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[2017] ZAWCHC 42
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Swart and Others v Fourie and Others (2488/2017) [2017] ZAWCHC 42 (13 February 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
(Coram:
Holderness, AJ)
[Not
Reportable]
Case
No.: 2488/2017
In
the matter between:
BRAAM
SWART
First
Applicant
PETRUS
JOHANNES VAN DER
WESTHUIZEN
Second
Applicant
JOHANNES
CHRISTIAAN
THIART
Third
Applicant
ARNO
SWART
Fourth
Applicant
JACQUES
BRINK
THERON
Fifth
Applicant
HUGO
VAN
NIEKERK
Sixth
Applicant
MUHAMAD
KHAN
Seventh
Applicant
and
MAGISTRATE
A
FOURIE
First
Respondent
LEANNE
LOMBARD
N.O.
Second
Respondent
MANYANE
KINLON MALEMA
N.O.
Third
Respondent
ABSA
BANK
Fourth
Respondent
PIETER
DEMPSEN
NEETHLING
Fifth
Respondent
JOHANNES
HENDRIK
BOTHA
Sixth
Respondent
PETRUS
HERMANUS
SWART
Seventh
Respondent
THE
MASTER OF THE HIGH
COURT
Eighth
Respondent
In
an application for urgent interim relief
JUDGMENT
DELIVERED ON 13 FEBRUARY 2017
HOLDERNESS
AJ
[1]
This is a matter which came before me on a Friday afternoon in the
urgent motion court seeking interlocutory interdictory relief
concerning an interrogation at a meeting of creditors to be held
before a magistrate in the district of Paarl on the following
Monday
morning.
[2]
I only received the papers at 16h30 on Friday. It was contended by Mr
Ferreira, appearing for the second and third respondents,
that the
filing of the application on an hour’s notice was a deliberate
stratagem to prevent his clients from having an opportunity
to file
opposing papers and prepare for the hearing.
[3]
The urgency, according to the applicants, arose from a
misunderstanding between Mr Ferreira and Mr Woodland, counsel for the
applicants, in terms of which Mr Woodland was under the impression
that of the applicants filed an application to set aside the
subpoenas by 10 February 2017, the meeting of creditors would not
proceed on 13 February 2017.
[4]
According to the applicant’s attorney, when Mr Woodland sought
confirmation earlier on 10 February 2017 from Mr Ferreira
that they
would not proceed if the application were delivered during the course
of the day, Mr Ferreira informed him that he agreed
to the meeting
not proceeding only if the application had been
granted
before
13 February 2017.
[5]
Pandemonium ensued, culminating in the present application being
brought at the last minute. In the brief affidavit filed by
the
second and third respondents’ attorney, he stated that counsel
in fact agreed to the application being filed within seven
days of
the creditors meeting held on 23 January 2017 and postponed to 13
February 2017.
[6]
I indicated that I was not inclined to strike the matter from the
roll on the basis that any urgency relied upon by the applicants
was,
as alleged by the respondents, self-created. Particularly because I
did not know whose version was correct (and as it is interim
relief I
am in any even bound to accept the applicants’ version), and
that as the issues arose out of an agreement between
the respective
parties’ counsel, it could not be resolved without them giving
evidence, which of course is not feasible in
the circumstances.
[7]
I now turn to deal with the interim relief sought. The applicants are
members of a close corporation which is currently under
winding up
and is unable to pay its debts. On 20 December 2016, the
presiding officer issued subpoenas, addressed to the
applicants, in
terms of section 66(1) and (2) of the Close Corporations Act, 1984
(‘the Act’) as read with sections
414(2), 415 and 416 of
the Companies Act, 1973. The subpoenas required the attendance
of the applicants at the meeting of
creditors to be interrogated and
further required the applicants to bring with them a long list of
specified documents.
[8]
The applicants have launched an application to set aside the
subpoenas and to permanently stay the interrogation by Bella Rosa
Investment Holdings (Pty) Ltd or its legal representatives, or former
legal representatives, which has been set down for hearing
on 10
March 2017. The current urgent relief sought before me is for
interim interdicts to stay the operation of the subpoenas
and the
interrogation of the applicants, at the postponed meeting of
creditors on 13 February 2017.
[9]
The statutory provisions, referred to above and in terms of which the
subpoenas were issued have the following relevant features:
1.1
the
applicant as members of the close corporation have a duty to attend
the first and second meetings of the creditors of the corporation
under winding up, unless they have been excused by the Master or the
officer presiding at such meeting;
1.2
a
subpoena may be addressed to only a person who on reasonable grounds
is believed to have been in possession of any property belonging
to
the corporation, indebted to the corporation or in the opinion of the
Master or presiding officer able to give material information
concerning the corporation or its affairs and the only documents that
may be required under the subpoena which contains such information;
1.3
an
interrogation may proceed only in respect of matters concerning the
corporation, its business or affairs or concerning any property
belonging to the corporation – the presiding officer is
required to disallow any question which is irrelevant or which in
the
presiding officer’s opinion would prolong the interrogation
unnecessarily.
[10]
Mr Woodland pointed out the extensive nature of the documents sought
in the subpoenas.
Prima facie
, the documents appear to
me to traverse subject matter far beyond the permitted scope of the
affairs or business of the corporation
or its property, and it
therefore appears that the officer issuing the subpoena seems not to
have applied the statutory provisions
which empower the issuing of
such a subpoena and define the scope of documents which may be
required thereunder.
[11]
In my view there is a
prima facie
case to stay the operation
of the subpoenas as in relation to the attendance of the applicants,
no such subpoena was necessary
as it is their duty to attend such a
meeting without any subpoena and further the documents sought therein
appear to be a “fishing
expedition” far exceeding the
legitimate bounds of the statutory provisions.
[12]
In relation to the interrogation of the applicants, the submission
has been made that there is presently existing civil litigation
between brought by the creditor who is driving the interrogation
against the applicants as sureties for the corporation.
The
fear has been expressed that admissions might be made in the
interrogation which might be used against the applicants in the
civil
litigation.
[13]
As members of a close corporation presently under winding up, the
applicants have a statutory duty to attend any meetings of
the
creditors and be subjected to interrogation concerning all matters
relating to the corporation or its affairs and concerning
any
property belonging to the corporation. The fact that during the
interrogation admissions might be made which might compromise
their
position in civil litigation is not a reason to nullify or suspend
their statutory obligations.
[14]
It is only where the purpose of the interrogation is to further this
extraneous civil litigation and is not in fact directed
at acquiring
information concerning the corporation, its affairs or property
belonging to the corporation, that it becomes an abuse.
[15]
I have now had an opportunity to read the application to set aside
the subpoenas and to permanently stay the interrogations
by the legal
representatives of Bella Rosa specifically, which sets out in some
detail the acrimonious nature of the relationship
between Van Zyl, of
Bella Rosa, and the members of the corporation which has been wound
up.
[16]
Whilst it is not unusual for the same legal representatives to act
for both the petitioning creditor and liquidator, nor for
the
petitioning creditor to fund the winding up, it appears, on the facts
in this case, that an interrogation specifically by the
legal
representative for the creditor / liquidators, may have the result
that the proceedings are conducted in a manner oppressive
to the
members, particularly in light of the pending litigation between the
parties and the detrimental effect of any admissions
elicited as a
result of such conduct and subsequently used against the members in
the related surety action
[17]
The relevant principles regarding applications of this nature were
set out by Thring J in
James
v Magistrate, Wynberg, and others
[1]
,
which
was referred to by Farlam J in
Lane
and Another NNO v Magistrate, Wynberg
[2]
.
It
is apparent from the relevant case law that the Court has the
discretionary power to stay an interrogation of an insolvent
or
a witness at a creditors' meeting. In the exercise of this discretion
it will weigh up the potential prejudice to the person
sought to be
interrogated if the interrogation proceeds, against the potential
prejudice to be suffered by the creditors if the
interrogation is
stayed: see
De
Jager v Booysen NO and Swanepoel NO
[3]
. The
Court has power to prevent interrogation which is oppressive or
vexatious.
[18]
In
De Jager supra
the Court confirmed that an interrogation
which is oppressive or vexatious will always constitute an abuse of
the provisions of
s 65 of the Act.
[19]
During argument, Mr. Ferreira declined to avail himself of the
opportunity to file a more comprehensive opposing affidavit
during
the weekend before I prepared these reasons, and when I enquired from
him what prejudice the respondents would suffer if
the interrogation
was stayed pending the main review application, he pointed out that
it was in the interests of the creditors
that the liquidation not be
delayed and that the costs of the meeting on Monday would be
substantial as he was on brief and other
witnesses were due to appear
to be examined.
[20]
After further questioning I established that witnesses other that the
applicant had been subpoenaed to appear on 13 February
2017, and that
the day would therefore not be wasted.
[21]
In paragraph 2.1 of the notice of motion, the applicants seek an
order staying the section 414 notices against themselves and
against
the fourth and fifth respondents. The fourth and fifth respondents
were not given notice of this application, and as far
as I can tell,
have not indicated that they require a stay of the notices. Mr.
Woodland was not on record for the fourth and fifth
respondents, and
did not object to the interrogation of other witnesses proceeding
today. I am, however, satisfied that the documents
listed in the
subpoenas served upon the fourth and fifth respondents appear to be
impermissibly broad, and that the subpoenas to
produce such documents
should accordingly be stayed until the outcome of the application to
review and set aside such subpoenas.
[22]
Considering the unduly broad scope of the documents listed in the
subpoenas served upon the applicants, the history of the
litigation
between the parties, and the pending litigation in the surety action,
I am satisfied that the applicants have made out
a
prima facie
case for the interim relief sought, and that the other
requirements for an interim interdict have been met.
[23]
I indicated to counsel, on Friday afternoon, that I would receive any
further submissions over the weekend by email. I waited
until Sunday
evening to prepare these reasons. At 07h45 this morning, I received a
note from Mr. Ferreira. Reliance is made on
the decision in
Receiver
of Revenue Port Elizabeth v Jeeva and Others
[4]
,
where
the Court rejected the general proposition that a creditor may object
to an examination on the ground of the liquidator’s
perceived
bias.
[24]
It is well established that insolvency interrogations are open to
abuse, particularly in circumstances such as those in the
present
matter. I have briefly considered the
Jeeva
decision and I am
of the view that the facts in that case are distinguishable and do
not preclude me from granting interim relief
in the present
application. In the present matter, the decision of the Magistrate to
issue subpoenas which are unduly broad is
subject to review and to
being set aside, and the only prejudice to the second and third
respondents is a delay of less than a
month, and costs if the meeting
is cut short today, which they could well recover in due course.
Weighed against the potential
prejudice to the applicants if the
interrogations proceed, I am satisfied that the balance of prejudice
favours the granting of
the interim relief sought.
[25]
In the result I order as follows:
1. The
applicants’ non-compliance with the rules and practices
relating to service and time periods is condoned;
2. Pending the
final determination of the relief sought in the main application,
under case number 2488/2017, to review and set
aside the subpoenas:
2.1
the notices in terms of section 414 of the Companies Act, 1973,
attached to the founding papers in this application and requiring
the
applicants to appear before the first respondent for the purposes of
interrogation with respect to Silver Falcon Trading 84
CC (in
liquidation), and the fourth and fifth respondents, requiring them to
produce the documentation listed in the subpoenas,
be stayed; and
2.2
the interrogation of the applicants by Bella Rosa Investment Holdings
(Pty) Ltd or its legal representatives, or former legal
representatives, be stayed.
3. All issues
of costs shall stand over for determination at the hearing of the
application for review launched by the applicants
on 10 February 2017
and set down for hearing on 10 March 2017.
________________
HOLDERNESS, AJ
ACTING JUDGE OF THE HIGH COURT
APPEARANCES
For
the Applicant(s):
Adv G Woodland SC
For
the Respondent(s):
Adv A Ferreira
Date
of Hearing:
10 February 2017
Judgment
delivered on:
13 February 2017
[1]
1995
(1) SA 1 (C)
[2]
1997
(2) SA 869
(C) a part of the judgment not affected by the subsequent
decision of the Appellate Division
[3]
1963
(4) SA 760 (W)
at
764G--765A
[4]
[1996] ZASCA 5
;
1996
(2) SA 573