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[2010] ZAGPJHC 184
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Angermaier v De Wet and Others (09/12628) [2010] ZAGPJHC 184 (5 June 2010)
SOUTH
GAUTENG HIGH COURT, JOHANNESBURG
Case
No: 09/12628
DATE:
05/06/2010
In
the matter between:
ANGERMAIER:
WOLF
DIETER
.................................................................
Applicant
and
DE
WET: CHRISTIAAN
FREDERIK
.........................................................
First
Respondent
MCQUARRIE:
ADEL
DOREEN
................................................................
Second
Respondent
MCKENZIE:
WERGELE
STAFFORD
......................................................
Third
Respondent
PANAMO
PROPERTIES 105 (PTY) LTD (In
liquidation)
.......................
Fourth
Respondent
JUDGMENT
A
J Bester, AJ
[1]
In March 2009, the First to Third Respondents, in their respective
capacities as joint liquidators of the Fourth Respondent,
a bankrupt
company, launched an action against the Applicant for damages in a
sum exceeding R13 million arising out of the purchase
of an immovable
property at a price of over R20 million.
[2]
It is unnecessary for the purposes of this judgement to recite the
allegations in the particulars of claim; suffice it to say
that it is
common cause between the parties that the Fourth Respondent was
finally wound up on 13 June 2006, upon the basis that
it was unable
to pay its debts. It is alleged in the particulars of claim that,
when purchasing the immovable property, the Fourth
Respondent's
liabilities exceeded the value of its assets; that it was unable to
pay its debts; and therefore that it was commercially
insolvent. In
those premises it is alleged that the Fourth Respondent had carried
on business recklessly, as contemplated in terms
of Section 424 of
the Companies Act, 61 of 1973, and that it did so with the full
knowledge and approval of the Applicant, who
was in fact the sole
cause of the Fourth Respondent's demise.
[3]
It is apposite to mention here that, at the date of the hearing of
this application, some 15 months after the launch of the
action, the
Applicant is yet to plead its defence to that action.
[4]
On 24 April 2009, the Applicant served a notice in terms of Rule
47(1) on the Respondents in which it called for the furnishing
of
security in the sum of R500,000.00. The Respondents did not respond.
They were reminded on 28 September 2009, that a response
had still
not been received and threatened that unless a response is received,
an application for security would be launched. Again
there was no
response; therefore on 29 January 2010, the Applicant launched an
application for security for costs.
[5]
The Applicant gave notice in the security application that the relief
sought in it would be moved on 23 February 2010. Of course,
that
application, as is the case with any other interlocutory application,
is brought under Rule 6(11) on a short form notice of
motion. On 3
February 2010, the Respondents served a notice of intention to oppose
the security application, and apparently assumed
that they then had
the customary 15 court days for the filing of their answering
affidavit, which would then have been due on 24
February 2010, i.e.,
the day after the proposed hearing date.
[6]
Notwithstanding the Respondents' notice of opposition, the Applicant
then, on Thursday, 18 February 2010, proceeded to set the
security
application down for hearing on 23 February 2010. The Respondents'
attorney immediately requested a postponement, but
was strangely, in
view of the opposition, rebuffed. The Respondents, in order to avoid
a hearing of the security application in
the absence of their
answering affidavit, were compelled to launch a formal application in
which they sought condonation for the
"late" filing of
their answering affidavit in the security application. That, they did
on 22 February 2010. The Applicant
opposed that application.
[7]
On 23 February 2010, the security and condonation applications served
before this court, but were postponed sine die, with costs
reserved.
[8]
On 26 February 2010, the Respondents served their answering affidavit
in the security application. On 12 March 2010, the Applicant
served
an answering affidavit in the condonation application and a replying
affidavit in the security application.
[9]
The security and condonation applications were then set down for
hearing on the opposed motion court roll for the week of 1
June 2010
and both applications were heard on 2 June 2010.
[10]
The condonation application can be disposed of with relative ease.
[11]
Rule 6(11) states that "(n)otwithstanding the aforegoing
subrules, interlocutory and other applications incidental to
pending
proceedings may be brought on notice supported by such affidavits as
the case may require and set down at a time assigned
by the registrar
or as directed by a judge".
[12]
Rule 6(11), of course, does not stipulate a time for the filing of
answering and replying affidavits in interlocutory applications.
However, that does not mean that the respondent in an interlocutory
application has unlimited time within which to file an answering
affidavit (and the same applies of course to an applicant's replying
affidavit). It has been held that Rule 6(11) should at least
be read
to mean that the answering (and replying) affidavits in interlocutory
applications must be filed within a reasonable time
and, prima facie,
that a reasonable time would be the time prescribed in terms of Rule
6(5)(e) unless there were some special circumstances
that dictated
longer or shorter periods. See: Gisman Mining and Engineering Co
(Pty) Ltd (in liquidation) v LTA Earthworks (Pty)
Ltd
1977 (4) SA 25
(W); Muller v Paulsen
1977 (3) SA 206
(E); Hendricks v Santam
Insurance C Ld
1973 (1) SA 45
(C).
[13]
In this division the practice, as I understand it, is generally that
a notice of set down in an interlocutory application is
served only
when the papers in the application are complete in the sense that all
the affidavits which the parties are entitled
to file, have been
filed. I put that to counsel for the Applicant, but she held a
different view. Even if I am wrong in my understanding
of the
practice, then it would seem to be a salutary approach to
interlocutory applications that would avoid exactly the type of
dilemma that the Respondents faced in this application.
[14]
Nevertheless, in my view, the set-down of the security application by
the Applicant was premature; he ought to have accorded
the
Respondents at least the time prescribed in terms of Rule 6(5)(e) for
the filing of an answering affidavit. That premature
set-down and the
refusal to postpone the hearing day pending the filing of the
Respondents' answering affidavit precipitated and
necessitated the
condonation application. Such conduct, in the face of the
Respondents' notice of opposition, was entirely unreasonable.
The
Applicant ought to have accorded the Respondents at least the time
prescribed in terms of Rule 6(5)(e) or, if that was unacceptable,
to
arrange time periods for the filing of affidavits with the
Respondents. Viewed from this perspective, the fact that the
Respondents'
answer was, in the event, filed a mere 2 days late is of
no consequence and the condonation must be allowed with costs. The
reserved
costs of the unnecessary hearing on 23 February 2010, must
then follow that result.
[15]
To return to the security application, counsel for the Applicant and
the Respondents were ad idem that I should decide the
question as to
whether security had to be furnished upon the procedural and
substantive bases provided under Rule 47(1) and section
13 of the
Companies Act. They were further ad idem that, although the
Respondents' particulars of claim in the action was not incorporated
in, and confirmed in the parties' affidavits filed in the security
application, I should take cognisance of it.
[16]
It was held in MTN Service Provider (Pty) Ltd v Afro Call (Pty) Ltd
2007 (6) SA 620
(SCA), at paragraph 7, that section 13 of the
Companies Act anticipates a two-stage enquiry: "/At the initial
stage, the question
is whether the applicant for security had
established, by credible testimony, that the body corporate, if
unsuccessful, will not
be able to pay the applicant's costs in the
main proceedings. If the applicant fails to meet this threshold
requirement, that is
the end of the proceedings. The application is
bound to be refused. If, on the other hand, the Court is satisfied
that such reason
to believe exists, it must, at the second stage,
decide, in the exercise of the discretion conferred on it by this
section, whether
or not to compel security."
[17]
The Applicant bases its entire case on averments made by the
Respondents in their particulars of claim in the action, in other
words, the allegation that the Fourth Respondent is a bankrupt
company that was finally wound up because its liabilities exceeded
the value of its assets, and/or it was unable to pay its debts,
and/or the Fourth Respondent was commercially insolvent. Based
on
those allegations in a pleading, which is certainly not evidence, the
Applicant then contends that the First to Third Respondent,
in their
respective capacities as joint liquidators of the Fourth Respondent,
and the Fourth Respondent, will on their own version
be unable to
satisfy a costs order should the Applicant be successful with his
defence to the action.
[18]
It is common cause that the Applicant was at all relevant times the
sole director of the Fourth Respondent. Presumably, he
should
therefore have been in a position to give direct evidence as to the
cause of the Fourth Respondent's demise, even if just
to confirm the
above allegation in the particulars of claim. But that he does not
do. The Applicant's attorney of record swore
the Applicant's founding
affidavit. The attorney says that the facts sworn to, are within his
personal knowledge, but is seems
relatively self-evident that all
that can be within his personal knowledge, is the fact that certain
allegations were made in the
particulars of claim. These hearsay
allegations can hardly pass muster as "credible testimony to the
effect that the Fourth
Respondent, if unsuccessful in the action,
would not be able to pay the Applicant's costs.
[19]
The scantiness of the Applicant's mentioned "evidence"
notwithstanding, the Respondents show in their answering affidavit
that a current account in the name of the Fourth Respondent has a
credit balance of R684,528.71. That account was opened by the
liquidators for the purposes anticipated in section 394 (1) (a) of
the Companies Act. It was submitted on behalf of the Respondents
that
any costs order against them in the main action would form part of
the costs of administration. Any costs, order awarded against
the
respondents and in favour of the applicant; would accordingly enjoy
preference over pre-liquidation creditors and other costs
of
administration and would be payable immediately. I agree. It was held
in Parity Insurance Co Ltd (in liquidation) v Hill
1967 (2) SA 551
(A) at 562 that a litigant who has been granted an order for
post-liquidation costs by a competent court is, after taxation of
such costs, entitled to immediate payment of them in full.
[20]
The Applicant fairly concedes that argument, but contends that there
is no guarantee that the funds would remain available
because there
is "no limit or prohibition on the Respondents to utilise (those
funds) ... for any other purpose". What
that "other
purpose" might be, is not declared; the Respondents cannot, for
example, pay any creditor until after confirmation
of a liquidation
and distribution account. But it is unnecessary to speculate about
such matter; the Respondents have shown that
they sufficient funds to
cover even the Applicant's overly generous estimate of the
anticipated costs in the action and they have
shown that the funds
cannot simply be dissipated at will or whim.
[21]
Applicant therefore failed to show, by credible testimony, that these
funds will not be available to pay the Applicant's costs
if the
Fourth Respondent is unsuccessful in the action. The security
application therefore stands to be dismissed. Even if I am
wrong in
concluding thus, then I would in any event not have exercised my
discretion in favour of the furnishing of security. The
Applicant has
had 15 months since the service of the summons to plead; he has not
done so. Neither has he specified his defence
in his security
application. I would think that, before the Applicant can claim
security, he should have pleaded or specified his
defence and, until
he has done so, his claim for security would be premature. The
Applicant has therefore not even shown that he
has a defence to the
action. It is apposite to point out that the Applicant also does not
contend that the action by the liquidators
is frivolous or without
merit. The main purpose of section 13 might well be to discourage
bankrupt companies from litigating vexatiously
or where they have no
prospects of success, thus causing their opponents unnecessary and
unrecoverable legal expense. But the converse
is also true. A company
with a legitimate claim should not be burdened with security
obligations where its opponent raises a vexatious
defence or one with
no prospects of success. Although it is not necessary for me fully to
enquire into the merits of the action,
the nature of the Applicant's
defence is therefore not irrelevant and the failure on the part of
the Applicant to inform the court
of such information relating to the
action, must militate against the granting of security.
[22]
In the premises, I grant the following order:-
a.
the late filing of the Respondents' answering affidavit in the
Applicant's security for costs application is condoned;
b.
the Applicant's application in terms of Rule 47(1) is dismissed;
c.
the Applicant is ordered to pay the costs of the condonation and
security for costs applications, which costs include the costs
reserved on 23 February 2010.
Bester,
AJ
Acting
Judge of the High Court 5 June 2010