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[2010] ZAGPPHC 162
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Motala NO and Others v ITT Financial Corporation (Pty) and Others (50516/10) [2010] ZAGPPHC 162 (13 October 2010)
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH, PRETORIA)
Case
no. 50516/10
DATE:
13/10/2010
In
the matter between:
ENVER
MOHAMED MOTALA N.O.
…..................................................
First
Applicant
MABUTHU
LOUIS
MHLONGO
..............................................................
Second
Applicant
AMOURE
YEUN
N.O
.
..............................................................................
Third
Applicant
REALEKA
INVESTEMENTS SA (PTY)
LTD
........................................
Fourth
Applicant
and
ITT
FINANCIAL CORPORATION
(PTY)
.................................................
First
Respondent
HENDRICK
ABRAM VAN VUUREN
..................................................
Second
Respondent
ABSA
BANK
LIMITED
...........................................................................
Third
Respondent
MASTER
OF THE HIGH
COURT
........................................................
Fourth
Respondent
JUDGMENT
LEGODI
J
INTRODUCTION
[1]
An order that was granted on the 5 August 2010 became a centre
of controversy around the appointment of judicial managers,
on the 19
August 2010, by the Master of this Court.
[2]
Several issues arose as a result of an interdict that was obtained on
the 3 and 6 September 2010 by the three provincial judicial
managers
in respect of whom the Master issued a letter of appointments as such
for Realeka Investments SA (PTY) Ltd (the fourth
applicant).
[3]
The order of the 3 September 2010 reads as follows:
"1.
The second respondent is interdicted from:
1.1
carrying
out any of the functions of a provisional judicial manager, whether
conferred by the Companies Act or purportedly, conferred
by the court
order dated 5 August 2010 issued by his Lordship Mr Justice Kruger
("the court order"). The court order
is attached hereto
marked "X",
1.2
representing
himself as the provisional judicial manager of Realeka to any third
person,
1.3
acting
in terms of the court order or giving effect thereto;
1.4
disposing,
alienating or in any way whatsoever encumbering of any of Realeka's
assets;
1.5
obstructing
the Master's provisional JMs either directly or indirectly from
carrying out their duties as joint provincial judicial
managers of
Realeka;
1.6
interfering
either directly or indirectly in the Master's JMs control of or
management of Realeka,
1.7
from
effecting any debits to the account held by Amber Mountain
Investments 183 (PTY) Ltd at the Haartebespoort branch of Absa Bank,
account number 40/6193/1737,
1.8
from
taking any steps in terms of paragraphs 3 to 6F of the court order,
2.
Divesting
the second respondent of the control and management of Realeka.
3.
Compelling
the second respondent:
3.1
to
forthwith take all steps necessary to hand over the control and
management of Realeka to the Master's JMs,
3.2
to
forthwith hand over possession of all Realeka's construction sites
and all other assets, including the handing over of all keys,
3.3
to
forthwith fully co-operate with the Master's JMs in any manner that
they require and in relation to anything concerning Realeka's
business and activities;
3.4
to
within 3 days of this order report in writing fully (with sufficient
particularly so that the Master's JMs are apprised of the
actions
taken by the second respondent and his activities to enable them to
investigate the actions and activities) to the Master's
JMs on:
3.4.1
all discussions, and meetings held with third parties in relation to
and/or concerning Realeka;
3.4.2
all
transactions concluded on behalf of Realeka or negotiations conducted
on behalf of Realeka,
3.4.3
all
payments made on behalf of Realeka;
3.4.3.1
all
payment made to Realeka;
3.4.3.2
all
correspondence written and received by the second respondent
concerning Realeka,
3.4.3.3
ail
documents prepared on behalf of Realeka and received by Realeka,
including but not limited to site plans, construction diagrams
and
the like as well as any written contracts entered into since 5 August
2010;
3.4.3.4
ail
documents received by the second respondent on behalf of Realeka;
3.4.3.5
any
other documents which have come into existence from 5 August 2010;
3.4.3.6
minutes
of all meetings attended by the second respondent on behalf of
Realeka,
4.
Prayers 1 to 3 (including sub-paragraphs) to operate with immediate
effect as interim orders pending the finalisation of one
or all of
the following legal processes:
4.1
Applying
to this honourable court for an order setting aside the order
appointing the Court appointed JMs; and/or
4.2
Applying
to this honourable court for an order in terms of section 428(3) of
the Companies Act for an order varying the terms of
the court order
to the effect that the second respondent's name is deleted there
from; and/or
4.3
Applying
to this honourable court for an order removing the second respondent
as a judicial manager of Realeka; and/or
4.4
Anticipating
the return date and seeking primarily a variation of the order by the
deletion of at least paragraph 3 thereof,
5.
The first and second respondent jointly and severally are
ordered to pay the costs of the application".
[4]
The order of the 6 September 2010 stated as "Amended Order"
reads as follows:
"1.
The second respondent is interdicted from:
1.1
carrying
out any of the functions of a provisional judicial manager, whether
conferred by the Companies Act or purportedly, conferred
by the court
order dated 5 August 2010 issued by his Lordship Mr Justice Kruger
("the court order"). The court order
is attached hereto
marked 'ABC",
1.2
representing
himself as the provisional judicial manager of Reaieka to any third
person,
1.3
acting
in terms of the court order or giving effect thereto;
1.4
disposing,
alienating or in any way whatsoever encumbering of any of Realeka's
assets;
1.5
obstructing
the first, second and third applicants bein the provisional judicial
managers appointed by the Master,
Pretoria
on 19 August 2010 (defined as the Master's JMs") either directly
or indirectly from carrying out their duties as joint
provincial
judicial managers of Realeka;
1.6
interfering
either directly or indirectly in the Master's JMs control of or
management of Realeka,
1.7
from
effecting any debits to the account held by Amber Mountain
Investments 183 (PTY) Ltd at the Haartbeespoort branch of Absa Bank,
account number 40/6193/1737,
1.8
from
taking any steps in terms of paragraphs 3 to 6F of the court order,
2.
Divesting
the second respondent of the control and management of Realeka.
3.
Compelling
the second respondent:
3.1
to
forthwith take all steps necessary to hand over the control and
management of Realeka to the Master's JMs,
3.2
to
forthwith hand over possession of all Realeka's construction sites
and all other assets, including the handing over of all keys,
3.3
to
forthwith fully co-operate with the Master's JMs in any manner that
they require and in relation to anything concerning Realeka's
business and activities;
3.4
to
within 3 days of this order report in writing fully (with sufficient
particularly so that the Master's JMs are apprised of the
actions
taken by the second respondent and his activities to enable them to
investigate the actions and activities) to the Master's
JMs on:
3.40.1
all
discussions, and meetings held with third parties in relation to
and/or concerning Realeka;
3.40.2
all
transactions concluded on behalf of Realeka or negotiations conducted
on behalf of Realeka,
3.40.3
all
payments made on behalf of Realeka;
3.40.3.1
all
payment made to Realeka;
3.40.3.2
all
correspondence written and received by the second respondent
concerning Realeka,
3.40.3.3
all
documents prepared on behalf of Realeka and received by Realeka,
including but not limited to site plans, construction diagrams
and
the tike as well as any written contracts entered into since 5 August
2010;
3.40.3.4
ail
documents received by the second respondent on behalf of Realeka;
3.40.3.5
any
other documents which have come into existence from 5 August 2010;
3.40.3.6
minutes
of all meetings attended by the second respondent on behalf of
Realeka,
4
Prayers 1 to 3 (including sub-paragraphs) to operate with immediate
effect as interim orders pending the finalisation of one or
all of
the following legal processes:
4.1
Applying
to this honourable court for an order setting aside the order
appointing the Court appointed JMs; and/or
4.2
Applying
to this honourable court for an order in terms of section 428(3) of
the Companies Act for an order varying the terms of
the court order
to the effect that the second respondent's name is deleted there
from; and/or
4.3Applying
to this honourable court for an order removing the second respondent
as a judicial manager of Realeka; and/or
4.4
The return date and seeking primarily a variation of the order by the
deletion of at least paragraph 3 thereof.
5.
The
first and second respondent jointly and severally are ordered to pay
the costs of the application".
6.
That
the third respondent be ordered to immediately freeze the account
held by Amber Mountain Investments 183 (Pty) Ltd in the books
of the
3
rd
respondent at its Hartebeespoort branch under account no 40/6193/1737
and not to allow any debits entries to be effected against
such
account"
[5]
The second respondent is a director in several Companies. This
appears from annexure EMM 5.1 and 5.2 to the founding affidavit.
[6]
He is said to be the Managing Director of the first respondent. He is
also a director of Amber Mountain (PTY) Ltd.
[7]
Although annexure EMM 5.1 and 5.2 has insufficient information, it
was relied upon by the applicants, on the 1 September 2010,
when the
first founding affidavit was deposed to.
[8]
On the 8 June 2010, the first respondent and second respondent
entered into a joint venture agreement with the fourth applicant,
in
terms whereof the first and or second respondent was to take control
of the management and operations of the fourth applicant.
[9]
The said joint venture agreement formed part of the papers in the
application for placing the fourth applicant under judicial
management.
[10]
On the 5 August 2010, the first and second respondents obtained an
order placing the fourth applicant under judicial management.
In
addition, the second respondent and the second applicant, were
appointed as joint judicial managers of the fourth applicant.
The
order reads as follows:
"1.
THAT
the First Respondent,
Realeka
Investment SA (PTY)
LTD
(the
Company) is hereby placed under provincial judicial management in
terms of the provisions of the
Companies
Act, Act No. 61 of 1973
(the
Act");
2.
THAT
as from the date of this order any person or persons vested with the
management, control and running of the company's affairs,
bank
accounts, assets or any other aspects of any kind be divested
thereof;
3.
THAT
HENDRIK
ABRAM VAN VUUREN,
Second
Applicant, jointly with
MABUTHA
MHLONGO
(the
judicial managers), are hereby appointed as joint judicial managers
to be in full control of all aspects of the First Respondent
and as
prescribed by
Section
430
of
the Act;
4.
THAT
the Judicial Managers be empowered with the authority of full control
of First Respondent to borrow money with or without security
on
behalf of the said Company, for the purpose of paying essential
running expenditure in and about the business of the said Company,
including salaries, wages and rental for business premises, required
by the said Company and to pledge the credit of the said Company
for
any Goods or services so required;
5.
THA
T while the company is under judicial management:
(a)
all
legal actions now are pending or any other legal proceedings be
stayed until date of this order.
(b)
All
contracts awarded to First Applicant and not complete to stay in
effect until the return date of this order.
(c)
any
proceedings that can effect the financial or any condition of First
Respondent in a negative way be stayed until the return
date.
(d)
all
amounts now held in any bank accounts in the name of First
Respondent, including any moneys now and in the future due to First
Respondent, under all of its contracts with Government or any other
company, or anyone else, be deposited into the Joint account
of the
Judicial Managers of their attorneys trust account, for payment of
all of the operations of First Respondent;
(e)
all
contracts from Government or any other entity that has been awarded
to First Respondent in the last five years, and is still
ongoing,
shall stay in full force and effect, until the return date.
(f)
this
application and order be served on all parties affected by this
order, within ten days;
6.
THAT
the rate of remuneration of the judicial managers be fixed by the
Master in accordance with the services rendered and disbursements
incurred, or should the Master so request, the said rate of
remuneration shall be fixed by the court after the Master has
reported
thereon.
7.
THAT
a rule nisi with return date of 26 October 2010 are hereby granted
and all parties and person that want to oppose this application
shall
file their documents on or before the 17 September 2010 and served
(sic) it on the clerk of this court and on Applicants
attorney
stating:
(a)
Why
the judicial management order dated 5
th
August 2010 should not become final,
(b)
that
the provisions of paragraph 3, 4 and 5 hereof, should apply mutatis
mutandis;
(c)
that
the judicial managers and their attorneys and council costs of this
application should not be costs in the judicial management
of First
Respondent;
(d)
that
the judicial managers also obtain the consulting of the Martins
Weir-Smith attorneys, located in Sandton, for their legal assistants
and planning of operations in the Company and their cost be paid by
the Company".
Mr
AN Komane, a businessman and a sole director of the fourth applicant
did not oppose the application placing the fourth applicant
under
judicial management. He agreed to an order been obtained for judicial
management against the company (the fourth applicant),
because of the
fourth applicant's financial position as well as the undertaking by
the second respondent to inject more funds into
the fourth applicant.
[12]
On the 6 August 2010, the second applicant was furnished with the
order of the 5 August 2010 in terms of which he was appointed
as
provisional joint manager of the fourth applicant with the second
respondent.
[13]
On the same day, the second applicant proceeded to the office of the
Master. He requested the Master to issue him with letters
of
appointment as judicial manager for the fourth applicant.
[14]
The Deputy Master, Ms Christine Rossouw, is said to have told the
second applicant that she was prepared to appoint the second
applicant, but that she was not prepared to appoint the second
respondent because of the following reasons:
14.1
that
the second respondent was not an individual on the Master's panel of
insolvency practitioners,
14.2
that
the second respondent was one of two applicants in the application
for judicial management of the fourth applicant,
14.3
that
the second respondent is also a managing director of the first
respondent.
[15]
On the 19 August 2010, the Master issued letter of appointments to
the first, second and third applicant. On the 3 September
2010, the
applicants obtained an exparte interim order referred to in paragraph
3 of this judgment. The order did not have neither
a Rule Nisi nor a
return date.
[16]
On the 6 September 2010, another order was obtained ex-parte. This
order is referred to in the papers as an amended order.
The terms of
this order have been quoted in paragraph 4 of this judgment.
[17]
The second respondent deposed to two opposing affidavits on the 8 and
10 September 2010 respectively. In addition, the first
and second
respondents withdrew the application for judicial management order,
by filing a notice of withdrawal dated the 7 September
2010. This
notice was filed by the two respondents' attorneys.
[18]
The second respondent apparently having been served with the order of
the 6 September 2010, approached the court on an urgent
basis,
seeking to uplift the restriction in terms of paragraph 6 of the
amended order placed in the bank account of Amber Mountain
Investment
183 (PTY) Ltd held at ABSA Bank Haartespoort Branch account number
40/6193/1737.
[19]
Secondly, in his notice of motion, the second respondent prayed that
the remaining orders of the amended court order be stayed
pending any
of the process under paragraph 4 intended by the applicants.
[20]
On the 10 September 2010, Raulinga J stood down the matter until
Monday 13 September 2010. The applicants were ordered to deliver
replying affidavit by 09h30 on that Monday.
[21]
The matter then came before me on the 13 September 2010. On this
date, I made an order as follows:
"1.
The matter is stood down until Thursday 16 September 2010 at 10h00,
2.
The
applicants to ensure that a proper index and pagination is made in
respect of the court's file and filed with the registrar
of this
court not later than Wednesday (15/09/2010).
3,
The
Master of this court is hereby called upon to file an affidavit by
not later than Wednesday (15/09/2010) at 12h00 noon, in which
affidavit the following must be explained:
3.1
why
he/she should not be found to be in contempt of court order of 05
August 2010, by refusing to issue the second respondent with
letters
of appointment as judicial manager of the fourth respondent,
3.2
to
confirm or deny averments made in the founding papers concerning the
Master of the High Court with regard the order made on the
05 August
2010,
3.3
to
explain the circumstances under which the letters of appointment as
judicial managers were issued to the first and third respondents
particularly regard been had to the order of the 05 August 2010,
4.
The costs occasioned by the standing down to Thursday 16
September 2010, are hereby reserved".
[22]
On the 16 September 2010, I was informed that there was counsel on
watching brief for the Master. I suggested to counsel to
inform the
Master that it might be advisable to instruct counsel to represent
the Master and not just be on a watching brief. The
matter then stood
down until 14h00. When the court resumed, I was informed that counsel
was now briefed to represent the Master.
More time was requested to
enable the Master to file further affidavits.
[23]
In the meantime, counsels for the applicants and the second
respondent argued the issues relating to their clients' matter
on
Thursday the 15 September 2010. I reserved judgment with regard to
the issued between the applicants and the second respondent.
[24]
I indicated that judgment will be handed down after completion of the
Rule Nisi issued against the Master. Both counsels were
advised to be
present
when
the
case
of
the
Master
was argued.
The
Master's
case
was argued on Friday the 17 September 2010. This then brings me to
deal with the issues raised herein.
ISSUES
RAISED
[24]
As I said in paragraphs 1 and 2 of this judgment, several issues were
argued. The following issues presented themselves:
24.1
Whether
the withdrawal of the judicial management application should be
accepted? And if so,
24.2
What
effect this would have on the judicial managers appointed by the
Master?
24.3
Whether
the order of the 5 August 2010 deserves to have been ignored and did
not have to be set aside on the basis of its alleged
nullity for lack
of jurisdiction? And if, not
24.4
Whether
the Master of this court is in contempt of the court order? And if
so,
24.5
Whether
the appointments made in breach of the court order are valid
appointments?
APPLICABLE
PRINCIPLES, CASE LAW AND LEGISLATIONS
[25]
Rule 41 (1)(b) of the Uniform Rules provides that a person
instituting any proceedings may at any time before the matter has
been set down and thereafter by consent of the parties or leave of
the court to withdraw such proceedings in any of which events
he
shall deliver a notice of withdrawal and may embody in such notice a
consent to pay costs and the taxing master shall tax such
costs on
the request of the
other
party.
[26]
Subrule 41 (1)(c) provides that if no such consent to pay costs is
embodied in the notice of withdrawal, the other party may
apply to
the court on notice for an order for costs.
[27]
The court does have a discretion whether or not to grant such leave
to withdraw. The question of injustice is germane to the
exercise of
the courts discretion.
(See
Pearson and Hutton NNO v Hitzeroth
1967 (3) SA 591
(E) at 593 D, 594
H and Karoo Ment Exchange Ltd v Mtwazi
1967 (3) SA 356
(E) at 359
B-G).
[28]
It is however, not ordinary the function of the court to force a
person to proceed with an action against his will or to investigate
the reasons for abandoning or wishing to abandon one.
(See
Levy v Levy 1991 (3) SA614Aat620B)
[29]
The general principle is that, the party withdrawing is liable as an
unsuccessful litigant to pay costs of the proceedings.
The court
retains a discretion to deprive the successful party of his costs.
(See
Waste Products Utilisation (PTY) Ltd v Wikes and Another (Biccari
Interested Party)
2003 (2) SA 590
SA 590 (W) at 597A).
[30]
Section 428 (1) of the Companies Act provides that the court may on
an application under section 427 (2) or (3), grant a provisional
judicial management order stating the return day or dismiss the
application or make any order that it deems just.
[31]
Subsection (3) provides that, the court which has granted a
provisional management order may at any time and in any manner
on the
application of the applicant, a creditor or member of the provisional
judicial manager or the Master, vary the terms of
such order or
discharge it.
[32]
The appointment of judicial managers is made by the Master in terms
of section 367 of the Companies Act, which apply
mutatis
mutandis
in
the context of section 431(4) which provides that, the provisions of
this Act relating to the proof of claims against a company
which is
being winded-up and to the nomination and appointment of a liquidator
of any such company shall
mutatis
mutandis
apply
with reference to the proof of claims against a company which has
been placed under judicial management and the nomination
and
appointment of a judicial manager of such a company.
[33]
Section 165 (5) of the Constitution provides that, an order or
decision issued by a court binds all persons to whom and organs
of
state it applies. If an applicant, proved that a respondent with the
knowledge of a court order, acted in conflict with its
terms such an
applicant would have proved a breach of such an order. However, the
respondent may be able to resist the relief sought
if he or she was
to prove that he or she was unaware of the court order. The onus
rests upon the respondent in this regard that
he had not
intentionally defied the order or had not acted
mala
fide
in
doing so.
(See
Noel Lancaster sands (Edms) Bpk v Theron en Andere
1974 (3) SA 688
(T).
[34]
The fact that a person against whom an order is issued is acting on
an attorney's advice in breach of a court order, does not
detract
from his having intentionally defied the order.
(See
Culverwell v Beira
1992 (4) SA 490
(W) at 493 D - E).
In
that case, the court having found that counsel for the respondent was
unable to refer to any authority for the proposition that
an order
which is wrongly granted by a court can be lawfully defied and the
court having indicated that it knew of none, concluded
by stating
that all orders of the court whether correctly or incorrectly
granted, have to be obeyed until they are properly set
aside.
(See
Culverwell's supra at 494 A - B).
It
was further stated in Culverwell's case, that acceptance of counsel's
argument would in many cases result in respondents being
able to defy
all orders with imputing by contending that they believed such orders
to be wrong, the resultant of which is not difficult
to imagine.
(See
at 494 B-C).
[35]
In Klopper NO v Master of the High Court
2010 3 ALL SA 182
WCC (at
184 g-h), it was stated that the Master seems to think that the
findings of the court were open for debate and reconsideration
in
that court. She was found to be mistaken. They were not. The court
was said not to be sitting to consider an appeal or review
the
correctness or otherwise of its earlier judgment and order.
(See
also Administration, Cape and Another v Ntshwaqela and others
1990
(1) SA 705
A at 716 B-C).
[36]
The court in Klopper NO's case, having found that it had pronounced
itself on that matter, it found that the matter was closed.
The time
for debate was found to have been long past and that, for that matter
it was time for appeal. The Master was found not
to have done so. It
was further found that, in those circumstances, after the court had
given judgment, and made its order, it
remained only for the Master
to comply with them. In failing to have done so, and indeed, in
contravening the order, it would seem
calculatedly and deliberately,
the Master had acted with gross impropriety and in fact unlawful. The
argument that the applicant
had in some way waived compliance with
the order of 13 June 2008, was found to be risible and that it did
not even begin to stand
up to the scrutiny not only is no foundation
whatsoever laid for it in the papers, but that it was extremely
doubtful whether it
laid within the applicant's power to afford the
Master a dispensation from complying with the order. In the
circumstances, it was
found that, the Master's latest decision could
not be permitted to stand, and like her first decision could not be
permitted to
stand and was reviewed and set aside as being tainted
with illegality.
(See
Kipper's matter at 184 h
-j
and
185 a).
[37]
If our courts do not act swiftly and strictly to stop the willful
disregard of court orders, the rule of law will be undermined
and
South Africa will be entering the realms of constitutional crisis.
The only institution that stands between anarchy and the
normal
citizen is the courts. The courts have a duty to protect normal,
honest citizens and should not hesitate to do so
(See
Thring J's remarks in Klopper
no
at
185 b when quoting an article in the matter of
h
Cilliers
v
p
Masinga).
[38]
There is no room for the extension of jurisdiction of the court by
the reason of the so called inherent powers, where the court
did not
have jurisdiction at all. An order or judgment in such circumstances
would be of nullity and could simply be ignored.
(See
S v Absalom
1989 (3) SA 154
(A).
[39]
Arbitration is a quasi-judicial proceeding. The precepts which govern
judicial proceedings apply to an arbitration. Want of
jurisdiction in
judicial or quasi judicial proceedings have the effect of nullity
without the necessity of a formal order setting
the proceedings
aside. Lack of jurisdiction in arbitration proceedings renders an
award invalid. Absence of proper notice in proceedings
has always
been treated as a fatal flaw.
(See
Vidavskey v Body Corporate of Sunhill Villas
2005 (5) SA 200
SCA at
para. 14 at 207
B
-F).
DISCUSSIONS,
SUBMISSIONS AND FINDINGS
[40]
I find it necessary to start with the most vexing aspect of this
judgment. That is, the issue raised in paragraph 24.3 above.
WHETHER
THE ORDER OF THE 5 AUGUST 2010 DESERVES TO HAVE BEEN IGNORED AND DID
NOT HAVE TO BE SET ASIDE ON THE BASIS OF ITS ALLEGED
NULLITY FOR LACK
OF JURISDICTION?
[41]
The issue of nullity of the court order of the 5 August 2010 and the
alleged entitlement to have it ignored, was raised by
counsel on
behalf of the Master who is the fourth applicant in the present
proceedings. In raising this issue, counsel for the
Master relied
heavily on the decisions in the two case referred to in paragraphs 38
and 39 of this judgment.
[42]
Perhaps let me deal first with the facts of the two cases in some
detail. In Absalom's case, the respondent in the Appellate
Division
was an accused who was convicted and sentenced in a Magistrate's
court in South West Africa. Ten years after his conviction
and
sentence, he applied for condonation of the late noting of the
appeal. The application for condonation in the court a quo was
dismissed. He then applied to the Supreme Court of South West Africa
for leave to appeal. Leave was granted and such leave to the
full
bench of the Supreme Court of South West Africa.
[43]
The majority of the full court held that, although there was no
statutory provision which conferred jurisdiction on the full
bench in
respect of such an appeal, it did in fact have jurisdiction to hear
the appeal. It found such authority to hear the appeal
by virtue of
its inherent powers to regulate procedural matters and by virtue of
the fact that neither the state nor the respondent
had objected to
the decision that the appeal should be heard by the Full Court. It
found that the legal and factual issues involved
in the appeal were
not of such a nature that they required the attention of the
Appellate Division. The appeal was heard and was
upheld by the Full
Bench. Thereafter, the state appealed which appeal was upheld by the
Appellate Division. The Appellate Division
then dealt with the issue
of nullity as indicated in paragraph 38 of this judgment
[44]
Similarly, in the matter of Vidavskey's case, the court on appeal had
to deal with the legal consequences of a wrong direction
by an
arbitrator in that, the proceedings took place in the absence of a
party to the
arbitration
under
Arbitration Act
42
of 1965
. The
party
in
whose
favour
an award had been made wanted the award to be made an order of court
in terms of section 31(1) of the Act.
[45]
The appellant was the owner of a sectional title unit in a
residential development in the suburb of Bruma, Johannesburg. The
respondent was the responsible body corporate. The appellant declared
a dispute with the respondent relating to various aspects
of the
latter's administration of the property which was referred to
arbitration. The provisions of the Act applied to the arbitration
in
section 40 thereof, since the arbitration was one under a law (the
sectional Title Act 95 of 1986, which lays down in section
35 (1) and
(2) that a scheme should be controlled and managed in
inter
alia
by
the management rules prescribed by regulation.
[46]
The appellant obtained an award in the arbitration proceedings in the
absence of the respondent. The respondent failed to adhere
to the
award. Consequently, the applicant approached the court to make such
an award an order of the court. The respondent opposed
it on the
basis that, it did not receive a notice of the hearing of the dispute
between the parties in the arbitration proceedings.
The objection was
upheld. The court a quo found that the award was tainted by the
irregularity, i.e. the hearing of the dispute
in the absence of the
respondent, and that it was null and void.
[47]
On appeal, the decision of the court a quo was confirmed. The court
of appeal expressed itself as indicated in paragraph 39
of this
judgment.
[48]
The facts in Absalom's case and those in Vidavsky's case in my view,
should be distinguished from the facts of the present
case and those
in Klopper NO's case and Culverwell's case referred to earlier in
paragraphs 34 to 37 above.
[49]
In Culverwell's case, the respondent was required amongst others, to
deliver
to the applicant all negative films and photographs
in
the
respondent's possession or under his control. He failed to do so.
Amongst others, he advanced as a reason for not complying with
the
court order that, he was advised by his attorney not to comply with
the order. He was found in contempt despite the suggestion
that the
applicant did not own such films and photographs.
[50]
In Klopper NO's case, an order was made against the Master as
follows:
"7.
The
decision of the respondent taken on the 18
th
June 2007, not to tax the applicant's remuneration otherwise than
according to Tariff B of the Second Schedule to
Insolvency Act, No 24
of 1936
, read with form CN 104 of the Companies Act, no 61 of 1973 is
set aside.
2.
The matter is referred back to the respondent for her reconsideration
bearing in mind what has been said in this judgment, it
being found
that in terms of section 384 (2) of the Companies Act, good cause
exists for remuneration to be awarded to the applicant
in excess of
the amount arrived at solely by applying the provisions of the said
tariff'.
[51]
Instead of complying with the order or judgment of the court, the
Master on the 16 October 2005 wrote a letter questioning
the
appropriateness of the order made against her. She sought to
interpret the judgment and the order made. In doing so, she found
it
fit to disallow, contrary to the court order, the applicant any
remuneration in excess of that arrived at by applying the tariff.
This was found to have been nothing else than flouting the clear
directory terms of the judgment and order. In actual fact, she
was
bound to reconsider the applicant's remuneration in the light of the
court's findings.
[52]
In the present case, the Master (the fourth applicant), having been
made
aware
on
the 6 August 2010 of the order of the 5 August 2010, refused to issue
the second respondent with letter of appointment as a judicial
manager for the fourth applicant. In addition, she appointed two more
judicial managers in the face of the order of the 5 August
2010.
[53]
In both two cases referred to in paragraphs 34 to 37 above, specific
performance was required or specific action was taken
in defiance of
the court order. The cases relied upon by counsel on behalf of the
Master, did not deal with specific performance
required in terms of
the court order, nor was specific action or actions taken in defiance
of a court order. Secondly, the courts
in both cases were not
confronted with contempt of court. Such an issue was not specifically
raised to be dealt with specifically.
[54]
Constitutionally, every person is in terms of section 165(5) of the
Constitution bound by an order or judgment of a court.
I tend to
align myself with the following expression in Klopper's case:
if
our courts do not act swiftly, and strictly to stop the willful
disregard of court orders, the rule of law will be undermined
and
South Africa will in my view, be entering the realms of a
constitutional crisis..."
[55]
Imagine every individual envisaged in section 165(5) of the
Constitution being required to perform specific action in terms
of a
court order, disobeying such an order, on the basis of his or her
desire to check on the legality or otherwise of the order
first. The
issue was eloquently put by Goldstein J, in Culverwell supra, as
follows:
"AH
orders of this court, whether correctly or incorrectly granted, have
to be obeyed until they are properly set aside. Counsel
relied for
his argument on cases concerning regulations which are found to be
ultra vires, in such cases conduct in breach of regulations
is not
unlawful. However, no authority was quoted to me- and I am aware of
none -which
equates
court
order with
regulations
in
the manner contended for.
Acceptance
of counsel's argument would in many cases result in respondents being
able to defy all but Appellate Division orders
with impunity that
they believed such orders to be wrong, the resultant chaos is not
difficult to imagine"
.
(My own emphasis).
[56]
Court orders that require there and then or anytime in the future,
specific performance, will become a free for all if they
are meant to
be scrutinized before being complied with. All sorts of defences as
the basis for not complying with such orders could
flood our courts.
In doing so, without following due process of the law to challenge
such orders. For example, that the respondent
was not satisfied with
the legality of the order and therefore did not have to do anything.
That the respondent still wanted to
check with his or her lawyer
whether or not to comply with the order and that, before he or she
did so, there was no obligation
to comply. That the respondent did
not believe that the order was correctly obtained and issued and that
before verification the
order could not be acted upon. Lastly, that
the respondent did not believe in the validity of the order or if the
court that made
the order had jurisdiction and that he or she was
therefore not bound by it.
[57]
I think, anything entitling any person or a party who is required in
terms of a court order to take a particular action or
who performs a
specific act in conflict with a court order under the disguise of
lack of jurisdiction on the part of the court,
would be a receipt for
a disaster. For example, those officials like the sheriff, who are
tasked with the function of executing
court orders, could find
themselves at a risk. That is, having executed an order which
ultimately found to have been invalid at
the first instance, could
find themselves been litigated against. If this was to happen, it
could have upset and undesired effect.
For example, they might want
to check the appropriateness of every order before execution takes
place.
[58]
The cases relied upon by counsel for the Master in the instant case,
did not require specific performance. In Vidarsky's case,
an award
having been awarded, the person or entity against whom the award was
granted, failed or refused to act in terms of the
arbitration award.
Such an award to be executed was subject to it been made an order of
the court. It was the attempt to make it
an order of the court that
was challenged and not much of the execution thereof.
[59]
Similarly, in Absalom's case, the Full Bench of the Supreme Court of
South West Africa, heard an appeal and upheld the appeal
when it did
not have jurisdiction to hear such an appeal. The outcome of the
appeal was said to be null. Assuming that, in that
case, the state
was not granted leave to appeal to the Appellate Division, would the
state or prison authorities have been entitled
to refuse to release
the prisoner without having taken any step that the state might have
been entitled to take? Put it differently,
would the state or prison
authority have been entitled to do nothing and not follow due process
of the law, but at the same time
refuse to release the prisoner? I do
not think so.
[60]
I am therefore satisfied that the facts of the present case can be
distinguished from the facts of the two cases relied upon
by counsel
on behalf of the Master. Therefore, the Master was not entitled to
ignore the order of the 5 August 2010 or to act contrary
thereto.
This should then bring me to deal with related issue raised in 24.4
above.
WHETHER
THE MASTER OF THIS COURT IS IN CONTEMPT OF THE COURT ORDER OF THE 5
AUGUST 2010?
[61]
The order was presented to the Master on the 6 August 2010 by the
second applicant. The second applicant was one of the judicial
managers appointed by the court on the 5 August 2010. The attitude of
the Deputy Master, Ms Christine Roussouw to the court order
is
described by the second applicant in supporting affidavit to the
founding affidavit as follows:
"5.
Later that day, I went to the office of Master of the High Court with
a request that a certificate of appointment be issued.
I was informed
by Christine Roussouw, the Deputy Master, that while she was willing
to issue a certificate of appointment to me,
she was not prepared to
appoint the second respondent because he is not an individual on the
Master's panel of insolvency practitioners
and also because the
second respondent was one of the two applicants in the application
for judicial management. He is also the
managing director of the
first applicant as a provisional manager".
61.1
In
the order that I made on the 13 September 2010, the Master was
required to file an affidavit in terms of which she was to confirm
or
deny averments made in the founding papers concerning her with
regards to the order made on the 5 August 2010.
61.2
The
Master sought to file a report prepared by an Assistant Master one W
J Cilliers. The report is dated the 14 September 2010.
This was meant
to be compliance with paragraph 3 of my order dated the 13 September
2010 and quoted in paragraph 21 of this judgment.
The Master was
accordingly advised that an affidavit and not a report was required.
Such an affidavit was deposed to on 15 September
2010, not by deputy
Master referred to in the affidavit of the second applicant, but by
another assistant Master, Mr Wynard Jacobus
Cilliers.
61.3
Before
dealing with the contents of the affidavit by Mr Cilliers, it is
worth mentioning that in the letter of the 15 September
2010 that I
directed to be addressed to the Master, he or she was required to
file an affidavit and in addition was required to
deal properly with
the issues raised in the order. The Master was also given the
citation of Klopper NO's case.
61.4
Ms
Roussouw referred to in quotation in paragraph 61 above, did not file
any affidavit to respond to the averments made against
her by the
second applicant, neither did she file confirmatory affidavit to Mr
Cilliers's affidavit. Therefore allegations made
against her by the
second applicant remain unchallenged.
61.4.1
On the 17 September 2010, Mr Cilliers further deposed to what is
referred to as "supplementary affidavit by the fourth
applicant". In this affidavit, Mr Cilliers seeks to explain the
conduct of Ms Rossouw and the Acting Master, Ms Ntabiseng
Ntsoane.
Neither Ms Roussouw nor Ms Ntsoane did file a confirmatory or
supporting affidavit. However, what is clear from the affidavit
deposed to on the 17 September 2010, is that the certificate of
appointment of the first, second and third applicants as judicial
managers of the fourth applicant, was signed and issued by the said
Ms Roussouw.
61.5
For
the purpose of the rule nisi issued against the Master, the events of
5 August 2010 to 19 August 2010 are of importance. The
rule was
issued as per court order quoted in paragraph 21 of this judgment.
61.6
Inasmuch
as Ms Roussouw elected not to deal with the allegations made against
her as quoted in paragraph 61 of this judgment,
I
will
deal with this matter on the basis that those allegations are common
cause. Secondly, I will deal with explanatory averments
as contained
in the supplementary affidavit by Mr Cilliers. But such common cause
factors should be seen in the light of the actual
reason for issuing
a letter of appointment. There is only one reason given which is
dealt with hereunder in paragraphs 61.25 to
61.27 of this judgment.
61.7
Whilst
Mr Cilliers in his supplementary affidavit might wish to suggest that
the Master was never served with any copy of the original
application
in order to submit a report to this court and that the order of the 5
August 2010 with papers were only submitted on
the 18 August 2010,
this does not mean that the deputy Master, Ms Roussouw only
knew
of
the
order
on the
18
August 2010.
She
knew
of
it
on
the
6
August
2010. Such knowledge was conveyed to her by the second applicant.
61.8
On
the same day, the second applicant then proceeded as indicated in
paragraph 61 of this judgment. There can be no doubt that the
second
applicant would have handed over a copy of the court order to Ms
Roussouw.
61.9
Mr
Cilliers in his affidavit deposed to on the 15 September 2010 elected
not to deal with averments as set out in paragraph 5 of
the second
applicant's affidavit deposed thereto on the 3 September 2010. It is
however, clear what Ms Roussouw on the 6 August
2010 became aware of
the order of the 5 August 2010.
61.10
She
took it upon herself to decide whom to appoint or issue with
certificate of appointment in defiance of the court order of the
5
August 2010. Assuming that she was obliged to issue certificate of
appointment to the second applicant in terms of the order
of the 5
August 2010, she did not only defy the court order by refusing to
issue such certificate to the second respondent, but
she also defied
the court order by adding two judicial managers, that is, the first
and third applicants.
61.10.1
For three reasons she was not prepared to recognize the order of the
5 August 2010, nor did she seem to have felt bound
by it. Three
reasons were that, the second respondent was not one of the
practitioners on her panel of insolvency practitioners,
that he was
one of two applicants in the judicial management application. Lastly,
that the second respondent was a managing director
of the first
respondent who was the first applicant in the application for
judicial management of the fourth applicant. Of course,
the three
reasons should also be seen in the light of what is stated in
paragraphs 61.25 to 61.27 hereunder.
61.11
I
do not think that, it was her place to defy the court order on the
basis of her averments to decide on the fitness or otherwise
of the
second respondent to be appointed as a judicial manager for the
fourth applicant. Such entitlement had been taken away by
the order
of the 5 August 2010, whether correctly or wrongly so.
61.12
In
fact, if one was to go by what is quoted in paragraph 61 above, or on
the only reason dealt in paragraphs 61.25 to 61.27 hereunder,
the
refusal to issue the second respondent with certificate of
appointment would not have been based on entitlement to appoint
judicial managers in terms of section 429(b)(i) of the Companies Act,
but rather on disqualification.
61.13
Therefore,
bringing in the applicability of the provisions of section 429 seems
to have been an after thought. This seems to be
confirmed by the only
reason given in Ms Rousouw's submission to the Acting Master as it
appears in paragraph 61.25 hereunder.
It is an afterthought imported
by Mr Cilliers into the explanation for not having complied with the
order of the 5 August 2010.
Such entitlement to appoint in terms of
section 429(b)(i) cannot be an excuse not to comply with an order
requiring specific performance
or where specific step had been taken
in conflict with an existing order.
61.14
Willfulness
or intention to disobey a court order will have to be determined at
the time when such an order came to the knowledge,
in this case, of
Ms Roussouw and or Ms Ntsoane or at the time of positive action being
taken in conflict with the court order.
For example, when the acting
Master, Ms Ntsoane, on the 18 August 2010 approved the appointment of
the first, second and third
applicants and refusing to include the
second respondent and when Ms Roussouw issued the letter of
appointment on the 19 August
2010. Also on the 6 August 2010, when
the latter made utterances to the second applicant as quoted in
paragraph 61 above.
61.15
No
one can on his or her own pretend to act as court of appeal or review
by ignoring an existing court order, either on the basis
of one's
entitlement to act or not to act on the basis of the invalidity of
such an order.
61.16
The
attack of the order of the 5 August 2010, on the basis that it is of
nullity and that it could be ignored should also be seen
as an
afterthought. It is put as follows in paragraph 15 of the
supplementary affidavit deposed to on the 17 September 2010:
"/
am informed by my attorney and counsel that there is case law
supporting an argument that prayer 3 of the order of 5 August
2010 by
the Honourable Mr Acting Justice Kruger, can be regarded as a nullity
and that it would be ignored".
61.17
Neither
Ms Roussouw nor Ms Ntsoane stated that when a decision was taken on
the 18 or 19 August 2010, the order of the 5 August
2010 was regarded
as of nullity. I however, understood the purpose of the submission in
this regard to be that, none of the officials
in the Master's office
could be found in contempt because, the order is in any event of
nullity and of no force. That is, it is
binding on no one. My finding
on the earlier issue referred to in paragraph 25.3 of this judgment
and dealt with from paragraphs
40 to 60, makes the issue of nullity
to have fallen by the wayside. I do not find it necessary to repeat
myself.
61.18
On
the 18 August 2010, the acting Master was presented with the order of
the 5 August 2010 together with founding papers. The submission
was
apparently made by Ms Roussouw. She prepared a written submission to
the Master, Pretoria, with a recommendation as to who
should be
appointed as a provisional managers. All of these are set out in
paragraphs 11 to 15 of Mr Cilliers' two affidavits deposed
to on the
15 and 17 September 2010 respectively.
61.19
It
however suffices to say, such a submission and recommendation by Ms
Roussouw could only have served to promote her view and her
attitude
with regard to the court order as explained by the second applicant
in paragraph 5 of his affidavit quoted in paragraph
61 above.
61.20
Once
the existence of an order is proved and that, it was served and that
it was not complied with, if the accused fails to furnish
evidence
raising a reasonable doubt whether non-compliance was willful and
mala
fide,
the
offence will be established beyond reasonable doubt. The accused is
entitled to remain silent, but, does not exercise the choice
without
consequences.
(See
Osman v A-G Transvaal
1998 (4) SA 1224
CC in para [22], see also
Fakie NO v CCII Systems (PTY) Ltd 2006(4) SA 326 para [22]).
61.21
It
should be noted that developing the common law, does not require the
prosecution to lead evidence as to accused' state of mind
or motive.
Once the three requisites continue to have been proved, in the
absence of evidence, raising a reasonable doubt as to
whether the
accused acted wilfully and
mala
fide,
all
the requisites of the offence will have been established.
61.22
What
is changed is that, the accused no longer bears a legal burden to
disprove wilfulness and
mala
fides
on
a balance of probabilities, but to avoid conviction he or she needs
only to lead evidence that establishes a reasonable doubt.
(See
Fanie NO supra para. [23])
61.23
There
can be no reason why these protections should not apply also where a
civil applicant seeks an alleged contemner's committal
to prison as a
punishment for non-compliance.
(See
Fanie NO supra para. [24]).
61.24
Mr
Cilliers, the Assistant Master decided to be a spokesperson for both
the Deputy Master (Ms C Roussouw) and acting Master (Ms
Ntsoane). No
explanation has been given as to why they, themselves, could not have
deposed to some affidavits to deal properly
with the allegations not
only made by the second applicant with regard to Ms Roussouw, but
also with regard to the averments made
by Mr Cilliers in the two
affidavits deposed to on the 15 and 17 September 2010 respectively.
Their intention as on the 6, 18 and
19 August 2010, had not been
placed on record. On the other hand, the order has been proved, it
came to their knowledge between
the period 6 and 19 August 2010 and
they failed to comply with it.
61.25
In
fact, the submission that was made by Ms Roussouw to the acting
Master raised only one reason as a disqualification and as the
basis
for not complying with the order and such a reason reads as follows:
"Mr
Van Vuuren is not on our approved panel of liquidators and can
therefore not be appointed as provisional judicial manager?
61.26
This
recommendation is despite what is stated by Ms Roussouw in the same
submission as follows:
"This
matter is placed under provisional judicial management. The Judicial
Managers appointed in terms of the court is:
1)
Mr
HA
Van Vuuren
2)
Mr
M Mhlongo"
61.27
This
is stated in the first paragraph of the submission to Ms Ntsoane. In
the last paragraph, the first, second and third applicants,
are
suggested as appointees instead.
61.28
The
real issue is, whether the explanation for not recognizing the court
order with regard to the second respondent and in appointing
the
first and third applicants in direct conflict with the order of the 5
August 2010 could be said to be raising a doubt as to
the guilty or
otherwise of Ms Roussouw and Ms Ntsoane. In my view, it does not.
61.29
In
the affidavit deposed to by Mr Cilliers on the 15 September 2010, no
reference is made to the provisions of section 428 (3) of
the
Companies Act. The provisions of subsection 3 thereof were referred
to in paragraph 31 of this judgment. In the order of the
5 August
2010, a rule nisi was issued returnable on the 26 October 2010.
Inasmuch as the Master suggests that he or she was not
informed of
the application for judicial management before the order was obtained
on the 5 August 2010, when it did so come to
his or her attention,
the Master could have anticipated the return date in terms of Rule
6(8) and Practice Directive dated the
12 February 2007 read with
section 428(3) of the Companies Act. Instead, both Ms Ntsoane and Ms
Roussouw, decided to proceed as
they did in conflict with the court
order.
61.30
Remember,
the court order came to the attention of Ms Roussouw on the 6 August
2010 and to Ms Ntsoane on the 18 August 2010. Instead
of dealing with
the essence of the court order, they were carried away by the fact
that the second respondent was not on the panel
of their insolvency
practitioners. This cannot be a reasonable explanation to escape
contempt.
61.31
Both
Ms Roussouw and Ms Ntsoane should be found in contempt of court order
by breaching the order of the 5 August 2010. Ms Ntsoane
for having
approved the suggestion of Ms Roussouw in conflict of the order of
the 5 August 2010 and Ms Roussouw for having facilitated
the
recommendation as set out in her report to Ms Ntsoane and her
subsequent signing and issuing letter of appointment on the 19
August
2010, an act that was in conflict with the order of the 5 August
2010.
61.32
The
next issue is what sanction should be imposed. I intend suspending
the imposition of a sanction or punishment indefinitely.
Hopefully,
this would serve as a deterrent in the future and would not be seen
as weak compassion on the part of the court. This
should then bring
me to another issue which was not specifically raised as an issue
under
paragraph
24
of this
judgment.
APPROPRIATENESS
OF HAVING APPROACHED THE JUDGE IN CHAMBERS.
[62]
The Master of the court whilst connected to the court, the office has
a distinct and important function to perform. The Master's
office
serves to ensure smooth execution of orders that are made by the
courts in respect of certain specific applications. For
example, in
sequestrations, liquidations and appointments of curator bonis
applications. These functions are performed by the Master
as an
independent institution which should see itself as such.
[63]
Its functions are either specifically legislated or subject to some
ancillary orders made by the courts.
[64]
When the office of the Master is cited as a party in a particular
proceeding, it should see itself as such and not as an extension
of
the court per se.
[65]
The events after the 19 August 2010 and some actions of the Master in
relation to the order of the 5 August 2010 worry me a
lot. Such
actions border around unethical and unprofessional conduct on the
part of the Master.
[66]
These events have no bearing on the contempt of court order per se.
At best, they can serve either to aggravate or mitigate
punishment.
What happened after the 19 August 2010 appears to have being prompted
by an order that was obtained by the second respondent
against the
Master on the 20 August 2010 in terms of which the latter was
interdicted from making further appointments of judicial
managers for
the fourth applicant.
[67]
In paragraph 18 of the affidavit deposed to by Mr Cilliers on the 15
September
2010,
he
states that, himself and the state attorney
Mr
P C
Cavanagh,
approached the Judge who granted the order of the 5 August 2010 in
chambers. They went to the Judge's chambers because
they were
uncertain about the proper interpretation of the order of the 5
August 2010. They went to visit the judge concerned to
clarify the
practical effect of the order and to ensure that the Master would not
be in contempt.
67.1
In
the proceedings of the 5 August 2010, the applicants who are the
respondents in the present proceedings, were represented by
Attorneys
Maluleka. Courtesy and good ethical conduct demand that, you do not
see a Judge in chambers in the absence of or without
the knowledge
and consent of your opponent. It is even worse if you go and see a
Judge in chambers about pending proceedings where
you are a party.
67.2
From
Mr Cilliers' affidavit of the 15 September 2010, the approach to the
Judge in chambers was after the 19 August 2010. It would
also have
been after the Master was interdicted from making further
appointments.
67.3
The
approach in chambers and in the absence of the other parties, was not
only uncalled for, unethical and unprofessional, but was
also as I
see it, meant to embarrass and compromise the Judge concerned. In
paragraph 20 of Mr Cilliers's affidavit deposed to
on 15 September
2010, it is suggested that the Judge concerned in chambers expressed
his views as follows:
67.3.1
That
the urgent court procedure was misused by the applicants and that not
all relevant facts were placed before him. I understand
this to
suggest that, the Judge indicated in chambers that he was misled by
the applicants in granting the order of the 5 August
2010,
67.3.2
That
the Judge had again listened to the recordings of the proceedings
before
him
and
to
the
submissions
that
were
made to
him
during the original application and that reference was made that
there was almost an agreement by all parties that an order
can be
given as it currently stands,
67.3.3
That
the Judge was further of the opinion that there is no such thing as
"an almost agreement" and that there is either
an agreement
or no agreement,
67.3.4
That
the Judge recommended that the Master must oppose the interdict order
on the return date of 26 October 2010,
67.3.5
That
the Judge discussed the issues of the misuse of the urgent court with
the Deputy Judge President and that the Master's office
must prepare
a submission to the Judges on the misuse of urgent court encounter.
[68]
Going into a Judge' chambers and discuss pending matters in the
manner the Master did, is like by default, in the absence of
one's
opponent seeking an appeal or consideration of review application.
This could have been nothing else than a move calculated
to embarrass
and compromise the Judge concerned. As I said, the Master's office is
not an extension of the court to the extent
that when the Master is
cited in the proceedings, it could discuss such matters in chambers
with the Judge, either before or after
the making of an order, to
seek an advice or clarity on the pending proceedings or outcome
thereof.
[69]
If this was to happen unabated, it could only serve to diminish the
confidence in the judiciary by those excluded from the
discussions in
Judge's chambers. Secondly, it could serve to undermine the
independence of the office of the Master in the execution
of
functions specifically assigned to it by legislation or by practice.
[70]
I do not think that the Master in the present case did not know what
it was supposed to do. As I said, it could have anticipated
the rule
nisi on a twenty four hours notice in terms of Rule 6(8) read with
section 428(3) of the Companies Act. The Master did
not have to be
told in chambers to oppose the return date on the 26 October 2010 as
alleged in paragraph 20.3 of Mr Cilliers affidavit
deposed to on the
15 September 2010.
[71]
It looks like the visit to the Judge in chambers did not happen once,
but rather thrice. According to Mr Cillier's affidavit
deposed to on
the 17 September 2010, a certain Mr Prigge on behalf of creditor
visited the office of the Master and spoke to Ms
Roussouw about the
status of the judicial management of the fourth applicant. Mr
Cilliers with the said Mr Prigge approached the
Chief Registrar of
this court to make enquiries about the order of the 5 August 2010.
The Chief Registrar is said to have taken
them to the Judge concerned
in chambers. In the judge's chambers, they were told the matter will
be investigated and that they
will be notified accordingly in due
course. All of these would have happened after the 19 August 2010.
[72]
On the 27 August 2010, Mr Cilliers is said to have been advised by
the Judge' secretary that the Judge wanted to see Mr Cilliers
together with his attorney in his chambers. Mr Cilliers then went
there with the state attorney Mr P Cavanagh. In chambers, the
Judge
is said to have expressed himself as follows:
72.1
that
the file could not be located,
72.2
that
he had listened to the tapes or record,
72.3
that
he discussed the matter with most of his colleagues and that two
suggestions had been made to him,
72.4
that
one school of thought was that he could not deal with the matter as
he was
functus
officio,
72.5
that
he indicated that the other school of thought was that the Master
could have resorted to Rule 42(1),
72.6
that
he was of the view that Rule 42(1) had limited applicability and
would not be of use to the Master, and
72.7
that
he repeated his earlier views that the Master should definitely
oppose the return date on the 26 October 2010.
[73]
Having said all of these in the affidavit, the Master concludes by
saying that there was never a suggestion from the Judge
concerned
that he felt that the Master and his or her team were in contempt of
his order, but that to the contrary the Judge endeavoured
to assist
the Master to resolve the issue and the problem created by his order.
[74]
The Master was mistaken and ill-advised to think that the invitation
to the Judge's chambers in the absence of the other parties
was an
excuse. Secondly, his or her approach of the Judge in chambers was
after the events of the 6, 18 and 19 August 2010. By
that time the
order was already been breached. Approaching the Judge in chambers
which approach was prompted by an interdict of
the 20 August 2010,
cannot be of any help to the Master.
[75]
The court order was breached not because of the advice allegedly
obtained in chambers, but rather because the second respondent
was
not on the panel list of insolvency practitioners. These are events
of the 18 and 19 August 2010.
[76]
What concerns me for now is these approaches in chambers. They were
obviously improper. As I said, the Master overstepped the
mark and
was misguided in this regard. Hopefully it is not something which
will be repeated in the future.
[77]
Perhaps the Master's attitude throughout should be seen in context.
It did not look like he or she ever regarded the conduct
as being
serious and in contempt. On the 13 September 2010, he or she was
ordered to file an affidavit. A rule nisi was also issued
against the
Master. Apparently, having received the order calling upon the Master
to show cause, he or she still did not see the
need to deal with the
matter seriously. The Master's report was filed in response to the
rule nisi instead of an affidavit. Secondly,
Mr Cilliers himself
brought the report, instead of instructing the State Attorney.
Thirdly, on the 15 September 2010, a counsel
was sent to court to be
on a watching brief. This was despite the fact that the Master was
facing a possible verdict on contempt
of court order. It did not look
like this worried the Master. Either because the Master did not
believe that this court was serious
with the contempt of court
proceedings or he or she just did not care. Of course, he or she was
wrong in thinking that way. It
was for this reason that I insisted
that he or she must properly be represented so that the contempt
proceedings could be properly
dealt with.
[78]
I now turn to deal with the other issue raised in paragraph 24.1 of
this judgment. The issue raised in paragraph 24.5 will
be dealt later
in this judgment when dealing with the issue raised under paragraph
25.2. The two issues in my view, have same effects.
WHETHER
LEAVE TO GRANT THE WITHDRAWAL OF JUDICIAL MANAGEMENT ORDER AND
RELATED ORDER SHOULD BE GRANTED TO THE RESPONDENTS WHO ARE
THE
APPLICANTS IN THE JUDICIAL MANAGEMENT PROCEEDINGS?
[79]
The first and second respondents had filed an application for
withdrawal of the judicial management proceedings and the related
orders thereto. This withdrawal was strenuously objected thereto by
counsel on behalf of the first, second and third applicants.
The
basis for the objection as I understood it, could be summed up as
follows:
79.1
that
the matter cannot be withdrawn unilaterally in terms of Rule 41 (1)
without the consent of the applicants or leave of the court,
79.2
that
leave by the court should not be granted seen in the light of the
following:
79.2.1
that
the respondents in their application for withdrawal did not tender
costs,
79.2.2
that
to allow the respondents to withdraw would be prejudicial to the
applicants and would be tantamount to circumventing the applicants
entitlement to proceed in terms of section 428(3) to set aside part
of the judicial management order and to allow the three applicants
to
remain as judicial managers of the fourth applicant.
[80]
Some provisions of Rule 41 were referred to in paragraphs 25 and 26
and of this judgment. Inasmuch as the matter had already
being set
down and no consent was obtained from the other parties, such
withdrawal could only be sanctioned by the court. This
will require
an exercise of a discretion on the part of the court.
[81]
In the exercise of discretion, the court will have regard to the
reasons for the withdrawal, the stage at which the application
for
withdrawal is been brought and the possible prejudice to be caused to
any of the parties and other alternative relief to curb
any prejudice
that might be caused to either party.
[82]
In his answering affidavit to the founding affidavit by the four
applicants, the second respondent noted the withdrawal accompanied
by
the filing of notice of withdrawal. Reasons for the withdrawal are
summed up as hereunder.
[83]
On the 8 June 2010, the fourth applicant represented by the sole
Director of the fourth applicant, entered into a Joint Venture
Agreement with the first respondent represented by Mr Van Vuuren (the
second respondent) in terms of which the first respondent
as a Mentor
to the fourth applicant, through the second respondent was to:
83.1
offer
its services through its employees, agents, workmen, sub-contractors
or to assist the fourth applicant in accordance with
the plans and
specifications,
83.2
carefully
calculate and agree upon the completion date for ail buildings,
roads, structures etc, which has to be rigidly adhered
to,
[84]
The fourth applicant was awarded a contract by various Government
Departments in terms of which certain plans had specifications
and in
ensuring compliance with its obligations to Government, sought to
engage the services of the first respondent through the
second
respondent.
[85]
The second respondent was further in terms of the Joint Venture
Agreement, selected to serve as the J V Administrator for the
duration of the JV and was in terms of the agreement authorized to
perform the day to day operations, management and administration
of
the awarded contract in accordance with all legal and regulatory
requirements.
[86]
In the answering affidavit, the second respondent deposed to on the 9
September 2010, explains the whole purpose of him been
appointed and
the second applicant as judicial managers. It was envisaged to allow
the second respondent to exercise control in
conjunction with the
second applicant and have direct say in how the funds that were to be
advanced in terms of the joint venture
agreement were handled.
Secondly, the second respondent did not want to risk advancing
millions of rands as has already been done
without being in a
position to ensure the funds were used properly.
[87]
I see nothing wrong in the respondents contending that they are the
dominus
litis
in
the application for judicial management of the fourth applicant. If
the second respondent's appointment as a manager is now been
challenged by the applicants, there is nothing unto what in
withdrawing the entire application for judicial management of the
fourth applicant and then revert to the authority of the first
respondent and that of the second respondent in managing the fourth
applicant in terms of the Joint Venture agreement.
[88]
Absence of
mala
fide
on
the part of the respondents in withdrawing the judicial management
proceedings, if the latter has any effect of undoing the appointments
by the Master of the first, second and third applicants, cannot serve
as a bar to the granting of leave to have judicial management
application be withdrawn.
[89]
Circumvention referred to on behalf of the applicants should be seen
in context. The context being that the aim of the judicial
management
proceedings was to give more power to the second respondent in
addition to the already existing powers in terms of the
Joint Venture
Agreement. Secondly, the Master having decided not to process the
second respondent's appointment as a judicial manager
for the fourth
applicant, the main idea of having more access and powers in respect
of the fourth applicant would have fallen by
the wayside.
[90]
It looks like Mr Komane who signed the Joint Venture Agreement on
behalf of the fourth applicant, decided to change sides by
aligning
himself with the other applicants. He deposed to a supporting or
confirmatory affidavit to the founding affidavit. Remember,
the
judicial management proceedings of the fourth applicant were
instituted with his knowledge and consent. He supported it as
the
sole director of the fourth
applicant.
Change
of
heart
on
his part, appears to
have
been
prompted
by the alleged mismanagement of the fourth applicant's funds.
[91]
Whilst the respondents in their notice of withdrawal did not tender
costs during discussion, counsel for the respondents conceded
willingness on the part of the respondents to pay costs occasioned by
the withdrawal. This willingness or concession should however
be seen
in context. I think the applicants had unnecessarily and without
basis opposed the application for withdrawal. The bulk
of time was
spent arguing the respondents' entitlement to withdraw the judicial
management application. The only motive for opposing
the application
as I see it, was to avoid the applicants' appointment fall by the
wayside.
[92]
At the risk of repeating myself, it is ordinarily not the function of
the court to force a person to proceed with an action
against his
will or to investigate the reasons for abandoning or wishing to
abandon one. The general rule is that, the party withdrawing
is
liable as an unsuccessful litigant to pay costs. However, the court
retains a discretion to deprive the successful party of
his costs.
[93]
In the instant case, the applicants should be denied of costs. Their
persistent in opposing the application was much more prompted
by
their desire to retain control over the fourth applicant as judicial
managers. They should be found to be unsuccessful in their
opposition
and for this reason, they should be found liable to pay costs.
[94]
I now turn to deal with the two issues raised in paragraphs 25.2 and
25.5 of this judgment.
WHETHER
THE APPOINTMENT MADE IN BREACH OF THE COURT ORDER ARE VALID
APPOINTMENTS AND WHAT EFFECT WOULD WITHDRAWAL OF JUDICIAL MANAGEMENT
PROCEEDINGS HAVE ON THE APPOINTMENTS BY THE MASTER?
[95]
Starting with the latter question, appointment of judicial managers
by the Master is provided for in terms of section 429.
It is a
jurisdictional factor that the appointment of a provisional judicial
manager would only be made upon the granting of a
provisional
judicial management order. Such an order is granted by the court in
terms of section 428(1) of the Companies Act.
[96]
The effect of all of these is that, appointment of judicial managers
in terms of section 429, cannot continue to exist in the
absence of
existing provisional judicial management order under section 428(1).
If a judicial management order under section 428
ceases to exist, of
necessity appointments of judicial managers appointed under section
429 would also cease to exist. This would
mean that such judicial
managers cannot continue to perform functions as if they are still
judicial managers. The lifespan of the
orders obtained on 3 and 7
September 2010, should also cease to exist inasmuch as orders were
obtained on the basis of the existence
of judicial management order.
[97]
Coming back to the other issue relating to the appointment of
judicial managers in breach of the court order of the 5 August
2010,
it would also mean that such appointments are illegal and cannot be
acted upon. The effect of this is that, three judicial
managers lack
authority to have brought the applications in respect of which the
orders of the 3 and 7 September 201 were granted.
[98]
The Master has been found to be in breach of the order of the 5
August 2010. The appointment of the first and third applicants
should
therefore be found to be invalid. The appointment of the second
applicant to the exclusion of the second respondent should
also be
found to have been seriously tainted to the extent that such an
appointment should also be found to be invalid.
RESTRICTION
ON AMBER MOUNTAIN INVESTMENT 183 (PTY) LTD'S
BANK
ACCOUNT
[99]
The effect of invalidity of the orders of the 3 and 7 September 2010
due to lack of authority in this regard and also factors
pronounced
in favour of the respondents in this judgment, is that, relief sought
in the respondents' notice of motion dated the
9 September 2010
should be granted. In the orders that were obtained on the 3 and 7
September 2010, certain activities on certain
bank accounts
controlled by the second respondent were restricted. For example, the
respondents were interdicted from effecting
any debits to the account
held by Amber Mountain Investments 183 (PTY) Ltd at the Hartespoort
branch of ABSA bank account number
40/6193/1737.
[100]
In the notice of motion the respondents in paragraph 2 ask for relief
as follows:
"2.
That the 3
rd
respondent be ordered to uplift the restriction placed on the Bank
Account of Amber Mountain Investment 183 (PTY) Ltd held at ABSA
Bank,
Haartespoort branch account number 40/6193/1737".
[101]
The second respondent is the sole director of Amber Mountain
Investment 183 (PTY) Ltd. I see no reason why such a restriction
should continue to exist especially in the light of my earlier
findings in this judgment.
CONCLUSION
[102]
I therefore conclude by making an order as follows:
102.1
The
acting Master of the court, Ms Nthabiseng Ntsoane
and
the Deputy Master of this court Ms Christine Roussow, are hereby
found in contempt of the court order of the 5 August 2010,
102.2
Sanction
or punishment in respect of the contempt of court order aforesaid is
hereby postponed indefinitely,
102.3
Leave
is hereby granted in terms of Rule 41(1) to the withdrawal of the
whole of the application for judicial management order granted
on the
5 August 2010,
102.4
A
relief is hereby granted in terms of paragraph 2 of the respondents'
notice of motion dated the 9 September 2010 and quoted in
paragraph
100 of this judgment.
102.5
The
entire rule granted on the 3 September 2010 and amended on the 7
September 2010 is hereby discharged.
102.6
The
fourth applicant is hereby ordered to pay the costs of the
application.
M
F LEGODI
JUDGE
OF THE HIGH COURT
BROOK
BRAND ATTORNEYS
Attorneys
for the Applicants c/o EDELSTEIN BOSMAN INC.
220
LANGE STREET
NEW
MUCKLENEUK BROOKLYN,
PRETORIA
Tel
no. 012 452
8900/460
Ref: R Farelo
MALUKEKE
ATTORNEYS
Attorneys
for the first & second respondents
114
Bronkhorst Street
NEW
MUCKLENEUK, PRETORIA
Tel:
012 346 5612
Ref:
Maluleke/CIV1034
THE
STATE ATTORNEY
Attorneys
for the Fourth Respondent
Manaka
Heights, 8
th
Floor,
167
Andries Street,
PRETORIA
Tel:
012 309 1548
Ref:
Mr C J Malan/5163/10/Z33