SMM Holdings (Pvt) Ltd v Mawere and Another (20235/2006) [2012] ZAGPJHC 186 (11 October 2012)

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[2012] ZAGPJHC 186
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SMM Holdings (Pvt) Ltd v Mawere and Another (20235/2006) [2012] ZAGPJHC 186 (11 October 2012)

SAFLII Note: Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance
with the law and SAFLII
Policy
IN THE SOUTH GAUTENG HIGH COURT
JOHANNESBURG
CASE No. 20235/2006
DATE:11/10/2012
Reportable only in the electronic law
reports
In the matter
between:
SMM HOLDINGS (PVT)
LIMITED
............................................
Plaintiff
and
MUTUMWA DZIVA
MAWERE
.................................................
First
Defendant
PARMANATHAN
MARIEMUTHU
............................................
Second
Defendant
JUDGMENT
WILLIS J:
[1] The plaintiff, a Zimbabwean
company, claims the following in an action:
1. An order declaring that the first
and second defendants are jointly and severally liable, the one
defendant paying the other
to be absolved, to the plaintiff in terms
of section 424 (1) of the Companies Act, No.61 of 1973, as amended
(‘the old Companies
Act’), for a debt owing by Southern
Asbestos Sales (Pty) Limited (‘SAS’) to the plaintiff in
the sum of ZAR
(South African Rands) 18 043 374, 21 (eighteen million
and forty-three thousand, three hundred and seventy–four rand
and
twenty-one cents);
2. An order that the first and second
defendants are jointly and severally liable, the one paying the other
to be absolved, to pay
the plaintiff the sum of ZAR 18 043 374, 21;
3. An order that the defendants pay
interest on the aforesaid sum a tempore morae and costs.
[2] At the root of the action is a
purported agreement of cession in terms of which debts owed by SAS to
the plaintiff were ceded
to a South African company, Petter Trading
(Pty) Limited (‘Petter’). This alleged cession gave rise
to an application
in this court resulting in order being granted (per
Van Oosten J).
1
In order to avoid an appearance of being pedantic, I shall refer to
this purported cession agreement simply as the ‘cession

agreement’. The signing of the cession agreement occurred in
April and the application to court in May of 2004, respectively.
That
court order was rescinded on application to this court in November
2004 on the basis that it was fraudulently obtained.
[3] The plaintiff alleges that as a
result of the court order that was granted by Van Oosten J, SAS paid
the sum claimed above to
Petter when this money should have been paid
to the plaintiff. The plaintiff alleges that the first and second
defendants acted
in concert, as part of a fraudulent scheme, to
obtain this purported cession and the consequent court order given by
Van Oosten
J. Both SAS and Petter were liquidated in 2005. SAS and
Petter will not be able to repay the plaintiff the money that was
diverted
from the plaintiff as a result of this fraudulent scheme.
The first and second defendants were at all material times directors
of the plaintiff. Accordingly, the plaintiff claims from the first
and second defendants personally in terms of section 424 (1)
of the
old Companies Act, No.61 of 1973, as amended.
[4] This has been none of the most
unpleasant civil cases in which I have presided in my fourteen years
on the bench. The case reeks
of contempt not only for those who have
lost employment as a result of the alleged fraud but also the court,
including the individual
persons who have been judges in this saga,
and the court’s rules and processes. In order to do justice to
this matter, it
will be necessary to set out its history in some
detail.
[5] I shall first deal with an outline
of the chronology which relates to the procedural aspects in bringing
this matter to trial.
Thereafter, I shall refer to substantive merits
of the case. The summons in this matter was issued on 13 September
2006. The
first application for a trial date was made on 16 October
2006. The matter was set down for hearing on 21 November 2007.

The first and second defendants then requested the postponement of
the matter on the basis that an application had been instituted
by
the first defendant in the Constitutional Court, allegedly relating
to the issues raised in the pleadings under the above case
number.
Although the plaintiff did not agree to the postponement of the
matter, a postponement was, in the end, forced upon it.
[6] A further trial date was then
applied for on 8 April 2008 and the matter was set down for hearing
on 12 October 2009. The trial
was, however, postponed as a result of
pending liquidation proceedings instituted by Investec Bank Limited
in relation to other
companies managed by the first and second
Defendants, which may have had a material effect on the trial. The
trial was then postponed
by agreement between the parties.
[7] A further application for a trial
date was delivered on 23 July 2010. The matter was set down for a
third time for 13 October
2011. The first and second defendants
requested a postponement on various grounds including:
(i) that they intended delivering a
Rule 35(3) Notice, requesting the plaintiff to make further discovery
of documentation;
(ii) the defendants intended
delivering a request for security for costs;
(ii) the alleged disallowance of the
plaintiff’s claim in the insolvent estate of Southern Asbestos
Sales (Pty) Ltd (in liquidation);
(iv) possible expert testimony that
the defendants may wish to lead; and
(v) the defendants estimated that a
long duration of trial of five to ten days would be required for the
hearing of the matter.
[9] These issues were raised on 27
September 2011 during the pre-trial meeting, shortly before the trial
was due to begin. The pre-trial
minute was filed on 6 October 2011,
after the defendants' attorneys of record had refused to sign the
pre-trial minute. The matter
set down for 13 October 2011 was,
however, postponed, the defendants agreeing to pay the wasted costs
of the plaintiff.
[10] An application for a fourth trial
date was then made. The trial was set down for hearing on 7 September
2012. Prior thereto,
on 6 October 2011, the defendants filed a notice
requesting that the plaintiff pay security for costs, in terms of
Rule 47(1).
They also filed a Rule 35(3) Notice. They also filed a
Rule 7(1) Notice on 3 August 2012. The plaintiff
refused
to provide the security for costs, as requested, but no
application for security for costs was forthcoming from the
defendants.
The plaintiff responded to the Rule 35(3) Notice on
29 June 2012 and filed a power of attorney in response to the
Rule 7(1)
notice on 17 August 2012.
[11] In the light of the previous
indication given by the defendants' attorneys of record that they
were of view that the trial
would run for five to ten days, the
plaintiff applied for a special allocation for a trial of estimated
long duration on 7 August
2012. Confirmation from the office of the
Deputy Judge President that such an allocation had been given was
forthcoming later in
that month. The first day of trial had been
allocated on 7 September 2012. No judge was available on that date.
Boruchowitz J,
who was calling the civil trial roll on that day,
indicated to the parties that I would be available on Monday 10
September 2012
and that he had allocated the trial to me. On Friday 7
September 2012 I was the senior judge on duty in Motion Court. I
nevertheless
met the representatives of the parties in my chambers
that afternoon to discuss matters relating to the ‘housekeeping’

of the trial that would commence before me. Both defendants were
jointly represented by an attorney Mr Kyle.
[12] On 6 September 2012, the day
before the trial had been set down, the defendants delivered a
supplementary discovery affidavit,
enclosing 110 pages of newly
discovered documentation. They also filed a notice of intention to
amend their special pleas, in terms
of Rule 28 of the Uniform Rules
of Court. Further still, the Defendants instituted an application in
terms of Rule 30 of the Uniform
Rules of Court.
[13] On Monday, 10 September 2012,
when the matter was formally called before me, the hearing opened
with an application brought
in terms of Rule 30 in terms of which the
defendants claimed that the power of attorney delivered by the
plaintiff pursuant to
a Rule 7(1) notice was defective in that it was
not retrospective. Mr Kyle argued the matter. The defendants sought
that the application
for trial date be set aside and that the matter
be struck from the roll. I dismissed the application, holding that
the power of
attorney, by necessary implication, ratified all the
proceedings that had been brought by the plaintiff thus far.
[14] Mr Kyle then proceeded to request
that the issue of whether the plaintiff was still subject to a
‘reconstruction order’
in terms of Zimbabwean law be
dealt with in a separation of issues in terms of Rule 33(4). In
particular, the defendants claimed
that the reconstruction order had
been cancelled, even though they admitted that there had been no
publication of the alleged cancellation
thereof in the Zimbabwean
Government Gazette. The court found that it would not convenient to
order a separation of issues on the
grounds which had been claimed to
justify it.
[15] Mr Kyle then proceeded to apply
for my recusal. He claimed that the issues in the special plea had
been pre-determined and
that there was clear bias in favour of the
plaintiff. After argument, the application for recusal was dismissed
with costs. At
that stage, I had not even read any of documents in
the nine Leverarch files before me. I had not even heard an opening
address.
I had no idea of the history of the matter and had merely
read the practice notes and annexures which had been filed. There
appeared
to me to be no legitimate grounds for my recusal. At that
stage I had no sense of the basketfuls of mambas with which I would
be
presented during this case. The application for my recusal was the
mere beginning of a strategy of intimidation of the bench.
[16] Mr Kyle then proceeded to bring
another application for a separation of issues in terms of Rule
33(4). He argued in that he
wanted the separate determination of the
issue as to ‘whether a foreign law of a penal nature where
State obtains a preferential
right as a creditor is permissible’.
The plaintiff argued that this is not necessarily an issue on the
pleadings and referred
to the judgment in constitutional litigation
that had taken place between the parties. Essentially, the
defendants argued that
the first defendant’s shares in the
plaintiff had been seized by the Zimbabwean government in terms of
the Zimbabwean Reconstruction
of State-Indebted Insolvent Companies
Act, CAP 24:27 and that in South African this seizure would be
regarded as unconstitutional.
[17] Later evidence by Mr Moyo, who
had been company secretary of the plaintiff at the relevant time, was
that the shareholder in
the plaintiff had been SMM Holdings Limited,
a British Company. Be that as it may, before I had even heard this
evidence, I dismissed
that application with costs. I did so on the
basis that even if it were the case that the first defendant’s
shares had been
appropriated in terms of this Zimbabwean legislation,
I was far from confident that, in our law, such a ‘socialist’

measure by a foreign state would not be recognised by the courts
exercising authority over the High Court. I indicated that while
I
might be personally sympathetic if such an expropriation had indeed
taken place, I seriously doubted that courts higher than
the High
Court would intervene to set aside the proceedings on the ground that
because the majority of shares in the plaintiff
had been obtained by
state expropriation. I referred, inter alia, to my personal
experience of both the Constitutional Court and
the Judicial Service
Commission when I had been a candidate for appointment as a judge in
the Constitutional Court. I had, as such
a candidate, publicly
criticised the Constitutional Court for being insufficiently aware of
the seriously unfortunate consequences
for economic growth and
job-creation by handing down rulings that were unfriendly to business
and investor interests. I was also
mindful of a judgment given by
Campbell AJ relating to the same point between the same parties in
September 2008. Campbell AJ had
found there was no merit in the
point. Campbell AJ dismissed the application for leave to appeal. The
petition to the SCA was unsuccessful.
[18] Mr Kyle then requested leave to
appeal my decision in respect of the separation of issues on the
point relating to the Zimbabwe
‘Reconstruction Act’. He
argued that the defendants had been prejudiced by the refusal to hear
these issues first.
The plaintiff argued that the order was not
definitive of the rights between the parties, nor final, and that
there was no basis
for the application for leave to appeal. I
dismissed the application for leave to appeal with costs. I placed on
record that the
fact that it was undesirable for appeals to be heard
piece-meal in actions and my lack of confidence that the courts above
the
High Court would consider there to be merit in the point informed
my decision. I also pointed out that the setting aside of action
done
in terms of legislation in Zimbabwe could have major diplomatic
implications. This would necessitate the joinder of at least
one
South African cabinet minister. No member of the South African
cabinet had received any notice of such an argument to treat
as pro
non scripto in a South African court actions done in terms of the
laws of a foreign state.
[19] Mr Kyle then requested that the
matter stand down so that he could draft a petition for leave to
appeal to the Supreme Court
of Appeal (‘SCA’). The
plaintiff objected. They decided that the trial would proceed but
pointed out that the petition
could be drafted in the meantime.
[20] Mr Kyle then informed the court
that he withdrew as attorney of record in the matter. He did not seek
the leave of the court
to withdraw. The first and second defendants
thereafter represented themselves. The first defendant decided to
proceed with the
trial and to defend the matter personally.
[21] During the lunch adjournment I
received a telephone call from an advocate to say that he had been
instructed to report me to
the Bar Council for saying that I had ‘no
confidence’ in the SCA and the Constitutional Court. This is a
twisting of
what I had said. Both courts give me reason to sleep
soundly at night. During the process of negotiations leading to the
establishment
of a democratic State in South Africa, I was a keen
supporter of the concept of a Constitutional Court having extensive
testing
powers. Whenever I had an opportunity to exert influence in
favour of such an idea, I did not hesitate to do so.
[22] In dismissing the application in
question, I said (and I remain convinced that I am correct in this
regard), that I was far
from confident that these courts would act in
the manner that the defendants had argued that they should with
regard to the alleged
expropriation of the first defendant’s
shares in the plaintiff by the government of Zimbabwe. That
afternoon I also received
a letter from attorneys claiming to have
been appointed to act on behalf of the second defendant and demanding
that I deliver transcripts
of my rulings earlier in the day. My clerk
was instructed to reply to these attorneys to advise them that
‘iafrica transcriptions’
were responsible for preparing
transcripts of rulings given ex tempore by the court. I made sure
that my clerk did, indeed, reply
accordingly via email. I referred to
the matter in open court. The letter from the attorney, as well as my
clerk’s reply
thereto, have been filed of record.
[23] After the lunch adjournment, the
second defendant requested a postponement of the matter so that he
could instruct new attorneys.
He claimed that Mr Kyle had withdrawn
‘on his own account’. I dismissed, with costs, the
application for a postponement.
I gave, as my main reason, that it
would be prejudicial to the plaintiff to grant a postponement in all
the circumstances of the
case. The second defendant then indicated
that he wished to apply for leave to appeal against that decision.
The application for
leave to appeal was also dismissed with costs. I
did so on the basis that rulings disallowing postponements were
exceptionally
appealable, if at all, because to allow an appeal on
such an issue would, in effect be to grant a postponement. The second
defendant
thereupon withdrew from the proceedings. He sat in the
gallery for a while thereafter and then left the court room, not to
return
again during the proceedings before me.
[24] The plaintiff then moved for
default judgment to be granted against the second defendant, without
the leading of any evidence.
I decided to exercise my judicial
discretion so as to defer this decision until the end of the trial.
The plaintiff then called
its first witness, Mr Peter Moyo.
[25] Any misgivings that one may have
had about the first defendant, a Zimbabwean who has become a South
African citizen through
naturalisation, and who now lives in Sandton,
being disadvantaged by not having legal representation were soon
dispelled. Legal
jargon trilled from his lips as though he had been
born in a courthouse and had well-known legal text books and law
reports read
to him as lullabies. He is clearly no stranger to
litigation, demonstrating familiarity with court procedures. He
cross-examined
witnesses with poise and confidence which many a
‘baby, blue-bag’ junior at the Bar would envy. He even
had the temerity
to suggest, at one stage, that I was treating him
‘like a nigger, like a kaffir’. When, in South Africa in
2012, a
person uses the ‘race-card’, one’s
curiosity is aroused.
[26] On Friday, 5 October 2012, before
I had delivered judgment in this matter, the first defendant lodged a
complaint with the
Chief Justice, as head of the Judicial Service
Commission, about my conduct in this trial. I annex a copy of the
complaint to this
judgment as ‘Annexure ‘A’.
[27] In his written heads of argument,
submitted at the end of the case, the first defendant submitted that
the following were the
issues which the court had to consider in
deciding the matter:
(i) whether the plaintiff was properly
authorised to bring these proceedings against the defendants;
(ii) whether the plaintiff was
entitled to bring the claim for relief against the defendants;
(iii) whether SAS was indebted to the
plaintiff as alleged in its amended particulars of claim;
(iv) whether the agency agreement
between SAS and the plaintiff was valid and enforceable;
(v) whether the order of the court
obtained in consequence of the purported cession agreement was used
to divert funds that were
due to the plaintiff;
(vi) whether the sum of ZAR 18 043
374, 21 paid to Petter represented funds collected by SAS pursuant to
a valid agreement in existence
and, therefore whether such funds were
available solely for the purpose of discharging an obligation to the
plaintiff;
(vii) whether SAS had in its
possession the aforesaid amount of ZAR 18 043 374, 21 at the time
when the order per Van Oosten J
was granted;
(viii) the status of an amount of
United States $4 646 445 paid by SAS;
(ix) whether the first defendant was a
director of SAS at the material time and was knowingly a party to the
business of SAS being
carried on recklessly or with intent to defraud
its creditors or for any fraudulent purpose;
(x) if the first defendant had
knowingly been a party to the fraud, the extent of his liability
under section 424 of the old Companies
Act.
[28] In his written heads of argument
presented at the end of the case, the first defendant further
submitted that ‘it is
common cause that the real driving force
behind this litigation is the government of Zimbabwe’. This is
not correct. He also
submitted that ‘There is no dispute on the
fact that the Reconstruction Act (of Zimbabwe) is a penal law and
allows the government
to superimpose itself as a party on commercial
transactions’. This, too, is incorrect.
[29] Mr Moyo, the first witness called
by the plaintiff, is presently employed as the managing director of
Tetrad Holdings Limited.
He has been employed by this company for
just over a year. Prior to his current employment, he worked for the
plaintiff from June
1998 to June 2011. He had been employed at the
plaintiff as a company secretary and administration manager. In this
position, he
looked after the statutory records and attended to the
legal work of the company and its subsidiaries. He was also secretary
to
the board of the plaintiff and all its subsidiary companies. In
addition, he dealt with pension fund issues, medical aid issues
and
related matters.
[30] Mr Moyo said that the plaintiff
has been in existence since 1923. The business of the plaintiff is
the mining white chrysolite
asbestos. It is also an investor in
certain subsidiary companies. The plaintiff conducted the operations
of asbestos mines since
the early 1900's. There are two asbestos
mines owned by the plaintiff, known as Shabanie and Gaths Mines. Long
fibre asbestos is
mined at Shabanie Mine and short fibre asbestos is
mined at Gaths Mine. In 2004 the plaintiff had employed over 5 000
people.
[31] SAS owed the plaintiff an amount
of United States $18 000 000, Canadian dollars 600 000 and South
African Rand 4 000 000 as
at 29 April 2004. At that time the
Zimbabwean government was facing foreign currency problems. As a
result, it began to control
the use of foreign exchange acquired by
exporters. 50% of foreign exchange acquired by exporters was required
to be surrendered
to the Government but the plaintiff had received an
exemption in terms of which it was permitted to use up to 75% of its
foreign
exchange generated from its operations. The exemption was
cancelled by the Reserve Bank of Zimbabwe.
[32] On 3 May 2004, Petter brought an
urgent application against the plaintiff and SAS in the High Court
here in Johannesburg
2
for payment of R74 872 468,49 plus interest. The application was
premised upon on a cession agreement purportedly entered into
in 2003
in terms of which the plaintiff appeared to have ceded its claims
against SAS to Petter. The cession agreement is a fraudulent
document
for reasons which Mr Moyo went on to explain. Although it purports to
have been signed in 2003, it was actually signed
on 28 April 2004, a
week before the urgent application was brought.
[33] The application was not opposed
by the plaintiff, as the founding papers were not served on it. An
order was issued against
SAS in terms of this application on
6 May 2004 by Van Oosten J.
[34] Mr Moyo first became aware of the
court order in the main application dated 6 May 2004, after the
date upon which it was
granted. When he received a copy of the court
order, he began to investigate the reasons for the court order being
granted. He
noticed certain anomalies in regard to the cession
agreement upon which the court order was based. He sought legal
opinion from
external legal advisors. He also facilitated the
investigation of the matter internally at the plaintiff.
[35] Mr Moyo testified that the
cession agreement was a fraudulent document because it contravened
the Zimbabwean laws in regard
to the remittal of foreign exchange. In
particular, he understood that one cannot cede the entitlement to
foreign exchange without
the prior approval of the Reserve Bank. In
addition, the cession agreement had not been approved by the board of
directors of the
plaintiff and the date upon which the agreement had
been signed was not the date reflected on the agreement itself. He
stated that
if the agreement had been signed in 2003, it would have
been in his records and he would have known about it. Furthermore, Mr
Obed
Dube (who was later called as a witness) had informed Mr Moyo
that the cession agreement was signed on 28 April 2004.
Mr
Moyo confirmed that he had been the author of the minutes of the
meeting of the board of directors of the plaintiff, during
which
meeting the fraudulent character of the cession agreement and the
reasons therefore had been recorded.
[36] The court order obtained per Van
Oosten J had been used to justify Petter receiving payment from the
plaintiff’s debtor,
SAS. Mr Moyo confirmed that the affidavit
in support of the application to rescind Van Oosten J’s order
had deposed to by
him and that an order granted rescission of Van
Oosten J’s earlier order was made by Joubert AJ on 29 November
2004.
[37] Mr Moyo said that the first
defendant had controlled the South African companies, Petter and SAS
and to some extent, the plaintiff
and another Zimbabwean company,
Minerals Marketing Corporation of Zimbabwe (‘MMCZ’). Mr
Moyo said that although ‘on
paper’, the first defendant
appeared to be non-executive, but he actually controlled these South
African companies and gave
instructions to the chairman of the
plaintiff in Zimbabwe. He went on to say that, at all material times,
the first defendant had
played an active role in the affairs of these
companies. The decisions taken by the board of directors of the
plaintiff had, historically,
been influenced by the first defendant.
The first defendant dictated what needed to be done. For example, in
regard to relocating
the group of companies from Zimbabwe to South
Africa, the first defendant called a meeting at the Sheridan Hotel in
Harare. This
was a major strategic decision initiated by the first
defendant. The idea was that a mining division to be called ‘Pan
African
Mining’ would be established in South Africa, with a
financial division to be known as ‘Pan African Financial
Services’.
The directors of the plaintiff had queried the
structure and sought clarity on the funding of the structure from the
first defendant.
[38] When it came to the attention of
the plaintiff that the order of Van Oosten J had been obtained, the
plaintiff launched proceedings
for rescission of that order on
7 October 2004. The basis of the application for rescission
was that the urgent application
papers had never been served on the
plaintiff that the reason for the procurement of the court order was
merely to provide a cloak
by which further to disguise complete the
fraudulent scheme in terms of which the plaintiff’s foreign
exchange earnings were
channelled to Petter on the basis of the
fraudulent cession agreement. The rescission application was opposed.
The issue of the
administrator’s authority to bring the
rescission application was raised as a defence in the answering
affidavit The second
defendant, who deposed to the answering
affidavit on behalf of Petter, denied that the administrator had
authority to bring the
rescission application.
[39] Consequent to its having obtained
the rescission order on 29 November 2004, the plaintiff
delivered an answering
affidavit to the application brought by Petter
against it and SAS in May 2004. Neither SAS, nor Petter, ever filed
any further
affidavits.
[40] The effect of the court order
obtained per Van Oosten J by reason of this so-called cession
agreement was that funds were not
remitted by SAS to the plaintiff in
Zimbabwe. The non-remittance of funds by SAS forced the plaintiff to
borrow funds from banks
and from the Ministry of Mines. The Governor
of the Reserve Bankin Zimbabwe had issued what was described as a
‘monetary
statement’ on 18 December 2003. As a result of
this, all outstanding ‘CD1 forms’ relating to export
documentation
had to be ‘acquitted’. The plaintiff had
many outstanding CD1 forms. From 2003, the Reserve Bank had taken an
active
role in following up the outstanding CD1 forms. The CD1
forms needed to be discharged within 180 days. The Reserve Bank
enquired
why so many of these forms were outstanding and summoned
senior executives of the plaintiff to a meeting at its offices. In
addition,
dispensations granted to mining companies as exporters in
regard to the retention of foreign currency were withdrawn. The
amounts
that had not been acquitted in terms of the outstanding
CD1 forms were United States $18 000 000 Canadian dollars
600,000
and South African Rands 4 000 000. The amounts that had not
been acquitted were unusually high.
[41] Mr Moyo testified that when he
reviewed the cession agreement, he had concluded that it was a
fraudulent document. He then
made recommendations to the Chief
Executive Officer (‘CEO’) and sought legal advice. The
CEO convened a meeting of
the board of directors of the plaintiff on
1 July 2004. Mr Moyo confirmed that the signature on the minutes of
the meeting held
on 1 July 2004 is that of the chairman of the
meeting, and the non-executive chairman of the plaintiff, Dr
Mudukunye. Dr Mudukunye
is the first defendant's cousin. Mr Moyo
asked Dr Mudukunye to sign the minutes, which he did. The minutes are
a true reflection
of what took place at the meeting of 1 July 2004.
Dr Mudukunye went through the minutes and would have objected if
there
was any item in the minute with which he did not agree.
[42] Mr Moyo also testified that AA
Mines (Pvt) Ltd was a dormant company and that it was an operating
division of the plaintiff.
He did not know why AA Mines (Pvt) Ltd was
referred to in the ‘Marketing and Sales Agreement’ which
had been concluded
between AA Mines (Pvt) Ltd and SAS in 1998. That
agreement was signed prior to Mr Moyo having been employed by the
plaintiff. Operationally,
the agreement was between SAS and the
plaintiff. He said that any reference to ‘AA Mines (Pvt) Ltd’
in that agreement
must have been a mistake. When the plaintiff had
instituted its claim in court for judgment in the amount of United
States $18
million, six hundred thousand Canadian dollars 600 000 and
four million South African Rand, the plaintiff had also applied for
rectification of the agreement and obtained an order to this effect.
[43] According to Mr Moyo, SAS had
marketed asbestos for the plaintiff. It was a relationship as between
principal and agent. The
plaintiff would have had various claims
against SAS including for non-payment of the amounts owed, interest
and return of goods.
The plaintiff invoiced the ultimate purchaser of
the asbestos fibre. The funds paid by the ultimate purchaser flowed
through SAS
and were remitted to the plaintiff by SAS. SAS had no
title in respect of the asbestos fibre.
[44] Mr Moyo was adamant that there
were certain amounts received by SAS and that were not remitted to
the plaintiff. The plaintiff’s
claim arises from funds which
SAS it received from the customers but did not remit to the
plaintiff. The plaintiff had verified
and confirmed the payments that
were made by the customers to SAS in respect of the claim of United
States $18 million, six hundred
thousand Canadian dollars and four
million South African Rand. These facts were a confirmed with the
customers themselves. There
were other amounts that were not remitted
to SAS by the customers. The amounts claimed by the plaintiff against
SAS are the amounts
that were paid by the customers to SAS. The
agent, SAS had indeed received payment as agent for the sum of
approximately United
States $18 million, six hundred thousand
Canadian dollars 600 000 and four million South African Rand. All
amounts that were received
by SAS as a result of the asbestos fibre
exported were required to be remitted to the plaintiff. SAS was the
agent responsible
for collection of such funds. Mr Moyo emphasized on
several occasions that Zimbabwean exchange control regulations forbid
the withholding
of export proceeds from Zimbabwe.
[45] With regard to the amount of 18
million South African Rand, which, it is common cause had flowed from
SAS to Petter (and which
is not to be confused with the amount of 18
million United States dollars or the amount of four million South
African Rand referred
to above), Mr Moyo stated that the details of
how this amount was made up came from the finance department. He said
that he saw
the vouchers in the books of the plaintiff in support
thereof and that he personally had gone went through such books in
order
to see the financial transactions, along with the finance
department. He stated that the finance department liaised with SAS
and
obtained documents from SAS that showed that Petter had been paid
the amount of 18 million South African Rand by SAS during the
period
May 2004 to December 2004. Mr Moyo said that if SAS paid Petter using
funds that were required to be remitted to Zimbabwe,
the payment to
Petter was unlawful. In order to make this for the remittances to
have been lawful, the plaintiff would have had
to have applied for
permission to make payment directly by SAS to Petter. The plaintiff
had not done so. He said that it was not
acceptable to merely use the
funds due to the plaintiff to pay a creditor of the plaintiff without
prior exchange control approval
from the Zimbabwean Reserve Bank.
[46] The plaintiff also called, as a
witness, Mr Obed Dube who had been appointed managing director of the
plaintiff’s mining
division, AA Mines in July 2002 and held
that position at the times material to this case. He studied mining
engineering at a college
in Zambia. He joined Mangura Copper Mines as
a general manager. The mine was taken over by a parastatal
organisation Zimbabwe.
In 1997, he joined AA Mines in the position of
Manager: Mining of Shabanie Mine. Mr Dube was promoted to Mine
Manager and then
to General Manager. He is a mining engineer with 40
years' experience. He described himself as ambitious and always
wanting to
achieve. He said that his mission had been to resuscitate
AA Mines. They had succeeded and it was sad to see the mines
deteriorating
later on. He had sleepless nights over this, as they
had mined, processed and sold asbestos but had not received any money
back
from SAS, as agent.
[47] Mr Dube said that the plaintiff
operated two asbestos mines, situated to the midlands to the east of
Zimbabwe. They were the
biggest in Zimbabwe. At the time, the
plaintiff was the fifth largest producer of asbestos worldwide. Like
Mr Moyo, Mr Dube said
that the plaintiff employed approximately 5,500
people.
[48] Mr Dube said that he has known
the first defendant since 1997. He knew the first defendant to be a
shareholder of the plaintiff.
He had not interacted with the first
defendant while he, Mr Dube, was in the lower ranks of the plaintiff
but began interacting
with the first defendant when he became its
managing director in 2002. Mr Dube described the first defendant as
an "executive
shareholder" in the plaintiff. The first
defendant had dealings with the management of the plaintiff that went
beyond his
being a person who merely owns shares. When there were
financial issues, the first defendant became involved because he had
a rich
fund of ideas when it came to raising money.
[49] Mr Dube described how the
plaintiff had made record production and record sales during 2002 and
2003. He outlined how the plaintiff
operated mechanised mines and
therefore had to import spares and equipment to operate the mines.
The plaintiff therefore owed funds
to foreign entities who sold the
spares and equipment. While the plaintiff had been selling asbestos
through SAS, it had not received
the proceeds of such sales. SAS had
sold the asbestos fibre and received funds but had failed to remit
those funds to the plaintiff.
He said that the plaintiff had always
sold asbestos through agents, the biggest of which was SAS. The
plaintiff had also sold asbestos
through an agent known as CJ Petrow.
Mr Dube said that Petter had purchased equipment and consumables on
behalf of the plaintiff.
Mr Dube had an independent recollection of
the amounts owed by SAS to the plaintiff as at the end of March 2004
being approximately
United States $18 000 000, Canadian dollars 600
000 to 650 000 and three to four South African rand. In total, SAS
had owed the
plaintiff approximately twenty million US dollars. Mr
Dube said that he had asked Mr Washington Samanga, the plaintiff’s
director of finance to confirm the amounts owed by SAS to the
plaintiff.
[50] Mr Dube confirmed his signature
and initials on the cession agreement that has been the vital subject
matter of this trial.
He said that the cession agreement had been
signed on 28 April 2004 and not on 1 March 2003 as appears ex
facie the document.
It was signed at the South African office in
Rivonia, South Africa. He said that, at the time of the signature of
the cession agreement,
all dispensations had been cancelled by the
government of Zimbabwe. The plaintiff had been selling its asbestos
in the market through
SAS.
[51] Mr Dube had been in Florida, in
the United States of America, at a producer's meeting, when the first
defendant contacted him
telephonically and asked him to stop in South
Africa on his way home to Zimbabwe in order to finalise a query with
MMCZ. Mr Dube's
wife, who was accompanying him, continued to
Zimbabwe but he made a detour to South Africa. He attended a meeting
in Rivonia on
26 April 2004 at which various discussions were held as
to how to deal with the outstanding amounts, as all parties were
suffering
as a result of the funds outstanding by SAS to the
plaintiff and funds outstanding from various parties worldwide to
MMCZ. The
plaintiff authenticated the amounts owed to it at this
time. By reason of the fact that the plaintiff was the end user of
the products
procured by Petter, a meeting was held in his presence
with the creditors of Petter.
[52] Mr Dube described how, later that
evening, the first defendant had called him to indicate that there
was a document that had
to be signed in order to procure that the
amounts outstanding were paid. The first defendant knew the problems
that had been encountered
by the operations. As the first defendant
was the owner of SAS, Mr Dube assumed that the first defendant knew
how the funds would
be paid by SAS to the plaintiff. The first
defendant informed Mr Dube that he must meet at the offices in
Rivonia the following
day.
[53] Mr Dube said that the next day,
while he was travelling to Rivonia, he contacted the first defendant
telephonically. The first
defendant said that Mr Dube would meet
with Mr Lovemore Dube at the office. I intend no disrespect to Mr
Lovemore Dube when
I refer to him as ‘the other Mr Dube’
in order to avoid confusion between Mr Obed Dube, on the one hand and
Mr Lovemore
Dube , on the other. When Mr Dube arrived, the other
Mr Dube was present with the lawyer of SAS, Mr John Ooosthuizen,
as well
as the other signatories to the cession agreement. Mr John
Oosthuizen was a relatively young man, who Mr Dube was meeting
for the first time. It seemed that Mr Oosthuizen had been dealing
with the people at the office a short while previously. Mr Dube
was
in a hurry as he needed to reach the airport that day to catch a
flight to Zimbabwe.
[54] Mr Dube was told why they were
signing the cession agreement. As the first defendant was so
successful at raising money, Mr
Dube was certain that the first
defendant would take steps to ensure that AA Mines runs and that the
creditors are paid. Mr Dube
asked who the author of the cession
agreement was. The other Mr Dube indicated to Mr Dube that the
agreement had been drafted by
the lawyer, Mr Oosthuizen and the first
defendant. The first defendant did not arrive while Mr Dube was at
the office that day.
Those present discussed the cession agreement
and it seemed that it was purely an inter-company transaction so that
one company
could pay what was due and the other company could
continue operating. Mr Dube thought that this was in order and he
signed the
cession agreement. He left the office while the other
signatories were finishing signing the agreement.
[55] The cession agreement was later
sent to Zimbabwe to Mr Dube's offices. He did not take a copy of the
cession agreement with
him when leaving South Africa. Once he arrived
in Zimbabwe, Mr Dube received legal advice from Mr Peter Moyo. In
response to a
question as to who the author of the cession agreement
was, he replied that all financial engineering had always, in his
experience,
been undertaken by the first defendant and given that the
cession agreement was meant to deal with getting the mines out of the

financial doldrums, it was the first defendant, who was the author
of the cession agreement. When back in Zimbabwe, Mr Dube also

consulted with MMCZ. He checked whether the cession agreement was
feasible in terms of Zimbabwean exchange control regulations.
He
consulted with Mr Moyo, who referred to the Reserve Bank regulations
regarding exports. Mr Dube sought legal advice from Mr
Moyo. He
informed Mr Moyo that a lawyer was present when the cession agreement
was crafted. Mr Moyo said that the agreement
should have been
approved by the plaintiff’s board. The cession agreement had
not been authorised by the board of the plaintiff.
Mr Dube said
that he had signed the document as managing director, subject to
ratification by the plaintiff’s board.
[56] Mr Dube said that he had
addressed a letter dated 11 May 2004 to the first defendant in
which he had raised concerns with
the first defendant about the
cession agreement and had sought clarity from him . Mr Dube said that
he had received no answer from
the first defendant to that letter. It
seems that the cession agreement had, in the meantime, received the
adverse attention of
the Reserve Bank in Zimbabwe. Mr Dube emphasised
that he had signed the cession agreement in good faith because the
first defendant
advised him to do so as part of a plan to re-engineer
the finances of the mines.
[57] Mr Dube spoke of how he and the
first defendant had spoken on the telephone on numerous occasions
about the need to deal with
the financial problems of the plaintiff.
This was important for the survival of the mines. Mr Dube would
not have signed the
cession agreement unless the first defendant had
instructed him to do so.
[58] Mr Dube confirmed that he had
attended the board meeting of the plaintiff on 1 July 2004. He also
confirmed that te also confirmedHehose
referred to in the minute as
having been present at the meeting were indeed so present and that
Mr Moyo had taken the minutes.
Mr Dube confirmed that the
content of the minutes accords with the events at the meeting. At the
meeting of 1 July 2004, Mr Dube
had expressed his concerns about
corporate governance in the plaintiff because the first defendant
made him do things that he would
never otherwise have done. After the
meeting of 1 July 2004, Mr Dube was called to give evidence by the
police, the state security
and the Reserve Bank of Zimbabwe.
[59] Under cross-examination Mr Dube
described how the first defendant had been passionately involved with
AA Mines. The board had
interfaced with the first defendant and had
received brilliant ideas from him. Unfortunately, things went astray.
Mr Dube described
how the dealings of SAS were predominantly run by
the first defendant. Mr Dube said that his interaction with the first
defendant
had arisen primarily as a result of SAS’ failure to
pay the plaintiff. Prior to that, the plaintiff had been receiving
funds
and there was no cause to interact with SAS at managerial or
director level. It was abundantly clear to Mr Dube that the first
defendant was the person who would assist because he had been so very
involved in SAS.
[60] Mr Dube said that the agreement
between SAS and the plaintiff was in place when he, Mr Dube took
over as the managing director
of the plaintiff. Mr Dube said that SAS
was the agent for the plaintiff and that the asbestos had been sold
on a commission basis.
Customers were situated in various countries
such as Brazil and India. The plaintiff was meant to have been paid
by SAS but SAS
did not do so at this critical period. There was a
policy to support the companies in the group. Mr Dube said that but
if SAS had
not had an inter-company relationship with the plaintiff
he would not have engaged SAS. Under cross-examination he confirmed
that
the plaintiff had supplied SAS with asbestos to the value of
twenty million United States dollars. The customers owed AA Mines
through SAS. He described how in 2004 the plaintiff had a turnover of
between forty-five and sixty million United States dollars.
The
plaintiff had improved production but the money was not coming in. Mr
Dube said that the first defendant had formed SAS in
order to take
over the marketing and selling of the asbestos.
[61] Mr Dube said that while he had
been in South Africa in April 2004, he had attended a meeting with
creditors of the plaintiff.
A representative of MMCZ had also
attended that meeting, along with the first defendant. The first
defendant had assured the creditors
that they would be paid, as an
arrangement was being reached between Petter, SAS and AA Mines. The
first defendant informed the
creditors that SAS owed the plaintiff
money and that the creditors would be paid.
[62] The plaintiff called the second
Mr Dube as a witness. He had been subpoenaed to give evidence at the
end of 2011. Last year,
he worked in Boksburg, South Africa. He
currently lives in Harare, Zimbabwe where he works for Riozim as
their Group Supply Chain
Manager. In this position, he manages the
procurement and supplies for the group of companies, which consist of
a gold mine, a
coal mine and a refinery. Prior thereto, he worked for
Shemax CC in Brakpan, South Africa.
[63] The second Mr Dube described how,
he began working for a subsidiary of the plaintiff, Turner Asbestos,
in 1991. He worked there
until 1998, when he began working for the
plaintiff in Bulawayo. In 2001, he was seconded to Petter Trading in
South Africa to
set up a buying house to buy for the plaintiff’s
group of companies. Even before 2001, he had travelled to and from
South
Africa for the purpose of setting up Petter. He had been
recruited by the first defendant. At Petter, he was at first the
Projects
Purchasing Manager. Later, he became the Operations Manager
or the Purchasing Manager. Essentially, he was doing the same job
with
all these titles, which was managing purchases for the group of
company. The second Mr Dube said that had been retrenched from Petter

in September 2004 and has not been paid the agreed severance package.
The second Mr Dube said that the first defendant had managed
the
business of Petter what was, effectively, a full-time basis.
[64] The second Mr Dube confirmed that
his initials and signature appear on the cession agreement. He
confirmed that the cession
agreement was signed in 2004 and that the
date in the agreement of 1 March 2003 was not the date upon which it
was signed.
[65] The second Mr Dube said that they
had reached a point where all companies in the plaintiff’s
group were being supplied
(for example Turnall, General Beltings, AA
Mines) but Petter was not receiving funds in respect of those
supplies. A discussion
was held in order to find a way for Petter to
receive payment from Zimbabwe. At the time, the management of the
plaintiff was the
same as the management of Petter. Petter needed the
money so that it could pay its creditors. The second Mr Dube
confirmed that
he had attended a meeting with creditors in late 2004.
The creditors wanted payment of the outstanding amounts, otherwise
they
were threatening to sue Petter. Petter was under pressure to get
the suppliers paid. There were times, during this crisis, when
the
creditors wanted the first defendant, to sign surety.
[66] The second Mr Dube said that the
other Mr Dube (Mr Obed Dube) was present at the meeting of creditors
of Petter. AA Mines had
therefore participated in the meetings with
the creditors. It was in this context that the first defendant came
up with the idea
of drafting the cession agreement. The first
defendant had an office near Mr Dube's office, in the same building.
The first defendant
wanted to put the cession agreement together so
that SAS, Petter and the plaintiff agreed that SAS would cede its
debtors or money
to Petter, so that Petter could pay its creditors.
The first defendant explained to all the relevant parties the purpose
of the
document, including SAS, Petter and the plaintiff. The second
Mr Dube said that AA Mines was a division of the plaintiff. He
confirmed
that there were funds outstanding by SAS to the plaintiff
as SAS sold asbestos on behalf of AA Mines.
[67] The second Mr Dube said that when
he signed the cession agreement, he asked why he was required to sign
and the first defendant
responded that it was because he was the
General Manager of Petter, the affected company, and that as General
Manager, he must
represent Petter. He described how, on 28 April
2004, the first defendant had come to his office. Those present
included the Group
Financial Director, the Accountant for SAS and the
second Mr Dube's secretary. The first defendant initiated the
idea of the
cession agreement. At first, he, the second Mr Dube had
typed the cession agreement, while the first defendant dictated the
details.
The first defendant then took over but later abandoned
typing the cession agreement and stated that they needed a lawyer to
draft
the cession agreement. This was a few weeks or a month before
28 April 2004.
[68] The first defendant then engaged
a lawyer whom the first defendant had described to the second Mr Dube
as ‘green behind
the ears’. The second Mr Dube stated
that it must have been the first defendant who gave instructions to
the lawyer to draft
the cession agreement because the first defendant
told him that he had engaged a company lawyer to draft the cession
agreement.
This was during the same week of the meeting of 28 April
2004. On 28 April 2004, Mr John Oosthuizen, a lawyer, had came to the
offices of Petter.
[69] A meeting was held on that day,
28 April 2008 at which both Mr Oosthuizen and the first defendant
were present. In the presence
of Mr Oosthuizen and the first
defendant, the second Mr Dube had queried why he was required to sign
the document and the issue
of backdating the document. When he asked
whether it was legal to put the incorrect date on the cession
agreement, Mr Oosthuizen
replied in the affirmative. The first
defendant had even asked the second Mr Dube, ‘Are you now
a lawyer?’ The
second Mr Dube said believed that if the lawyer
said it was fine to backdate the agreement, he must be correct. The
second Mr Dube
said that he had trusted the first defendant and there
was no reason for him to think that the cession agreement and
affidavit
were not in order.
[70] The second Mr Dube said that the
offices of Mr Oosthuizen, the lawyer were across the road from ARPS
House, the offices of
Petter and SAS. The lawyer went and worked on
the document and made certain changes but eventually the second Mr
Dube was called
to go and sign the document. The second Mr Dube
cannot remember whether the document was signed at Petter's offices
or at the lawyer's
offices. He said there were lots of people present
to sign. The second Mr Dube said that he had seen the other Mr Dube
(Mr Obed
Dube) at the signing of the cession agreement and that
Mr Obed Dube had come to the offices specifically to sign the
cession
agreement.
[71] The second Mr Dube confirmed his
signature to the affidavit that was used in support of the
application heard by Van Oosten
J. The second Mr Dube said that the
affidavit had been drafted by Mr Oosthuizen. The second Mr Dube said
that he had been called
by Mr Oosthuizen to go to Mr Oosthuizen’s
offices to sign the affidavit. Mr Oosthuizen had then transported the
second Mr
Dube in Mr Oosthuizen’s car to the police station to
have the affidavit commissioned. Mr Oosthuizen has read the affidavit

out to him. The affidavit was already complete when he arrived. He
did not consult with Mr Oosthuizen about the content of the

affidavit. Mr Oosthuizen was already briefed by somebody else.
[72] Mr Oosthuizen must have received
the information to put into the affidavit from the first defendant.
According to the second
Mr Dube there could not have been any other
person who could have provided the information. The second Mr Dube
said that the entire
idea of the cession agreement and the purpose
thereof had originated with the first defendant. No other person
would have an interest
in or could come up with necessary background
information for Mr Oosthuizen to draft the agreement, other than the
first defendant.
[73] The second Mr Dube confirmed that
he has signed a letter on behalf of Petter to the plaintiff dated 26
April 2004 in which
Petter had demanded payment from the plaintiff
‘regarding long overdue outstanding payments amounting to R74
872 468, 49’.
The second Mr Dube said that the letter had been
typed by his secretary and dictated in his presence by the first
defendant. The
source of the detail contained therein is the first
defendant. The content of the letter was not in written by the second
Mr Dube
in his own words. The same applies to a letter which the
second Mr Dube had signed on the same date on behalf of Petter,
addressed
to SAS which referred to the cession agreement and demanded
payment of this amount of R74 872 468, 49.
[74] The second Mr Dube also described
how the first defendant was also the author of a letter dated 29
April 2004 which was addressed
by the plaintiff to SAS in terms of
which the plaintiff recognised and accepted the cession agreement.
The second Mr Dube said
that the letter had been drafted at the
offices of Petter and sent by telefax to Zimbabwe so that Dr
Mudukunye, the chairman could
sign the letter and send it back. The
same stratagem applied in respect of a letter dated 30 April 2004
addressed by the plaintiff
to Petter and signed by Dr Mudukunye, the
chairman which alluded to and recognised the cession agreement.
[76] The plaintiff called Mr Norman
Klein, one of the joint liquidators of SAS to give evidence. He
is a Chartered Accountant by profession and conducted business as an
insolvency practitioner under the name and style of ‘Westrust’

at 41 Central Street, Houghton, Johannesburg. He has been an
insolvency practitioner for approximately 45 years. He concentrated

his business in Gauteng but was on the panels of various other
Masters' offices such as Bloemfontein and Cape Town. He said that
of
the four other
joint liquidators of SAS, Ms Daphne Lindup
is deceased and has been replaced by Ms Karen Keevy of the
same office.
As far as he is aware, the other parties are all still
liquidators of SAS. He confirmed that the summons, together with the
particulars
of claim in the action instituted by the plaintiff
against SAS
3
had been served on him. Mr Klein had been subpoenaed in about
November/December 2011 and he had also been subpoenaed to appear
at
the last set-down of the trial for October 2011.
[77] Upon receiving the summons, the
liquidators consulted with their attorneys and sought advice from
counsel. They took steps
to file a notice of intention to defend. The
matter was then dealt with by Mr Vincent Matsepe, a joint liquidator.
They received
a formal opinion from Advocate Johan Smit but Norman
Klein did not attend the consultation with him. They filed a plea
that was
a bare denial because there were not sufficient facts and
documents to give full details of a defence. The bare denial plea was

submitted because the liquidators did not want default judgment to be
issued against them. After the plea had been delivered, a

consultation was held on 3 November 2006 between Mr Matsepe,
representing the joint liquidators, Advocate Johan Smit, the
first
defendant and the second defendant, along with the instructing
attorney, Mr Gewer.
[78] Mr Klein confirmed that Advocate
Smit had given them a formal written opinion which has never been
seen by the plaintiff. In
that opinion Advocate Smit advised the
liquidators that there was no basis upon which the liquidators could
proceed to defend.
He recommended that the liquidators withdraw their
defence of the matter. Advocate Smit stated that there were not
sufficient documents
but that there may be a counterclaim. He stated
that if there is a counterclaim, the liquidators could proceed with
the counterclaim
or allow the first defendant to proceed with the
counterclaim.
[79] Mr Klein said that he had dealt
mainly with the second defendant and to a lesser extent, with the
first defendant. He confirmed
that the second defendant had been a
director of the company in liquidation from about a year before the
liquidation of the company.
[80] Mr Klein said that, between
filing the notice of intention to defend and withdrawing the defence,
there had been interactions
involving the liquidators and both the
first defendant and the second defendant.
[81] Mr Klein confirmed that SAS was
finally liquidated in June 2005. He was then appointed as a
provisional liquidator on 13 October
2005. After the first meeting of
creditors, all five liquidators were appointed as final liquidators
on 11 April 2006.
He has since been involved in the usual
liquidator's task of collecting assets and reducing the assets to
cash. He said that approximately
R4,6 million has been recovered into
the SAS estate. A little more had been recovered, as this amount was
nett of costs. This amount
has been recovered since April 2006.
[82] Mr Klein said that besides the
plaintiff’s claim, a claim has been submitted in the SAS estate
by the South African Revenue
Service (SARS), but not yet proved. The
claim of SARS is in the amount of approximately R8,6 million. He
pointed out that the plaintiff
is not a secured creditor and
therefore does not rank first in the distribution of the estate.
SARS, however, is a preferent creditor
in the free residue of the
estate. Mr Klein said that a small portion of its claim
(approximately R80,000) is not preferent, as
it is for penalties and
interest.
[83] If SARS' claim is proven, the
other creditors will receive nothing. SARS’ claim is not yet
proven because the second
meeting of creditors was held on 22 October
2006 and SARS' claim was not received in time for such meeting. The
second meeting
has not yet been closed by the Master and another
meeting cannot be convened while the meeting is still open. The SARS
claim has
therefore not been submitted for proof as yet. Mr Matsepe,
Ms Keevy and Mr Klein have been meeting to discuss ways to bring the

matter to finality but no conclusion has been reached as yet.
[84] Mr Klein testified that the
plaintiff had tried to prove a claim in the SAS estate before the
Master at the second meeting
of creditors. The claim was withdrawn,
an action was instituted and judgment granted in favour of the
plaintiff.
[85] Mr Klein said that he had
received no CM100 form from the second defendant, as the director of
SAS. He also did not know whether
the second defendant had been
excused from producing a CM100 in terms of section 363 of the old
Companies Act.
[86] He confirmed that, to the best of
his knowledge, AA Mines was a division of the plaintiff even though
on certain documentation
it appeared as if it was a separate company.
He also confirmed that he had received a list of debtors to the value
of many millions.
The list of debtors was handed to the liquidators
by the attorneys for the plaintiff. He sent the debtors statements
and letters
of demand. He said that, in general, the debtors
responded that they had already paid SAS or they put the liquidators
to the proof
of the allegations in the letters of demand. The
liquidators could not compile the documentation substantiating the
claim. He
confirmed that had been received from Brazil and Nigeria.
[87] Mr Klein also confirmed further
that, to the best of his knowledge, with regard to the relationship
between SAS and the plaintiff,
that the plaintiff had supplied
asbestos to SAS, which sent customers invoices in its own name. There
is a dispute as to whether
it was an agent-principal relationship.
SAS was responsible for non-collection and was entitled to a
commission of 4,25%. The plaintiff
was aware of the customers and
provided the list of debtors.
[88] Mr Klein said that the notice of
withdrawal of the defence to the plaintiff’s action had been
filed for two reasons.
First, the liquidators received a letter from
the attorneys Brink Cohen Le Roux Incorporated, the plaintiff’s
attorneys,
advising that they considered the funds in the estate to
belong to the plaintiff and that if the funds were used, the
liquidators
did so at their peril. Secondly, Advocate Smit had also
advised them that they were unlikely to succeed. Advocate Smit had
also
advised that the liquidators would be at risk in their personal
capacity to pay costs and recommended that the liquidators not defend

the action. Advocate Smit had gone on to advise that if a
counterclaim were to be instituted, the first and second defendants
could be allowed to pursue the counterclaim so long as they furnished
an indemnification or provided security. Mr Klein confirmed
that a
letter was sent to the first and the second defendants stating that
if they wanted to defend the claim action, the liquidators
could not
take on the personal risk but they, the first defendant and the
second defendant could do so on behalf of the estate,
if they so
wished.
[89] Ms Kirsty Simpson, a practising
attorney employed by Brink Cohen Le Roux Incorporated, the
plaintiff’s attorneys, also
testified. She said she is a
practising attorney and that since the second half of 2005 she has
been working on various matters
relating to matters in which the
first and second defendants had been parties. She confirmed that she
had attended the rescission
action proceedings on 4 and 5 October
2007. She said that she took detailed notes during such proceedings,
at which both the first
and the second defendant were present. Ms
Simpson also confirmed that she had perused the transcription of the
proceedings relating
to the hearing in application to rescind the
order of Van Oosten J and that they contained an accurate record of
what had been
said by the second defendant in those proceedings. The
transcript was handed in as an exhibit.
[90] Ms Simpson said that, during the
rescission proceedings, the second defendant had given evidence as
set out in the affidavit
in support of the joinder application. She
confirmed, in particular that the second defendant had stated that he
was the sole director
of SAS and a director of Petter at the material
time and as such, he knew of and sanctioned the application
proceedings in respect
of which Van Oosten J had given the order. He
had confirmed that he knew that this application had been predicated
upon the cession
agreement in question as well as consent by SAS and
the plaintiff to judgment being taken by Petter. The second defendant
had
also confirmed that he had discussed the judgment being sought in
the application that went before Van Oosten J with the first

defendant. The second defendant had been clear that the first
defendant agreed with the course of action that had been taken. The

second defendant had also admitted that, as a result of the court
order secured in the application heard by Van Oosten J, approximately

R18 million flowed from SAS to Petter.
[91] In paragraphs 6.6 and 6.7 of the
plaintiff’s particulars of claim, it alleges as follows:
6.6 On 6 May 2004 Petter obtained
judgment against SAS for payment of the amount of ZAR 74 872 468, 49,
together with interest
and costs (‘the cession court order’).
6.7 Purporting to act in accordance
with the cession court order, SAs during or about the period May 2004
to December 20-04 paid
to Petter an amount of ZAR18 043 373, 21.In
response to these allegations the first defendant expressly admitted
not only that
Petter had obtained the judgment but also that ‘an
amount of R18 043 373,21 was paid to Petter’.
[92] After the close of the
plaintiff’s case, the first defendant applied for absolution
from the instance. I dismissed the
application with costs on the
basis that I could not conclude that there was no case for either of
the defendants to answer.
[93] The first defendant declined to
give evidence. He called one witness only, Mr Cleopas Sanangura. Mr
Sanagura confirmed that
he had been the financial manager of SAS from
2001 to October 2004 and that his signature appears on the cession
agreement which
he had signed on behalf of SAS. He agreed that John
Oosthuizen, the attorney had drawn up the cession agreement. Mr
Sanangura said
that SAS was at risk at the time. AA Mines owed Petter
money. He said that the cession agreement had been devised to enable
SAS
to divert the funds which SAS owed to the plaintiff to pay to
Petter directly. He said that the cession agreement had served as
‘as
security’.
[94] He said that SAS had paid Petter
the amount of R18 million before the signing of the cession
agreement. He agreed that the
date reflected on the agreement was not
the actual date the agreement was signed. The attorney had given
advice that the agreement
must be back-dated to before the payments
were made by Petter. He confirmed the allegations in paragraph 6.7 of
the plaintiff’s
amended particulars of claim as being correct.
He accepted that it was correct that the first defendant had, at all
material times,
been a director of SAS.
[95] During cross-examination, Mr
Sanangura admitted that he had recorded in letters during August
2004 that SAS owed the plaintiff
approximately US $18 million,
Canadin dollars 600 000 and R4,5 million. He said, however, that that
those amounts had been reduced
since 31 March 2004 by US $4,2
million.
[96] At the end of the trial the
following facts were common cause:
(i) That at all material times, the
plaintiff had carried on business as a miner of asbestos fibre in
Zimbabwe, inter alia under
the name and style of African Associated
Mines;
(ii) That SAS was a company with
limited liability duly incorporated in accordance with the laws of
the Republic of South Africa
with its registered office at AHI House,
325 Rivonia Boulevard, Rivonia, Johannesburg;
(iii) That Petter was a company with
limited liability duly incorporated in accordance with the laws of
the Republic of South Africa
with its registered office at AHI House,
325 Rivonia Boulevard, Rivonia, Johannesburg;
(iv) That SAS and Petter shared a
common principal place of business at AHI House, 325 Rivonia
Boulevard, Rivonia, Johannesburg;
(v) That the first defendant had been
a director of SAS, more particularly during the period 1 April 1996
to 1 March 2004;
(vi) That the first defendant had been
a director of Petter, more particularly from 1 July 1998 to 1 March
2004;
(vii) That the second defendant had
been a director of SAS, more particularly from at least 6 May 2004
until date of liquidation
of SAS on 14 July 2005;
(viii) That the second defendant had
been a director of Petter, more particularly from at least 6 May 2004
until date of liquidation
of Petter on 20 September 2004;
(ix) That on or about 4 January 1998,
the plaintiff and SAS concluded an agreement;
(x) That pursuant to that agreement,
the plaintiff had, from time to time, delivered asbestos fibre to
SAS;
(xi) That a document styled a ‘cession
agreement’ and dated 31 March 2003 was signed on 28 April
2004, (the date
when this document was created is not in dispute any
more), in terms whereof the plaintiff had purported to cede to Petter
a part
of its claim against SAS in the amount of R74 872 468,49;
(xii) That on or about 3 May 2004,
Petter caused an application to be issued out of the Witwatersrand
Local Division of the High
Court in terms whereof Petter, relying on
the cession agreement, sought judgment against SAS for payment of the
amount of South
African R74 872 468,49;
(xiii) On 6 May 2004, Petter obtained
judgment against SAS for payment of the amount of South African
R74 872 468,49 together
with interest and costs;
(xiv) That SAS paid to Petter an
amount of South African R18 043 373,21;
(xv) That the cession order was
rescinded at the instance of the plaintiff in what was then known as
the Witwatersrand Local Division
of the High Court on 29 November
2004;
(xvi) That SAS was finally wound up in
the Witwatersrand Local Division of the High Court on 14 June 2005.
(xvii) That a final order for the
liquidation of Petter was made in the Witwatersrand Local Division of
the High Court on 20 September
2004.
[97] There is no reason to doubt the
evidence of Mr Klein and Ms Simpson, both of whom are professional
persons. Messrs Moyo and
the two Dubes were excellent witnesses. If
I could waive a magic wand, in the manner of a fairy godmother, I
would appoint each
of them to prominent positions in the
administration of the courts in this country. They were intelligent,
well-educated, motivated,
disciplined, hard working and idealistic.
Their evidence was convincing.
[98] Messrs Moyo and the two Dubes
were cross-examined up hill and down dale by the first defendant. At
no stage was it put to them
that the first defendant disagreed with
them as to his role in the events relating to the cession agreement.
[99] The following additional
information, involving other court proceedings in which the plaintiff
was a litigant, may assist in
obtaining perspective in this matter:
99.1.1 SAS brought an attachment
application against the plaintiff in order to attach the assets of
the plaintiff in South Africa
to found, alternatively, confirm
jurisdiction in an action, which allegedly would be instituted by SAS
against the plaintiff for
the payment of US $6,966,666.00, as an
alleged damages claim
4
,
which claim has been pursued;
99.1.2 Thisapplication for attachment
was argued before Fevrier AJ at the end of January 2005. The
attachment was later set
aside and SAS was ordered to pay the
plaintiff’s costs.
99.2.1 The plaintiff launched an
application for the final winding-up of SAS on 2 February 2005.
5
99.2.2 This application was based on
SAS’ indebtedness to the plaintiff arising from asbestos
product which had been delivered
to SAS and sold through it, to
customers.
99.2.3 SAS opposed the winding-up
application. SAS’ main grounds of opposition were that the
legislation underpinning the
plaintiff’s authority to prosecute
the application was unconstitutional and, therefore, unenforceable in
the South Africa,
and that the application for winding-up constituted
an abuse .
99.2.4. It was alleged on behalf of
SAS in opposing the application that the application was an attempt
at victimisation by the
Zimbabwean Government and that the Zimbabwean
reconstruction order and reconstruction legislation was nothing more
than the unlawful
expropriation of assets by the Zimbabwean
Government, including the plaintiff without compensation.
99.2.5. This application was argued
before Epstein AJ on 1 June 2005 and resulted in the
granting of a final winding up
order. In his judgment, Epstein
AJ he dismissed the defences raised by SAS. He specifically dealt
with and dismissed the alleged
defence that the plaintiff was not
authorised to bring the application.
6
An application for leave to appeal against this judgment has been
lodged but has not been argued.
99.3.1. On 7 April 2006,
almost a year after the final winding-up order had been granted, the
first and the second defendants
instituted a rescission action to on
behalf of SAS,
7
in which they sought the rescission and setting aside of the order
placing SAS under final liquidation, as well as the setting
aside of
the appointment of the liquidators and costs against the plaintiff’s
administrator and the plaintiff. The defendants
cited included not
only the plaintiff but also the liquidators of SAS. The plaintiff
defended the action, which was set down for
hearing on
4 October 2007.
99.3.2. After two days of trial during
which the second defendant gave evidence, the action was withdrawn,
the second defendant
tendering payment of costs personally.
99.4.1. On 9 June 2006,
Mr Norman Klein and various others were appointed as
liquidators in the estate of SAS. The first
meeting of creditors in
the estate of SAS was held on 4 November 2005. No claims
were proved at the first meeting.
99.4.2. A second meeting of creditors
was held on 14 September 2006. Both the first the second defendants
proved claims in the
estate of SAS on behalf of various companies,
namely ECC Properties (Pty) Limited (‘EEC’), Africa
Heritage Management
Services (Pty) Limited (‘AHMS’) and
Africa Resources Limited (‘ARL’).
99.4.3. On the following day, the
plaintiff brought an urgent application
8
for an order reviewing and setting aside of the decision of a
representative of the Master of the High Court to admit, as proved,

claims submitted by the first and the second defendant on behalf of
ECC, AHMS and ARL; as well as an order that these aforesaid
claims be
submitted to interrogation by the Master of the High Court, as set
out in
section 44(7)
of the
Insolvency Act, 24 of 1936
and
directing the Master of the High Court to reconsider the claims in
accordance with
section 44
of the
Insolvency Act, after
completion of the interrogation.
99.4.4. The review application was
argued before Wepener AJ (as he then was). On 14 November 2005,
Wepener AJ rejected
the argument regarding a lack of authority and
reviewed and set aside the admission of the claims and granted costs,
including
the costs of two counsel, against the companies on which
behalf the first defendant acted.
99.4.5. Both the first and the second
defendant then made an application for leave to appeal to be brought
in respect of the judgment
of Wepener AJ. This application for
leave to appeal was dismissed by Wepener AJ.
[100] Sight must also not be lost of
the fact that on 18 September 2006, the plaintiff brought an action
against SAS for the proving
of its claim as well as the fact that the
plaintiff obtained default judgment against SAS on 17 July 2007 for
rectification of
an agreement and payment of the amount of United
States $13 308 150,27; South African R4 515367,48 and Canadian
dollars 628 071,84,
(which constituted the aggregate of the
plaintiff’s claim against SAS). The default judgment was
granted after the liquidators
of SAS withdrew the bare denial plea
that they had entered in defence of the claim.
[101]
Section 424
(3) of the old
Companies Act provides as follows:
Without prejudice to any other
criminal liability incurred, where any business of a company is
carried on recklessly or with such
intent or for such purpose as is
mentioned in subsection (1), every person who was knowingly a party
to the carrying on of the
business in the manner aforesaid, shall be
guilty of an offence.
This is plainly a penal provision.
Section 425 of the same Act makes the criminal provisions of the law
relating to insolvency applicable
to the directors or officers of a
company, under certain circumstances.
[102] Throughout this trial I have
been mindful of the common law wariness of treating admissions of
criminal activity by one person
as admissible against another.
9
Extra-curial statements made by one accused person are not evidence
against another accused person.
10
It is not, however, an absolute rule of law that admissions made by
one person are inadmissible in evidence against another.
11
In S v Miller,
12
Watermeyer JA, delivering the judgment of the court held that the
acts and declarations of one conspirator are admissible in evidence

against another provided they are acts performed and declarations
made in the furtherance of a common purpose.
13
In this connection, he relied on R v Levy and Others
14
and R v Cilliers.
15
[103] A useful discussion of the whole
question of the admissibility of statements made by one person as
evidence against another
is to be found in the judgment of Friedman J
(as he then was) in S v Banda and Others.
16
In considering the issue, he draws attention to the distinction
between narrative statements (which are not admissible against

another accused person) and executive statements (which are). Good
illustrations of the difference between the two types of statements

is to be found in R v Blake and Tye
17
which was considered by the court in the R v Miller case (supra).
18
Another useful discussion on the question of ‘narrative’
v ‘executive’ statements is to be found in Zeffert
and
Paizes’ The South African Law of Evidence.
19
Sight must also not be lost of the provisions of section 219 the
Criminal Procedure Act, No.51 of 1977
, which provides that ‘(n)o
confession made by any person shall be admissible as evidence against
another person’.
[104] The trial has been replete with
damning admissions made by the second defendant. The question arose
as to whether these admissions
may be admissible against the first
defendant. As mentioned above in this judgment, in paragraphs 6.6 and
6.7 of the plaintiff’s
particulars of claim, it alleges as
follows:
6.6 On 6 May 2004 Petter obtained
judgment against SAS for payment of the amount of ZAR 74 872 468, 49,
together with interest
and costs (‘the cession court order’).
6.7 Purporting to act in accordance
with the cession court order, SAs during or about the period May 2004
to December 20-04 paid
to Petter an amount of ZAR18 043 373, 21.
In response to these allegations the
first defendant expressly admitted not only that Petter had obtained
the judgment but also
that ‘an amount of R18 043 373,21 was
paid to Petter’.
[105] The first defendant did not
plead that the payment of the amount of approximately R18 million was
made before the judgment
was obtained on 6 May 2004. Taken in
context, the first defendant’s plea contains a clear admission
that the payment of
some R18 million by SAS to Petter was effected
consequent upon the judgment obtained per Van Oosten J on 6 May 2004.
This clear
admission makes it unnecessary to make a pertinent finding
of the admissibility of the second defendant’s admissions as
against
the first defendant. It also makes irrelevant the question
of whether SAS did or did not make a payment on behalf of the
plaintiff
in an amount of US $4 646 445. So too, if such a payment
was made the question of when it was paid becomes a red herring in
the
context of this case.
[106] The court has had regard to the
vexed question, related to the to questions considered in the case of
Hollington v F. Hewthorn
& Company Limited,
20
of the extent to which admissions made by the second defendant as a
person in other civil proceedings may be used against him in
this
particular trial. Useful discussions about the admissibility of these
admissions, which may perhaps be considered as informal
admissions in
this particular trial, are to be found in Zeffert and Paizes’
The South African Law of Evidence
21
and Schwikkard and Van der Merwe’s Principles of Evidence.
22
[107] In the absence of any viva voce
evidence from the second defendant in this trial, there seems no good
reason not to have regard
to the admissions which the second
defendant has made in other related matters which have a bearing on
this issues in this trial.
Even if this conclusion relating to the
admissibility of the second defendants admissions in other matters is
wrong, he faces the
much same difficulties, mutatis mutandis, as the
first defendant in regard to his formal admissions in pleadings in
this trail
action. He has admitted that he was a director of both SAS
and Petter from at least 6 May 2004 until 14 June 2005 (the date of
liquidation of SAS) and 20 September 2005 (the date of liquidation of
Petter) respectively. The second defendant has also admitted
that
Petter obtained the judgment against Petter on 6 May 2004 and that an
amount of R18 043 373, 21 was paid to Petter. Again,
taken in
context, the second defendant’s plea contains a clear admission
that the payment of some R18 million by SAS to Petter
was effected
consequent upon the judgment obtained per Van Oosten J on 6 May 2004.
[108] In evaluating the evidence, the
court has held in focus the ‘purple passage’
23
set out in the case of Stellenbosch Farmers’ Winery Group
Limited & Another v Martell et Cie & Others
24
as follows:-
On the central issue as to what the
parties actually decided, there are two reconcilable versions. So,
too, on a number of peripheral
areas of dispute which may have a
bearing on the probabilities. The technique generally employed by
courts in resolving factual
disputes may conveniently be summarised
as follows:
To come to a conclusion on the
disputed issues, a court must make findings on:
the credibility of the various
witnesses;
their reliability; and
the probabilities.
As to (a) the court’s finding on
the credibility of a particular witness will depend on its impression
about the veracity
of the witness. That in turn will depend on a
number of subsidiary factors not necessarily in order of importance
such as:
the witness’ candour and
demeanour in the witness box;
his bias, latent or blatant;
internal contradictions in his
evidence;
external contradictions with what was
pleaded or put on his behalf, or with established fact or with his
own extracurial statements
or actions;
the probability or improbability of
particular aspects of his version;
the calibre and cogency of his
performance compared to that of other witnesses testifying about the
same incidents or events.
As to (b), a witness’
reliability will depend, apart from the factors mentioned under (a)
(ii), (iv), (v) above, on
the opportunities he had to
experience or observe the events in question and
the quality, integrity and
independence of his recall thereof.
As to (c), this necessitates an
analysis and evaluation of a probability or improbability that each
partiy’s version on each
of the disputed issues. In the light
of its assessment of (a), (b) and (c) the court will then, as a final
step, determine whether
the party burdened with the onus of proof has
succeeded in discharging it. The hard case, which will doubtless be
the rare one,
occurs when a court’s credibility findings compel
it in one direction and its evaluation of the general probabilities
in
another. The more convincing the former, the less convincing will
be latter. But when all factors equipoised the probabilities

prevail.
[109] Mindful of the penal nature of
section 424
of the old Companies Act, the court considers it
appropriate to apply a criminal standard of proof insofar as
inferential reasoning
is concerned. The standard is that found in R v
Blom:
25
the inference to be drawn must not only be consistent with all the
proved facts but must also exclude every other reasonable inference

that may be drawn. The court has also had regard to the
Constitutional Court’s imprimatur in S v Boesak
26
and Osman and Another v Attorney-General, Transvaal
27
of the inference of guilt that may be drawn when, during a trial, an
accused person fails to testify in his defence in the face
of there
being evidence which calls for an answer.
[110] Having regard to the tests set
out in SFW v Martell and R v Blom against the evidence outlined
above, the failure of the first
defendant to put it to Messrs Moyo
and the two Dubes that he disputed their evidence with regard to the
cession and the first defendant’s
failure to testify (despite
the free advice from the bench that he had a case to answer when he
applied for absolution from the
instance), one question looms large:
why would there have been this rigmarole to concoct a cession
agreement and thereafter,
relying upon it, would there have been the
application before Van Oosten J if not for the very purpose of
diverting funds which
were due to the plaintiff by SAS, out of the
accounts to SAS to Petter? This leads to another question: if the
funds were not,
in fact paid from SAS to Petter, how come, when SAS
was liquidated those funds were not in its accounts? The
probabilities mount
to the extent that it may be concluded, beyond
reasonable doubt, not only that (i) the cession agreement was devised
for the purpose
of diverting funds which were due to the plaintiff by
SAS, out of the accounts to SAS to Petter but also that (ii) the
aforesaid
diversion of funds took place consequent upon the order of
Van Oosten J. In the result, the diversion of funds caused the
plaintiff
to suffer the loss in question.
[111] Section 424(1) of the old
Companies Act reads as follows:
(1) When it appears, whether it be in
a winding-up, judicial management or otherwise, that any business of
the company was or is
being carried on recklessly or with intent to
defraud creditors of the company or creditors of any other person or
for any fraudulent
purpose, the Court may, on the application of the
Master, the liquidator, the judicial manager, any creditor or member
or contributory
of the company, declare that any person who was
knowingly a party to the carrying on of the business in the manner
aforesaid, shall
be personally responsible, without any limitation of
liability, for all or any of the debts or other liabilities of the
company
as the Court may direct.
[112] If one has regard to the cases
of Cooper & Others NNO v SA Mutual Life Assurance Society and
Others
28
and Ozinsky NO v Lloyd and Others,
29
it is clear that, in addition to the plaintiff having to show that it
is a creditor of SAS, in order to hold someone liable under
s 424(1),
the following has to be established:
(1) the business of the company was
carried on
(a) recklessly,
(b) with intent to defraud creditors
(of the company or of any other person), or
(c) for any fraudulent purpose; and
(2) the person concerned must:
(a) have been a party to the
carrying on of the business, and
(b) have had knowledge of the facts
from which the conclusion is properly to be drawn that the business
of the company was or
is being carried on:
(i) recklessly;
(ii) with intent to defraud
creditors (of the company or of any other person); or
for any fraudulent purpose.
[113] Insofar as the interpretation
and applicability of the provisions of section 424 of the old
Companies Act are concerned, the
Supreme Court of Appeal (‘SCA’)
has delivered a judgment which is ‘hot off the press’:
Fourie v Firstrand
Bank Limited.
30
That case dealt with the cases to which the plaintiff and the first
defendant had previously referred me: Howard v Herrigel and
Another
NNO
31
Philotex (Pty) Limited and Others v Snyman; Braitex (Pty) Limited v
Snyman and Others,
32
L & P Plant Hire Beperk en Andere v Bosch en Andere
33
and Saincic and Others v Industro-Clean (Pty) Limited and Another.
34
In paragraph [30] of Fourie v Firstrand Bank, the general principle
that section 424 of the old Companies Act does not require
proof of a
causal link between the relevant conduct and the company’s
inability to pay the debt in question is affirmed.
In Fourie v
Firstrand Bank, the SCA also reaffirmed the exception to this general
principle where the converse had been positively
established inasmuch
as there plainly was no causal connection between the relevant
conduct and the debt.
35
[114] The factual finding, in this
court, that the probabilities are, beyond reasonable doubt:-
(i) that the cession agreement was
devised for the purpose of diverting funds which were due to the
plaintiff by SAS, out of the
accounts to SAS to Petter; and
(ii) that a diversion of funds took
place consequent upon the order of Van Oosten J; and
(iii) that this diversion of funds
resulted in the plaintiff suffering a loss of R18 043 374, 21
makes it unnecessary to deal with the
finer points of causality raised in the respective cases of Saincic
and Fourie v Firstrand
Bank. While the first and second defendants
were directors of SAS, it business was, with their knowledge and
active participation
being conducted for fraudulent purposes. As a
result of this fraudulent conduct of the business of SAS, SAS has not
been able to
pay a debt due by it to the plaintiff.
[115] The plaintiff has asked for the
costs of two counsel, where two counsel were, in fact engaged in the
matter. In view of the
nature of this matter, such an order is
justified. The plaintiff has asked that interest be order to run from
6 May 2004 (the date
of the order given by Van Oosten J),
alternatively from 14 September 2006 (the date of service of the
summons). It will be wiser
if the court errs on the side of being
conservative on this issue. The date of service of the summons shall
apply.
[116] Judgment is given in favour of
the plaintiff against the first and second defendants jointly and
severally, the one defendant
paying the other to be absolved. It is
declared that the first and second defendants are jointly and
severally liable to the plaintiff,
the one defendant paying the other
to be absolved, in terms of section 424 (1) of the old Companies Act
(No.61 of 1973, as amended)
for a debt owing by Southern Asbestos
Sales (Pty) Limited (‘SAS’) to the plaintiff in the sum
of ZAR (South African
Rand) 18 043 374, 21 (eighteen million and
forty-three thousand, three hundred and seventy–four rand and
twenty-one cents).
[117] The first and second defendants
are jointly and severally liable to pay the plaintiff, the one
defendant paying the other
to be absolved, as follows:
The sum of R18 043 374, 21;
Interest on the aforesaid sum
calculated at the rate of 15.5% per annum from 14th September, 2006
to date of payment;
Costs of suit, which costs are to
include all costs previously reserved and the costs of two counsel
for the times when two counsel
were actually employed by the
plaintiff.
DATED AT JOHANNESBURG THIS 11th DAY OF
OCTOBER , 2012
N.P. WILLIS
JUDGE OF THE HIGH COURT
Counsel for the Plaintiff: Adv H. C.
Bothma
Attorneys for the Plaintiff: Brink
Cohen Le Roux Incorporated
First Defendant: In Person
Second Defendant: In Default of
Appearance
Dates of hearing: 10-14 ; 17 -19; 27
September, 2012
Date of judgment: 11 October, 2012
ANNEXURE ‘A’ (the
complaint by the first defendant about the court to the Judicial
Service Commission) appears overleaf:
…
...................
…
........................
+27………….
(office)
+27…………….
(mobile)
…………………
.@gmail.com
4 October 2012
The Judicial Services Commission
c/o Chief Justice of the Republic of
South Africa
Constitutional Court
1 Hospital Street
Constitution Hill
Braamfontein
Attention: Your Lordship Mr. Chief
Justice Mogoeng Mogoeng:
Re: Complaint against His Lordship Mr.
Justice N. Willis
1. I am lodging this complaint in
terms of
Section 14(4)(e)
of the
Judicial Service Commission Act 9 of
1994
as amended by
Judicial Service Commission Amendment Act 20 of
2008
in relation to the Presiding Judge, His Lordship Mr. Justice N.
Willis, in the matter SMM Holdings (Private) Limited (“SMM”)

v Mutumwa Mawere & Parmanathan Mariemuthu under Case Number
20235/2006 in the South Gauteng High Court.
2. I am the First Defendant in the
above-mentioned matter.
3. The Plaintiff in the matter is SMM,
a company that was placed under reconstruction, on 6th September
2004, pursuant to the operation
of a decree promulgated by President
R. Mugabe allowing for the control and management of the company to
be vested in a state-appointed
administrator on allegations that the
company was indebted to the government of Zimbabwe and, therefore,
the government could not
rely on the existing laws to protect itself
as a purported creditor. A copy of the Reconstruction Act is
attached hereto as Annexure
MDM1.
4. I was born in Zimbabwe and acquired
South African citizenship in 2002 having been resident in the country
since 1995.
5. I am a businessman and prior to my
taking residency in South Africa, I was employed by the World Bank in
Washington DC as a Senior
Investment Officer in the Oil, Gas &
Mining Department.
6. In March 1995, I founded Africa
Resources Limited (ARL”), a company incorporated under the laws
of the British Virgin Islands
(“BVI”) that acquired in
March 1996 the entire shareholding in the holding company of SMM, SMM
Holdings Limited (“SMMH”),
a company incorporated under
the laws of the United Kingdom.
7. The facts of the matter before His
Lordship Mr. Justice Willis relate to a period in which SMM was under
my control and management.
8. SMM’s control and management
was divested through an act of state in the jurisdiction of Zimbabwe.
Accordingly, it is
submitted that the control and management of the
Plaintiff was altered pursuant to the operation of a law that offends
the South
African constitution as set out below.
9. It is common cause that the
Plaintiff is a company that was placed under reconstruction on 6
September 2004.
10. SMM represented in this action as
strictly a private company is in truth and fact, an organ of the
state of Zimbabwe in so far
as the control and management of the
company was divested from its shareholders.
11. The absurdity of this matter is
that were it not for the extra-judicial intervention of the
government of Zimbabwe, this action
would not have been instituted as
it would be tantamount to me suing myself as the companies concerned
were all under my control
at the material time.
12. The abuse by the Zimbabwean
government of this forum in far as using the Courts of this country
to implement a scheme to expropriate
my assets in Zimbabwe and assert
rights acquired pursuant to a draconian legislation did not start
with this action but this is
the only action in which I am a
defendant in claim instituted by a company that was under my control
during the material time.
13. Be that as it may, SMM is claiming
from Mr. Mariemuthu and myself, jointly and severally, an amount of
R18,043,373.21 in terms
of Section 424(1) of the Companies Act 61, of
1973.
14. SMM alleges that as a consequence
of a fraudulent scheme, the said R18 million flowed to Petter Trading
(Pty) Limited (“Petter”)(in
liquidation) from Southern
Asbestos Sales (Pty) Limited (“SAS”)(in liquidation).
15. The summons was issued on 13
September 2006.
16. I was a director of Petter and SAS
until 1 March 2004 when I resigned together with other directors
appointed to the boards
of South African based companies following a
decision taken in response to the actions of the government of
Zimbabwe in denying
the Plaintiff access to foreign currency to pay
its foreign creditors.
17. As a consequence, Mr. Mariemuthu
was appointed a director of both SAS and Petter on 6 May 2004, the
day on which the High Court
of South Africa granted the cession court
order.
18. As stated above, SMM, SAS and
Petter were under my control and beneficial ownership.
19. The government of Zimbabwe (“GOZ”)
caused SMM to rescind the cession court order as well as authorising
the Administrator
to institute the various litigations in South
Africa including the application for the liquidation of Petter and
SAS.
20. Although the summons was
originally issued against me, Mr. Mariemuthu was joined in the
proceedings by SMM on account of disputed
admissions regarding the
timing of payments that were made by SAS to Petter in the ordinary
course of business and, therefore,
could not be remotely considered
to be part of any fraudulent scheme when regard in made to the fact
that such payments were made
prior to the date the cession order was
granted.
21. On Monday 10 September 2012, the
trial commenced before His Lordship Mr. Justice Willis.
22. Mr. Frederick Kyle who withdrew
his services following concerns regarding the manner in which the
trial was being handled represented
Mr. Mariemuthu and myself.
Factual Background to the Case
23. SMM was until 1 March 2004; a
company controlled by its board of directors and was ultimately
beneficially me.
24. I became a target of the Zimbabwe
government following my decision to decline taking a position of an
office bearer of the ruling
party’s provincial committee in
October 2003 after being elected in absentia and without being
consulted.
25. Beginning in mid-December 2003
when the current governor of the Reserve Bank of Zimbabwe was
appointed, a number of businesspersons
were targeted for foreign
currency violations and the law was changed to make failure to remit
foreign currency proceeds from exports
a criminal offence and
investigations were commenced against selected exporters including
the Plaintiff.
26. Accordingly, foreign currency
violations were described as externalisation and at the core of this
matter is the attempt by
the government of Zimbabwe to apply the
Zimbabwean legislation extra-territorially in that the cause of
action in this matter relates
to a company, SAS, that is registered
in South Africa and it is alleged that this company failed to remit
foreign currency proceeds
to Zimbabwe using a court order that had
the effect of allowing the company to divert funds to a company,
Petter, also registered
in South Africa. However, for this law to be
applied in South Africa, the control and management of the Plaintiff
had first to
be divested from its private shareholders to allow the
government of Zimbabwe to superimpose itself in commercial
transactions
and approach this jurisdiction dressed as a normal
company pursuing a bona fide commercial debt.
27. It is significant to state that
during the material time, exporters were allowed to retain in foreign
currency only a portion
of the export proceeds that could then be
used to procure inputs from external suppliers.
28. In December 2003, the Reserve Bank
of Zimbabwe (“RBZ”) unilaterally and arbitrarily lowered
the percentage that
SMM could retain from 75% to 50% and this had the
effect of reducing the amount of foreign currency available to pay to
the company’s
foreign creditors including Petter.
29. As a result, SMM could no longer
timeously meet its obligations to Petter, a key supplier to the mines
resulting in the disruption
of mining operations.
30. Mr. Mariemuthu was then approached
by the then Chairman and CEO of SMM to sit on the board of the
holding company of SAS and
Petter i.e. AR Projects Services (Pty)
Limited (“ARPS”)(in liquidation) as it was felt that the
it was in the best
interests of the group that all directors
representing the Plaintiff including Mr. Mawere resign from the
boards of all South African
registered companies in the group.
31. Consequently, he was appointed a
director and Chairman of ARPS and subsequently a director and
Chairman of SAS and Petter.
32. He was fully briefed about the
challenges faced by the group in so far as the deteriorating
relationship with the GOZ was concerned
and the threat it posed to
the continued viability of the mines and the South African companies
associated with SMM.
33. In fact during May 2004, an
investigation team from the RBZ visited South Africa to meet with Mr.
Mariemuthu . The team demanded
to see the books of SAS and was
informed that there was no legal basis for a Zimbabwean investigating
team to have records and
documents of a South African company without
a court order in South Africa. Threats were then made that action
would be taken
in Zimbabwe against SAS and all companies associated
with me.
34. To confirm the deteriorating
relationship between SMM and the GOZ, a dispensation granted in 1998
for the company to export
its own asbestos was withdrawn with effect
from 1 April 2004 and this had the effect of disturbing the business
model that was
in place whereby inter-company transactions would take
place between the companies in the group.
35. The relationship between SAS and
SMM’s wholly owned subsidiary, African Associated Mines
(Private) Limited, evolved from
that of an agent to a distributor in
December 2002.
36. Notwithstanding, His Lordship Mr.
Justice Fevrier, established that at the time the cession court order
was obtained there was
no valid and enforceable agreement between SAS
and AAM and stated in his judgment that: “It appears that the
parties did
not refer to the Act because, had they done so, they
would have realised that in terms of Section 46 of the Act, the
duration of
validity of the exemption was a for a maximum period of
twelve months, namely, from (1) December 1997 to 30 November 1998.”
37. SMM was indebted to Petter at the
time in the amount of R27 million far in excess of what SAS had paid
to Petter prior to the
cession court order that has been used over
the past 8 years to justify the interference of the government in the
affairs of SMM.
Accordingly, SMM had constructive knowledge that SAS
in the ordinary course of business had made payments to Petter to
allow for
the continued supply to the mines otherwise the suppliers
to Petter and in turn to AAM would not have continued to support the
mines without payments.
38. The cession court order was
granted on 6 May 2004 and on 11 May 2004, Mr. Obed Dube. Managing
Director of AAM wrote to me instead
of the directors of SAS informing
me for the first time after he had signed the cession agreement that
that the agreement was unworkable
fully knowing that I was no longer
a director of SAS and Petter. It is submitted that for him to write
the letter in the manner
he did, he was already working with the
authorities in Zimbabwe whose objective was to find a connection
between me, the holder
of the shares in SMM, with the alleged fraud.
It took more than two years for this action to be instituted after
the letter from
Mr. Dube was written.
39. However, on 17 May 2004, a warrant
of arrest was issued in terms of Section 33(1) of the Criminal
Procedure and Evidence Act
(CAP) 9:07 of Zimbabwe on the suspicion
that I had committed a crime during 1 January 2000 to June 2003 of
fraud or alternatively
violating the Exchange Control Regulations of
Zimbabwe.
40. On 25 May 2005, I was arrested in
South Africa pursuant to an extradition application instituted by the
government of Zimbabwe.
It is ironic that SMM was not the
complainant. None of the directors of SAS and Petter were mentioned
in the extradition application
notwithstanding the fact the alleged
fraudulent cession agreement was duly signed by representatives of
the companies concerned
i.e. SAS, Petter and AMM by Messrs.
Sanangura, Lovemore Dube and Obed Dube; respectively..
41. It was alleged in the extradition
application that I and not SAS had amounts in my personal accounts
held outside Zimbabwe and
it was suspected that some of the export
earnings allegedly owed by SAS to SMM went into these accounts:
US$18,464,595.27,
Can$ 628,071.84, and
ZAR4,515,367.48
42. It is significant that at the
time, the authorities in Zimbabwe were operating on the assumption
that I was still a Zimbabwean
citizen in which case the alleged
holding of foreign funds by a resident of Zimbabwe would have fallen
within the ambit of the
Zimbabwean exchange control regulations hence
the choice of words above.
43. The extradition application was
dismissed on 29 June 2004.
44. The board of SMM was then forced
by the Reserve Bank of Zimbabwe to formally meet on 1 July 2004 for
the sole purpose of passing
a resolution that the company’s
consent to the granting of the cession court order was unauthorised
and, therefore, the court
order was to be rescinded.
45. Immediately after the board
meeting, the Chairman of SMM, Dr. William Mudekunye, left the country
and has since not returned
to the country for fear of being arrested
by the authorities.
46. On 9 July 2009, I was specified in
terms of the provisions of the Prevention of Corruption Act of
Zimbabwe on the same allegations
of causing SAS not to remit funds
allegedly due to SMM. The same figures as mentioned above were used
in justifying his specification.
47. On 13 August 2004, an Investigator
was appointed in terms of the Prevention of Corruption Act of
Zimbabwe to investigate my
affairs and in particular my alleged role
in respect of the cession court order. The effect of specification
was to legally disable
me from challenging the actions of the
government of Zimbabwe and more significantly alienating me from the
control and management
of my Zimbabwean companies.
48. On 26 August 2004, SMM was also
specified together with other companies deemed to be under my
control.
49. On 3 September 2004, a decree was
promulgated by President Mugabe using state of emergency powers to
place SMM under the control
of Mr. Gwaradzimba, as Administrator. It
is on Mr. Gwaradzimba’s authority that these proceedings and
others have been instituted
in South Africa.
50. On 6 September 2004, SMM was
placed under the control of an extra-judicially appointed
Administrator on allegations that the
effect of the cession court
order was to divert funds allegedly due to SMM from SAS and,
therefore, SMM was denied of working capital
necessitating the
government to intervene as a super creditor protected by the decree.
51. A copy of the Reconstruction of
State Indebted Insolvent Companies whose application is retrospective
is available should the
JSC wish to review it. The law is a penal
one and it is submitted that it offends the provisions of the South
African constitution.
52. The fact that a number of
litigations have been entertained in this jurisdiction based on the
rights conferred on the litigants
by this draconian law must be a
cause of concern to all South African investors in Zimbabwe and no
doubt a source of celebration
and vindication in Zimbabwe that laws
of this nature pose no real threat to the rule of law in South
Africa.
53. The facts of this matter will
confirm that this matter goes beyond the pursuit of any normal
foreign-based creditor for a bona
fide monetary claim against a South
African debtor. Rather the rights sought to be asserted in this
jurisdiction arise from an
act of a foreign state.
54. It is submitted that Mr.
Mariemuthu was not cited as a Defendant in the original summons
confirms that no facts existed linking
us jointly to the allegations
and more importantly the decision to join him in these proceedings
were motivated simply by a recognition
that the case against me was
weak and more significantly was not supported by concrete evidence.
55. A reading of the particulars of
claim will confirm that the cause of action is predicated on a link
between the alleged fraud
and the purported monetary loss of
R18,043,373.21.
56. It is submitted that all that we
expected would be evidence that such funds were in truth and fact
diverted as alleged and more
significantly that SAS had the funds to
be so diverted as well as confirmation that such funds were solely
dedicated for payment
to SMM.
57. It is submitted that the
particulars of claim were amended opportunistically to deal with the
embarrassment of failing to join
a director of SAS and Petter at the
material time who would and should have known about the alleged
payments that were made as
a consequence of the cession court order.
In the absence of concrete evidence supporting the connection between
the alleged misrepresentation
of facts in obtaining the cession court
order and the purported monetary loss, it can be understood why Mr.
Mariemuthu’s
alleged utterances are now being used with the
support of His Lordship Mr. Justice Willis as a substitute for
concrete evidence
of the manner in which the alleged payments to
Petter by SAS to the cent were made and the timing of such payments.
58. As expected, no evidence was led
confirming that payments were indeed made as alleged. During the
trial, SMM’s witnesses
confirmed that Petter was owed by SMM in
amounts in excess of the alleged payments made by SAS to it, which
would suggest that
SMM couldn’t approach a court claiming a
monetary loss caused by its non-payment to a South African company.
59. This is an unusual matter in which
I am the primary target because I hold the shares that the government
wanted to acquire without
paying any compensation and hence the need
to pursue this claim to complete the expropriation look as Section 12
of the Reconstruction
Act provides for the forfeiture of the assets
of a culpable and liable person to the government.
60. I was de-specified by the Ministry
of Home Affairs that is now responsible for administering the
Prevention of Corruption Act
of Zimbabwe following investigations
about the alleged fraudulent cession scheme. It is important to
state that until January
2010, both the Prevention of Corruption Act
and Reconstruction Act were administered by the Minister of Justice
and Legal Affairs,
Hon. P. Chinamasa, who has been the driving force
of this matter.
61. It is ironic that one arm of the
Zimbabwean government would come to the conclusion that the cession
agreement was not fraudulent
and more specifically that I committed
no offence while another would hold a different view without the
burden in this jurisdiction
of leading evidence in support of the
cause of action and pleadings.
Proceedings at the Trial
62. The trial started on 10 September
2004 before the Honourable Mr. Justice Willis.
63. I approached the court with clean
hands expecting that the Court would deal with issues of authority
and also the critical fact
that a law of a penal nature in a foreign
state is being used to assert rights in this jurisdiction.
64. I will not bore you with the
content of the proceedings but will draw your attention to the fact
that all motions that were
advanced on behalf of the Defendants were
dismissed with costs including the issues of authority ignoring the
constitutional implications
of this trial on the integrity of South
Africa in so far as it can claim that the constitution of the country
does provide protection
to citizens and the judiciary has an
obligation to safeguard and protect the democratic constitutional
order.
65. My attorney withdrew after
realising that the attitude of the Court was subjective.
66. I was not granted an opportunity
to find a replacement attorney rather I was given two alternatives
either of proceeding with
the trial without an attorney or face the
consequence of a default monetary judgment. I chose to proceed with
the trial in the
hope that His Lordship Mr. Justice Willis will rise
above his personal prejudices to deal with the core issues of this
matter whether
in the first place, a creature of statute in a foreign
state can be given audience by the Courts in South Africa to assert
claims
of a penal nature and then proceed to allow evidence that
prove or disprove the allegation that the alleged fraudulent cession
court order was used to divert funds purportedly due to SMM from SAS.
67. It is submitted that this
complaint must not be construed as an attempt to influence His
Lordship Mr. Justice Willis who reserved
his judgment rather it must
be seen in the context of the failure by His Lordship to be the gate
keeper on a matter that is critically
important to the protection of
the reputation that the judiciary in post-apartheid South Africa has
gained as a guarantor of the
Bill of Rights that are enshrined in the
constitution.
68. One would have expected His
Lordship Mr. Justice Willis who clearly has lost confidence in the
objectivity of the Higher Courts
to deal with the constitutional
matters raised before dealing with the merits of the matter.
The record of the relevant aspects of
the trial is contained in the attached transcript as Annexure MDM2
that I believe will assist
the JSC appreciating the context in which
this complaint is framed.
70. It is important to state that an
application for the recusal of His Lordship Mr. Justice Willis was
made on my behalf; but as
expected was also dismissed by His
Lordship.
The Complaint
71. I have reviewed the contents of
the transcript for the proceedings on 10 April 2012 being Volume 1 –
pages 1 to 91 and
believe that this is so grave a matter that it
cannot wait lest other innocent litigants may be exposed to the same
injustice without
the JSC knowing what is really happening at the
coalface of justice.
72. The third plea on behalf of the
Defendants dealt with the constitutional aspects of this matter. I
quote what His Lordship
Mr. Justice Willis said on page 22 of the
transcript as follows:
“
....Is it not convenient to
deal with it (constitutional aspects) as part of the bigger story?
The owner is, as I understand it
that you are complaining of is a
socialist one. It is a radical; it is reminiscent of socialist
ideology. I do not get a sense
that the courts above us in South
Africa are .....towards measures, on the contrary. I mean I have
actually even given a judgment,
and you see scant affirmation of the
importance of private property on line. So in other words I cannot
even sit here in conscience...even
though the point might be a good
one, if it is supported by the evidence and it comes out, even if it
comes out I am not sure you
are going to have any chance of success.
It is not even likely, as I understand the jurisprudence emerging
from on high.”
His Lordship Mr. Justice was making
the point he has no confidence in the higher courts of South Africa
upholding the values and
principles of the constitution. One would
naturally have expected His Lordship to be the gatekeeper and,
therefore, deal with
the issue as the court of first instance but
regrettably the comments were clearly made not to advance any
conceivable legal point
but to undermine the rule of law.
I feel strongly notwithstanding the
fact that in previous matters, South African presiding judges have
taken a similar approach,
this matter involves a liquid claim and in
the event that a judgment is made against me, the very assets that I
would need to make
good on such an order are in the hands of the
government that is now controlling SMM.
In addition, SAS, Petter and myself
have already been declared culpable and liable in Zimbabwe terms of
the law that gives the Administrator
the authority to represent SMM
in the legal proceedings in South Africa on the same allegations and
facts as contained in this
action.
The separation of issues would have
allowed the court to clearly see the direct role of the government of
Zimbabwe and the fact
that SMM is not a voluntary litigant but an
organ of a foreign state that has no respect of the sovereignty of
South Africa and
the rule of law.
I had never expected that the doors of
justice would be shut in this jurisdiction and expediency would
override justice.
1. The exchange that follows between
Mr. Kyle on behalf of the Defendants and His Lordship Mr. Justice
Willis will help the JSC
to appreciate why this matter ought to be
ventilated outside the confines of the court:
MR KYLE: M’Lord, we are dealing
with a very peculiar Act M’Lord, which makes provision in
Section 4 for the government
of Zimbabwe to have superior rights as a
creditor.
COURT: Ja.
MR KYLE: And to take control of a
company without affording the company or shareholders any right to
deal with. Now it is in terms
of the South African constitution
where we have a right to a fair impartial hearing M’Lord. We
say that one cannot give
an ear to a legislation which was designed
specifically to prefer one creditor over another, where the creditor
is his own jury
and judge, and by implication has already taken a
punitive measure by expropriating my client’s shareholding in
the Plaintiff,
to become an owner, and then still come to South
Africa while they are in control of all these assets, to seek an
enforcement of
a monetary claim well knowing that they have got all
the assets.
COURT: But I repeat I have got –
firstly is it not convenient to determine that as part of the greater
issue, and while I
personally may be sympathetic, I have no
confidence that even if that point is established, that it is going
to be held to be enforceable
in a South African court by either the
Supreme Court of Appeal or the Constitutional Court. You must
remember I have been a judge
for 14 years, I have seen the thrust of
judgments coming from them, they are not going to sit....I do not
know.
MR KYLE: M’Lord can I have two
minutes to take further instructions?
COURT: Well do you want me to give
reasons? Then should I not give my reasons?
MR KYLE: As the court pleases.
COURT: Well what do you – well
are you thinking of an instruction to withdraw the point or what do
you want to do? I mean
surely – my reasons are, well I will
give them do you in two minutes, in a minute.
MR KYLE: M’Lord the first and
second defendant is primarily of the concern that before one can give
audience to this Act,
the constitutional nature and the issues has to
be dealt with M’Lord. It is not so much an issue of
convenience. If it
is found that this Act is in contravention of the
South African Constitution by impeding on the defendants’
rights to a fair
and partial hearing, and by – basically
expropriating the assets and then trying to enforce it by obtaining a
monetary judgment
M’Lord, one needs to deal with that issue
first before one leads evidence. Because if one starts leading
evidence the issue
as to whether or not the Act can be enforced, sort
of loses effect.
COURT: No, but I think you must –
I mean I am not saying that you cannot close the point. What I am
putting to you is that
firstly let us hear the trial, let us proceed
with the trial. If all the facts become apparent, and you wish later
to appeal on
high on that being one of the grounds, that is something
that we will consider at that stage and not now. That is what I am
putting
to you.
MR KYLE: As the Court pleases.
COURT: The argument, is on behalf of
the second defendant only or ....
MR KYLE: Mainly the first defendant.
COURT: First Defendant
2. Then His Lordship Mr. Justice
Willis ruled as follows on this important matter:
“
The First Defendant has now
sought a separation of issues once again, the basis as I understand
it is that it is alleged that the
majority shares in the Plaintiff
were unlawfully expropriated by the Zimbabwean government.
The first difficulty is that this does
not even appear in the pleadings; although I have been given to
understand that it will be
appear in the amended plea, raised as a
special plea, concerning the question of constitutionality.
If it is true that the shares were
unlawfully expropriated,....also it is true that the majority of the
shares in the Plaintiff
were expropriated by the government of
Zimbabwe, I am not embarrassed to place on record that I am
personally sympathetic to that
situation. However, there are two
reasons why I think it inappropriate to a give a ruling that would
amount to a separation of
issues to determine the constitutionality
of that particular point.
The first is that I think altogether
more convenient that the issue be dealt with together with all the
evidence, and it may ultimately,
at the end of the day, depending on
how the trial proceeds, be a ground of appeal in the event that the
Plaintiff is successful
wholly or in part, in the main action.
But the second is that I have been a
judge for some 14 years and from what I can see of judgments
delivered by the Supreme Court
of Appeal and the Constitutional
Court, it cannot be said that they ant sympathetic to socialist
measures. This is certainly a
socialist measure if it is true that a
person’s shareholding was expropriated by the state, but as I
say there is scant indication
that the courts in authority over us
here, are sympathetic to such arguments, and accordingly even if the
point is ultimately established
in the First Defendant’s
favour, namely that shares were expropriated from it in the
Plaintiff, without any compensation,
I am far from confident that the
argument would carry weight on an appeal in this country.
Accordingly the application is
dismissed with costs.”
3. It is submitted that His Mr.
Justice Willis is contemptuous of the manner in which the SCA and CC
have dealt and are dealing
with the issue of protection of property
rights and, therefore, the impression I got is that he has no
confidence with both the
SCA and CC upholding the bill of rights
enshrined in the constitution let alone protecting this court from
abuse by foreign states
who do not subscribe to generally acceptable
constitutional and rule of law norms.
4. South Africa is a signatory to a
number of international conventions that compel the judiciary to
enforce and respect standards
that are generally accepted yet in this
case, it is the position of His Lordship Mr. Justice Willis that
granting audience to a
company whose shareholding has been altered by
an act of state and that is now an organ of state does not pose any
threat to the
integrity of the South African constitutional order.
5. It is for this reason that Mr. Kyle
refused to be part of a trial presided by a judge who clearly feels
that the superior courts
are no longer fulfilling the duties set out
in the constitution.
6. The application for leave to appeal
on this constitutional question was dismissed by His Lordship Mr.
Justice Willis as follows:
“
According I am satisfied that
the correct legal decision is to dismiss the application with costs.
The following is the order of
the court: The application of leave to
appeal against the ruling which I gave regarding the
constitutionality or otherwise of the
Zimbabwe Reconstruction of
State Indebted Insolvent Companies Act 24:27, is dismissed with
costs.”
7. Following the withdrawal of my
attorney, I continued with trial and His Mr. Justice Willis continued
to make disparaging remarks
about the SCA and CC in so far as the two
institutions can be relied upon to enforce the provisions of the
South African constitution.
On page 34 of the transcript, His
Lordship Mr. Justice Willis remarked as follows:
COURT: I am not saying ... [inaudible]
absolutely clear, what I am saying is that I am not aware of a single
judgment of the Constitutional
Court where the issue of property
rights has been contested, keenly contested. ... [Inaudible] property
rights, in other words
it is extremely difficult to evict people from
property that they are unlawfully occupying, that is number one. You
have had pronouncements
from the Constitutional Court about the
privileges of ownership, and if it is tougher on you as the owners of
property it is tough
luck. We are not - in other words the tone is
not ... [inaudible] the courts are there to protect property right.
You have got
a presumption in law that the municipal rates and taxes
are to be paid before a property can be transferred; I think that
that
is brutally offensive to property rights. have been a candidate
myself for the Constitutional Court, I have raised in written
documents,
my personal misgivings about a number of judgments of the
Constitutional Court that I think have not defended property rights
as
they should have been defended.
The result of that is that I was not
even shortlisted for appointment. In other words not only has the
court got that view but the
Judicial Service Commission, with the
minister sitting there, truly those objections that I raised, it was
like water off a duck's
back. It was speaking to deaf ears. So all I
am saying is I have really - I have no confidence, and it is a matter
of genuine intellectual
conviction, I have no confidence that if you
take this challenge to the Constitutional Court they are going to say
if it is true,
and I do not know what the facts are, but if it is
true that shares were taken unlawfully ... [inaudible] taken from you
by the
government of Zimbabwe without compensation, I have no
confidence that the Constitutional Court in South Africa is going to
say
it is unlawful therefore all these proceedings are vitiated. That
is what I was saying, and I hope it is clear.
8. Based on the above, my own
confidence with the judiciary has been compromised and accordingly I
feel that this is so grave a
matter that merits the urgent attention
of the JSC.
9. Section of 14(4)(e) of the JSC act
reads as follows: “(e) Any other wilful or grossly negligent
conduct, other than conduct
contemplated in paragraph (a) to (d),
that is incompatible with or unbecoming the holding of judicial
office, including any conduct
that is prejudicial to the
independence, impartiality, dignity, accessibility, efficiency or
effectiveness of the courts.”
10. I have no doubt that the JSC will
concur with me that the unsolicited views regarding the competence or
otherwise of the SCA
and the CC to deal with constitutional matters
that relate to the protection of citizens to their property fall
within the ambit
of the section in that the alleged conduct is
prejudicial to the dignity and accessibility of the higher courts.
11. As a result of the personal views
of His Lordship Mr. Justice Willis regarding his failure to be
appointed as a judge of the
CC, I feel that the doors of the SCA and
CC were closed to me in a manner that is prejudicial to the
accessibility, efficiency
or effectiveness of the courts.
12. What was alarming is that although
His Lordship Mr. Justice Willis was contemptuous of the SCA and CC,
he was unwilling during
the trial to address the constitutional
matters inherent in this matter and in so doing he effectively denied
me the right to justice
and a fair trial.
13. His Lordship Mr. Justice Willis
effectively gave me no choice but to proceed with the trial on his
terms. The application for
separation of issues provided an
opportunity for the constitutional matters to be dealt with in South
Africa and I submit that
this would have given the court the full
factual and legal matrix of this complex matter.
14. The fact that an organ of the
Zimbabwean government was already in the South African Forum created
an opportunity to raise questions
that can never be raised in
Zimbabwe regarding the constitutionality of the Reconstruction Act
and its implications on the rule
of law in Zimbabwe.
15. The failure by His Lordship Mr.
Justice Willis to protect the constitution of South Africa and its
obligations in terms of international
law is incompatible with or
unbecoming of the holding of judicial office.
16. His Lordship Mr. Justice Willis by
refusing to address the constitutional matters that he said he had no
confidence that the
higher court would be able to objectively and
fairly deal with, he effectively acted in a manner that is
inconsistent with the
conduct of a judge operating in a jurisdiction
that respect the rule of law.
Conclusion
17. I believe that I have set the
grounds on which this complaint falls within the ambit of Section
14(4)(e) of the Act.
18. In addition, I feel strongly that
this a matter that ought to attract zero tolerance from the judiciary
of South Africa as its
implications on investors in Zimbabwe whose
rights may very well be compromised unless the judiciary in this
jurisdiction speaks
with one voice on what matters.
19. The Reconstruction Act exists and
given the trading relationship between South Africa and Zimbabwe, the
probability of it being
used as a back door mechanism to expropriate
assets is high necessitating this application in the hope that a
declaration can be
made on this important aspect of international
law.
20. While I appreciate that His
Lordship Mr. Justice Willis may be frustrated by the rulings of the
higher court, I feel that this
is a matter that should not have been
brought in these proceedings and I fail to appreciate the relevance
of the attitude of the
higher courts to the matter for which he was
called upon to be the custodian of the very justice that he feels is
now a privilege
and not a right in South Africa.
21. Without prejudging his findings in
this matter, my confidence with the judiciary has sufficiently been
shaken and compromised
by utterances from the branch of the state
that I so much respect.
22. As a litigant in this matter, the
least I would have expected is for His Lordship Mr Justice Willis to
keep his personal views
on the higher courts to which I must look to
for justice in the event that His Lordship Mr. Justice rules against
me.
23. This court was uniquely equipped
to hear all the facts and allow for their ventilation especially
given that the trial was allocated
10 days and only four witnesses
were called to give evidence.
24. Each time I tried to cross-examine
SMM’s witnesses on matters relating to the status of SMM as an
organ of state and to
adduce evidence on the role of the government
of Zimbabwe in instigating the legal proceedings in South Africa, I
was warned that
I may get a cost order if I followed that line of
questioning. The full record of the trial has not yet been
transcribed but suffice
to say that contrary to the promise that the
constitutional matters that were flagged would be dealt with during
the trial, His
Lordship Mr. Justice Willis was not prepared to allow
witnesses to be cross examined on the facts surrounding the
reconstruction
of SMM and my specification.
25. My decision to take South African
citizenship was primarily informed by the security that the
constitution offers to citizens
and the ability of the judiciary to
provide the kind of checks and balances that protect citizens and
their right to property.
26. To the extent that His Lordship
Mr. Justice Willis has given up faith in the ability of the higher
court to be objective and
impartial, I am left with no choice but to
bring this serious matter before the attention of the JSC and believe
that the gravity
of the matter will allow this issue to be nipped in
the bud.
27. Should any clarification be
required, please do not hesitate to contact the undersigned.
Yours Faithfully,
Mutumwa Mawere
Cc: His Lordship Mr. Justice Willis
(…….)
His Lordship Deputy Judge President,
South Gauteng Court, Mr. Justice Mojapelo (….)
1
Under Case No. 04/10496
2
As noted under footnote 1 (
supra
), the case number was
04/10496
3
Under case number 06/2007
4
Under case number 2004/26770
5
Under case number 2005/20057
6
The judgment has been reported as
SMM Holdings (Pvt) Ltd v
Southern Asbestos Sales (Pty) Ltd
[2005] 4 All SA 584
(W).
7
Under case no. 2006/7836
8
Under case number 2006/20467.
9
See, for example,
R v Miller and Another
1939 AD 106
; R v
Mayet
1957 (1) SA 492
(A);
R v Matthews and Others
1960 (1)
SA 752
(A);
R v Baartman and Others
1960 (3) SA 535
(A);
S
v ffrench-Beytagh
1972 (3) SA 430
(A);
R v Heyne and Others
1955 (2) SA 539
(W);
S v Cooper and Others
1976 (2) SA 875
(T).
10
See, for example,
R v Matsitwane and Another
1942 AD 213
at
218-20;
R v Serobe and Another
1968 (4) SA 420
(A) at 425F-H;
Makhathini v Road Accident Fund
2002 (1) SA 511
(SCA) at
519-520;
R v Kefasi
1966 (1) SA 364
(SRA) at 365-66B.
11
See, for example,
S v Ndhlovu and Others
2002 (2) SACR 325
(SCA);
S v Ralukukwe
2006 (2) SACR 394
(SCA);
S v Shaik
and Others
[2006] ZASCA 105
;
2007 (1) SACR 247
(SCA);
S v Mokoena and Other
s
2006 (1) SACR 29
(W).
12
1939 AD 106
13
At 115.
14
1929 AD 312
15
1937 AD 285
16
1990 (3) SA 466
(BG) at 502E-507G
17
[1844] EngR 603
;
(1844) 6 QB 126
18
1939 AD 106
(
supra
, footnote 12) at 116-7
19
2009, D T Zeffert and AP Paizes, Second Edition (formerly Hoffmann
and Zeffertt), LexisNexis: Durban, at p495-6.
20
[1943] KB 587
(CA);
[1943] 2 All ER 35
(CA); See, also,
Prophet v
National Director of Public Prosecutions
2007 (6) SA 169
(CC) at
paragraph [42].
21
2009: Zeffertt, D.T. and Paizes, A.P. Second Edition; LexisNexis:
Durban at Chapter 10, pp340-44 and Chapter 16, pp475-570.
22
2010: Schwikkard, P.J. and Van der Merwe, S.E. in collaboration with
Collier, D.W.; De Vos, W.L. and Van der Berg, E. Third Edition;

Juta’s: Cape Town at Chapter 16, pp305-332.
23
William Shakespeare’s account of Cleopatra sailing down the
Nile to meet Mark Antony is another example of what the court
has in
mind as a ‘purple passage’.
24
2003 (1) SA 11
(SCA) at paragraph [5]
25
1939 AD 188
at 202-3
26
[2000] ZACC 25
;
2001 (1) SA 912
(CC) at paragraph
[24]
27
1998 (4) SA 1224
(CC) at paragraph [22]
28
[2000] ZASCA 153
;
2001 (1) SA 967
(SCA)
29
[1995] ZASCA 34
;
1995 (2) SA 915
(A) at 917G - I
30
(578/2012)
[2012 ZASCA 119
(18 September 2012)
31
[1991] ZASCA 7
;
1991 (2) SA 660
(A) at 672C-E
32
[1997] ZASCA 92
;
1998 (2) SA 138
(SCA) at 142G-I
33
2002 (2) SA 662
(SCA) at paragraphs [39 ] and [40]
34
2009 (1) SA 538
(SCA)
35
Paragraph [31] of
Fourie v Firstrand Bank Limited
; paragraph
[29] of
Saincic
.