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[2016] ZAGPJHC 233
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Geldenhuys and Others v Orthotouch Limited and Others; In re: Highveld Syndication Investors v Orthotouch Limited (42334/2014) [2016] ZAGPJHC 233 (1 September 2016)
IN THE HIGH COURT
OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 42334/2014
In
the matter between:
JURIE JOHANNES
GELDENHUYS
ARTHUR BRADY
COCHRANE
SHARON ANN
VLOK
And
ORTHOTOUCH
LIMITED
DEREK PERDOE
COHEN N.O.
HANS KLOPPER
N.O.
And
OTHERS
First
Applicant
Second
Applicant
Third
Applicant
First
Respondent
Second
Respondent
Third
Respondent
Fourth to
Twenty-seventh Respondents
And
THE HIGHVELD
SYNDICATION INVESTORS
(“the
Main Application”)
In re:
The ex parte
application of:
ORTHOTOUCH
LIMITED
(Registration
number: 2010/004096/06)
Application
for the sanctioning of a Scheme of Arrangement in terms of section
155(7) of the Companies Act, no 71 of 2008
(“the ex
parte application”)
APPLICATION
FOR LEAVE TO APPEAL
SPILG, J:
1
September 2016
INTRODUCTION
The
parties will be identified as in the original application.
There
were a number of competing interlocutory applications brought which
were dealt with as a special motion. They came to be
reduced to two
applications which required determination.
In
the one, the first respondent brought a rule 30A application to
declare as an irregular proceeding the application brought
by the
applicants to rescind an order the sanctioning a scheme of
arrangement. It was contended that the rescission application
was
defective because of a failure to join and give notice to all the
affected persons, who would include the investors in each
of the
Highveld Syndications, or first to have applied for substituted
service. It was common cause that they number between
17 000 to
18 000 individuals. This application was supported by the third
to sixteenth respondents. The respondents
argued that the failure in
not first complying with rule 42(2) (and obtain an order for notice
to be given to all persons affected
by the rescission application)
or in not complying with rule 4(2) read with 5(2) (in regard to
substituted service) was fatal.
I
held that the rescission application was not fatally defective.
In
the other, the applicants applied for substituted service of the
rescission application allowing for notice to all investors
by means
of a notice in two national weekend newspapers which would direct
them to a website where the application could be viewed
and
downloaded. The third respondent indicated that he would abide the
decision in this regard.
I
considered that the form of notice proposed by the applicants was
inadequate and would amount to only formalistic compliance.
In my
view an effective form of notification, having regard to the number
of investors (and taking into account those who allegedly
supported
the rescission application), required a structured order whereby
inter
alia
the third respondent (Mr Klopper in his representative capacity)
would be involved in providing the names and contact details of
the
relevant investors. This is reflected in the terms of the order.
The
first respondent accepts that the judgment in respect of the rule
30A application is not appealable.
It
however contends that the order for substituted service is
appealable. Klopper who abided the decision of the court in this
regard now enters the fray and also applies for leave to appeal on
the grounds that he being subjected to a mandatory order without
having been heard.
There
are two preliminary issues. The first is whether the order for
substituted service is appealable. The second is whether
Klopper is
entitled to apply for leave to appeal without an explanation as to
why he is no longer prepared to abide the decision
and where he does
not assert prejudice.
APPEALABILITY
7.
The
respondents rely on
Nova
Property Group Holdings Ltd v Cobbett and others
2016(4)
SA 317 (SCA) as the basis for being entitled to appeal an order which
is purely interlocutory in form and in effect.
8.
Leaving
aside the requirement, at the time, that the Constitutional Court
could only be seized with a constitutional issue in
South
African Informal Traders Forum and Others v City of Johannesburg and
Others
2014
(4) SA 371
(CC) (the ‘
SAITF
case’
)
the court held that there is no absolute bar against an interlocutory
order being appealable. In the SAITF case the court allowed
an appeal
because the issue was determinative of the rights and obligations
between the parties and that, as stated in the subsequent
case of
Zulu
and Others v Ethekwini Municipality and Others
2014 (4) SA 590
(CC) at para 53;
“
The
qualifier is the interests of justice, since interim orders can be
reconsidered and altered by the court of first instance.”
9.
In
Nova
Property
the
SCA held that section 17(1) of the Superior Courts Act gives express
recognition that the paramount consideration remains the
interests of
justice.
10.
It
appears that one of critical issues that the SAITF case required to
be considered was whether the point raised and decided is
determinative of the rights and obligations between the parties.
Clearly the question of substituted service cannot be.
11.
My
findings are therefore not definitive of the main issues to be dealt
with in the rescission proceedings. My decision is purely
concerned
with how best to give effective service where there are many
thousands of affected investors.
12.
Adv
Brett
in
anticipation of this contended for a new ground of appeal not
foreshadowed in either the application for leave to appeal or in
his
heads of argument; namely that there was a substantive constitutional
law point involving access to information. It was contended
that the
provisions of the
Promotion of Access to Information Act 2 of 2000
(“PAIA”)
would
not be respected in that the privacy rights of investors would be
affected if Klopper was to provide the information as required
in my
order without first proceeding in terms of that Act. It was contended
that my order was therefore
ultra
vires
.
13.
Adv
Brett’s attention was drawn to s7(1) of PAIA which exempts from
the purview of the Act
inter
alia
recorded information requested after the commencement of civil
proceedings from any public or private body. The subsection reads:
(1)
This Act does not apply to a record of a public body or a private
body if-
(a)
that record is requested for the purpose of criminal or civil
proceedings;
(b)
so requested after the commencement of such criminal or civil
proceedings, as the case may be; and
(c)
the production of or access to that record for the purpose referred
to in paragraph (a) is provided for in any other law.
The
respondents conceded that the point was not good.
14.
It
was then contended that there was some substantive irregularity in
that I could not make an order which had not been sought by
the
applicant.
The
applicants had sought relief from the strictures of notice to all
affected persons or personal service under rules 42 or 4 of
the
Uniform Rules respectively. I considered that it was unlikely to
properly serve its intended purpose and that a more
effective
means of giving notice should be adopted. It will also be recalled
that the application was heard together with the Rule
30A application
where it was contended that the failure to give notice of the
rescission application to all investors was fatal.
15.
The
respondents cannot have it both ways. This is a classic case of a
party performing cart wheels with no purpose other than to
frustrate
the merits of the case being dealt with expeditiously.
In
the Rule 30A application the respondents challenged the failure to
give each investor notice and in the substituted service application
Klopper was prepared to abide the decision if the court ordered a
much diluted form of giving notice to investors. What was before
the
court was an application for substituted service and the court
determined how best to deal with it bearing in mind that the
affected
persons who have an interests are the investors whose right to be
heard on whether they support or object to the grant
of the
rescission application are paramount. Accordingly if the interests of
justice are taken into account their rights prevail.
16.
Moreover
it is difficult to see why it would be in the interstates of justice
to further delay the determination of the merits.
The issues raised
now are symptomatic of a Stalingrad defence; where side issues taken
on appeal simply delay the matter and build
up costs for lay
litigants against those who have deep pockets. The risk of being
financially out-litigated cannot be in the interests
of justice
particularly where the interests of justice are served ultimately by
ensuring that the most effective and practical
means is adopted to
bring the rescission application to the notice of the thousands of
affected investors.
17.
This
does not seem to be an issue in respect of which the first respondent
can complain.
18.
As
regards Klopper, who is cited in his capacity as the duly appointed
business rescue practitioner, the court required a more effective
form of service. This cannot possibly be detrimental to the interests
he is required to protect and serve, considering his duties
and
responsibilities under the
Companies Act. If
it is, then he was
obliged to say so under oath when explaining why he has changed his
non-intervention position. The form of notice
or service and when and
how it will be relaxed is a discretionary judicial power exercised on
a regular basis by courts when looking
after the interests of all
potentially affected parties who are not presently before court.
19.
The
attempt to make the case fit within the scope of a substantive law
point in order render it appealable is misconceived. The
respondents
are trying to force a square peg into a round hole.
The
order made is neither final nor definitive of any rights. It remains
a purely procedural means of giving notice in a practical
manner to
over 17000 individuals.
20.
In
my view this case is not appealable.
THE
MERITS
21.
If
I am incorrect on the issue of appealablity, then save for possibly
an immaterial error regarding who attorney Lubbe represented,
I am
satisfied on re-reading the judgment in light of the points raised
that an appeal would not have reasonable prospects of success.
I
should add that this would be on the assumption that I was not
exercising a judicial discretion. I however believe that the issue
of
substituted service on persons who are not before the court concerns
the exercise of a judicial discretion and no acceptable
grounds have
been raised for challenging the basis upon which the discretion was
improperly exercised.
ORDER
22.
Aside
from deciding the application for leave to appeal it was agreed that
I should amend the order for substituted service so as
to take into
account any further appeal process. The terms were was agreed upon.
23.
I
accordingly order that:
1.
The
application for leave to appeal is refused.
2.
The
order of 26 May 2016 is amended as follows;
a.
The
date of 6 June 2016 in para 4 is deleted and replaced with: “within
three weeks of the respondents exhausting the appeal
process”
b.
The
date of 11 July 2016 in para 6 is deleted and replaced with:
“
within
eight weeks of the respondents exhausting the appeal process”
3.
The
respondents are to pay the costs of the application including the
costs of two counsel
SPILG,
J
DATES
OF HEARING:
DATE
OF JUDGMENT: 1 September 2016
LEGAL
REPRESENTATIVES:
FOR
APPLICANTS: Adv NJ Graves SC
CH
J Maree
Theron
& Partners c/o BDK Attorneys
FOR
FIRST RESPONDENT: Adv Brett SC
Adv
J Smit
Nathalie
Lubbe & Associates Inc
FOR
3
rd
to 16
th
RESPONDENTS: Adv Smit
Faber
Goerts Ellis & Austin Inc
Kyriacou
Inc