by Desiree.
Although Seardel disputed such contention it was advised, as a
precautionary measure, to acquire
the potential claim against Searll
from Desiree which had subsequently changed its name to Metamin
Property Group Ltd (‘Metamin’).
[13]
At that stage, in late 2010, Hough was a
director of Metamin and, together with another one of his companies
known as La Lucia Investments
Ltd (‘La Lucia’), were the
major shareholders of Metamin.
[14]
In March 2011 a written cession agreement
(‘the cession’) was concluded between Seardel and Metamin
in terms whereof
Metamin ceded all its claims against third parties
to Seardel which, in return therefor, paid an upfront amount of
R50 000
for Metamin’s ceded claims. This amount was duly
paid by Seardel.
[15]
Shortly after the conclusion of the
cession, Hough disputed its validity (but without returning the money
received) and claimed,
inter alia, that he was not authorised to sign
the cession on Metamin’s behalf. Thus commenced years of
litigation between,
inter alia, Hough, Metamin and La Lucia on the
one side and the executors and Seardel on the other. It is
unnecessary to set out
in any detail this litigation, and it will
suffice to mention the main cases.
[16]
In April 2011 Seardel launched an
application in this Court against Hough, Metamin and La Lucia for an
order declaring, inter alia,
that the cession was valid and binding
on the parties (‘the Seardel application’). Oral evidence
was heard before Veldhuizen
J who granted an order against Hough with
costs.
[17]
In July 2013 Seardel applied for the
liquidation of Metamin and La Lucia which application was opposed by
Hough. Final orders of
liquidation were granted in July 2014.
[18]
In that same month Hough instituted an
application to review the Master’s decision not to sustain his
objection against the
liquidation and distribution account in estate
Searll (‘the objection application’).
[19]
In October 2014 Hough launched an
application to remove second applicant, Mr Eliot Osrin (‘Osrin’),
as an executor of
estate Searll. Shortly thereafter Hough contested
the authority of the executors’ attorneys, Messrs Edward Nathan
Sonnenberg
(‘ENS’), to act on their behalf and in
response the executors and Seardel launched an application in terms
of Rule
of Court 7(1) to confirm their authority.
[20]
In November 2014 Seardel successfully
applied for the sequestration of Hough’s estate. In February
2015 Hough launched a business
rescue application in respect of
Metamin and La Lucia. In November 2015 Hough launched an application
to review a decision taken
by the Master at the first meeting of
creditors in his insolvent estate.
[21]
Many of these applications spawned
interlocutory applications brought either by Hough, the executors or
Seardel. Where, as was invariably
the case, Hough’s application
or action was dismissed or an order unfavourable to him was made at
the behest of the executors
or Seardel, he sought leave to appeal
and, when that failed, he petitioned the Supreme Court of Appeal
(‘SCA’) for
leave to appeal.
[22]
I shall, where necessary, return to the
details of some of these cases at a later stage. At this stage it
suffices to state that
the mainspring of all this litigation appears
to be Hough’s belief or his assertion that the claim against
Searll, which
after the latter’s death lay against his estate,
for the disgorgement of the profits earned between 1967 and
approximately
2011 from the ownership of Reeds House, vested in
Metamin. This appears to remain Hough’s view notwithstanding
the fact that
the confidential arbitration between Seardel and estate
Searll for the same lost or stolen profits was eventually resolved by
a
substantial settlement in favour of Seardel.
[23]
Various issues arise in the present
application and counter-application and, rather than list these, I
propose to follow the structure
followed by applicants’ counsel
in grouping those related parts of the relief sought in either the
application or counter-application
together and determining them one
by one.
[24]
I shall then deal in sequence with the
following issues:
1.
whether the executors may now be authorised
to pay the creditors and distribute the estate and, whether, as
sought by Hough in his
counter-application, the resolutions taken by
the creditors in his insolvent estate to direct Hough’s
trustees to withdraw
various civil proceedings and effecting those
withdrawals should be set aside;
2.
whether Hough should be declared a
vexatious litigant in terms of the VPA;
3.
the question of Hough’s locus standi
to lodge an objection in respect of liquidation and distribution
account in estate Searll,
the seeking of a declaration that his
objection is not a valid objection and interdicting him from lodging
any further objections
to any liquidation and distribution account.
THE FIRST ISSUE –
WHETHER THE ESTATE MAY BE DISTRIBUTED
[25]
The basis of Hough’s objection to the
liquidation and distribution account in the estate was set out in a
lengthy letter he
wrote to one of the executors in April 2011, the
essence of which was that it was his companies, Metamin and La Lucia,
which enjoyed
a claim against the estate for Searll’s alleged
theft of the corporate opportunity in respect of Reeds House CC.
[26]
As mentioned, in the late 1960’s
Searll was a director of Desiree and bought a controlling interest in
Reeds House CC in circumstances
where the opportunity to acquire that
controlling interest in truth belonged to Desiree. Desiree later
became Metamin. However,
it was Seardel that instituted proceedings
against Searll in 2009 arising out of the alleged stolen corporate
opportunity by which
stage Seardel had acquired all of the shares in
Metamin.
[27]
According to the executors the effect was
that Desiree’s claim against Searll in respect of Reeds House
CC lay in the hands
of Seardel, and no longer in the hands of its
wholly owned subsidiary, Metamin. Nonetheless, for the reasons
previously mentioned
Seardel acquired, by way of a cession agreement,
any potential Reeds House CC claim from Metamin in order to cater for
that risk.
[28]
Hough controlled Metamin and was also a
party to the cession agreement. It reads in part as follows:
‘
2.3
it may be contended by Searll that certain of the claims to be
adjudicated upon in the Arbitration are held by the Cedent (Metamin)
and not by the Cessionary (Seardel). The Cessionary disputes this
contention and avers that all of such claims are held by the
Cessionary in one or more of the plaintiff’s in the
Arbitration.
2.4 the Cessionary
nevertheless wishes, ex abundante cauteli, to acquire, inter alia,
the Arbitration claim so as to cater for a
finding in the Arbitration
that any of their claims adjudicated upon in fact belonged to the
Cedent (Metamin).’
[29]
The most important litigation for present
purposes was that commenced by Seardel in the South Gauteng High
Court against Hough and
Metamin where the principal relief sought was
a declaration that ‘
the out and
out cession concluded amongst (Seardel) and (Metamin) and (Hough) …
is valid and binding on the parties.’
The
matter was transferred to this Court with two limited issues being
referred to oral evidence, namely ‘
the
basis on which the cession agreement … was delivered to the
applicant (Seardel and/or its representative) and the authority
of
the third respondent (Hough) to have concluded such cession agreement
on behalf of the first respondent (Metamin).’
Evidence was heard in April 2012 when various witnesses gave evidence
on behalf of Seardel and were cross-examined by Hough. He
himself did
not testify.
[30]
Veldhuizen J found in favour of Seardel
holding, inter alia, that the Metamin cession was valid and binding
on the parties. Hough
unsuccessfully sought leave to appeal the
judgment. Thereafter he petitioned the SCA for such leave but his
petition was refused
in May 2013. It is thus the executors’
case that Hough’s claim against the estate based on the Metamin
cession has
no merit and it is pursuant to this view that in May
2011, Osrin an executor acting on behalf of the joint executors,
rejected
Hough’s claim against estate Searll. Undeterred, on 14
March 2014 Hough duly lodged an objection to the liquidation and
distribution
account in estate Searll on the same basis in terms of
sec 35(7) of the Act. This was after the executors had signed the
first
and final liquidation and distribution account in December
2013, lodging it with the Master and advertising it to lie for
inspection.
[31]
The Master did not uphold Hough’s
objection. In a letter to Hough dated 18 June 2014, the Master
advised that he was of the
opinion that the objection required him to
decide factual disputes and complex legal matters and that he had no
legal training
to decide such matters. He continued: ‘
consequently
the Master directs that this matter be taken to the Court of law to
resolve the legal issues that are in dispute’
.
The concluding paragraph of the letter reads:
‘
In
terms of
sec 35(10)
of the
Administration of Estates Act 66 of 1965
any person aggrieved by the Master’s refusal to sustain an
objection may apply by motion of Court within thirty (30) days
from
the date of the decision, for an order to be set aside the decision’
.
[32]
Hough duly instituted the objection
application in this Court seeking an order sustaining his objection
to the account and setting
aside the Master’s failure to do so.
He also sought an order declaring that the Metamin cession was ‘
void
on the grounds of fraud’
committed by Seardel’s lawyers, ENS.
[33]
The respondents in that application, who
included the executors, brought an interlocutory application
demanding security for costs
from Hough in an amount of more than
R1mil on the grounds that the objection application was vexatious and
reckless and amounted
to an abuse of the process of court. In
November 2015 the interlocutory application was argued before Davis J
who granted same,
ordering Hough to put up security in the amount
sought.
[34]
This was by no means the only litigation
between the parties at that time but it is presently unnecessary to
set out the details
of the further litigation save to refer to an
application by Seardel in November 2014 for the sequestration of
Hough’s estate.
That application was successful and a final
order was made in August 2015 by Dlodlo J in this Court.
[35]
There were two proved creditors in Hough’s
estate, Seardel and the executors of estate Searll, both of whose
claims against
Hough were based on taxed costs orders which they had
obtained in one or other of the actions or applications instituted
either
by or against Hough and Metamin. Hough’s sequestration
had far reaching consequences for the various applications and
actions
which he had instituted in his bid to pursue his claim
against estate Searll. Two such matters were pending in the Durban
High
Court and three in this Court but his insolvent estate was in no
position to fund the litigation.
[36]
What is more, the two proved creditors,
Seardel and the executors of estate Searll, being to all intents and
purposes the target
of all this litigation, clearly had no interest
in it being pursued by Hough’s insolvent estate. At a meeting
of creditors
both creditors accordingly directed the trustees to
adopt resolutions withdrawing the pending litigation which included
Hough’s
application to set aside the Master’s decision
not to sustain his objection to the liquidation and distribution
account in
estate Searll.
[37]
However, the trustees in Hough’s
insolvent estate first took advice from senior counsel regarding the
proposed resolutions.
Counsel furnished an opinion advising in favour
of the adoption of the resolutions which would withdraw, inter alia,
Hough’s
aforesaid objection application. In so advising,
counsel noted that the relief ultimately sought by Hough was the
setting aside
of the Metamin cession but that this question had been
decided in proceedings before Veldhuizen J against Hough and Metamin,
and
that leave to appeal against that decision had thereafter been
refused at every level. Counsel advised that Veldhuizen J’s
judgment was dispositive of the question of the validity and
enforceability of the Metamin cession.
[38]
It should be mentioned that prior to
obtaining an independent opinion from senior counsel, the trustees’
own prima facie view
was that the litigation instituted by Hough
should not be continued as ‘
there
(was) no prospect of such litigation yielding any benefit for the
insolvent estate’
and it ‘
would
expose the creditors of the insolvent estate to a contribution’
.
They were of the prima facie view that the litigation had no
reasonable prospects of success.
[39]
At the second meeting of creditors of
Hough’s estate, resolutions requiring the withdrawal of Hough’s
litigation were
duly adopted and pursuant thereto Hough’s
objection application was withdrawn in April 2016. Those resolutions
and the withdrawal
of the litigation is now the subject of Hough’s
counter-application.
[40]
The executors’ case is simply that
they should now be authorised to pay the creditors and distribute the
estate in accordance
with the first liquidation and distribution
account in terms of sec 35(12) of the Act.
[41]
Section 35 of the Act deals with
liquidation and distribution accounts and provides as follows in
relation to objections by interested
parties to such accounts:
‘
(9) If, after
consideration of such objection, the comments of the executor and
such further particulars as the Master may require,
the Master is of
opinion that such objection is well-founded or if, apart from any
objection, he is of opinion that the account
is in any respect
incorrect and should be amended, he may direct the executor to amend
the account or may give such other direction
in connection therewith
as he may think fit.
(10) Any person
aggrieved by any such direction of the Master or by a refusal of the
Master to sustain an objection so lodged, may
apply by motion to the
Court within thirty days after the date of such direction or refusal
or within such further period as the
Court may allow, for an order to
set aside the Master's decision and the Court may make such order as
it may think fit.
(11) …
(12) When an account
has lain open for inspection as hereinbefore provided and-
(a) no objection has
been lodged; or
(b)
an
objection has been lodged and the account has been amended in
accordance with the Master's direction and has again lain open
for
inspection, if necessary, as provided in subsection (11), and no
application has been made to the Court within the period referred
to
in subsection (10) to set aside the Master's decision; or
(c) an objection has
been lodged but withdrawn, or has not been sustained and no such
application has been made to the Court within
the said period,
the executor shall
forthwith pay the creditors and distribute the estate among the heirs
in accordance with the account…’
[42]
Applying these provisions to the present
matter it is clear that Hough’s objection to the account was
not sustained by the
Master whereupon he applied by motion to the
Court for an order setting aside the Master’s decision. Those
proceedings have
been withdrawn, however, and there is no question
therefore of the Court making any other order ‘
as
it may think fit’
.
[43]
It was argued on behalf of Hough, however,
that the Master had neither sustained the objection nor dismissed it;
rather he had given
a ‘
direction
in connection therewith’
and as
such that direction stood until such time as it was set aside.
[44]
In considering this submission one must
have regard in the first place to the relevant letter written by the
Master. His reference
in the final paragraph to the procedure in sec
35(10) is a clear indication that, in the words of the sub-section,
he had refused
to sustain Hough’s objection. Notwithstanding
the sentence ‘
consequently the
Master directs that this matter be taken to the court of law (sic) to
resolve the legal issues that are in dispute’
,
I do not consider that this was a direction as contemplated in
sub-section 9 but rather a reference to Hough’s right in
terms
of sec 35(10) to take his objection to court for determination.
[45]
That this was so is borne out by Hough’s
own papers in the objection application where he stated that it was
brought by him
‘
as an aggrieved
person envisaged by sec 35(10) of the AE Act’
and where he referred to his objection not having been ‘
sustained
by the Master’
.
[46]
On the assumption that the withdrawal of
Hough’s objection application by the trustees was a valid step,
the question arises
as to whether the unsuccessful objection
initially lodged by Hough presents any bar to the executors
proceeding to distribute the
estate in accordance with the
liquidation and distribution account. The situation that obtains in
the present matter is not explicitly
dealt with by sec 35(12) which
does not cater for an application having been made to court to
challenge the Master’s decision,
which application is later
withdrawn. The scheme of sec 35(12) clearly provides, however, that
where an unsuccessful objector has
exhausted his remedy of applying
to court, without success, then the objection process is brought to
an end and ‘
the executor shall
forthwith pay the creditors and distribute the estate among the heirs
in accordance with the account […]’
.
Leaving aside for the time being Hough’s counter-application
seeking the setting aside of his trustees’ decision to
withdraw
the litigation, including the objection application, in my view it is
clear that the executors are entitled, without more,
to proceed to
distribute the estate in accordance with the liquidation and
distribution account.
[47]
It is appropriate to now turn to those
portions of Hough’s counter-application which bear on the
relief sought by the executors
in order to finalise the winding up of
estate Searll. In his counter-application Hough seeks the reviewing
and setting aside the
rulings of the Master made on 16 March 2016
refusing a postponement of the second meeting of the creditors of his
insolvent estate,
allowing that meeting to proceed to business and
his recording of the creditors resolutions requiring the trustees to
withdraw
five court actions brought by Hough including the objection
application. He also seeks the setting aside of the decisions taken
by the trustees to carry out those resolutions and withdraw the
proceedings and, in the alternative, a declaration that the creditors
resolutions and the trustees actions as aforesaid are null and void.
[48]
The first point to be considered, one which
was not taken by the executors is whether the counter-application is
properly before
the Court. This point was raised
mero
motu
by the Court in the light of a
judgment by Gamble J in an interlocutory application in one of the
High Court matters referred to,
namely, case 19457/2014, in which
Hough, having cited the Master and the executors, sought the removal
of Osrin from his position
as one of the executors in estate Searll.
In the interlocutory application the Court made an order directing
Hough ‘
prior to lodging any
further proceedings in the Western Cape High Court, whether by way of
action or application, be it for interim,
interlocutory or final
relief, to obtain the written authorisation of the Judge President’
.
The order was made on the basis of the Court’s finding that
Hough’s interlocutory application itself was not bona
fide,
constituted an abuse of process and that Hough’s behaviour was
vexatious. In the interlocutory application Hough sought
an order
interdicting ENS from practising as attorneys on the basis that the
firm, as opposed to its individual partners or members,
did not hold
a valid fidelity fund certificate to practice under the Attorneys
Act. In his judgment Gamble J observed that the
order he made was
appropriate because of the fact that there were at least six matters
pending before this Court in which Hough
was directly involved and it
was necessary to protect prospective litigants against whom Hough
might make further unnecessary and
spurious claims and allegations.
[49]
I was advised from the bar, and this was
not disputed by Hough’s counsel, that Hough had sought leave to
appeal against the
judgment of Gamble J but that this application had
lapsed upon withdrawal of the litigation by the trustees with the
result that
the order of Gamble J aforesaid remains of full force and
effect.
[50]
By common cause Hough did not seek the
written authorisation of the Judge President before launching his
counter-application in
the present matter. On Hough’s behalf it
was contended, on the strength of a dictum in
Pitje
and Another v Joubert and Another
[2015] ZAGPPHC 747 (10 November 2015), that since his counter-claim
was brought in response to the main application by the executors
it
was not hit by the provision of Gamble J’s order, the reasoning
being that the counter-claim involved defending or resisting
the
application which Hough was not precluded from doing.
[51]
In
Pitje
,
the Court held that where the applicant, the subject of an order in
terms of the VPA, had been sued for eviction and had then
brought at
least one application arising from and in response thereto, he was
not required to seek judicial permission to do so.
The Court reasoned
that an order in terms of the VPA did not require as litigant to seek
judicial permission to defend or resist
any application and that
‘whatever had followed since the eviction application ‘
were
as a result of the application for eviction brought against the
applicant’
.
[52]
I do not read this dictum to mean that no
counter-application by a vexatious litigant ever requires judicial
permission. If I am
wrong in this regard, I must respectfully
disagree. To allow a vexatious litigant to launch any
counter-application or other legal
steps in response to proceeding
brought against him or her would defeat the entire purpose of an
order in terms of the VPA. It
must be borne in mind that the litigant
in question is not barred from bringing a counter-application, s/he
must merely seek judicial
permission to do so. The fact that it is
brought in response to proceedings launched against him or her, will
no doubt, be an important
factor in the determination of the judicial
officer who must decide whether to grant such permission.
[53]
Although his counter-application was
brought in response to the executors’ application, in my view,
it nonetheless falls within
the terms of the order made by Gamble J.
That order, whilst referring only to an action or application, must
be purposively interpreted
to include proceedings brought by way of
counter-application. Accordingly, in the absence of written
authorisation from the Judge
President, Hough is precluded from
bringing the counter-application and has no standing before the
Court.
[54]
It was common cause that no such written
authorisation had been sought by Hough and no explanation for this
omission was tendered.
Hough did not even address the matter in his
answering affidavit which served also as a founding affidavit to his
counter-application,
notwithstanding that the judgment of Gamble J
was an annexure to the founding affidavit filed on behalf of the
executors.
[55]
Counsel for Hough submitted that should the
Court be inclined to give effect to the relevant order made by Gamble
J, he be put to
terms to seek the necessary authorisation from the
Judge President. In the absence of any reasons or explanation from
Hough as
to why he did not see fit to comply with the order I decline
to accept this invitation. In any event, for the reasons which will
follow I do not consider that any useful purpose will be served by
allowing Hough such an opportunity.
[56]
During argument Hough’s counsel
nevertheless intimated that his client would,
ex
post facto,
seek permission from the
Judge President. To date I have not been advised by Hough’s
legal representatives of the outcome
of any such application. Upon
enquiry on 11 December 2016, the Judge President advised me that he
too was unaware of any such application
by or on behalf of Hough.
[57]
Notwithstanding the conclusion which I have
reached regarding Hough’s lack of locus standi in relation to
the counter-application
I shall proceed to deal with it on its merits
on the assumption that I could be wrong in this conclusion.
WHETHER THE
MASTER’S DECISION TO POSTPONE THE SECOND MEETING OF CREDITORS
IN HOUGH’S ESTATE ON 16 MARCH SHOULD BE REVIEWED
AND SET ASIDE.
[58]
In his counter-application Hough sought an
order reviewing and setting aside virtually all of the business at
the second meeting
of the creditors of his insolvent estate on 16
March 2016. The starting point is the Master’s decision not to
grant Hough
a postponement of the second meeting of creditors on 16
March 2016. The background to this decision was that the Master had
granted
two earlier postponements at the instance of Hough on 13
November and 14 December 2015. These postponements had been sought by
him on the basis that he was reviewing, in the High Court, the
Master’s decision to admit to proof the claims of the two
creditors in his estate, namely, Seardel and the executors of estate
Searll. Such claims were based on taxed bills of costs obtained
by
these parties against Hough in the course of litigation.
[59]
Even though the creditors’ claims
were based on taxed bills of cost Hough disputed them on the basis
that they had been represented
by ENS in those proceedings but had
not been entitled to charge fees by reason of its failure to hold a
fidelity fund certificate
in its own name. This argument was dealt
with by Rosenberg AJ in an interlocutory application in Hough’s
objection application
when the executors and Seardel invoked the
provisions of Rule 7(1) after Hough contested ENS’ authority to
act. Rosenberg
AJ duly granted an order ruling against Hough.
[60]
Be all that as it may, Hough had instituted
his second review application (disputing the admission of the
creditors’ claims
to proof) but by 16 March 2016 the position
was that the Master and the creditors had filed their answering
affidavits and Hough’s
replying affidavit was long overdue. The
matter had also not been enrolled for hearing. Accordingly the
creditors resisted the
postponement contending that the basis
therefor advanced by Hough was spurious and that he was merely
seeking to delay further
action on the part of the trustees. The
Master appeared to accept this argument and refused to grant the
further postponement sought
by Hough. Following on from this decision
the creditors passed the resolutions requiring or directing the
trustees to withdraw
all litigation launched by Hough.
[61]
Hough now contends that the Master’s
decision was irrational and arbitrary inasmuch as he had granted
postponements on two
previous occasions for the same purpose, namely,
allowing the review application to be determined. In my view it is a
fallacy to
argue, as did Hough’s counsel, that the Master was
constrained by his previous decisions or, more accurately, by the
reasons
therefor, from refusing a postponement sought for similar
reasons on 16 March 2016. Clearly the Master was required, on each
occasion
a postponement of the creditors meeting was sought, to
exercise his mind anew based on the facts and circumstances as then
presented
to him. It is also clear from the transcript of that
meeting, and that particular exchange, that in light of Hough’s
delays
in moving the review application forward the Master had
concluded that Hough was seeking to delay the insolvency process and
therefore
he should refuse a further postponement.
[62]
It is of some interest to note that Hough
immediately announced that he intended, within days, to review the
aforesaid decision
by the Master. In any event he did not do so, only
bringing the review in his counter-application in the present matter
upon receipt
of the executors’ compendious application for
relief.
[63]
It was also contended on Hough’s
behalf that the Master failed to give proper consideration to the
question of the prejudice
that such a decision would have for him, as
against the limited prejudice to the creditors if the postponement
was not granted.
I can see no merit in this argument, however,
Hough’s very failure to file a replying affidavit suggested
that he was dragging
his feet with ulterior motives. It follows from
this that the argument that the resolution thereafter taken by the
creditors was
tainted by the unlawfulness of the Master’s
conduct cannot be sustained.
[64]
In my view no basis is made out in Hough’s
counter-application to review the Master’s decision to refuse
the postponement.
Following that refusal and the passing of
creditors’ resolutions, the trustees withdrew all litigation
instituted by Hough.
[65]
Insofar as Hough seeks to review and set
aside those resolutions and the trustees actions as well, regard must
be had to the provisions
of
sec 53(3)
and (4) of the
Insolvency Act,
24 of 1936
which provide as follows:
‘
(3)
Every resolution of creditors at a meeting of creditors and the
result of the voting on any matter as declared by the officer
presiding at the meeting, shall be recorded upon the minutes of the
meeting and shall be binding upon the trustees in so far as
it is a
direction to him; no other direction of creditors shall be binding
upon him.
(4) Any direction by
creditors which infringes the rights of any creditor may be set aside
by the Court on the application of the
creditor whose rights are
affected or of the trustee with the consent of the Master.
[66]
It is thus immediately apparent that the
Insolvency Act does
not make explicit provision for an insolvent,
i.e. Hough, to set aside the directions by creditors. It is also
relevant in this
regard that, as previously mentioned, the trustees
took advice from senior counsel on the merits of, inter alia, Hough’s
objection application, before recommending to the creditors that it
be withdrawn. The trustees own prima facie view was that the
litigation showed scant prospects of success and counsel confirmed
this view in his advice.
[67]
It
is trite that the primary duty of trustees is to protect the interest
of proved creditors and that the law regards creditors
as the best
judges of their own interests. See in this regard
Kanderssen
(Pty) Ltd v Bowman
NO
[1]
,
where, per Franklin J, the Court held that:
‘
A
resolution of creditors is not bona fide and may be set aside by the
Court if it has been passed not in the honest belief that
it was in
the interests of the estate and for the benefit of the creditors, but
for some collateral object, whether that object
is a fraudulent one
or not.’
The Court also quoted
with approval the following extract from the head note in
Ex Parte
Winshaw
1921 CPD 212:
‘
The
right to determine the manner in which and the conditions on which
the assets of an insolvent estate are to be realised rests
with the
creditors, and the Court will not interfere with their discretion
unless it is satisfied that they are abusing that right.’
[2]
[68]
One possible basis upon which it might be
possible to find that the resolutions of creditors in the present
matter were not bona
fide would be if they were using their position
as creditors to halt litigation against themselves which had
reasonable prospects
of success. That possibility, however, is belied
by the fact that the trustees took independent advice from counsel on
whether
to pursue any litigation brought by Hough including, most
notably, his objection application challenging the Master’s
failure
to sustain his objection to the liquidation and distribution
account in estate Searll. The basis for that objection lies at the
very heart of the litigation between Hough, the executors and all
other parties drawn into such litigation, namely, that any claim
against estate Searll for the stolen corporate opportunity relating
to Reeds House CC lay at Hough/Metamin’s instance and
that the
out and out cession agreement in terms of which they divested
themselves of any such claim was invalid and of no force
and effect.
[69]
Independent senior counsel advised the
trustees, however, that the judgment of Veldhuizen J holding that the
cession agreement in
question was valid and enforceable was
dispositive of the question. This was so because Hough’s
attempts to appeal that judgment
were all unsuccessful. In an effort
to circumvent this conclusion Hough had in the past contended that
Veldhuizen J’s judgment
was not dispositive of the issue since
it had not dealt with his allegation that the cession was obtained
fraudulently. In their
papers, however, the executors point out that
during the trial before Veldhuizen J, and whilst cross-examining,
Hough pertinently
raised the question of fraud with attorney
Pretorius, one of the two witnesses called by Seardel. Pretorius
rejected any question
of fraud on the part of his client and
thereafter Hough failed to testify in the matter. Hough’s
cross-examination thus puts
paid to any suggestion that the
proceedings before Veldhuizen J did not contemplate a fraudulent,
misrepresentation – based
attack on the Metamin cession, and
that his judgment is therefore not dispositive of the validity of the
cession. In the circumstances
it is clear that this further leg to
Hough’s case cannot be sustained.
[70]
In his answering affidavit in the present
matter, Hough contended for yet a further basis on which to attack
the validity of the
cession, namely, that whereas he was told, prior
to signing the cession that the executors
may
contend that Metamin held the Reeds House CC claim, in truth ENS knew
that the executors had already made that contention and that
this
amounted to a fraudulent misrepresentation vitiating the cession.
There is no substance to this point, however, since it is
clear from
Hough’s cross-examination of Pretorius that he knew or had in
mind the alleged factual basis for such an attack.
[71]
On
behalf of Hough, Mr van den Berg sought to rely on
Broodryk
v Die Meester en ‘n Ander
[3]
for his contention that Hough was and remains a ‘
person
aggrieved’
in terms of sec 35(10) of the Act. That case establishes that a
person who, as an interested party, has filed a claim against the
deceased’s estate and is dissatisfied with the Master’s
treatment of his claim, can qualify as a ‘
person
aggrieved’
in terms of sec 35(10) of the Act and will therefore have locus
standi to apply for the setting aside of the Master’s decision
on his objection to the liquidation and distribution account.
[72]
This position is not challenged by the
executors, their case being that Hough has exhausted all these
remedies following the withdrawal
of his first objection application
and that, in any event, it was doomed to fail since the crucial issue
therein had been finally
disposed of by Veldhuizen J.
[73]
Whilst it is correct that the power of
creditors to give directions to the trustees is not unlimited, as
discussed above, the law
presumes that the creditors are the best
judges of their own interests and there is nothing to suggest that
the resolutions of
the creditors in the present matter were not taken
bona fide. On an analysis of the litigation that was withdrawn,
insofar as it
related to Hough’s claim against the estate, it
stood no prospect of success since the issue had been finally
determined
by Veldhuizen J in the Western Cape High Court.
[74]
In seeking to set aside the trustees’
withdrawal of the civil proceeding, counsel for Hough contended that
they had ignored
the fact that Hough had a vital reversionary
interest in his insolvent estate and accordingly had the right to
litigate in matters
‘
connected
with the administration of his estate’
.
He further contended that the trustees failed to appreciate that the
insolvent’s interest in Searll’s estate was a
contingent
one which he could only acquire through litigation. Counsel submitted
further that the trustees failed to appreciate
that their refusal to
continue the litigation entitled Hough to do so. In these submissions
Mr van der Berg relied inter alia on
Stern
and Ruskin, NO v Appleson
1951 (3) SA
800
(W) 805 D–G and
De Polo and
Another v Dreyer
and
Others
1991 (2) SA 164
(W) at 179 D–F.
In
De Polo,
however,
it was held that the position would appear to be that in all matters
which could result in a benefit to the insolvent estate,
the proper
person to take action would be the trustee and accordingly that an
insolvent could not sue as of right.
[75]
Finally, counsel for Hough contended
further that the liquidation and distribution account was in
suspension, the Master having
made no ruling on its merits, nor on
Hough’s objection. However, as I have pointed out, the Master
in fact did not sustain
the objection with the result that Hough’s
only remaining course of action was to review that decision in the
High Court
which he duly did. That process having come to an end with
no positive result for Hough, the liquidation and distribution
account
is no longer ‘
in
suspension’
.
[76]
In the result it is clear that Veldhuizen
J’s judgment is dispositive of the question of the validity of
the Metamin cession,
that independent counsel supported this view and
advised the withdrawal of the relevant litigation by Hough’s
trustees, that
the creditors cannot be faulted for passing such
resolutions i.e. directing the trustees to withdraw the litigation
and that, in
any event, Hough has limited scope to challenge the
resolutions or the withdrawal of the litigation. In the
circumstances, I consider
that the executors have established that
they are entitled to an order authorising them to pay the creditors
and distribute the
estate in accordance with the first liquidation
and distribution account.
[77]
It follows that, even if properly before
Court, Hough’s counterclaim cannot succeed in these respects
nor in the alternative
form in which it is cast, namely, that the
Master’s action are set aside and declared that the creditors
resolution and the
withdrawal of the civil proceedings by the
trustees are null and void and of no force or effect.
[78]
That disposes of the first issue as
categorised by counsel and I turn now to the second issue, namely the
relief sought against
Hough in terms of the Vexatious Proceedings
Act.
AN INTERDICT IN
TERMS OF THE VEXATIOUS PROCEEDINGS ACT
[79]
In prayer 6 of the notice of motion the
executors seek an order in terms of sec 2(1)(b) of the VPA that no
legal proceedings may
be instituted by Hough against any person in
the High Court, the Constitutional Court or an inferior Court without
the leave of
that Court or any judge of the High Court. As mentioned,
Gamble J has already found Hough to be a vexatious litigant and to
that
end made an order requiring him to seek the written
authorisation of the Judge President of this Division before
launching any
proceedings therein. The question therefore arises as
to whether any further order is necessary.
[80]
It appears from Gamble J’s judgment
that Hough was given an opportunity in that interlocutory application
to deal with the
suggestion that he was in effect a vexatious
litigant and would in future have to seek permission from a neutral
judicial authority
before launching any further proceedings. The
order was made, however, in the course of interlocutory proceedings,
and the issue
was in fact introduced
meru
motu
by Gamble J. By contrast in the
present matter Hough has been given full notice of the relief sought
and has had an opportunity
to respond thereto by way of his answering
affidavit. In addition this Court must apply the specific test laid
down in sec 2(1)(b).
In these circumstances I consider that it is
appropriate to entertain the application for this relief
notwithstanding the fact
that any order given will overlap with that
made by Gamble J.
[81]
Sec 2(1)(b) provides as follows:
‘
(b)
If, on an application made by any person against whom legal
proceedings have been instituted by any other person or who has
reason to believe that the institution of legal proceedings against
him is contemplated by any other person, the court is satisfied
that
the said person has persistently and without any reasonable ground
instituted legal proceedings in any court or in any inferior
court,
whether against the same person or against different persons, the
court may, after hearing that person or giving him an
opportunity of
being heard, order that no legal proceedings shall be instituted by
him against any person in any court or any inferior
court without the
leave of the court, or any judge thereof, or that inferior court, as
the case may be, and such leave shall not
be granted unless the court
or judge or the inferior court, as the case may be, is satisfied that
the proceedings are not an abuse
of the process of the court and that
there is prima facie ground for the proceedings.’
[82]
In essence then the requirement to be
proved by a party seeking such an order is that the allegedly
vexatious litigant has ‘
persistently
and without any reasonable ground instituted legal proceedings’
against the applicant. The executors
relied on the long running plethora of proceedings instituted by
Hough and what can be termed
‘
his
interests’
i.e. the companies
under his control, in pursuance of a claim based on the Metamin
cession against the late Aaron Searll or his
estate. That litigation
is set out in a summarised form covering four and a half pages in the
founding affidavit filed on behalf
of the executors and I have
already described at least some of it.
[83]
It commenced in April 2013 when Seardel
launched an application against Hough, Metamin and La Lucia for an
order declaring that
the cession was valid and binding on the parties
and continues up until November 2015. Further major suits brought by
Hough included
an urgent application to remove Osrin as an executor
of estate Searll; three applications by Hough in the KwaZulu-Natal
Durban
High Court consequent upon the liquidation of his two
companies, Metamin and La Lucia, at the instance of Seardel; an
application
for business rescue launched by Hough in respect of
Metamin and La Lucia; action proceedings by Hough against inter alia
Seardel
and ENS; and Hough’s application to review the decision
taken by the Master at the first meeting of creditors in his
insolvent
estate. There was, importantly, also Hough’s
application to review the Master’s decision not to sustain his
objection
against the liquidation and distribution account in estate
Searll. Many of these actions involved interlocutory applications
launched
by Hough (and in at least one case against him).
[84]
In most if not all of the actions and
interlocutory applications which have been concluded, Hough was
unsuccessful and cost orders
were made against him. In the tabulated
list I am unable to find one instance where Hough was successful in
either an application,
action or any interlocutory application. When
unsuccessful, Hough would generally apply for leave to appeal which
in all instances
was refused. Thereafter he would launch a petition
for leave to appeal, and, again, I can see no instance where this
step was ever
successful. A further perusal of the consideration of
the brief table of litigation reveals seven instances where cost
orders were
made against him.
[85]
In summary, in the main trial action heard
before Veldhuizen J relating to the Metamin cession Hough was
unsuccessful and his attempts
to appeal the judgment have failed. His
two companies, Metamin and La Lucia were placed into final
liquidation and his business
rescue application was not proceeded
with. Despite his opposition a final sequestration order was granted
against him and his attempts
to appeal this judgment have failed.
Amongst other failed applications Hough lost two interlocutory
applications relating to discovery
in the matter finally determined
by Veldhuizen J. He also lost interlocutory applications in terms of
which he was required to
furnish security for costs in the first
objection application and where he contested ENS’ authority to
act. To this lengthy
list of litigation can be added Hough’s
counter-application in the present matter for a wide range of relief.
As discussed
the counter-application was brought without any attempt
to comply with the provisions of Gamble J’s filtering order let
alone
refer thereto. There can be no doubt therefore that the
executors have succeeded in proving that Hough has ‘
persistently
instituted legal proceedings’
against
the executors of estate Searll, Seardel and interests related to
these entities.
[86]
In granting the order which he did Gamble J
clearly concluded that Hough was a vexatious and reckless litigant.
Dealing with the
Rule 47(1) application Davis J remarked of the first
objection application that it had an ‘
astoundingly
long history’
and in ordering the
furnishing of security for costs, did so on the express basis that
Hough’s litigation was reckless or
vexatious. In so doing Davis
J stated:
‘
True
litigants are entitled to exhaust their remedies but there comes a
point when the Court must say: ‘this is enough, your
conduct is
now bordering on vexatiousness or recklessness. It is designed only
to postpone the inevitable as there is no legal
merit in the
argument’.
[87]
It must be noted too, what I believe is
common cause, namely, that Hough has not paid one cent in respect of
any costs order made
against him in the litigation.
[88]
There are other disturbing features of the
litigation, one of which is Hough’s propensity to persist in
raising arguments
already fully ventilated and disposed of by the
Courts. The main example of this behaviour is Hough’s
persistent attacks
on the Metamin cession which question has long
since been finally resolved. Another such example is Hough’s
repeated attempts
to challenge ENS’ entitlement to represent
its clients and to practice as a firm of attorneys based on the
contention, upheld
by no Court to date, that it lacks a corporate
fidelity fund certificate. Although that point appears, on the face
of it, to have
been disposed of by the SCA’s refusal to grant
him leave to appeal Rosenberg AJ’s decision, Hough persisted
with this
argument in the sequestration proceedings before Dlodlo J.
The latter also rejected the argument which Hough again raised before
the SCA in his petition for leave to appeal which was rejected by
both that Court and its President. Notwithstanding this Hough
raised
this argument before Davis J.
[89]
There are also instances of Hough failing
to disclose to courts, in seeking leave to appeal, that such
arguments as he was advancing
had been unsuccessfully ventilated
before other Courts. In his petition for leave to appeal against the
order of Dlodlo J, Hough
failed to disclose that his fidelity fund
certificate argument had effectively been rejected by the SCA and its
President. In that
petition he held out that before Veldhuizen J the
question of the Metamin cession being obtained by fraud was never
ventilated.
As had been alluded to earlier, this was not the case.
[90]
In his defence Hough denies any vexatious
intent in litigating. This is difficult to square with his threats in
proceedings before
the Master on 16 March 2016 when he failed to
obtain a further postponement of the second meeting of creditors and
stated:
‘
And
to get on with my life and let me just tell you what is number one on
my agenda – Edward Nathan Sonnenbergs; that is my
focus. I will
nail this firm until there is nothing left of them for what they have
done to me and my company, I promise you this
is it.
Mr Presiding officer –
what do you mean?
Mr Hough: this is an
all-out, this is like warfare, you must understand this’
[91]
But
even accepting at face value Hough’s protestations that he does
not litigate with vexatious intent, this takes the matter
no further.
The Courts recognise that proceedings may be vexatious in effect even
though not in intent. See
In
Re Alluvial Creek Limited
1929 CPD 532
at 535. In
Corderoy
v Union Government (Minister of Finance)
[4]
,
Innes CJ, in the context of the Court’s common law power to
interdict vexatious litigants, expressed himself in terms
particularly
apposite to the present matter as follows:
‘
They
were all cases against the Government, all founded on the same cause
of action - the wrongful dismissal - and all substantially
in respect
of the same subject matter. The relief prayed for was not always
couched in the same language; considerable ingenuity
was exercised in
varying the form of prayer; but in substance it was the same.
Moreover the appellant quite frankly and openly
announces his
intention of proceeding on these lines until, as he says, the facts
of the case are dealt with by some competent
court. Now that being
so, however genuine the feeling of injustice under which he smarts,
however real his sense of grievance,
the further prosecution of this
long-continued litigation has become vexatious in a legal sense, and
therefore an order prohibiting
its continuance was justified, and I
do not think we should interfere with it.’
[92]
It is not disputed that estate Searll has
already incurred legal costs exceeding R3mil and Seardel nearly R9mil
in respect of litigation
against Hough. Hough’s counsel placed
some reliance on the fact that he had not instituted any legal
proceedings since November
2015. This excludes of course the
counter-application in the present matter. He also referred to the
fact that although Hough had
previously represented himself, he has
now obtained the services of an attorney and senior counsel. This
affords little comfort.
It is clear from Hough’s answering
affidavit that he intends to proceed with litigation against the
executors, Seardel and
related interests as he sees fit. As he put it
in his answering affidavit: ‘
I
shall also be pursuing my legitimate objectives, in accordance of my
constitutional right ‘to have any disputes that can
be resolved
by the application of law decided in a fair public hearing before a
Court’, selectively and judiciously’.
Hough
decried one of the stated reasons for the executors seeking the
present order, namely, that it carries with it a potential
criminal
sanction but I see nothing untoward or reprehensible in this. Hough
has already demonstrated his disdain for an order
of this Court
requiring him to seek permission before launching any proceedings out
of this Court.
[93]
Hough also sought to rely on the fact that
all civil proceedings launched at his instance having been withdrawn
by the trustees
and that there was no evidence that he contemplated
or threatened any future proceedings against the executors or related
parties
or interests. But this is disingenuous on the part of Hough
when regard is had to inter alia the threat he made in the
proceedings
before the Master, his stated commitment to pursuing his
‘
legitimate objectives’
before the Court and the history and sheer volume of the litigation
instituted by him arising out of or related to the Metamin
cession.
[94]
What must also be taken into account is the
ingenuity of Hough’s legal mind. Even though five civil suits
at his instance
have now been withdrawn, having regard to Hough’s
rights in terms of
sec 23
of the
Insolvency Act to
sue in his own
name and for his own benefit in respect of certain causes of action
it is quite possible, if not probable, that
he will nonetheless renew
his campaign to assert his claim arising out of the Metamin cession.
It must also be borne in mind that
Hough has a reversionary interest
even in those of his estate’s assets as vest in the trustee
because of a possibility that
a surplus of realised assets over
liabilities may accrue to him. The fact that Hough’s estate has
been sequestrated therefore
does not necessarily disentitle him from
instituting further legal proceedings. Should Hough obtain judicial
permission to do so
this would be entirely proper but at the least he
must first make out a case for instituting such proceedings to the
Court in question
or a judge of the High Court before being allowed
to do so without let or hindrance.
[95]
Section
2(1)(b)
of the VPA has undergone and survived judicial scrutiny. In
Beinash
and Another v Ernst & Young and Others
[5]
the Constitutional Court held that the Act achieves its purpose of
putting a stop to persistent and ungrounded institution of legal
proceedings by allowing a Court to screen (as opposed to absolutely
barring) a person who has ‘
persistently
and without any reasonable ground instituted legal proceedings in any
Court or inferior court’
.
It held further that this screening mechanism was necessary to
protect the interests of the victims of the vexatious litigant
who
have repeatedly been subjected to the costs, harassment and
embarrassment of unmeritorious litigation as well as the public
interest that the functioning of the Courts and the administration of
justice should proceed unimpeded by the clog of groundless
proceedings. The Court, per Mokgoro J, noted that the right of access
to courts by any person so affected is regulated and not
prohibited.
It stated:
‘
The
more remote the proposed litigation is from the causes of action
giving rise to the order or the persons or institution in whose
favour it was granted, the easier it will be to prove bona fides
and the less chance there is of the public interest being
harmed. The
closer the proposed litigation is to the abovementioned causes of
action or persons, the more difficult it will be
to prove bona fides,
and rightly so, because the greater will be the possibility that the
public interest may be harmed.’
[6]
[96]
The Court also considered, favourably, the
contention that the power to prohibit all proceedings against all
persons in all courts
necessarily encompasses a power to make a more
limited order prohibiting some proceedings against some parties in
some courts.
I mention this point because I put it to Mr Manca, who
appeared on behalf of the executors, that the interest which his
clients
sought to protect could be achieved by a more narrowly
tailored order than the all-encompassing one which sec 2(1(b)
articulates.
The Constitutional Court said in this regard:
‘
There
is much to be said for this contention. In the view that I take of
the matter, however, it is unnecessary to decide this issue,
which
can properly be left open for consideration by the High Court should
the occasion to do so ever arise. I am prepared to assume
in favour
of the applicants that the Act has the meaning for which they contend
that the only order that can be made under the
Act is one prohibiting
all actions against all persons in all courts without leave of the
court.’
[7]
[97]
Since this issue was not specifically dealt
with by counsel in their pleadings, I invited both parties’
representatives to
furnish me with a draft order and to exchange
these orders within a stipulated time after the hearing. Hough’s
counsel made
no submissions but the order received from the
executors’ attorneys seeks an order in terms of sec 2(1)(b)
limited to the
executors, any corporate body or trust in which estate
Searll has an interest, the heirs of estate Searll, various creditors
of
estate Searll, Seardel and subsidiaries or associates thereof of
estate Searll and its subsidiary or associated company, Edward
Nathan
Sonnenberg Incorporated and any of its directors, two senior counsel
at the bar who previously acted for Seardel and were
cited by Hough
in proceedings, the trustees of Hough’s insolvent estate, the
liquidators of Metamin, La Lucia and the Master
of the High Court.
Regard being had to the outlines of the litigation instituted by
Hough since 2011 and the parties which he has
cited, I have no
difficulties with the form of this order.
[98]
In the result the applicants have satisfied
me that the requirements for an order in terms of sec 2(1)(b) of the
Vexatious Proceedings
Act against Hough have been met.
SHOULD HOUGH BE
BARRED FROM LODGING FURTHER OBJECTIONS TO THE LIQUIDATION AND
DISTRIBUTION ACCOUNTS IN ESTATE SEARLL?
[99]
This relief was sought in prayers 2, 3 and
4 of the applicants’ notice of motion wherein a declaration was
sought that Hough
was not a person contemplated in sec 35(7) of Act
66 of 1965, that he had no locus standi to lodge an objection in
respect of any
liquidation and distribution account and that his
objection was not a valid objection as well as an order interdicting
him from
lodging any further objections.
[100]
Hough’s claim against the estate, as
set out in his letter of demand to the executors dated 11 April 2011,
was a not a liquidated
claim and thus had to be proved against the
estate. The claim was rejected by the executors on 11 May 2011 and
therefore, at the
latest, prescription commenced running from that
date. It is common cause that neither Hough, Metamin nor La Lucia
ever commenced
action against the estate in respect of this claim
despite being able to formulate it with precision by 11 April 2011 by
which
stage they were in possession of the pleadings in the action in
which Seardel sued the late Aaron Searll for the theft of the
corporate
opportunity.
[101]
The procedure envisaged in sec 32 of the
Act dealing with disputed claims was not followed and the proceedings
whereby Hough sought
to review the Master’s decision not to
sustain his objection have now been withdrawn at the instance of his
trustees. In
the circumstances it would appear that Hough’s
claim against the executors arising out of the Metamin cession has
prescribed.
[102]
Section 35(7) of the Act provides that ‘
any
person interested in the estate’
may
lodge an objection to the liquidation and distribution account but
that interest must of course be a legal interest. The
only claim
which Hough has asserted against the estate is that arising out of
the Metamin cession but it has been finally determined
in this Court
and cannot sustain any objection, past or future, against an account
in the estate.
[103]
Apart
from any other consideration, in my view Hough would be barred from
raising the question of the validity of the Metamin cession
in
proceedings relating to estate Searll by the defence of res iudicata
in the form of issue estoppel. Put differently, even though
the
requirements for the defence of res iudicata may not be met these
requirements would be relaxed in the event that Hough were
to rely on
the Metamin cession in any action against the executors
notwithstanding that they were not party to the proceedings
before
Veldhuizen J. See in the regard
Prinsloo
NO and Others v Goldex 15 (Pty) Ltd
[8]
where
the Court stated as follows:
‘
[…]
our courts have come to realise that rigid adherence to the
requirements [of the same cause of action and the same relie])
may
result in defeating the whole purpose of res iudicata. That purpose,
so it has been stated, is to prevent the repetition
of lawsuits
between the same parties, the harassment of a defendant by a
multiplicity of actions and the possibility of conflicting
decisions
by different courts on the same issue […] Issue estoppel
therefore allows a court to dispense with the two requirements
of
same cause of action and same relief, where the same issue has been
finally decided in previous litigation between the same
parties.’
In
Royal
Sechaba Holdings (Pty) Ltd v Coote and Another
[9]
it was said that:
‘
There
is no reason in principle why a court cannot relax the same-person
requirement for the very reasons that the two other requirements
have, over time, been relaxed.’
[104]
In the course of argument it was put to
counsel for the executors that an interdict might be unnecessary
inasmuch as the Master
could determine any further objection to the
current liquidation and distribution account or any future variant
thereon. In response
counsel contended that this would merely set up
the same cycle of litigation as the present case has seen, namely,
the Master stating
that he was unable to resolve complex issues of
fact and directing or indicating that the dispute would have to be
resolved by
a court. In such an instance, it was pointed out, the
winding up of the estate would be delayed by yet further litigation
which,
if founded upon the Metamin cession, would be doomed to
failure by reason of the fact that this issue has been conclusively
resolved.
[105]
The submission on behalf of Hough that it
would be unjust to interdict him from asserting what might turn out
to be a valid claim
against estate Searll is not well made. Counsel
for Hough was unable to persuade me that any objection based on the
Metamin cession
was not doomed to failure by reason of that issue,
including any aspect informed by an allegation of fraud on the part
of the cessionary
or its representatives, having being finally
disposed of by the Courts. Significantly, Hough does not assert that
he has no intention
of lodging further objections or that the
executors are wrong to fear further objections. An interdict will not
be unfair to Hough
since the only basis upon which he can lodge any
objection is a claim based on the Metamin cession which has been
found to have
no merit. On the other hand without an interdict the
executors are faced with the likelihood of further unmeritorious
objections
with the consequent expense and delay in the finalisation
of the estate, already long delayed. In the circumstances the
requirements
for a final interdict, namely, a clear right, an injury
reasonably apprehended and the absence of similar protection by any
other
ordinary remedy have been proven.
[106]
For these reasons I am persuaded that the
applicants are entitled to an interdict against further objections on
the part of Hough.
[107]
In the result, I am satisfied that the
executors have made out a case for the relief which they seek in
their application and, further,
that the respondents’
counter-application is without merit.
COSTS
[108]
The applicants sought costs on the attorney
and client scale. Taking into account the history of the litigation
which has led to
the present matter and the reasons why the executors
were eventually driven to bring this application, I consider that
such an
order would be appropriate.
[109]
In the circumstances the following order is
made:
1.
It is declared that first respondent is not
a person interested in Estate Late Aaron Searll (“estate
Searll”) as contemplated
in terms of
section 35(7)
of the
Administration of Estates Act No. 66 of 1965
and that the first
respondent does not have locus standi to lodge an objection with the
fourth respondent in respect of any liquidation
and distribution
account (whether a first, amended or supplementary account) in
respect of estate Searll.
2.
It is declared that first respondent’s
objection to the first and final liquidation and distribution account
in respect of
estate Searll dated 14 March 2014 and addressed to
fourth respondent is not a valid objection as contemplated in
section
35(7)
of the
Administration of Estates Act No. 66 of 1965
.
3.
First respondent is interdicted from
lodging any further objections to any liquidation and distribution
account (whether a first,
amended or supplementary account) in
respect of estate Searll.
4.
The applicants are authorised to pay the
creditors and distribute the estate among the heirs in accordance
with the first and final
liquidation and distribution account in
terms of
section 35(12)
of the Administration of Estates Act No. 66
of 1965.
5.
It is directed that, in terms of section
2(1)(b) of the Vexatious Proceedings Act No. 3 of 1956, no legal
proceedings shall be instituted
by first respondent in any provincial
or local division of the High Court of South Africa or an inferior
court without the leave
of that Court or any judge of the High Court
against any of the following persons ("the listed persons"):
5.1.
Lauren Searll, Eliot Osrin, Jeffrey Flax,
David Friedland and Quinton Honey, in their personal capacities and
in their capacities
as joint executors of estate Searll;
5.2.
Any company, close corporation and trust in
which estate Searll has an interest, including but not limited to
Reeds House CC;
5.3.
The heirs of estate Searll, including but
not limited to Lauren Searll, Juliette Sonia Searll, Sophia Searll
and the Julsop Inheritance
Trust (IT5951/2007);
5.4.
The trustees of the Soliette Family Trust (IT16/2013);
5.5.
The creditors of estate Searll, including
but not limited to Balu Nivison, Cathy Abraham, Graham Searll,
Jennifer Schneider, A Searll
Descendants Trust, Searll Tannery Trust,
the Tannery Park Development Joint Venture, Grawood Investments (Pty)
Ltd (registration
number 1971/003412/07), Balu Inheritance Trust,
Cathy Inheritance Trust, Graham Inheritance Trust and Epprop
Investment Trust;
5.6.
Seardel Investment Corporation Ltd, Seardel
Group Trading (Pty) Ltd and any subsidiary, fellow-subsidiary or
associate company of
Seardel Investment Corporation Ltd and/or
Seardel Group Trading (Pty) Ltd;
5.7.
Edward Nathan Sonnenbergs Inc. and any of
its directors, including but not limited to John Zieff and Kaanit
Abarder, and any of
its employees;
5.8.
Peter Hodes SC;
5.9.
Paul Farlam SC;
5.10.
Eugene Nel and Gordon Nokhanda, in their
capacities as the trustees of the first respondent's insolvent
estate;
5.11.
The liquidators of Metamin Property Group
Ltd (in liquidation), company registration number 1951/003010/06;
5.12.
The liquidators of La Lucia Property
Investments Ltd (in liquidation), company registration number
1968/004380/06; and
5.13.
The Master of the High Court.
6.
The first respondent's counter-application
is dismissed.
7.
The first respondent is directed to pay the
costs of this application and the counter-application, including the
costs of two counsel,
on the attorney and client scale.
____________________
BOZALEK
J
APPEARANCES
For the Applicant: Mr BJ
Manca (SC)
Ms
K Reynolds
Instructed
by: Edward Nathan Sonnenberg Inc
For the 1
st
Respondent: Mr J van der Berg
Instructed
by:
Powell
Kelly Veldman Attorneys
[1]
1980 (3) SA 1142
(TPD) at 1146F.
[2]
Ibid
at 1146E.
[3]
1991 (4) SA 825 (C).
[4]
1918 A.D. 512
at 519.
[5]
1999
(2) SA 116
(CC) para 15.
[6]
Beinash
n 5
para 19.
[7]
Beinash
n 5
para 9.
[8]
2014 (5) SA 297
(SCA) para 23.
[9]
2014 (5) SA 562
(SCA) para 19.