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[2012] ZAGPJHC 36
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Kwan v Kaplan NO and Others (38097/2011) [2012] ZAGPJHC 36 (16 February 2012)
NOT REPORTABLE
IN THE SOUTH GAUTENG HIGH COURT
(JOHANNESBURG)
CASE NO 38097/2011
DATE:16/03/2012
In the
matter between
BETTINA FIONA
KWAN
................................................................................
APPLICANT
and
HARRY
KAPLAN
NO
....................................................................
FIRST
RESPONDENT
KEN TI
WONG
..........................................................................
SECOND
RESPONDENT
THE
MASTER OF THE HIGH
COURT
..........................................
THIRD
RESPONDENT
Liquidator
of solvent dissolved partnership – powers and obligations in
terms of court order appointing him – applicant
seeking
declarator concerning exact nature of such obligations –
interpretation of court order appointing liquidator -
purpose in appointing and empowering a liquidator to
ensure the proper and effective liquidation of the dissolved
partnership, having
regard to its own peculiar circumstances –
practicality of extensions sought by applicant – absence of –
no dispute
shown - declarator refused.
Liquidator
– opposition to application – whether justified in
circumstances of this case.
Costs –
punitive costs – application ill-conceived – ulterior
motive in bringing application – court’s
disapproval of
conduct of applicant – punitive costs ordered.
J U D G M E N T
VAN OOSTEN J:
[1] In this application the applicant seeks a declarator concerning
the obligations of the first respondent who was appointed by
this
court (Watt-Pringle AJ) as receiver and liquidator of the dissolved
partnership that had existed between the applicant and
the second
respondent. The order appointing him gave the liquidator certain
powers. Both the second and third respondents oppose
the application.
The third respondent, for the reason I will presently deal with, no
longer has an interest in the matter. As the
adjudication of the
application requires a proper interpretation of the order of
Watt-Pringle AJ (the order) it is convenient,
at this stage, to set
it out in full:
Appointing
Harry Kaplan as the liquidator and the receiver (“the
receiver”) of the dissolved partnership of the applicant
and
the respondent and for the purposes of dividing the net value of the
dissolved partnership of the applicant and the respondent
relative
to the right attaching to a bookmaker’s licence.
The
receiver shall have those powers, duties and obligations as if he
were a
final
trustee of an insolvent partnership under and in terms of the
provisions of the insolvency Act No. 24 of 1936 (as amended)
and
which will
inter
alia
include the following powers:-
2.1 to
institute legal proceedings against any party for the delivery to him
of any assets, deeds or documents which may vest in
the partnership;
and
2.2 to
instruct and appoint attorneys and/or counsel to institute
proceedings on his behalf for the purpose of obtaining delivery
of
any assets, deeds or documents which may vest in the partnership
and/or to claim any such other or alternative relief as may
be
required to enable him to execute his office as receiver;
2.3 to
dispose of the assets of whatever nature, movable or immovable,
corporeal or
incorporeal forming part of the partnership by public auction and on
terms and conditions that he may impose, or in
such other manner as
he deems fit under such terms and conditions as he may deem fit; and
2.4
to sign and execute any agreements and/or documents that may be
necessary to effect transfer of any of the assets, movable
or
immovable or the partnership to whomsoever may acquire same from the
partnership;
and
2.5
to undertake all investigations necessary and in particular to
obtain from the applicant and the respondent all information
with
regard to assets
comprising
the partnership; and
2.6
to demand and to obtain information regarding the financial affairs
of the partnership from bank managers and/or managers
of any
financial institution; and
2.7
to inspect books of account in respect of the partnership; and
2.8
to make physical inspection of assets and take inventories relative
to the partnership; and
2.9
to question the applicant and the respondent and obtain all
explanations deemed necessary by him for the purpose of making
the
division of the net value of the partnership and for the purpose of
establishing what personal claims they have against the
partnership;
and
2.10
to pay the costs (on attorney and own client scale in the case of
attorneys and advocates) of those persons and/or entities
contemplated in 2.1., 2.2
and
2.3; and
2.11
to open and conduct a separate trust account at any financial
institution and to be designated for the benefit of the partnership;
and
2.12
to retain in trust, after deduction of all costs, any amount which
shall accrue to either the applicant and/or the respondent
and to pay
such amounts as
directed
by the applicant and/or the respondent.
The
receiver shall be entitled to recover and to receive his
disbursements and fees on the scale as envisaged in the Insolvency
Act no 24 of 1936 (as amended) to form part of the winding-up of the
partnership;
All
costs, including fees and disbursements arising from the realisation
of all the assets of the dissolved partnership shall
form part of
the winding-up of the said partnership.
Costs
in the winding up in partnership (sic).
[2] A brief background to the application is the following. In 2006
the applicant and the respondent, who is the brother of the
applicant’s husband, established a partnership for the sole
purpose of conducting the business of a licensed bookmaker. Although
the bookmaker’s licence was obtained, the partnership never
commenced business. It was dissolved by agreement on 19 August
2010.
It was at all times solvent. The parties were unable to reach an
agreement on the liquidation of the partnership and the
relationship
between them deteriorated and indeed became acrimonious (or, as it
was perhaps more aptly put by the applicant, they
were “at
daggers drawn”). The second respondent launched an application
to this court for the appointment of the first
respondent as
liquidator of the dissolved partnership which although opposed by the
applicant, was successful (except for the punitive
costs order sought
against the applicant), resulting in the issuing of the order I have
referred to.
[3] The first respondent, to whom I shall henceforth refer to as the
liquidator, duly commenced with the liquidation of the partnership
asset. The only asset of the partnership was the bookmaker’s
licence which was sold at a public auction for R2,7m. In August
2010
the liquidator prepared and submitted a provisional first liquidation
and distribution account. The account, in summary, reflects
the
proceeds derived from the sale of the bookmaker’s licence, two
claims lodged against the estate, one in respect of rentals
claimed
by the second respondent in the sum of R197 640-00 and the other by
the Gauteng Gambling Board, and then further items
relating to costs,
expenses and the liquidator’s remuneration. The applicant
disputes the second respondent’s claim
in respect of rental and
the second respondent has instituted an action in this court for the
recovery thereof which is still in
its initial stages and thus
pending. On 6 October 2011 the applicant launched the present
application in which the following relief
is sought:
Declaring
that the words contained in paragraph 2 of the court order dated 24
February 2011 in case no 2010/43535, namely:
“The
receiver shall have those powers, duties and obligations as if he
were a final trustee of an insolvent partnership
under and in terms
of the provisions of the
Insolvency Act No 24 of 1936
…..”
have the meaning and
effect that, for the purposes of liquidating the dissolved
partnership of the applicant and the second respondent,
the first
respondent is vested with the same powers, duties and obligations
that:
Vest
in a final trustee of an insolvent partnership under and in terms
of the
Insolvency Act; and
that
The
applicant and the second respondent could themselves have conferred
upon a receiver by agreement had they been able to reach
agreement
in respect thereof.
Directing:
The
first respondent to open a book wherein he shall enter a statement
of all moneys, goods, books, accounts and other documents
received
by him on behalf of the dissolved partnership estate, as
contemplated by
section 71(1)
of the
Insolvency Act;
The
applicant and the second respondent to formulate their respective
claims under oath in a manner contemplated by
section 44(4)
of the
Insolvency Act;
The
first respondent to examine the applicant’s and the second
respondent’s claims in accordance with the provisions
of
section 45
of the
Insolvency Act;
The
first respondent to frame his liquidation account in accordance
with the provisions of
section 92
of the
Insolvency Act;
The
first respondent to verify his liquidation and distribution account
in accordance with the provisions of
section 107
of the
Insolvency
Act.
The
first respondent to submit his liquidation and distribution account
to the Master in accordance with the provisions of
section 91
of
the
Insolvency Act.
That
such respondent/s who oppose this application be ordered to pay the
applicant’s costs.
[4] For the sake of completeness it is necessary to refer to certain
relief that was subsequent to the launching of the application,
abandoned by the applicant. The relief sought in prayer 2.6 of the
notice of motion, although heavily relied upon in the correspondence
by the applicant’s attorneys, was wisely abandoned in the
applicant’s replying affidavit, which counsel for the applicant
informed me was based on the recent judgment of the Supreme Court of
Appeal in
Morar NO v Akoo
2011 (6) SA 311
(SCA)
.
Another perceived issue raised in the papers by the applicant, was
the liquidator’s entitlement to remuneration, provided
for in
paragraph 3 of the order. The applicant alleged that the liquidator
had prior to his appointment, bound himself to a lesser
scale of
remuneration of 5% of the gross value of the dissolved partnership.
The applicant served a notice of intention to amend
the notice of
motion, thereby seeking a variation of paragraph 3 of the order, to
reflect the lower scale of remuneration. The
amendment, yet again
wisely, was likewise abandoned three days prior to the hearing of
this application.
[5] This brings me to the opposing contentions of the parties
concerning the proper interpretation to be afforded to the order.
The
difficulty, and I put it no higher, experienced by the applicant
concerns the introductory portion of paragraph 2 of the order
and in
particular the words “
as if he were a final
trustee of an insolvent partnership under and in terms of the
provisions of the Insolvency Act no 24 of 1936
(as amended)”
Whether the applicant’s difficulty has been shown to
constitute the subject matter of a dispute will be considered later.
Those words, so the applicant contends, mean that the liquidator has
“the same” powers, duties and obligations to those
of a
trustee of an insolvent estate or partnership in terms of the
Insolvency Act, while
the applicant prefers an interpretation that
would afford “similar” powers, duties and obligations to
the liquidator.
Semantics aside, the opposing contentions are but two
sides of the same coin. Both contentions moreover lead to artificial
and
untenable arguments in complete ignorance of the ultimate
intention expressed in clear terms in the order which was for the
liquidator
to affect a division between the erstwhile partners of the
net value of the dissolved (solvent) partnership, relative to the
right
attaching to the bookmaker’s licence.
[6] In argument before me, the applicant’s edifice founded on
her proposed construction of the order, soon revealed structural
defects and it eventually crumbled down. Counsel for the respondents,
much to their relief, latched onto the
prima facie
views
having crossed the floor from the bench to counsel for the applicant,
and they no longer pursued the interpretation contended
for in their
heads of argument. It is trite that the basic principles applicable
to construing documents also apply to the construction
of a court’s
judgment or order (see
Firestone South Africa (Pty) Ltd v
Genticuro AG
1977 (4) SA 298
(A) 303D). Once a court has duly
pronounced a final judgment or order, it becomes
functus officio
,
and has no authority to correct, alter or supplement it, save in
certain exceptional circumstances, one of which is that “the
court may clarify its judgment or order, if on proper interpretation,
the meaning thereof remains obscure, ambiguous or otherwise
uncertain, so as to give effect to its true intention, provided it
does not thereby alter the ‘sense and substance’
of the
judgment or order...”
(
Firestone
p 307A). The
applicant clearly relies on this exception in seeking the declarator.
The question for determination in the present
matter accordingly is
whether the order, given its true intention, is uncertain to such an
extent that it requires the express
powers mentioned in the order, to
be extended to include those enumerated in paragraph 2 of the notice
of motion. What strikes
one immediately is the curious phrasing of
prayer 2: an order is sought “directing” the liquidator
to perform the obligations
thereafter set out. I do not think this is
proper but in the view I take of the matter, no further comments are
necessary. It is
necessary to also refer to a draft order which,
during argument, was handed up by counsel for the applicant. The
draft order attempts
to narrow down the generality of the directions
sought in prayer 2 of the notice of motion by way of excising and
pasting portions
of the sections of the
Insolvency Act referred
to in
prayer 2. I will revert to the draft order in my discussion of the
relief sought by the applicant.
[7] I have already touched on the intention as expressed in the order
(see:
Coopers and Lybrand and Others v Bryant
[1995] ZASCA 64
;
1995 (3) SA 761
(A) 767E-768E). The purpose in appointing and empowering a liquidator
is to ensure the proper and effective liquidation of the
dissolved
partnership, having regard to its own peculiar circumstances. To that
end the liquidator is given powers in regard to
which certain duties
and obligations are imposed. Some of those, preceded by the words
“inter alia”, are spelled out
in the order. The
applicant, in essence, seeks by way of a declarator to have a number
of additional obligations, derived from
the
Insolvency Act, imposed
.
The question accordingly is whether those additional obligations are
necessary for the liquidator to properly and effectively
liquidate
the dissolved partnership. Applying this principle I turn now to an
examination of the additional obligations in their
diluted form in
the draft order.
[8] Firstly, prayer 2.1. The implementation of prayer 2.1 in its
diluted form would require the liquidator to open a book wherein
he
shall enter as soon as possible a statement of all moneys, goods,
books, accounts and other documents received by him on behalf
of the
dissolved partnership estate. This obligation is not only
superfluous: it also has long been overtaken by the steps that
have
already been taken in the liquidation and would accordingly not have
any practical application. The powers given to the liquidator
in the
order include the obligation to make physical inspection of the
assets and take inventories relative to the partnership.
The
partnership, it is common cause, has never traded, which brings into
question the applicant’s insistence on the liquidator
receiving
books, accounts and other documents. But, as I have mentioned, these
aspects have in any event already been taken care
of in the
liquidator’s provisional first liquidation and distribution
account. Not surprisingly, counsel for the applicant
was unable
firstly, to suggest what other items the liquidator could be
expected, even stretching one’s imagination to the
extreme, to
receive and enter into a book and secondly, what the relevance or
practicality of this requirement would be accepting
that the
liquidation of the dissolved partnership, at least as for the
liquidator’s involvement, is in its final stages.
I can find no
justification at all for imposing this obligation, at this stage, on
the liquidator.
[9] Prayer 2.2 suffers the same fate. In the draft order this
proposed obligation cascades into several sub-obligations. Those
are
formulated as follows: the liquidator would be required to receive,
and the applicant and the second respondent are for that
purpose to
deliver to the liquidator, within 10 days of the granting of the
order, affidavits, together with any supporting documents
upon which
they rely, in which they formulate their respective claims against
the dissolved partnership estate and in those affidavits
they must
then set out the facts upon which the deponent relies for knowledge
of the claim, the nature and particulars of the claim,
whether it was
acquired by cession after the institution of the proceedings by which
the dissolved partnership was dissolved, if
they hold security
therefore, the nature and particulars of that security and the amount
at which he or she values the security.
After all these cumbersome
requirements have been complied with, the liquidator would be
required to examine the claims so submitted
within 10 days of
submission thereof and to advise the parties of his views in respect
of the claims, within the aforesaid period.
But, there it does not
end: if either of the ex-partners dispute the views of the liquidator
in respect of a claim, such party
is to institute fresh proceedings
or to continue with such proceedings as already instituted, as he/she
may be advised, within
20 days of the first respondent advising the
parties of his views. The fallacy of the proposed obligation is
revealed once the
facts of this matter are considered. The second
respondent’s claim in respect of rental is already the subject
matter of
a pending action. There is no suggestion whatsoever of any
other claims against the partnership save for those referred to in
the
provisional liquidation and distribution account. When this
insurmountable obstacle was pointed out to counsel for the applicant,
he submitted that the requirement of affidavits having to be filed,
even
ex post facto
would possibly fabricate this benefit: it
might provide useful material for purposes of cross-examination at
the trial of the action
which has already been instituted by the
second respondent. I do not consider the contention worthy of any
comment. It is rejected.
[10] The next and final, proposed obligation concerns the form of the
liquidator’s liquidation and distribution account.
The
applicant has succeeded in further burdening the administrative
obligations in proposing the addition of a number of additional
requirements. Those are: to contain an accurate record of all moneys
received and of all moneys disbursed by the liquidator, the
record of
each such receipt and disbursement to set forth the amount and date
thereof as well as sufficient particulars to explain
its nature; the
liquidation account to be accompanied by the liquidator’s bank
statement and any vouchers in support of the
record of receipts and
disbursements. And further, to round it off, it would further be
required of the liquidator to
sign the account,
and to verify under oath that the account is full and a true account
of his administration of the dissolved partnership
up to the date of
the account and that, insofar as he is aware, all the assets of the
dissolved partnership have been disclosed
in the account.
The
proposed obligation, as are all the others, is simply aimed at
procuring slavish adherence to statutory requirements enacted
for an
entirely different purpose, and would, if anything, result in nothing
more than an exercise in futility. Counsel for the
applicant was
unable to raise any objection against the provisional first
liquidation and distribution account. Nor was counsel
able to
suggest, again by the wildest stretch of imagination, how this
obligation could have contributed to the effectiveness of
the
liquidation of the partnership. The liquidator has confirmed his
willingness to, if required to do so, sign and attest the
final
liquidation and distribution account. I merely need to add that the
arguments advanced evidently overlooked the plain facts
of this
matter and in particular that only the net proceeds of the sale of
the single asset of the partnership, fall to be distributed.
[11] I am satisfied that the application is ill-conceived. No dispute
exists concerning the applicant’s perceived difficulties.
The
relief sought by the applicant will not be of any practical relevance
in the circumstances of this case (see for example
Eagles Landing
Body Corporate v Molewa NO and Others
2003 (1) SA 412
(T) 429F).
Counsel for the applicant submitted as reason for launching the
application, that the applicant was merely protecting
herself against
any possible bias or hostility towards her on the part of the
liquidator. Those fears, so the argument went, are
reasonable. It is
necessary to examine the applicant’s version in this regard by
referring to the allegations relied upon
by her counsel. In the
founding affidavit the applicant states: “In determining Chie’s
(the second respondent’s)
application (for the appointment of
the liquidator) the Court did however provide a safeguard against any
possible bias or hostility
towards me on the part of Kaplan (the
liquidator)”. The applicant further states: “This manner
of liquidating the dissolved
partnership (with reference to prayer 2
of the notice of motion) avails Chie and me of the various checks and
balances provided
for in the
Insolvency Act, so
as to afford us both
an equal and fair measure of protection against any possible form of
potential obduracy”. Nothing in
support of these imputations
exists. The file in the application for the appointment of the
liquidator was made available to me
at the hearing of this matter for
perusal. In that application nothing is stated by the applicant
concerning the fears she has
now expressed. The conclusion that
measures were included in the order to safeguard the applicant’s
perceived fears, is without
foundation. Nor has anything been
advanced by counsel for the applicant to justify the harbouring of
any such fears at any stage
and in particular now, having regard to
the liquidation which has reached its final stages. One further
disturbing feature of the
applicants’ wild unsubstantiated
allegations concerning the liquidator requires comment: some
unhappiness appears to exist,
which echoed in her counsel’s
argument that the bookmaker’s licence could have been sold for
a higher price. This clearly
was aimed as a side-blow out of the dark
towards the liquidator. It yet again lacks any substance. In the
appointment application
the applicant estimated the value of the
bookmaker’s licence “in the region of R1.25m to R2.5m”.
It was sold
by way of public auction, at which the applicant was
present, for R2,7m. The applicant has not alleged any untoward
conduct by
or on behalf of the liquidator in the sale of the
bookmaker’s licence nor has she for that matter, taken any
steps to set
the auction aside. The applicant’s allegations of
impropriety, albeit by implication, are plainly untenable and fall to
be
rejected.
[12] For all the above reasons the application cannot succeed.
[13] This brings me to the costs of this application. Counsel for the
second respondent asked for a punitive costs order. In the
exercise
of my discretion I consider a punitive costs order to be justified.
The applicant has clearly launched this application
for an ulterior
motive. I do not consider it necessary to speculate as to what such
motive could have been. Nothing of substance
was advanced in support
of the application. The respondents were severely criticised for
having entered the fray. Counsel for the
applicant could not fathom
the reason for the liquidator in fact opposing the application as
opposed to simply abiding the decision
of this Court. I am unable to
agree. The obligations of the liquidator were at stake and he was
entitled to become involved in
the application thereby avoiding
unreasonable costly red tape obligations being imposed on him. The
liquidator’s assistance
in and contribution to this matter, in
my view, was not only necessary but also valuable. As for the second
respondent, his involvement
was likewise necessary as it became
clear, right from the outset, that the applicant in launching this
application was not doing
so in the interests of the proper and
effective liquidation of the partnership. Counsel for the applicant
made much of the applicant’s
prayer for costs to be paid only
in the event of opposition. I do not think this has any bearing on
the issue. The applicant had
no justification for assuming that the
second respondent would simply return his dagger to the sheath. Had
it been the applicant’s
intention of swiftly obtaining the
order without opposition, in the unopposed motion court, as has been
put forward by her counsel,
such perception was clearly misplaced.
The application was misconceived right from the outset; it resulted
in the expenditure of
unnecessary costs and it must have become
apparent to the applicant’s legal team, as the matter
progressed, and the impropriety
of prayer 2.6 realised, that it was
doomed to failure. In these circumstances there are no good reasons
why the second respondent
should be out of pocket concerning the
costs of this application. A punitive costs order, moreover, would
further serve as a mark
of this Court’s disapproval of the
conduct of the applicant.
[13] In the result the following order will issue:
The application is
dismissed.
The applicant is
ordered to pay the costs of the first respondent on the scale as
between party and party, as well as the costs
of the second
respondent on the scale as between attorney and client, such costs
to be deducted and paid from the award due to
the applicant upon
final distribution and payment of the partnership awards by the
liquidator.
_________________________
FHD VAN
OOSTEN
JUDGE
OF THE HIGH COURT
COUNSEL
FOR APPLICANT : ADV J BOTH SC
ADV
R KUJAWA
APPLICANT’S
ATTORNEYS: PHILIP PRITCHARD
COUNSEL
FOR FIRST RESPONDENT: ADV AC BOTHA
FIRST
RESPONDENT’S ATTORNEYS : FJ COHEN ATTORNEYS
COUNSEL
FOR SECOND RESPONDENT: ADV L HOLLANDER
SECOND
RESPONDENT’S ATTORNEYS: FJ CAMERON ATTORNEYS
DATE
OF HEARING: 8 MARCH 2012
DATE
OF JUDGMENT : 16 MARCH 2012