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[2022] ZAFSHC 124
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National Director of Public Prosecutions v Sharma and Others (2427/2021) [2022] ZAFSHC 124 (16 May 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No:
2427/2021
Reportable:Yes/No
Of
Interest to other Judges:Yes/No
Circulate
to Magistrates:Yes/No
In
the matter between:
NATIONAL
DIRECTOR OF PUBLIC PROSECUTIONS
Applicant
and
IQBAL
MEER SHARMA
First Defendant
NULANE
INVESTMENTS 204 (PTY) LTD
Second Defendant
ISLANDSITE
INVESTMENTS 180 (PTY) LTD
Third Defendant
KURT
ROBERT KNOOP N.O.
Fourth Defendant
JOHAN
LOUIS KLOPPER N.O.
Fifth Defendant
ISSAR
GLOBAL LIMITED
First Respondent
ISSAR
CAPITAL (PTY) LTD
Second Respondent
TARINA
PATEL-SHARMA
Third Respondent
JUDGMENT
BY:
N. SNELLENBURG, AJ
HEARD:
12
MAY 2022
REASONS
DELIVERED ON:
16 MAY 2022
[1]
On the extended return date of the rule
nisi
issued by this Court per Naidoo J on 2 June 2021 in terms of
section
26
of the
Prevention of Organised Crime Act 121 of 1998
[POCA]
[1]
,
a substantive application was made for the extension of the rule
nisi
pending ‘prosecution’ of an appeal against the order of
CJ Musi JP, delivered on 11 August 2021, which provides as
follows:
“
1.
BDK Attorneys do not have authority to act on behalf of the third
defendant
in these proceedings.
2.
The directors and or shareholders of the third defendant have
no
standing to oppose these proceedings without the approval of the
Business Rescue Practitioners.”
[2]
Ms Ronica Ragavan [Ms Ragavan], in her capacity as director of the
third defendant,
deposed to the founding affidavit in support of the
relief by virtue of a resolution by the Board of Directors of the
third defendant.
[2]
[3]
On 13 May 2022 I dismissed the application by the Board of Directors
[referred to
below as the extension application] and reserved the
costs.
[4]
These are the reasons for the order.
SALIENT
BACKGROUND
[5]
At commencement of the proceedings, it was established that the third
defendant was
represented by two separate sets of legal
representatives.
5.1
The first set of representatives appeared on instructions of the
business rescue
practitioners [the BRPs] in their capacity as
representatives of the company in business rescue, Islandsite
Investments 180 (Pty)
Ltd.
[3]
5.2
The second set of representatives appeared on instructions of the
directors of the
third defendant.
[4]
[6]
The representatives acting on instructions of the Board of Directors
made a substantive
application for the extension of the return date
of the provisional restraint order, whilst the applicant in the
restraint application
[NDPP] and the set of representatives acting on
behalf of the BRPs opposed the extension application.
[7]
It is important to understand the purpose of the extension
application and the consequences
should the extension as sought be
granted. The application is not simply an application for extension
of the rule
nisi
to a later date for argument of the
provisional restraint order (thus a postponement to a fixed date in
future when the provisional
restraint order would be argued and
finalised). The purpose of the application is to seek leave to extend
the rule
nisi
pending finalisation of an application for leave
to appeal the judgment of Musi JP to the SCA and, if that application
is unsuccessful
or is successful but the appeal is not upheld by the
SCA, then an application for leave to appeal to the Constitutional
Court as
well as the appeal in that Court if leave is granted.
Because a rule
nisi
cannot be extended
sine die
, it
would, from a practical point of view, be necessary to extend it from
time to time whilst the aforesaid appeal process is pursued.
For this
reason, the relief sought in the extension application is framed in
the manner it is, namely that the rule
nisi
be extended to a
date determined by the Court.
[8]
If the application is successful, the effect of the order would be
that finalisation
of the provisional restraint order will be
postponed for an indefinite period.
[9]
The essence of this application revolves around the question of
whether the order
of Musi JP (referred to in paragraph 1 above) still
has efficacy or not, which in turn depends on the question of whether
a right
to appeal the order of Musi JP exists. If no right to appeal
exists, then the further issue arises of whether it is in the
interests
of justice to grant the extension, nonetheless.
[10]
Where an application for leave to appeal is not made within the
prescribed time-period, the right
to apply for leave to appeal does
not exist. In other words, until a court grants condonation there is
no right.
Panayiotou
v Shoprite Checkers (Pty) Ltd AND Others
2016
(3)
SA 110
(GJ)
.
An application for condonation does not suspend the efficacy of the
court order sought to be appealed.
Myeni
v Organisation Undoing Tax Abuse and Another
[5]
.
[11]
During December 2021 the ‘third defendant’ filed an
application for leave to appeal
dated 15 December 2021 accompanied by
a condonation application for the late filing of the application for
leave to appeal. Ms
Ragavan deposed to the affidavit in support of
the condonation application.
11.1
Both applications were opposed by the NDPP whilst the fourth
and
fifth defendants filed a notice to abide the decision of the Court.
11.2
Following allegations by Ms Ragavan in the replying affidavit
in the
condonation proceedings, the fourth and fifth defendants filed an
affidavit to respond thereto.
11.3
The BRPs recorded that they abide the decision of the Court
because
they do not believe that the application for leave to appeal has any
prospects of success and in a desire to avoid incurring
any
unnecessary costs in the rescue process.
11.4
The BRPs pertinently denied having authorised the ‘third
defendant’ to apply for leave to appeal and thus also denied Ms
Ragavan’s allegations to that extent in her replying
affidavit.
11.5
The BRPs recorded that they agreed to the directors of the
company
(third defendant) delivering an affidavit and presenting arguments on
the company’s behalf to deal with allegations
falling outside
their knowledge and allegations accusing the company of criminal
wrongdoing. The precise manner in which this would
be done was still
to be decided. The BRPs however state that they did not authorise Ms
Ragavan to represent the third defendant
in the proceedings.
[12]
On 28 April 2022 Mbhele AJP handed down judgment in the application
for leave to appeal, accompanied
by an application for condonation
and made the following order:
“
The
application for leave to appeal is dismissed with costs.”
[13]
A dispute exists regarding the intention of this court order.
13.1
On the one hand, Mr Hellens argued that although Mbhele AJP
did not
specifically make an order granting condonation for the late filing
of the application for leave to appeal, the Court dismissed
the
application for leave to appeal on its substantive merits. In doing
so condonation was granted by implication. If the Court
intended to
dismiss the condonation application, the order would have said so.
Where an application for leave to appeal is dismissed,
the aggrieved
party is entitled as of right in terms of the provisions of the
Superior Courts Act
[6]
to apply
for leave to appeal to the SCA
[7]
and the efficacy of Musi JP’s order will in such event be
suspended
[8]
pending the
finalisation of the application for leave, and if granted, the appeal
itself.
13.2
In opposition, the NDPP contends that considering the judgment
the
court intended to dismiss the condonation application, in which case
the order of Musi JP has efficacy and is not suspended.
[14]
The first order of business is to interpret the order of Mbhele AJP.
To this end Mr Hellens invited
my attention to
Lutchman
N.O. and Others v African Global Holdings (Pty) Ltd and Others;
African Global Holdings (Pty) Ltd and Others v Lutchman
N.O. and
Others
[9]
where Meyer AJA on behalf of the Court, with reference to the dictum
in
HLB
International (South Africa) v MWRK Accountants and Consultants
[2022]
ZASCA 52
paras
26-27
,
explained the test applicable to the interpretation of court orders
as follows:
“
[T]he now
well established test on the interpretation of court orders is that
the starting point is to determine the manifest
purpose of the order,
and that in interpreting the order the court’s intention is to
be ascertained primarily from the language
of the order in accordance
with the usual well-known rules relating to the interpretation of
documents. As in the case of a document,
the order and the court’s
reasons for giving it must be read as a whole in order to ascertain
its intention. The manifest
purpose of the order is to be determined
by also having regard to the relevant background facts which
culminated in it being made.”
[10]
[15]
The reasons for Mbhele AJP’s order as dealt with in her
judgment leave no doubt that she
intended to dismiss the condonation
application. It is quite clear that the Judge considered the
application for condonation and
intended to dismiss the same.
“
[14]
Prospects of success on merits cannot be the only determining factor
when considering an application for condonation. The applicant
in a
condonation application must still explain to the court why there was
flagrant disregard of the rules of court. The third
defendant failed
to give reasons why the rules of court could not be adhered to.”
[16]
The Judge dealt with the prospects of success as but one of the
factors relevant to the exercise
of the Court’s discretion when
considering an application for condonation. The Judge, on that score,
concluded that no prospects
of success with an intended appeal would
in any event exist.
[17]
It is inconceivable, considering the Judge’s conclusion that
there was no explanation for
the flagrant disregard of the rules of
court, coupled with the finding that the intended appeal would have
no reasonable prospects
of success, that she intended to grant
condonation.
[18]
It follows that Musi JP’s order has efficacy.
[19]
The result is of course that the directors don’t have any
authority to act on behalf of
the third defendant.
[20]
Unless the order of Musi JP is set aside, it must be complied with
and may not be ignored.
“
For so long as
that order stood, it could not be disregarded. The fact that it was a
consent order is neither here nor there. Such
an order has exactly
the same standing and qualities as any other court order. It is res
judicata as between the parties in regard
to the matters covered
thereby. The Constitutional Court has repeatedly said that court
orders may not be ignored. To do so is
inconsistent with s 165(5) of
the Constitution, which provides that an order issued by a court
binds all people to whom it applies.
The necessary starting point in
this case was therefore whether the grounds advanced by the
applicants justified the rescission
of the consent judgment. If they
did not, then it had to stand and questions of the enforceability of
the settlement agreement
became academic.”
[11]
[21]
What remains to be considered, is whether it is in the interests of
justice to grant the extension
as sought.
[22]
Mr Hellens submitted that the interests of justice demand that the
extension be granted. For
this submission reliance is placed, in
summary, on the following considerations:
22.1
The application to the SCA has already been issued. That application
not only
seeks leave to appeal the order of Musi JP on the basis that
a right to appeal exists, but also caters for the eventuality of a
court ruling that the condonation application was in fact dismissed
by Mbhele AJP.
22.2
The intended appeal has strong prospects of success regardless of the
findings
by Mbhele AJP.
22.3
In addition to the fact that the application to the SCA has already
been issued,
that application also contains a request that the SCA
hear the appeal (if leave is granted) simultaneously with the appeal
in the
matter of
Ronica
Ragavan and 2 others V Optimum Coal Terminal (Pty) Ltd and
Others
.
[12]
Mr Hellens submitted that although the latter judgment could be said
to confirm Musi JP’s conclusions, Victor J granted leave
to
appeal to the SCA in that matter. Victor J held that the Companies
Act does not clearly distinguish between the powers of directors
sitting on the Board of Directors of a company under business rescue
supervision, and the powers of appointed business rescue
practitioners. This enhances the prospects that leave will be granted
by the SCA.
22.4
The extension sought will not prejudice the relevant parties to the
restraint
application because the assets will remain subject to the
provisional restraint order.
22.5
The refusal of the extension application on the other hand may result
in prejudice
to not only the directors of the third defendant, but
also the other parties to the restraint application.
22.5.1
Concerning prejudice to the directors, it contended that should the
application be dismissed, and the appeal
eventually succeed, the
directors would have been deprived of the right to defend the company
against the NDPP’s allegations.
It would in essence amount to
closing the doors of justice for the directors. Refence was made in
this regard to the NDPP’s
argument in the restraint application
that the answering affidavit deposed to by Ms Ragavan, and which was
filed by the attorneys
who were appointed by the Board of Directors,
should not be taken into consideration as it constituted an affidavit
‘filed
by a party who is not a party to the proceedings’
[13]
.
Should that happen, no evidence on behalf of the third defendant
regarding the alleged criminal conduct would exist, which would
be
highly prejudicial to the company as the provisional restraint order
will then in all probability be confirmed. If the appeal
eventually
succeeds, it follows that the affidavit in question would have been
filed by a party that ought to be a party to the
proceedings.
22.5.2
Concerning the prejudice to all the relevant parties to the restrain
application, it is contended that
should the extension application be
dismissed and the provisional restraint order confirmed, but the
appeal is eventually successful,
these proceedings will constitute a
nullity.
[23]
On behalf of the NDPP Mr Budlender, assisted by Ms Eastwood,
contended that an extension as sought
would be inimical to interests
of justice and should be dismissed. In summary, the following
considerations are relevant:
23.1
The contemplated appeal is without merits. Musi JP’s
order is
not assailable. The application for leave to appeal does not have any
reasonable prospects to succeed. The simple fact
is that the
directors do not have the authority to act on behalf of the company.
They are simply seeking to delay finalisation
of the application.
23.2
The extension sought will result in the postponement of the
provisional restraint order for an indefinite period. In the unlikely
event that the SCA does grant leave, the prosecution of the
appeal in
that forum will take time, so much the more if an appeal will
thereafter be pursued in the Constitutional Court (should
the SCA
dismiss the appeal).
23.3
The NDPP is entitled to finality in these proceedings.
23.4
There is no merit in the complaint that the directors will
be denied
access to justice. The directors have several options available to
them to protect their interests and that of the company,
none of
which they elected to exercise. These include, amongst others:
23.4.1
The directors have a residual interest and could request leave
to
intervene in the proceedings in personal capacity. In such event the
directors will be able to address any allegations of criminality
pertaining to the company.
23.4.2
The BRPs could present the evidence of Ms Ragavan.
23.4.3
The directors could challenge the BRPs’ authority directly
in
the circumstances. They have not done so.
23.4.4
The directors could apply for an order compelling the BRPs to
authorise them to defend these proceedings.
Instead of pursuing these
avenues, the directors insist that they are authorised to represent
the company.
[24]
Mr Bham, assisted by Mr Scott, submitted on behalf of the third,
fourth and fifth defendant (the
company and BRPs) that the extension
would be highly prejudicial to the BRPs and the company. In summary,
the following considerations
are relevant:
24.1
The extension as sought will have ‘no end in sight’.
24.2
The third defendant is under business rescue. The longer this
situation continues, the
more prejudice the company and creditors
stand to suffer.
24.3
The BRPs are not able to properly perform their functions whilst the
provisional restraint
order is in place.
24.4
Due to the provisional restraint order, the BRPs are constrained to
defend the restraint
application on a restricted fee basis, since
they need to apply for the release of funds.
24.5
The interests of the third defendant’s creditors who approved a
business rescue plan
are prejudiced whilst the provisional restraint
order remains in place as the plan cannot be implemented.
24.6
It is imperative that the Court adjudicate the issues of procedure
and practicality that
they have raised in the answering affidavit and
heads on behalf of the third, fourth and fifth defendants.
24.7
The matters raised by the directors are matters that the Court can
deal with in the restraint
application. To this end, Mr Bham
submitted that if the request for extension found favour with the
Court, the Court should instead
of granting the extension, rather
consider granting permission that the two sets of representatives may
‘argue’ the
matter on behalf of the third defendant on
such conditions as the Court may impose, for example that Mr Hellens
be allowed to argue
the matter on the basis of the answering
affidavit deposed to by Ms Ragavan.
[25]
Mr Skhosana on behalf of the first defendant and first to third
respondents did not oppose or
support the extension application. He
submitted that in the event of an extension being granted, the issues
between his clients
and the third, fourth and fifth defendants should
not be separated as suggested by Mr. Budlender.
[26]
In my view, when considering the competing interests, the extension
would be inimical to the
interests of justice.
[27]
The fact that the assets will remain subject to the provisional
restraint order for an indefinite
period can hardly be argued not to
be prejudicial to the NDPP, third defendant or the BRPs. The
directors do not dispute that the
BRPs are responsible, amongst other
matters, to implement the business rescue plan and to manage the
company. It cannot be contentious
that their ability to perform these
functions are affected by the provisional restraint order. Whether
that is a valid consideration
in relation to a restraint order in
terms of POCA is an alive issue on the papers in the restraint order
between the NDPP and BRPs,
who act on behalf of the company, that
needs to be resolved in the interest of all concerned, including the
third defendant. This
issue does not only affect the rights of the
NDPP and thus public interest, the BRPs and the company. The
interests of the creditors
of the third defendant are also directly
implicated. The parties are entitled to have the dispute ventilated
so that they can obtain
clarity, regardless of the outcome. The
parties have a right to finality in this litigation.
[28]
The applicant for the extension did not adequately address the
prejudice that the NDPP or BRPs
take issue with. In addition, the
issue of prejudice to other interested parties, as dealt with above,
have not been addressed
by applicant for the extension.
[29]
Dismissal of the extension application is not akin to depriving the
directors of the right to
defend the company against the NDPP’s
allegations. The directors have remedies available to them. The most
obvious is the
fact that the directors have always been entitled to
apply for leave to intervene in the restraint proceedings as result
of their
residual interests to address any allegations of wrongdoing
or criminal conduct attributed to the company.
[30]
As far as the reliance is placed on possible findings in the
restraint application regarding
admissibility of the answering
affidavit deposed to by Ms Ragavan, that is an issue that needs to be
dealt with by the Court hearing
the restraint application. I am not
called upon, nor is it desirable to express any opinion on the
matter. As stated above, the
directors have remedies to ensure that
the worst-case scenario, which is proposed as possible prejudice if
the extension is not
granted, does not eventuate.
[31]
The order of Musi JP is extant and final in its effect. At best for
the applicant in the extension
application, the court order may or
may not be the subject of an appeal in future. Even then the outcome
on appeal, should there
be one, is at best uncertain.
[32]
One issue remains to be considered.
[33]
The extension application was issued by Krause Attorneys Incorporated
through their Bloemfontein
correspondent on behalf of ‘the
applicant’. The notice of motion is silent on who the applicant
in the extension application
would be. The founding affidavit in
support of the relief sought in the extension application is deposed
to by Ms Ragavan who states
that she is instructed to ‘bring’
the extension application by resolution of the Board of Directors of
the third defendant
on the third defendant’s behalf. Ms Ragavan
appends the resolution to defend the restraint application passed on
4 August
2021 to the founding affidavit as annexure RR1, as well as a
resolution passed on 10 May 2022, authorising Krause Attorneys
Incorporated
to act on behalf of the third defendant as annexure RR2.
[34]
The BRPs did not make the extension application, nor did they
authorise Krause Attorneys Incorporated
(or for that matter the
correspondent attorney appointed by Krause Attorneys Incorporated) to
make the extension application on
behalf of the third defendant.
[35]
From the arguments for the extension I had no doubt that it was
indeed the directors who sought
the extension to challenge the
findings of Musi JP. It is after all the directors who take issue
with the finding that neither
they nor the shareholders of the third
defendant have any authority to act on the third defendant’s
behalf in the restraint
proceedings without the approval of the
Business Rescue Practitioners.
[36]
My difficulty arises from the loose use of the term ‘on behalf
of the third defendant’.
The authority application revolved
around the question of who has the authority to act on behalf of the
company (third defendant)
in the restraint application. In other
words, the question of whether the directors retained authority to
defend the restraint
application regardless of the fact that the
third defendant was placed under business rescue supervision or do
the BRPs have exclusive
authority to represent the third defendant
and appoint attorneys to oppose the restraint application or
authorise the directors
to defend the aforesaid application.
[37]
The directors require the extension of the rule
nisi
to enable
them to pursue the appeal against the order of Musi JP. As matters
stand, they do not have any authority to act on behalf
of the third
defendant in the restraint proceedings without approval of the BRPs.
They also lack authority to act on behalf of
the third defendant in
these proceedings.
[38]
When the parties addressed me on the issue of costs of the extension
application, after I dismissed
the application, Mr Hellens however
submitted that the directors were not a party to
these
proceedings.
[39]
Insofar as the directors do not have the authority to act on behalf
of the third defendant, it
could only be them who made the extension
application.
[40]
Insofar as the directors purported to act on behalf the third
defendant when making the extension
application, they would not have
any standing to do so considering my findings above. On that basis
the application also stands
to be dismissed.
[41]
In the premises the following
order
was made:
1.
The application by the Board of Directors
of the third defendant for extension of the return date of the
Provisional Restraint Order
is dismissed.
2.
The costs of the application are reserved.
N
SNELLENBURG, AJ
APPEARANCES
On
behalf of the Applicant in the extension application:
Adv.
M.R. Hellens SC
Instructed
by:
Krause
Attorneys Incorporated (Honey Attorneys, Bloemfontein)
On
behalf of the Applicant in the restraint application:
Adv.
G.M. Budlender SC, with Ms. J. Eastwood
Instructed
by:
The
State Attorney, Bloemfontein
On
behalf of the 3
rd
, 4
th
and 5
th
Defendants in the restraint application:
Adv.
A.E. Bham SC, with Adv. T. Scott
Instructed
by:
Smit
Sewgoolam Incorporated (McIntyre Van der Post, Bloemfontein)
On
behalf of the 1
st
Defendant and 1
st
to 3
rd
Respondents in the restraint application:
Adv.
M.G. Skhosana
Instructed
by:
Forbay
Attorneys Incorporated (Gcasamba Incorporated, Bloemfontein)
[1]
Extended
return date of the Provisional Restraint Order.
[2]
Annexure
RR2 to the founding affidavit.
[3]
The BRPs are also joined as fourth and fifth defendants. They
appointed Smit Sewgoolam Incorporated (attorneys) to represent
them
and the third defendant in the restraint proceedings. The aforesaid
attorneys in turn instructed senior counsel, Mr Bham
assisted by Mr
T Scott to appear on behalf of the third, fourth and fifth
defendants.
[4]
The board of directors of the third defendant appointed Krause
Attorneys Incorporated (who substituted BDK Attorneys who were
previously appointed by the board of directors). The first mentioned
attorneys instructed senior counsel, Mr Hellens, to appear
‘on
behalf of’ the third defendant.
[5]
(15996/2017) [2021] ZAGPPHC 56 (15 February 2021) paras 23-26.
[6]
Superior Courts Act 10 of 2013
.
[7]
Section 17(2)(b)
provides: ‘If leave to appeal in terms of
paragraph (a) is refused, it may be granted by the Supreme Court of
Appeal on
application filed with the registrar of that court within
one month after such refusal, or such longer period as may on good
cause be allowed, and the Supreme Court of Appeal may vary any order
as to costs made by the judge or judges concerned in refusing
leave.’
[8]
Act
10 of 2013 above, section 18(1).
[9]
(1088/2020
and 1135/2020)
[2022]
ZASCA 66
(10
May 2022).
[10]
Para
42. In
HLB
International (South Africa) v MWRK Accountants and
Consultants
supra at para 26, Meyer AJA referred to the test enunciated in
Finishing
Touch 163 (Pty) Ltd v BHP Billiton Energy Coal South Africa Ltd and
Others
2013
(2) SA 204
(SCA) para 13 which was endorsed by the
Constitutional Court in
Eke
v Parsons
2016
(3) SA 37
(CC) para 29.
[11]
Moraitis
Investments (Pty) Ltd and Others v Montic Dairy (Pty) Ltd
2017
(5) SA 508
(SCA) para 10.
[12]
(52832/2021) [2022] ZAGPJHC 14 (18 January 2022).
[13]
To
borrow from the NDPP’s heads of argument.