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[2021] ZAGPJHC 107
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Pillay and Another v Hammond and Another (2020/44362) [2021] ZAGPJHC 107 (25 January 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
CASE
NUMBER: 2020/44362
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
NOT
REVISED
25
January 2021
In the matter between:-
PILLAY,
DEON
First Applicant
HOME
TO EARTH SOLUTIONS (PTY) LTD
Second Applicant
and
HAMMOND,
ERROL
First Respondent
THE
STANDARD BANK OF SOUTH AFRICA LTD
Second Respondent
JUDGMENT
DIPPENAAR
J
:
Delivered:
This judgment was prepared and authored
by the Judge whose name is reflected and is handed down
electronically by circulation to
the parties’ legal
representatives by e-mail. The date and time for hand-down is deemed
to be 10h00 on the 25th January 2021.
[1]
This is an urgent reconsideration under
r6(12)(c) of an
ex parte
order granted in the urgent court on 22 December 2020 at the instance
of the first respondent (“Mr Pillay”). In terms
of that
order a rule nisi was granted, returnable on 15 February 2021,
granting Mr Pillay leave to institute the proceedings on
behalf of
the second applicant (“the company”) and granting
interdictory relief prohibiting the first respondent, (“Mr
Hammond”) from transacting on the company’s banking
account without his written authorisation and ancillary relief.
The
second respondent played no role in these proceedings.
[2]
Mr Hammond seeks the setting aside of the
ex parte
order. He further seeks dismissal of the application or, in the
alternative, the postponement of the application to be heard in
the
normal course. Costs are sought on the attorney client scale. Mr
Pillay on the other hand seeks confirmation of the
rule
nisi
granted on 22 December 2020.
[3]
The
purpose of a reconsideration under r6(12)(c) is to offer an
aggrieved party a mechanism to redress imbalances in and injustices
and oppression from the granting of an urgent order in his
absence.
[1]
A court has wide
discretionary powers and reconsideration may involve a deletion of
the order, either in whole or in part, or the
engraftment of
additions thereto
[2]
. Relevant
factors requiring consideration include whether an imbalance,
injustice or oppression has resulted, whether alternative
remedies
are available, the nature of the order and the reasons for the order
being sought ex parte. These factors are not a
numerus
clausus
.
[4]
Mr
Hammond contends that the
ex
parte
application falls foul of the principles enunciated in
Schlesinger
v Schlesinger
[3]
(“
Schlesinger”
)
as Mr Pllay’s version did not disclose all the true and
relevant facts and his affidavit substantially misled the court.
These principles are set out in
Schlesinger
[4]
as follows:
“
Although
on the one hand the petitioner is entitled to embody in his petition
only sufficient allegations to establish his right,
he must, on the
other, make full disclosure of all material facts which might affect
the granting or otherwise of an ex parte order.
The utmost good faith
must be observed by litigants making ex parte applications in placing
material facts before the court; so
much so that if an order has been
made upon an ex parte application and it appears that material facts
have been kept back, whether
willfully and mala fide or negligently,
which might have influenced the decision of the court whether to make
an order or not,
the court has a discretion to set the order aside
with costs on the grounds of non-disclosure. It should however be
noted that
the court has a discretion and is not compelled, even if
the non- disclosure was material, to dismiss the application or set
aside
the proceedings…..
Unless
there are very cogent practical reasons why an order should not be
rescinded, the court will always frown on an order obtained
ex parte
on incomplete information and will set it aside even if relief could
be obtained on a subsequent application by the same
applicant”.
[5]
This
approach was endorsed by the Supreme Court of Appeal in
Powell
NO and Others v Van der Merwe and Others
[5]
,
which commented that the approach would apply equally to relief
obtained on facts which are incorrect because they are misstated
or
inaccurately set out in the application and should be rigorously
applied where a right in the Bill of Rights has been violated.
[6]
In
Thint
(Pty) Ltd v NDPP and Others; Zuma and Another v NDPP & Others
[6]
, the Constitutional Court
confirmed the principle that an applicant in
ex
parte
applications bears a duty of utmost good faith in disclosing all
material facts in his/her knowledge.
[7]
In considering the issue, the first enquiry
is whether material facts were undisclosed or material facts were
misstated. The second
enquiry is whether a court should exercise its
discretion in favour of the applicant and set the order aside.
[8]
It is trite that a party must make out its
case in its founding papers. It was common cause that Messrs Pillay
and Hammond are the
directors of the company. Mr Pillay holds a 49%
shareholding in the company whereas Mr Hammond holds a 51%
shareholding. In his
founding papers, Mr Pillay’s case was that
Mr Hammond was a rogue director who constantly dissipated the
company’s
funds by transferring large amounts to himself
without authority, misused the company’s funds and circumvented
the agreed
banking mandates and protocols of the company. His
application was framed at preventing Mr Hammond from perpetuating
prejudicial
conduct towards Mr Pillay as minority shareholder of the
company. His affidavit did not deal with how he became involved in
the
company. Reference was made to various substantial cash
withdrawals and an amount of R510 000 paid to conveyancing attorneys
pertaining to a property acquisition by Mr Hammond. Mr Pillay alleged
that he was the only person entitled to load and authorise
payments
from the company’s bank account held with the second respondent
and that he had not authorised any of the withdrawals
made from the
company’s account by Mr Hammond.
[9]
There are presently many factual disputes
on the papers pertaining to,
inter alia
,
the central issue whether the withdrawals made by Mr Hammond were
unauthorised. These disputes include whether the withdrawal
of the
funds pertaining to the property transaction was objected to by Mr
Pillay and whether many of the company’s creditors
and
employees of the company were paid in cash, necessitating cash
withdrawals from the business. Mr Hammond also disputed Mr Pillay’s
version regarding the daily limits on the company’s banking
accounts being increased by him on 14 December 2020 to R1 million
and
provided documentary evidence that by arrangement with the second
respondent, the limit was R2 million since 27 May 2020 and
payments
to be released by both Messrs Hammond and Pillay. There are also
disputes regarding Mr Pillay’s ongoing knowledge
of payments
being made from the company’s account. Mr Hammond averred that
Mr Pillay was aware of and agreed to Mr Hammond
being authorised to
do telephone/internet banking and to make withdrawals as it was
essential to obtain cash as many of the service
providers of the
company and some labourers demanded to be paid in cash.
[10]
Mr Hammond’s version regarding Mr
Pillay’s involvement in the company was by and large
undisputed. According to Mr Hammond,
he was the driving force behind
the company who solely operated its business, whereas Mr Pillay had
no involvement therein. It
was not disputed that Mr Hammond had
approached Mr Pillay for a loan pursuant to financial constraints
suffered during the lockdown
period in March 2020 under the Disaster
Management Act. Mr Pillay became involved in the company during May
2020 and acquired a
49% shareholding and directorship therein as
security for a loan of R3 million advanced to the company. This loan
was repaid by
November 2020 and negotiations were underway to procure
Mr Pillay’s exit from the company. This resulted in the
relationship
between the directors becoming strained during November
2020 as Mr Pillay was reluctant to do so.
[11]
It was not disputed that no demand was made
of Mr Hammond prior to the launching of the
ex
parte
application, nor was he
forewarned of Mr Pillay’s intentions. The
ex
parte
application was launched after
the second respondent refused to accede to Mr Pillay’s demands
in a letter dated 14 December
2020, absent a court order. There
is merit in Mr Hammond’s contention that the
audi
alteram partem
principle has been
violated and thus his constitutionally protected right to be heard
before an order was made.
[12]
It was not expressly disputed that the
ex
parte
relief which prohibited Mr
Hammond from transacting on the company’s business account, has
effectively brought the company’s
business to a standstill and
creditors and employees could not be paid, although Mr Pillay in
reply averred that no payments had
been loaded and that he would have
authorised payment if this had been done. Mr Pillay did not however
aver that any discussions
on this issue took place.
[13]
There is merit in Mr Hammond’s
contention that in his founding papers Mr Pillay sought to create a
certain atmosphere at variance
with the true facts. The information
provided by Mr Pillay in the
ex parte
application was scant and selective and although technically not
incorrect regarding his involvement in the company, created a
distorted picture of the parties’ relationship and the nature
of his involvement in the business of the company. His version
of the
unauthorised nature of the payments is a hotly contested issue.
[14]
I conclude that there was a material
non-disclosure of relevant facts in the
ex
parte
application which might have
influenced the decision of the court whether to make an order or not.
It matters not whether Mr Pillay
was willful or merely negligent in
not disclosing all the material facts. Had all the facts been
presented, the application would
not have been entertained on an
ex
parte
basis.
[15]
I turn to consider how the discretion
afforded should be exercised. Mr Pillay’s argument that the
affidavit of Mr Hammond
raised irrelevant and immaterial facts which
did not contribute to the determination of the application does not
pass muster. There
are material disputes of fact on central issues as
alluded to above, striking at the heart of Mr Pillay’s
entitlement to
the relief sought. I am not persuaded that Mr Pillay
has met the requirements for interdictory relief.
[16]
The
reasons presented for why the order was sought in the absence of Mr
Hammond were not convincing, considering all the evidence.
In my view
there has been an imbalance considering the nature of the order
granted. The nature of the order is also oppressive
considering all
the facts. Moreover, various alternative remedies are available to Mr
Pillay to protect his interests, inter alia
the protection afforded
to minority shareholders under s163 (3) of the Companies Act.
[7]
The authorities relied on by Mr Pillay illustrates the existence of
these remedies.
[8]
[17]
Mr Pillay’s argument that the relief
obtained was sustainable on the facts and the reconsideration should
be dismissed with
costs, thus lacks merit.
[18]
For these reasons the discretion afforded
must be exercised against Mr Pillay. It follows that the
ex
parte order
falls to be set aside and
the application dismissed.
[19]
The normal principle is that costs follow
the result. There is no reason to deviate from this principle. Mr
Hammond sought costs
on a punitive scale. I decline to accede to this
request. It would not be appropriate to grant any costs order against
the second
applicant as the application was clearly launched at the
instance of Mr Pillay or to hold the second applicant liable for any
costs
in relation to the proceedings.
[20]
I grant the following order:
[1]
The ex parte order granted on 22 December 2020 is set aside.
[2]
The application is dismissed.
[3] The first applicant,
Mr Pillay, is directed to pay the costs of the application, including
the costs of the ex parte application
and its reconsideration.
EF DIPPENAAR
JUDGE
OF THE HIGH COURT
GAUTENG
DIVISION
JOHANNESBURG
APPEARANCES
DATE
OF HEARING
:19 January 2021
DATE
OF JUDGMENT
:25 January 2021
APPLICANT’S
COUNSEL
:Adv HP van Nieuwenhuizen
APPLICANTS’
ATTORNEYS:
:Marques Soares Fontes Attorneys
Mr
Fontes
1
st
RESPONDENT’S
COUNSEL
: Adv. JC Klopper
1
st
RESPONDENT’S ATTORNEYS
:IRS Attorneys
Mr
Steenkamp
[1]
ISDN
Solutions (Pty) Ltd v CSDN Solutions CC and Others
1996 (4) SA 484
W
[2]
ISDN
supra 486I-487A/B ; Rhino Hotel & Resort (Pty) Ltd v Forbes &
Others
2000 (1) SA 1180
(W) 1182 B-E; Steeldale Ore at Rebar (Pty)
Ltd v Ore at Rebar (Pty) Ltd & Others unreported judgment of
Mudau under case
number 2018/61795 dated 4 September 2018, para [13]
–[14]
[3]
1979 (4) SA 342 (W)
[4]
348E-349B,
350 B-C
[5]
2005
(7) BCLR 675
(SCA) par [73]-[75]
[6]
[2008]
JOL 22119
(CC) para 102
[7]
71
of 2008
[8]
De
Sousa and Another v Technology Corporate Management (Pty) Ltd and
Others
2017 (5) SA 577
(GJ); City Capital SA Property Holdings Ltd v
Chavonnes Badenhorst St Clair Cooper and Others
2018 (4) SA 71
(SCA); Grancy Property Ltd v Manala and Others
2015 (3) SA 313
(SCA)