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[2020] ZAGPJHC 311
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Bassani Mining (Pty) Ltd v Sebosat (Pty) Ltd and Others (191905/20) [2020] ZAGPJHC 311 (10 September 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
Case
number :
191905/20
IN
THE MATTER BETWEEN:
BASSANI
MINING (PTY) LTD
Applicant
and
SEBOSAT
(PTY) LTD
First Respondent
MASHALA
RESOURCES (PTY) LTD
Second Respondent
HERMAN,
KURT
Third Respondent
ANDERSON,
ANDREA AVRIL
Fourth Respondent
JUDGMENT
BHOOLA
AJ:
Introduction
[1]
The applicant ("Bassani") seeks leave to appeal the whole
judgment of this court (save for the paragraphs 2 to 5 relating
to
urgency), delivered on 21 August 2020, in which its application for
urgent interim relief
pendente lite
in the form of an
anti-dissipation interdict was refused. The respondents ("Mashaba",
"Herman" and "Sebosat")
oppose the application.
[2]
Section 17(1)(a)
of the
Superior Courts Act 10 of 2013
sets out the
test for granting leave to appeal as being whether the appeal would
have reasonable prospects of success, or whether
there is some other
compelling reason why the appeal should be heard. Respondents' submit
that there is no reasonable prospect
that another court would come to
a different conclusion on any of the grounds of appeal raised by the
applicant, nor is there a
compelling reason why it should be heard.
Grounds
of appeal
The
Court erred in applying the test as being "intention to thwart"
the applicant's pending damages claim
[3]
Mr Eyles SC, appearing for the applicant, submitted that insofar as
the Court found that
"intention
to thwart"
the applicant's claim in the pending action to be instituted was a
requirement for granting of an interdict, this did not take
account
of the lower threshold that the conduct of the respondents would
leave it with a hollow judgment. Whilst the Court correctly
referred
to the test set out by Van der Linde J in
Carsten
v Kullman,
[1]
it then erred in failing to recognise the principles set out in
paragraph 25 and footnote 6 of the judgment (as recognised in the
relevant passages of
Knox
D’Arcy Ltd v Jamieson and Others
[2]
and as described in the
passage from Herbstein and Van Winsen quoted in the judgment).
[4]
Counsel submitted that at paragraph [25] Van der Linde J (footnotes
excluded) clearly posited a lower threshold when he determined
that
in order for the applicants to
"succeed
in obtaining the interdict they seek, the question is whether the
applicants have made out a case that the respondents
are dissipating
their assets thereby intending to procure the result of a hollow
judgment. Some authorities
[3]
have set a lower bar in this latter regard; if the effect of the
respondents' conduct would be a hollow judgment, that would of
itself
be sufficient."
[5]
In failing to apply the lower threshold, Mr Eyles submitted, the
Court erred in finding that Bassani had to show that the dispositions
were made with the "
intention to
thwart
" its pending damages claim.
In circumstances (such as
in casu
,
where the respondents are
mala fide
),
Bassani submits that it is not a prerequisite to relief to establish
an intention on the part of the respondent to frustrate
an
anticipated judgment,
if the conduct of
the respondent is likely to result in a hollow judgment.
(Counsel's
emphasis).
[6]
As a result, the Court erred in failing to take into account that the
conduct of the respondents fell into the category of "
exceptional
cases"
referred to in the following paragraph in
Knox
D’Arcy
[4]
:
"
The
question which arises from this approach is whether an applicant need
show a particular state of mind on the part of the respondent,
i.e.
that he is getting rid of the funds, or is likely to do so, with the
intention of defeating the claims of creditors.
Having regard
to the purpose of this type of interdict, the answer must be, I
consider, yes,
except
possibly in exceptional cases
."
(Counsel's
emphasis).
[7]
The reference to "
exceptional
cases
"
in the judgment of Stegman J
[5]
on appeal in the passage quoted by Grosskopf JA, Mr Eyles submitted,
makes it clear that that intention is not relevant, in particular
when
mala
fides
are alleged, as is in the present case. The above authorities dealt
with instances where the anti-dissipation interdict was sought
in
circumstances of
bona
fide
conduct.
In
Knox
D'Arcy
the interdict was sought where the respondent was in good faith
[6]
disposing of its assets, but the possibility of "
exceptional
circumstances"
arises in relation to alleged
mala
fide
conduct.
[8]
Mr Eyles submitted that this Court ignored the fact that the
respondents were committing a fraud upon it, and had as a result
structured their affairs so as to leave it with a hollow judgment in
its anticipated claim for damages. As a result the Court erred
in
finding that:
8.1
Bassani had not proven that there is a real risk that the respondents
will take every step in the intervening period before
the damages
claim is heard, to dissipate and/or diminish their assets in order to
avoid the efficacy of a court order and to leave
it with a hollow
judgment should it succeed; and
8.2
Bassani had not met the second threshold requirement in
Knox
D’Arcy
[7]
for obtaining an anti-dissipation interdict) and its application fell
to be dismissed.
[9]
Mr Eyles submitted that the Court ought to have found (at least on a
prima facie
basis) that the respondents had planned their
affairs and structured their businesses in such a way that the effect
will be that
Bassani will be left with a hollow judgment. This
finding should have been made for the following reasons:
9.1
The Court’s finding (albeit
prima facie
) that there is
substance to Bassani’s damages claim against Herman and/or
Sebosat arising out of an alleged fraud;
9.2
That Mashala was mining illegally;
9.3
That there was a pattern of conduct on the part of the respondents to
use shelf companies and to interpose them between subcontractors
and
Mashala to protect assets against the execution of a judgment; and
9.4
That there was a misuse or abuse of the distinction between Sebosat
and Mashala by Herman, which misuse or abuse resulted in
an unfair
advantage to Mashala.
The
Court erred in concluding that relief sought should be limited to
coal mined by Bassani.
[10]
Bassani submits that the Court erred in finding that it was common
cause, or not in dispute that “
the
coal is being mined by Sebosat and Mashala and disposed of in the
ordinary course of business".
[8]
The Court ought to have found that the disposal of the coal was part
of the respondents' planning their affairs and structuring
their
business to protect assets against the execution of a judgment and
leave Bassani with a hollow judgment. Mr Eyles submitted
that in any
event the meaning of "
ordinary
course of business"
in
this context is not clear.
[11]
Mr Eyles emphasised that the relief sought by the applicant (and as
stated in the notice of motion) is not limited to coal
that it had
mined. This was recognised in the Court's judgment at paragraphs 21
and 22. If regard is had to the founding affidavit
[9]
it is clear that the assets being referred to are minerals i.e. the
coal already mined. The respondents are opportunistic in disputing
this when they themselves make reference in their answering affidavit
inter
alia
to "
coal"
and to "
coal
mined".
Moreover, they do not deny that there is coal to the value of R 25
million on the mine, or that coal is on a daily basis leaving
the
mine and being sold.
The
Court erred in finding that it was not required to make a finding on
fraud
[12]
Mr Eyles submitted that the Court erred in finding that it was not
required to decide whether the respondents were in fact
committing a
fraud on Bassani or whether Mashala was mining illegally. The Court
should also have dealt with the issue of whether
there is pattern of
conduct by Herman to use shelf companies and interpose them between
the subcontractor and Mashala to protect
Mashala’s assets, and
whether there is a practice to use various contractors (i.e.
Lateozest, Tamosys and Sebosat) as a front
which is then allowed to
be liquidated, thus protecting Mashala as owner of the coal. The
Court further erred in failing to deal
with the question whether
Herman had abused the corporate personalities of Sebosat and Mashala
in such a way that the respondents,
including Mashala, had obtained
an undue advantage. Counsel submitted that the Court ought to have
dealt with these issues, on
the basis as required in an application
for an interim interdict, so as to determine whether the respondents
had planned their
affairs and structured their businesses in such a
way that the effect would be that Bassani will be left with a hollow
judgment.
[13]
It would follow, having dealt with these issues, that the Court
should have found that:
13.1
The respondents had committed a fraud on Bassani;
13.2
Mashala was mining illegally;
13.3
There was a pattern of conduct on the part of the respondents to use
shelf companies and to interpose them between subcontractor
and
Mashala to protect assets against the execution of a judgment;
13.4
The respondents did so structure their affairs and used various
contractors as a front to protect Mashala as the owner of the
coal;
and
13.5
There was a misuse or abuse of the distinction between Sebosat and
Mashala by Herman, which misuse or abuse resulted in an
undue
advantage to Mashala.
[14]
The Court furthermore, counsel submitted, failed to have regard to
the misrepresentation in clauses 17 and 18 of the Subcontract
Agreement. The Court should also have accepted the evidence of what
had occurred between Lateozest with the contractor Close Up
Mining
(Pty) Ltd, since this is uncontested.
The
Court erred in finding that the coal was being disposed of in the
ordinary course of business
[15]
Mr Eyles submitted that the respondents do not dispute the terms of
the Subcontract Agreement between Basani and Sebosat, nor
do they
dispute the structures put in place pursuant to the three
subcontracts (Lateozest, Tamosys and Sebosat). This could never
constitute conducting business in the ordinary course for the
following reasons:
15.1
The preamble to the Sebosat Subcontract Agreement is incorrect when
it refers to the "Contractor" concluding a main
agreement
with Mashala, as it is only the business rescue practitioners who
could have approved such an agreement. This constitutes
misrepresentation of the mining right.
15.2
Clause 17 provides that ownership of the coal mined by Bassani
remains the property of the "Contractor", i.e. Sebosat,
but
this contradicts the allegation by the respondents that the coal in
fact belongs to Mashala. This establishes the fraud that
was
committed.
15.3
Clause 18 provides that notwithstanding ownership remaining with
Contractor, the mined minerals shall be used to provide security
for
the Subcontractor for any amounts due by the Contractor. The
Contractor does not own the minerals and this is a misrepresentation.
15.4
Clause 36 makes provision for representations and warranties in
regard to authorisation and powers and these are likewise based
on
misrepresentations.
Respondents'
submissions
[16]
Mr Cassim SC, appearing for the respondents, submitted that the Court
fully analysed the facts and law in reaching a decision.
In
responding to the merits of the appeal (I deal with counsel's
introductory point on mootness below), counsel denied that the
respondents were opportunistic in referring to the relief being
sought as being limited to coal mined by Bassani. This appears
from
the founding affidavit (at paragraph 8) where the applicant states
that the relief it seeks is: "
first, an interim interdict
pendente lite to restrain the respondents from concealing or
dissipating assets (i.e.
coal that was mined by Bassani
)
pending the outcome of an action for damages against them; and
secondly, the return of certain equipment which belongs to Bassani".
[17]
Furthermore, in their answering affidavit, the respondents aver that
coal mined by Bassani during March, April and May 2020
had already
been sold in their entirety. This was in keeping with the intention
of the parties as reflected in the Subcontract
Agreement that the
coal mined would be sold as soon as possible and hence there is no
longer coal that was mined by Bassani on
the property or in
possession of Sebosat and Mashala. These facts was never refuted by
the applicant. Mr Cassim submitted in these
circumstances that,
properly construed, the applicant pursued this application because it
was seeking security for its future claim
for damages. It was pursued
in terroram
and correctly dismissed as not meeting the
essential requirements for an anti-dissipation interdict. The Court,
he submitted, properly
had regard to this feature in paragraph 7 of
the judgment.
[18]
In regard to the ground of appeal that that applicant need not show
an intention to defeat the claims of creditors if it was
shown that
the conduct of respondents was likely to result in a hollow judgment,
Mr Cassim submitted that the reference to "
exceptional
circumstances
" in
Knox
D'Arcy
does not create a definite and
clear exception to the requirement of intention. It merely suggests
that this is a possibility in
certain instances. This Court
correctly summed up the requirements for the anti-dissipation
interdict in paragraphs 6-9 of
the judgment and concluded that, on
the facts of this case, the applicant had to show that the
dispositions being complained of
are being done with the intention
"
of thwarting"
applicant's pending damages claims. In the circumstances the Court
correctly concluded that
"[t]here
is no evidence that Mashala and Sebosat are arranging their assets or
disposing of coal with the intention of defeating
its claim".
[19]
Mr Cassim referred to the authority of
Carmel
Trading v Commissioner
for
the South African Revenue Services and Others
[10]
where
the Supreme Court of Appeal confirmed the requirements for an
anti-dissipation order as follows: "
[3]
Such an order, which interdicts a respondent from disposing of or
dissipating assets, is granted in respect of a respondent’s
property to which the applicant can lay no special claim. To obtain
the order the applicant has to satisfy the court that the respondent
is wasting or secreting assets with the intention of defeating the
claims of creditors."
Harms
ADP further held in regard to the anti-dissipation order granted in
the court
a
quo
,
that "
[i]mportantly,
the order does not create a preference for the applicant to the
property interdicted."
[20]
Mr Cassim also referred to
Investec
Employee Benefits v Electrical Industry KwaZulu Natal Pension Fund &
Others
[11]
where
the court declined to develop the law to include a lower threshold in
the following terms:
“
[121]
The main thrust of the argument advanced on behalf of the
interdicting parties is that the law should be developed so that
an
applicant is entitled to an asset-preservation order where it is
demonstrated that the respondent is disposing of property in
a way
that will defeat the applicant's right to levy execution upon it. It
is submitted that what should be of paramount importance
is the
effect of the conduct, namely whether the likely effect of the
conduct will be to leave the respondent with insufficient
assets to
satisfy the judgment that the applicant hopes to obtain. It is
submitted that this court has the inherent power to develop
the law,
as well as the statutory power to do so in terms of s 173 of the
Constitution.
[122]
In support of their argument for the development of the law, counsel
for the interdicting parties referred to English and
Australian law.
They referred to Ninemia Maritime Corp v Trave
Schiffahrtsgesellschaft mbH
[1984] 1 All ER 398
; Ketchum
International plc v Group Public Relations Holdings Ltd and Others
[1996] 4 All ER 374
; Derby & Co Ltd and Others v Weldon and
Others D (No 2)
[1989] 1 All ER 1002
(CA); Dixon & Webster v
Liddy
[2002] SADC 143
; and Jackson v Sterling Industries Ltd
[1987] HCA 23
;
(1987)
162 CLR 612.
[123]
No point would be served in dealing with these judgments in
any detail. The applicable law in South Africa was reinstated
by
the Supreme Court of Appeal as recently as November 2007. In the
short space of time that has elapsed since then, it is inconceivable
that the law would require development of the kind suggested by the
interdicting parties. Moreover, the relief sought makes substantial
inroads into the rights of a party to deal with his or her assets as
he or she deems fit, in circumstances where it may well
be
established that the applicant for the relief is not entitled to any
award at all from the party against whom the award was
made. In
circumstances such as these, potentially irreversible and prejudicial
consequences can be caused to the party against
whom the order is
made. In these circumstances the interdicting parties' invitation to
develop the law in the manner suggested
must be declined.”
[21]
On these authorities Mr Cassim submitted that the applicant did not
demonstrate "
exceptional
circumstan
ces" nor did it
demonstrate any grounds for the Court to have found that the
requirement of intention should be departed from.
In this regard he
submitted it is significant that the applicant
does
not dispute that the coal currently being disposed of belongs to
Mashala, and that it is being disposed of by Mashala and Sebosat
in
the ordinary course of business and that value is received for such
disposition. Whilst it contends that this Court erred in
making the
finding that this was common cause or at least not disputed, this
allegation is uncontroverted on the papers. There
is moreover no
suggestion, nor was any factual basis pleaded, that the coal and/or
proceeds derived from the sale of the coal,
were being spirited away
and/or concealed.
[22]
In regard to the applicant's grounds of appeal related to the Court's
failure to make findings on fraud, illegality and abuse
of corporate
entities, Mr Cassim submitted that Bassani was never mistaken on its
rights or role. The Subcontract Agreement clearly
records that the
parties to the agreement means "the Contractor", which is
Sebosat, and the "Subcontractor",
which is the applicant.
The applicant could never have been induced to contract by any
misrepresentation that it would have a right
of recourse against
Mashala at the time of concluding the Subcontract Agreement. Herman
explained in his answering affidavit that
Sebosat was formed as a
special purpose vehicle through which a subcontractor would be
appointed to perform mining operations at
the mine. The reason for
structuring the affairs in this way was to ensure that the risks
associated with the operations do not
fall in one specific entity but
in several entities established for that purposes. This explains why
Sebosat and not Mashala appointed
it as a subcontractor. Moreover,
clause 16.5 of the Subcontract Agreement stipulated that for the
first three months, Bassani would
only be entitled to payment of its
invoices against receipt by Sebosat of payment from its clients. In
other words, the coal mined
by Basani would be sold, and Sebosat
would use the capital obtained from the sale to pay it. The
respondents explained that this
clause was inserted to allow Sebosat
sufficient cash flow from its operations. This was never disputed by
Bassani, and in fact
this allegation was never addressed at all. The
use of the words "
to the extent
that such ownership is allowed by the MPRDA..."
in clause 17 of the Subcontract Agreement excludes an unqualified
right of ownership of the coal in favour of Sebosat. There could
thus
have been no misrepresentation. Furthermore, clause 18 does not
provide an unqualified right of security to the coal in favour
of
Bassani nor any representation that the coal would be preserved by
Sebosat pending payment to Bassani. This is so because the
agreed
manner for payment for services, as stipulated in clause 16.5 of the
Subcontract Agreement, was made conditional on the sale of
the coal.
In relation to these submissions, Mr Eyles submitted that whilst it
is correct that Bassani was never mistaken as to
its rights or its
role in terms of the Subcontract Agreement, the misrepresentations in
respect of the validity of the mining rights
remains relevant.
[23]
In relation to the Lateozest and Close Up Mining (Pty) Ltd issue, Mr
Cassim submitted that Bassani impermissibly raised this
for the first
time in reply. The respondents were entitled to know the case they
were called upon to meet and were entitled to
place before the Court
a contrary factual version. As such these allegations cannot be
considered to be uncontested and fell to
be disregarded. In this
regard
Betlane
v Shelly Court CC
[12]
is clear authority for
the trite principle that the obligation is on a party to make out a
case in its founding papers, and that
a case cannot be made out in
the replying affidavit for the first time. The rationale for this
principle is set out in
Director
of Hospital Services v Mistry
[13]
where
the Appellate Division stated:
"When...proceedings
are launched by way of notice of motion, it is to the founding
affidavit that a Judge will look to determine
what the complaint is.
As was pointed out in Krause J in Pountas' Trustees v Lahanas
1924
WLD 64
at 68 and has been said in many other cases:
"..an
applicant must stand or fall by his petition and the facts alleged
therein, and that, although sometimes it is permissible
to supplement
the allegations contained in the petition, still the main foundation
of the application is the allegation of facts
stated therein,
because
those are the facts the respondent is called upon to either affirm or
deny".
(Counsel's
emphasis)
[24]
However, as Mr Eyles submitted, it was always available to the
applicant even despite the urgency of the proceedings, to seek
that
the allegations pertaining to
Lateozest
should
be struck out or to seek leave to file a further affidavit. This
information appears to only have become known to the applicant
in its
consultations with the business rescue practitioners after the
answering affidavit had been filed. Courts are more inclined
to grant
such indulgences in urgent proceedings, as was held by the Supreme
Court of Appeal in
Lagoon
Beach Hotel (Pty) Ltd v Lehane N.O and others,
[14]
at para [16]
:
"...Moreover,
the initial application was moved as a matter of urgency, and the
courts are commonly sympathetic to an applicant
in those
circumstances, and often allow papers to be amplified in reply as a
result, subject of course to a right of a respondent
to file further
answering papers. Regard should also be had to the intricacy
of....dealings that required intensive and ongoing
investigations.
Furthermore, the applicant, as respondent a quo, seeks not to avail
itself of the opportunity to deal with the
additional matter...set
out in reply, and I see no reason why these allegations should
therefore be ignored".
Conclusion
[25]
The applicant seeks leave to appeal to the Supreme Court of Appeal,
relying on the submission that issues of considerable public
importance involving an important question of law are involved. This
is the question of the “
exceptional
case”
referred to in
Knox
D’Arcy
and whether it is required
in such cases for an applicant to establish an intention on the part
of the respondent to dissipate
its assets or whether a lesser
threshold is sufficient. Mr Eyles submitted that this "lower
bar" test has not been dealt
with previously by the Supreme
Court of Appeal, and that in
Carmel
Trading (supra)
the court was not
dealing with "
exceptional
circumstances
" when it determined
that "
wasting
or secreting assets with the intention of defeating the claims of
creditors
" remains
the applicable test.
[26]
It is so that the court in
Investec
(supra)
declined the invitation to
further develop the law to incorporate a lower threshold. However,
Van der Linde J's decision in
Carstens
(supra
)
does in fact do so. I am therefore persuaded that there are merits in
this ground of appeal in addition to the factual grounds.
I am of the
view that there is a reasonable prospect that another court would
conclude that the lower threshold test should have
been applied and
that the alleged
mala fide
conduct of the respondents falls within the category of possible
"
exceptional circumstances"
espoused by Stegman J and the Appellate Division in
Knox
D'Arcy
.
[27]
Lastly, Mr Cassim's introductory point that leave to appeal will be
moot in that,
inter
alia,
the
declaratory order sought by the applicant, should it be granted on
appeal, would have no practical effect, remains to be considered.
The
conduct of the applicant is also relevant, he submitted, in that the
applicant has not
instituted an action for damages; has not referred the dispute to
mediation or arbitration in terms of the Subcontractor
Agreement; and
has not taken back its equipment despite the respondent's tender made
prior to hearing of the urgent application.
Mr Eyles in reply
submitted that the damages claim would be instituted within the 30
day period as set out in the notice of motion;
that the applicant was
not amenable to arbitration or mediation as those proceedings would
be limited to the issues in the Subcontract
Agreement; and that the
applicant was in the process of collecting its equipment. Mr Eyles
submitted that the appeal is not academic
given the fact that the
respondents do not dispute that there is sufficient coal on the
premises to form the subject of an interdict.
I agree.
[28]
I am therefore of the
view that there are reasonable prospects that another court would
come to a different conclusion and determine
that
the
anti-dissipation interdict should have been granted and/or that
respondents had planned their affairs and structured their businesses
in such a way that the effect will be that Bassani will be left with
a hollow judgment.
Order
[29]
In the result, I make the following order:
29.1
The applicant is granted leave to appeal to the Supreme Court of
Appeal.
29.2
The costs of this application to be costs in the appeal.
_______________________________
U.
BHOOLA
Acting
Judge of the High Court of South Africa
Gauteng
Local Division, Johannesburg
Date
of hearing: 8 September. Heard by videoconference as per the
Consolidated Directive of the Judge President of 11 May as extended
to 15 September 2020.
Date
of judgment: 10 September 2020.
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email, by being uploaded
onto
the CaseLines digital system of the GLD and by release to SAFLII. The
date and time for hand-down is deemed to be 13h00 on
September
2020.
Appearance:
Counsel
for the Applicant :
AJ EYLES SC with
R ISMAIL
Instructed
by:
Hogan
Lovells
Johannesburg
Counsel
for the Respondents:
N
CASSIM SC with A VORSTER
Instructed
by:
Hulley
& Associates
Johannesburg
[1]
2018
JDR 0018 (GJ)
at
[33].
[2]
[1996] ZASCA 58
;
(1996) 4 SA 348
(A) at 372G.
[3]
Reference
to authorities is to the paragraph in Herbstein and Van Winsen also
quoted in the court's judgment.
[4]
Ibid.
[5]
(
1995)
2 SA 579 (W).
[6]
Groskopff JA
at
373 E.
[7]
Ibid
at
para [22].
[8]
At
para [20].
[9]
Paragraphs [67] and [68].
[10]
(
447/07)
[2007] ZASCA 160
; [2007] SCA 160 (RSA);
[2008] 2 All SA 125
(SCA);
2008 (2) SA 433
(SCA) (29 November 2007)
at
3.
[11]
SA
2010 (1) 446 (W).
[12]
2011
(SA) 388 (CC).
[13]
1979
(1) SA 626
(A) at 635H-636D.
[14]
2016
(3) SA 143
(SCA).