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[2011] ZAGPJHC 125
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Pellow NO and Others v Master of the High Court and Others (2010/22522) [2011] ZAGPJHC 125; 2012 (2) SA 491 (GSJ) (19 September 2011)
Links to summary
REPORTABLE
SOUTH
GAUTENG HIGH COURT, JOHANNESBURG
CASE
NO: 2010/22522
DATE:19/09/2011
In
the matter between:
PELLOW
N.O. ALLAN
DAVID
........................................................
1st
Applicant
KOKA
N.O. JERRY
SEKETE
.......................................................
2nd
Applicant
INVESTEC
BANK
LTD
..................................................................
3rd Applicant
and
THE
MASTER OF THE HIGH COURT
......................................
1st
Respondent
GENERAL
BELTINGS (PTY) LIMITED
....................................
2nd
Respondent
HARRY
KAPLAN
N.O.
..............................................................
3rd
Respondent
LEBOGANG
MICHAEL MOLOTO N.O.
.....................................
4th
Respondent
GAVIN
CECIL GAINSFORD N.O.
............................................
5th Respondent
JUDGMENT-
LEAVE TO EXECUTE
SPILG,
J:
THE
APPLICATION
The
three applicants, being respectively the two liquidators of African
Heritage Investments (Pty) Ltd (
AHI
)
whom the Master (in the person of Assistant Master Adv N
Netshitahame) had removed from office and AHI’s major creditor
(Investec), seek an order under Uniform Rule 49(11) for leave to
execute on the order I made on 18August 2011 reviewing and setting
aside that decision. I had also ordered the reinstatement of the
liquidators who together with the three liquidators whom the
Master
has subsequently appointed are to continue as liquidators of AHI. It
should be pointed out that in the main judgment I
mentioned that
Investec had withdrawn as a party. This was incorrect, only the
attorneys had withdrawn. Nothing however turns
n this.
It
bears repeating that neither the Master nor the subsequently
appointed liquidators opposed the review application, let alone
that
part of the order seeking reinstatement. Similarly it bears
mentioning that the effect of the court order made on 18 August
setting aside the Master’s decision to remove the original
liquidators is to place the control and administration of the
affairs of AHI in the hands of five liquidators. The decision
accordingly is one regarding status as it determines the
locus
standi
of the liquidators and their
authority to act. The effect of the application for leave to appeal
which was brought on 30 August
2011is to restore the
status
quo ante
. Accordingly any decision
regarding the advisability or otherwise of allowing execution
pending any leave to appeal or appeal
must take into account
problematic questions that may arise if the three liquidators wish
to take decisions without the concurrence
of the two who have been
reinstated before the appeal is finalised. By this I contemplate the
exhaustion of all appeal procedures
which may take a considerable
time with the potential of adversely affecting the expeditious
finalisation of the liquidation
process and the ability to recover
assets some of which have allegedly been demonstrated to have been
dissipated into the hands
of third parties.
The
nature of the matter and the patent lack of merit in the defences
raised made it desirable to give a decision as soon as possible
even
though it was not possible to provide reasons at the same time due
to the uninterrupted allocation of cases at the time.
It was
necessary to take care in formulating certain aspects of the
judgment, not because of the case before me - which I considered
to
be clear cut, but rather in order to have sufficient opportunity to
consider the broader consequences of the way I intended
formulating
my reasons and whether they ought to be more narrowly stated. In the
result it was only when the application for
leave to execute was
launched that the court became aware that General Beltings had
brought an application for leave to appeal
on 30 August 2011, which
it had not previously directed be allocated a date for hearing, let
alone advise that it intended appealing
and therefore desired that
reasons be provided urgently.
The
application for leave to appeal was set down for hearing on 9
September 2011. Although not requested, during the hearing I
decided
to adjourn for one week until 16 September 2011 so that I could
deliver reasons for judgment in the review application
on 13
September 2011. This course was adopted so that General Beltings’
counsel had an opportunity to consider them before
the hearing,
since success on appeal is a factor that must be taken into account
in an application for leave to execute pending
an appeal.
The
reasons for setting aside the Master’s decision were delivered
in open court on 13 September 2011.They were noted by
another
counsel appointed by General Beltings. The typed version was made
available later that day. On a re-reading certain
grammatical errors
and an error in what had not been transposed onto the typed version
were revealed. These were corrected on
the revised version of 14
September 2011 which would have been received by both parties no
later than the following morning.
The revision did not affect the
substance of the reasons for finding against General Beltings and
setting aside the Master’s
decision to remove the original
liquidators.
While
I had understood that counsel for General Beltings would amend its
application for leave to appeal if so desired and argue
its
application first at the resumed hearing on 16 September , its
counsel indicated that General Beltings had instructed that
it
wished to consider whether to amend its grounds of appeal over the
15 day period allowed by the Rules. No application was
made to
postpone the hearing of the application for leave to execute and I
accordingly only heard that application on 16 September.
APPLICATION
TO REINSTATE LIQUIDATORS PENDING APPEAL
The
leading authority on the considerations that a court ought to take
into account when a request is made for leave to execute
pending an
appeal remains
South Cape Corporation
(Pty) Ltd v Engineering Management Services (Pty) Ltd
1977
(3) SA 534
(AD) at 545D-546A. Corbett JA (at the time) speaking
on behalf of the court held that;
The
court exercises a discretion based on what appears to be “
most
consistent with real and substantial justice “
having regard to what is
“just and
equitable in all the circumstances”
;
In
giving effect to this, the court “...
would
normally have regard,
inter alia,
to
the following factors:
the
potentiality of irreparable harm or prejudice being sustained by
the appellant on appeal ... if leave to execute were
to be
granted;
the
potentiality of irreparable harm or prejudice being sustained by
the respondent on appeal ... if leave to execute were
to be
refused;
the
prospects of success on appeal, more particularly the question as
to whether the appeal is frivolous or vexatious or
has been noted
not with the bona fide intention of seeking to reverse the
judgment but for some indirect purpose, eg.,
to gain time or
harass the other part; and
where
there is the potentiality of irreparable harm or prejudice to
both appellant and respondent, the balance of hardship
or
convenience, as the case may be.”
(emphasis
added)
South
Cape
was concerned with an application for
leave to execute pending the appeal of a money judgment. (at 542D).
The case before me has
a broader dimension. It has repercussions
with regard to the effectiveness of the liquidation process, the
expedition with which
further investigations or existing proceedings
might be pursued, the risk of the process becoming moribund while
General Beltings
pursues its rights of appeal and any other factor
that has the potential of irreparably harming or prejudicing the
orderly winding
up of the company in liquidation if the appellant is
successful as opposed to if it is unsuccessful with its appeal. It
is clear
from
South Cape
that the considerations mentioned in the case do not constitute a
closed list.
POTENTIAL
FOR IRREPERABLE HARM OR PREJUDICE AND BALANCE OF HARDSHIP OR
CONVENIENCE
General
Beltings claims that it will be irreparably prejudiced if the
original liquidators are reinstated with the three current
liquidators. The basis advanced is they will look after the
interests of Investec to the prejudice of General Beltings by not
enquiring into the validity of Investec’s claim and by not
having done their job properly in failing to reduce any alleged
claim by General Beltings against AHI by the recovery of some R27.3
million in the liquidation of Cade Transport (Pty) Ltd (
“Cade”)
where Pellow is one of the joint liquidators. Neither ground is
founded on fact but is based on submissions. This is adequately
demonstrated by counsel for AHI confirming that there is nothing in
either the main application or in the present interlocutory
proceedings suggesting that Investec’s claim is challenged.
Indeed while the applicants were removed as liquidators the
attempt
to call executives of Investec and senior members of Edward Nathan
Sonnenberg to an enquiry were not pursued. On the
contrary the
Master subsequently closed the enquiry.
Similarly
there is no factual support provided by General Beltings in regard
to the allegations of not accounting for the R27.3
million recovery
in Cade which is reflected in the Liquidation and Distribution
account of Cade drawn in June 2010. It will be
recalled that Pellow
was removed as a liquidator in AHI on 20 September 2010 and there is
no suggestion that he either had concealed
the recovery or otherwise
would not be accounting for it when AHI’s Liquidation and
Distribution account is drawn.
General
Beltings also submit that the three liquidators who replaced the
applicants do not provide an adequate numerical safeguard
in
relation to any action that the two applicants may take in the
interests of Investec should my order be implemented now.
The
argument is that the three current liquidators were also supported
by Investec and cannot be relied upon. This argument is
self-defeating. If the current three liquidators are said to
support Investec then it is difficult to appreciate what irreparable
harm will be occasioned if the applicants are reinstated now and the
appeal ultimately succeeds.
There
is no discernible prejudice to General Beltings
qua
creditor if its appeal is successful and
in the interim the applicants are reinstated as liquidators. On the
contrary their conduct
demonstrates that there can be no downside
for General Beltings. Every successful unearthing of AHI assets
increases General
Beltings dividend while the cost of any fruitless
enquiry is born exclusively by the major creditor. And ultimately
the remaining
liquidators are able to regularise anything done
during the tenure of all five liquidators. Since there is no
discernable prejudice
to General Beltings the second leg of this
part of the
South Cape
enquiry,
namely that of balance of hardship or convenience, does not arise.
General
Beltings however argues that it is the applicants who have not set
out a basis for contending that they are irreparably
prejudiced if
they are not reinstated pending the outcome of the appeal. In my
view all the parties are entitled to rely on the
contents of
affidavits in the main application without being obliged to repeat
them chapter and verse. This is an interlocutory
application which,
save in exceptional circumstances, is heard by the judge who made
the substantive order against which the
respondent has sought leave
to appeal.
In my
view while it cannot be said that the applicants in their individual
capacity will be irreparably prejudiced I am quite
satisfied that
the potential for irreparable harm or prejudice exists to the
orderly and expeditious liquidation process if
the applicants are
not reinstated now and the appeal process does not result in my
decision being overturned. The evidence before
me in the main
application indicates that substantial grounds exist for believing
that AHI’s assets have been wrongfully
dissipated by its
directors with the assistance of others. The longer it takes to
finalise the investigative process or the
litigation initiated under
the applicants the greater the risk that, if the allegations are
correct, assets will be disposed
of and the liquidation process
thereby irreversible prejudiced. There is a real likelihood that the
liquidation process will
grind to a halt until the appeal process is
finally concluded or exhausted. Conversely the applicants adequately
demonstrated
in the main application that they had vigorously
pursued their duty to recover assets for the benefit of creditors
and would
have acquired information and knowledge that might yet be
of assistance in the course of the litigation without incurring
further
unnecessary expense.
PROSPECTS
OF SUCCESS ON APPEAL AND WHETHER APPEAL BONA FIDE
General
Beltings continued to rely on the broad grounds set out in its
application for leave to appeal. It did not raise any other
grounds
in argument nor seek a postponement despite accepting the basis upon
which an application of this nature is to be determined.
In my
view counsel for General Beltings remained unable during the hearing
to demonstrate that there are prospects of success
on appeal on the
grounds raised. I do not believe that another court might come to a
different conclusion on the grounds raised
because the decision of
the Master does not bear scrutiny if regard is had to the written
representations made by the applicants
and the Master’s
failure to have regard to them as well as his failure to afford the
applicants an opportunity to respond
to new facts. Moreover there
remains the inexplicable failure to have regard to the ordinary
practices adopted and accepted
in the liquidation process.
The
background to the removal of the applicants was set out in the main
judgment. It reveals the lengths to which Mawere and Mariemuthu
went
in their attempt to frustrate the enquiry and the litigation
directed at them or entities in which they had an interest.
The
question as to what possible interest General Beltings may have qua
creditor to remove the applicants, when enquiries they
conducted
led to the interdicts which preserved assets for its benefit and
when section 424 proceedings have been instituted
which if
successful will benefit them as creditors, remains unanswered.
These factors justify the grave concern that the application
for
leave to appeal is not bona fide, but brought for the indirect
purpose of delay and harassment.
ORDER
The
applicants seek a punitive order for costs. The costs will stand
over and be dealt with when the application for leave to
appeal is
considered.
I am
satisfied that it is just and equitable in all the circumstanced to
make the following order which will obviate the necessity
for the
applicants to bring a new application if leave is refused and the
Supreme Court of Appeal is petitioned:
Pending
the outcome of the application for leave to appeal, alternatively
the outcome of an application for leave to appeal
to the Supreme
Court of Appeal, or the finalisation of an appeal should leave be
granted by the Court or by the Supreme Court
of Appeal, the first
and second applicants are immediately reinstated as joint
liquidators of Africa Heritage Investments (Pty)
Ltd (in
liquidation);
The
costs are reserved for determination at the hearing of the second
respondent’s application for leave to appeal.
_____________________________________________________________
Attorneys
for First and Second Applicant
...........
:
Werkmans Attorney
Counsel
for First and Second Applicant
.............
:
Adv. M M Antonie
…..........................
:
Adv. A J Lapan
Attorneys
for Second Respondent
.....................
:
Kyle Attorneys
Counsel
for Second Respondent
.......................
:
Adv
Date
of hearing
..................................................
:
9 and 16 September 2011
Date
of order
…..................................................
:
19 September 2011
Date
of Reasons for Judgment
..........................
:
19 September 2011