Brief Summary

Curatorship — Leave to proceed with action — Curator opposing application for leave to proceed with rental claim action instituted by Born Free Investments 247 (Pty) Ltd without prior court approval — Curator contending that action should be consolidated with loan claim action against Rockland Group Holdings (Pty) Ltd — Court determining whether Born Free's ability to proceed should be restricted by consolidation or stay pending loan claim adjudication — Curator conceding that rental claim action may proceed after determination of loan claim — Court emphasizing legislative intent behind curatorship provisions to protect invested funds and ensure efficacy of curatorship.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings comprised two interconnected applications arising from the curatorship of a financial services business. The first was an application by Born Free Investments 247 (Pty) Ltd for leave to proceed with a pending action against a company under curatorship, in circumstances where an extant curatorship order (and a subsequent Supreme Court of Appeal order) operated to stay the prosecution of that action unless leave of court was obtained. The second was an application by the curator, Pierre du Plessis Kriel N.O., for the consolidation of two pending actions for trial purposes.

The principal parties were Born Free Investments 247 (Pty) Ltd (as applicant for leave and plaintiff in the stayed rental action) and Pierre du Plessis Kriel N.O. (as respondent to the leave application, in his capacity as curator of the business of Rockland Asset Management and Consulting (Pty) Ltd (“RAM”), and as applicant for consolidation). Rockland Group Holdings (Pty) Ltd (“RGH”) was involved as the defendant in the separate loan repayment action brought by RAM (through the curator), which the curator sought to have consolidated with Born Free’s action.

Procedurally, RAM had been placed under curatorship by orders granted in 2012 under the Financial Institutions (Protection of Funds) Act 28 of 2001 (“FI Act”), which orders included a direction purporting to stay claims and proceedings against the relevant entities during the curatorship without leave of court. Born Free nevertheless instituted its rental claim action against RAM without first obtaining leave. That misstep gave rise to a special plea and subsequent appellate litigation, culminating in the Supreme Court of Appeal ordering that the rental claim action be stayed pending either (i) an order granting leave to proceed, or (ii) termination of the curatorship. In the present application, Born Free sought that leave; the curator opposed it, and advanced alternative procedural mechanisms (consolidation or a further stay) aimed at controlling the timing and manner in which Born Free’s claim could proceed.

The general subject-matter of the dispute concerned the administration and protection of investor-related funds under a statutory curatorship regime, and the extent to which a third party’s ability to litigate against an institution under curatorship may be limited or deferred in the interests of the curatorship’s statutory purposes. A secondary procedural dispute concerned whether, as a matter of case management and convenience under the Uniform Rules, two unrelated actions should be tried together.

2. Material Facts

RAM was under curatorship pursuant to court orders made in 2012 in terms of s 5(2) and later s 5(4) of the FI Act. The curatorship order contained a direction (paragraph 6.2) providing that, while the curatorship existed, claims and proceedings against any of the entities were stayed and not to be instituted or proceeded with without leave of court. The court in the present matter treated this direction as operating as a stay which had also been confirmed in effect by the Supreme Court of Appeal’s order in the earlier litigation concerning Born Free’s rental action.

Two pending actions were central to the applications. First, in case number 5417/2014, the curator (on RAM’s behalf) sued RGH for repayment of R31 282 386.46, alleged to be due on a loan (the “loan claim action”). RGH’s defence was that the loan was not repayable on demand, but only out of dividends to which RGH would become entitled.

Second, in case number 9609/2014, Born Free sued RAM for R2 896 165.68, alleged to be due as rental for premises from which RAM had conducted its business (the “rental claim action”). Born Free instituted this rental action without first obtaining leave under the curatorship order. The Supreme Court of Appeal ultimately ordered that the rental action be stayed pending leave or the termination of the curatorship. The present proceedings (case number 12862/2019) were Born Free’s attempt to obtain such leave.

The corporate relationships formed part of the contextual matrix relevant to the curator’s opposition and to the court’s assessment of whether the opposition to Born Free’s claim was merely tactical. RAM’s former director and CEO was Mr Wentzel Oaker. RGH (of which Oaker was the sole director) was the sole shareholder in RAM, and also the sole shareholder in other entities within the structure, including Born Free. The curator’s evidence characterised Oaker as having had effective control over the structure in which the relevant entities operated.

A further undisputed and materially relied-upon fact was the curator’s evidence concerning RAM’s financial position and the interests the curatorship sought to protect. The court accepted, as uncontested for the purposes of the application, that RAM’s only asset was its loan claim against RGH. In addition, the curator placed before the court evidence that, in other litigation (not the subject of these applications) RAM had been found jointly and severally liable in provisionally determined amounts totalling many tens of millions of rand to investor-linked entities (TDI and PIF), subject only to outstanding quantification issues. The court treated those provisional findings as sufficient to support an assessment that RAM faced liabilities that far exceeded the value of its only identified asset (the loan claim).

Born Free relied on RAM’s annual financial statements for certain years, which recorded a rental-related liability to Born Free, as support for the contention that RAM’s defence to the rental claim was not bona fide. The court noted that the statements’ treatment of the rental claim was “rather peculiar”, and that the notes to the financials referred to the contested litigation and suggested uncertainty as to the claim’s “fair value”. The court considered that, against the broader context of alleged self-enrichment and control relationships, the enforceability and bona fides of the rental claim could not be assumed, and the court declined to treat the curator’s opposition as bogus.

The court expressly did not attempt to predict the outcome of the rental action on its merits. Instead, it identified as material the curatorship’s purpose, RAM’s asset position, and the potential adverse effects on the curatorship (and investor interests) if additional litigation costs were incurred or if litigation steps could jeopardise the curator’s control over RAM’s sole asset (the loan claim).

3. Legal Issues

The central legal questions were, first, whether it was convenient within the meaning of Uniform Rule 11 to consolidate the loan claim action and the rental claim action for purposes of trial, and whether any countervailing prejudice precluded consolidation. This required the court to make a discretionary procedural evaluation guided by established criteria relevant to consolidation.

Second, the principal substantive-procedural issue was whether Born Free had shown that the court should grant leave to proceed with the stayed rental claim action notwithstanding the curatorship order’s suspension of proceedings as contemplated by s 5(5)(a) of the FI Act. This issue involved the application of statutory purpose to the facts, and a value-laden assessment of proportionality: the court had to weigh the statutory objectives of curatorship (notably, protecting invested funds and enabling an effective curatorship) against the limitation on Born Free’s ability to have its dispute adjudicated without delay, in light of s 34 of the Constitution.

A further legal question concerned the incidence of the onus (burden of persuasion) in an application for leave to proceed where a stay already exists by virtue of a statutory-curatorship direction and has been reinforced by an appellate order. The court had to determine whether Born Free or the curator bore the burden to justify a departure from the existing stayed position.

4. Court’s Reasoning

The court approached the matter in two stages. It first considered the curator’s application to consolidate the two actions because the curator’s stance was that he would not oppose Born Free’s leave application if consolidation were ordered. The court nevertheless treated the questions as discrete, and analysed consolidation on its own merits.

Consolidation under Uniform Rule 11

The court restated that consolidation is governed by Rule 11, and that the test is convenience in the practical conduct of proceedings and the court’s business, with the general object that the actions be determined in one trial culminating in a single judgment. The court emphasised that “convenience” is not the convenience of one party but relates to forensic and procedural management considerations.

In applying these principles, the court identified typical indicators of convenience, including commonality of parties and issues, costs-saving, efficient use of court resources, and avoiding the risk of inconsistent outcomes on the same issue. The court also reaffirmed that even if consolidation appears convenient, it should be refused where it would materially prejudice a litigant, and that the decision involves a discretionary exercise rooted in the court’s inherent power to regulate its process (with reference to s 173 of the Constitution).

On the facts, the court held that there was no commonality of parties or issues between the two actions. The mere fact that the curator featured in both matters, in different capacities and with different opposing parties, was not treated as meaningful commonality. The court considered that the only identified overlaps were that the legal representatives were the same and that Oaker might be a key witness in both, neither of which was sufficient to justify consolidation.

The court also rejected the argument that consolidation would save costs in any balanced, litigation-wide sense. It considered that any potential savings were, at best, unclear and would likely accrue only to the curator, not to Born Free (as plaintiff in the rental action) or to RGH (as defendant in the loan action). It further held that the curator’s reliance on convenience in finalising the curatorship was not the kind of forensic convenience Rule 11 addresses, because Rule 11 is directed at the efficient conduct and management of court proceedings, not at broader administrative benefits to the curatorship process.

On these grounds, the court concluded that a case for consolidation was not established and refused the consolidation application.

Leave to proceed notwithstanding the curatorship stay (s 5(5)(a) FI Act)

Turning to Born Free’s leave application, the court distinguished authorities relied upon by Born Free which concerned other forms of “leave” (such as leave for edictal citation or for litigation in forma pauperis). The court framed the present inquiry differently: Born Free had already instituted proceedings; the question was whether it should be permitted at this stage to proceed to trial given the extant curatorship stay and the Supreme Court of Appeal’s order confirming the stayed position pending leave or termination.

The court reasoned that a leave decision under a s 5(5)(a)-type direction must be determined with due regard to the purpose of the restriction within the FI Act’s legislative scheme, namely to craft orders that lend efficacy and efficiency to curatorship and thereby protect invested funds and trust property. The court relied on the understanding (derived from the jurisprudence referenced) that curatorship often arises in crises where “drastic steps” may be necessary, even if they impinge on third-party rights, and that the FI Act expressly contemplates far-reaching protective measures, including the suspension of proceedings.

A significant step in the reasoning was the court’s rejection of Born Free’s contention that the stay is primarily aimed at sparing curators from vexatious litigation or merely giving time to investigate claims. The court pointed to the statutory reference to suspending foreclosure proceedings as indicating that the suspension may apply even where indebtedness is admitted or uncontested, underscoring that the provision’s protective reach is broader and not confined to disputed or dubious claims.

The court accepted that the stay mechanism limits s 34 constitutional rights, and stated that a court should weigh competing interests with proportionality in mind. However, there was no direct constitutional challenge to the statute, and the court proceeded on the basis that the statutory scheme permits such limitation where justified by the curatorship’s purpose.

On the incidence of the onus, the court held that the burden of persuasion rested on Born Free to show that leave should be granted. It rejected the characterisation of the curator as an applicant seeking a stay, because the stay already existed by virtue of the curatorship order (as confirmed by the Supreme Court of Appeal). The court considered that the curator’s contingent counter-application did not change this underlying position.

In applying these principles to the evidence, the court accepted as materially significant the curator’s uncontested evidence that RAM’s only asset was the loan claim against RGH, and that the investors’ prospects of recovery depended on RAM successfully pursuing and realising that claim. The court held that conserving resources to pursue that loan litigation appeared to be in the interests of an effective curatorship and the investors the curator was enjoined to protect. It accepted the curator’s view that there was little point in incurring the costs of a rental trial if RAM failed in the loan claim, because RAM would have no assets.

The court addressed Born Free’s reliance on financial statements suggesting that RAM had recorded a rental liability. It noted the uncertainty reflected in the notes to the statements and considered that the broader context (including the controlling relationships and earlier credibility findings against Oaker in separate litigation) supported the possibility that the rental claim might be contested in good faith. The court held it was not in a position to predict the outcome of the rental action and was not persuaded that opposition to it was bogus.

Crucially, even on the assumption that RAM’s defence might be weak, the court held that this would not be determinative because the statutory stay can apply even to enforcement proceedings on acknowledged indebtedness. The primary consideration remained whether lifting the stay now would be inimical to the interests of the curatorship and thus to those of investors.

The court further reasoned that Born Free had not shown what benefit it would derive from obtaining judgment before the loan claim action was resolved, given RAM’s financial state. The court identified one conceivable benefit—enabling Born Free to attach and sell in execution RAM’s claim against RGH—and held that such an eventuality would plainly be inimical to the effective conduct of the curatorship. This supported refusal of leave.

Finally, because leave was refused, the court considered it unnecessary to decide the curator’s contingent counter-application for a further stay. It observed, however, that replacing an existing stay with a fresh stay would be conceptually counterintuitive, and indicated that if the counter-application caused additional costs, Born Free should not bear those additional costs as part of the costs awarded to the curator (leaving the matter for taxation).

5. Outcome and Relief

The court refused Born Free’s application for leave to proceed to trial in the rental claim action (case number 9609/2014). The court ordered Born Free to pay the curator’s costs in that application, including the costs of two counsel where engaged. The court confirmed that the further conduct of the rental action remained subject to the existing suspension flowing from the curatorship order and the Supreme Court of Appeal’s order.

The court also refused the curator’s application to consolidate the loan claim action (case number 5417/2014) and the rental claim action (case number 9609/2014) for purposes of trial. The court ordered the curator to pay the costs of the consolidation application, including the costs of two counsel where engaged.

No order was made on the curator’s contingent counter-application for a further stay, subject to the court’s observation that any additional costs occasioned by that counter-application should not be borne by Born Free as part of the curator’s costs award in the leave application.

Cases Cited

Born Free Investments 247 (Pty) Ltd v Kriel NO [2019] ZASCA 21 (26 March 2019).

Ovation Preservation Pension Fund and Others v Executive Officer, Financial Services Board [2008] ZASCA 82; 2009 (1) SA 485 (SCA).

Conze v Masterbond Participation Trust Managers (Pty) Ltd 1996 (3) SA 786 (C).

New Zealand Insurance Co Ltd v Stone 1963 (3) SA 63 (C).

Orion Pacific Traders Inc v Spectrum Shipping Ltd 2006 (2) SA 586 (C).

De Jager v National Employers’ Mutual Insurance Co 1957 (3) SA 91 (T).

Ex parte Hartley 1964 (4) SA 598 (W).

Nel v Silicon Smelters (Edms) Bpk en ’n Ander v Nel 1981 (4) SA 792 (A).

Mpotsha v Road Accident Fund and Another 2000 (4) SA 696 (C).

AJVH Holdings (Pty) Ltd and Others v Steinhoff International Holdings NV and Another; AJVH Holdings (Pty) Ltd and Others v Steinhoff International Holdings NV and Others [2020] ZAWCHC 46 (4 June 2020).

Western Assurance Co v Caldwell’s Trustee 1918 AD 262.

Williamson v Schoon 1997 (3) SA 1053 (T).

Kriel NO v Born Free Investments 247 (Pty) Ltd [2017] ZAWCHC 122 (13 October 2017).

Legislation Cited

Financial Institutions (Protection of Funds) Act 28 of 2001, including s 1 (definition of “trust property”), s 5(2), s 5(4), s 5(5)(a), and s 5(6).

Trust Property Control Act 57 of 1988, s 6(4).

Inspection of Financial Institutions Act 80 of 1998 (repealed), referenced as part of the historical statutory context.

Constitution of the Republic of South Africa, 1996, s 34 and s 173.

Rules of Court Cited

Uniform Rules of Court, Rule 11.

Held

The court held that the proposed consolidation of the loan claim action and the rental claim action did not satisfy the Rule 11 convenience requirement because there was no meaningful commonality of parties or issues, and the claimed efficiency and cost-saving rationale did not bear on forensic convenience in the conduct of the litigation. The consolidation application was therefore refused with costs.

The court further held that Born Free bore the burden to justify the lifting, at this stage, of an already-operative statutory curatorship stay (as reinforced by a Supreme Court of Appeal order). Born Free did not establish that allowing the rental action to proceed to trial now would be consistent with the effective conduct of the curatorship and the protection of investor interests, nor did it demonstrate prejudice sufficient to warrant an exception. The leave application was therefore refused with costs, and the rental action remained stayed.

LEGAL PRINCIPLES

The judgment applied the principle that consolidation under Uniform Rule 11 is a discretionary procedural measure dependent on convenience in the practical conduct and management of proceedings, assessed with reference to factors such as commonality of issues and parties, efficient use of court resources, costs implications across litigants, and the avoidance of inconsistent findings on the same issue. Even where some convenience exists, consolidation should be refused if it would materially prejudice affected litigants, and the inquiry is grounded in the court’s inherent power to regulate its own process.

The judgment also applied the principle that a suspension of proceedings authorised under s 5(5)(a) of the Financial Institutions (Protection of Funds) Act 28 of 2001 must be interpreted and applied in light of the statutory purpose of curatorship, namely to protect invested funds and ensure the effective and efficient administration of an institution in crisis. The power to suspend proceedings is not confined to disputed, vexatious, or meritless claims; it may extend even to enforcement proceedings relating to acknowledged indebtedness, because the legislative scheme contemplates potentially far-reaching measures to secure the curatorship’s objectives.

In deciding whether to grant leave to proceed in the face of such a stay, the court must conduct a context-sensitive assessment that weighs the curatorship’s efficacy and investor protection against the limitation of the claimant’s s 34 constitutional interest in timely access to court, applying proportionality. Where a stay is already in place by virtue of a curatorship order (and has been confirmed in effect by appellate order), the burden of persuasion rests on the party seeking leave to show that departure from the stayed position is justified at the particular stage.

Kriel N.O v Rockland Group Holdings (Pty) Ltd and Another; Born Free Investments 247 (Pty) Ltd v Kriel N.O (5417/2014; 9609/2014; 12862/2019) [2021] ZAWCHC 243 (24 November 2021)