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[2022] ZAFSHC 272
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Organo Gold Holdings Ltd (H.K) (S.A.R) P.R.C and Another v Hartslief and Others (3091/2022) [2022] ZAFSHC 272 (14 October 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No.:
3091/2022
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
ORGANO
GOLD HOLDINGS LTD (H.K.) (S.A.R.) P.R.C.
First
Applicant
OG
SOUTH AFRICA (PTY) LIMITED
Second
Applicant
(Registration
number: 2017/652639/07)
and
PHILIP
HENRY
HARTSLIEF
First
Respondent
BLUE
LAWN ENTERPRISES (PTY) LTD (in liquidation)
Second
Respondent
SAVANNAH
LODGE 65 (PTY) LTD
Third
Respondent
THE
MASTER OF THE HIGH COURT :
JOHANNESBURG
Fourth
Respondent
JUDGMENT
BY:
VAN RHYN, J
HEARD
ON:
15
SEPTEMBER 2022
DELIVERED
ON:
14
OCTOBER 2022
INTRODUCTION.
[1]
On 5 July 2022 the applicants brought an urgent application for an
order authorising
the Sheriff to attach and place into safekeeping
any and all of the second respondent’s assets in the possession
or under
the control of the first respondent pending the appointment
of a liquidator or provincial liquidator to the second respondent and
interdicting the first respondent from disposing of the second
respondent’s assets.
[2]
On 5 July 2022 the court granted the rule
nisi
on an urgent ex
parte basis
.
The first respondent is the only party who is an
active participant in this application. He does not oppose the
substantive relief
sought by the applicants, but has filed an
answering affidavit and joins issue with the applicants solely in
order to argue the
costs.
THE PARTIES.
[3]
The first applicant, Organo Gold Holdings Ltd (H.K.) (S.A.R.) P.R.C
is a company incorporated
and registered in accordance with the laws
of Hong Kong in the People’s Republic of China. The second
applicant was incorporated
in South Africa for the purposes of
operating the Organo Group’s business in South Africa. The
Organo Group is a global company
that markets its premium products in
the luxury consumables industry to clients and to authorised
distribution partners. During
2018 the first applicant appointed the
first respondent as its local managing director responsible for
developing the Organo business
in South Africa.
[4]
The first respondent is Phillip Henry Hartslief (“Mr
Hartslief”), a major
business man of Parys in the Free State
Province. Mr Hartslief is the former sole shareholder and sole
director of Blue Lawn Enterprises
(Pty) Ltd (in liquidation), the
second respondent (“Blue Lawn”). Blue Lawn has its
registered address at Honeydew,
Gauteng.
[5]
The third respondent is Savannah Lodge 65 (Pty) Limited (“Savannah
Lodge”),
cited because execution of the order granted in terms
of the urgent application on 5 July 2022 had to occur at its premises
at
Parys. Mr Hartslief is also the director of the third respondent.
No costs are sought against the third respondent unless it opposes
the relief sought, which it did not.
[6]
The fourth respondent is the Master of the High Court, Johannesburg
(the “Master”)
The Master is cited as an interested
party, representing the interests of Blue Lawn as the Master had not
yet appointed a provisional
liquidator at the time when this
application was issued. At the time of the hearing on the return day,
this court was informed
that a final certificate of appointment had
been received.
BACKGROUND.
[7]
On the 5th of July 2022 Van Zyl J granted the order sought by the
applicants and issued
a rule
nisi
with return day the 4
th
of August 2022 calling upon the respondents to advance reasons why
the order set out in paragraph 3 of the Notice of Motion, which
consists of paragraph 3.1 to 3.9, should not be made final. Only Mr
Hartslief opposes this application. On behalf of Mr Hartslief
it is
argued that he has complied with, not only the provisions of Part A
of the applicants’ Notice of Motion, but has also
complied with
Part B of the relief sought by the applicants.
[8]
Mr Lamplough SC on behalf of the applicants therefore contends that
the only issues
that require a pronouncement by the court, is whether
an application by the applicants was necessary and the question
relating
to costs. The applicants are moving for a punitive costs
order against Mr Hartslief.
[9]
The background relating to this matter is as follows: Blue Lawn was
placed into voluntary
liquidation by Mr Hartslief on 17 January
2022. The second applicant is a creditor of Blue Lawn and is
the sole authorised
distributor of Organo Gold Products in South
Africa. On 26 January 2022 the Johannesburg High Court granted an
order by agreement
between the parties declaring,
inter
alia
, that Mr Hartslief is, and has
been since 1 February 2019 the registered shareholder of the shares
in Blue Lawn as nominee for
and on behalf of the first applicant. The
first applicant is therefore the sole beneficial shareholder of all
the shares in Blue
Lawn
[10]
On 7 February 2020 the parties agreed that the stock belonging to
Blue Lawn be placed in a locked
cage in a warehouse at Honeydew,
which warehouse was leased by Mr Hartslief and/or one of his
affiliated entities and being the
registered address of Blue Lawn.
The agreement was that the keys to the cage would be handed to the
applicants’ attorneys
of record, ENSafrica as custodian. The
stock would be kept in the cage pending a court order in relation
thereto or the registration
of the transfer of the shares to the
first applicant or pending any agreement between the parties.
[11]
On 8 February 2020 an inventory was prepared of to the stock to be
preserved and the cage was
locked. The keys to these locks were
handed to the applicants’ attorneys as agreed. Some 8 months
later, on 7 October 2020,
a second inspection of the stock was
arranged. On preparing the second inventory the first applicant
became aware that some of
the stock were missing. The applicant’s
attorneys addressed correspondence to Mr Hartslief and informed him
of their findings
to which Mr Hartslief’s attorney replied
stating that he, Mr Hartslief “has not sold nor traded in any
Organo products
and will continue to do so”. Mr Hartslief’s
attorney furthermore confirmed that an embargo on the sale of the
stock
is in place pending the outcome of the shareholding dispute.
[12]
Towards the end of May 2022 authorised distribution partners of the
second applicant complained
that expired stock, or soon to be expired
stock, was being sold on the South African market at greatly reduced
prices. These sales
were being conducted by unauthorised sellers. An
investigation conducted by the applicants indicated that the goods
being sold
on the market were stock belonging to Blue Lawn and which
was supposed to be in the locked cage in the warehouse at Honeydew.
On
28 June the applicants ascertained that the warehouse at Honeydew
was empty.
[13]
Subsequent to the order being granted on 5 July 2022, the sheriff
attended at the premises of
Savannah Lodge and a significant amount
of the stock that was kept in the cage at Honeydew was found at the
premises. A trailer
and a 14-ton truck were required to remove the
stock for safekeeping. Mr Hartslief on his arrival at the
lodge, pointed out
stock not already removed by the sheriff. However,
the sheriff also found additional stock at another shed and had to
use a bolt
cutter to cut the lock and gain access to the shed.
[14]
Mr Hartslief deposed to two affidavits and in the second affidavit,
deposed to on 19 July 2022,
he stated that he caused the stock to be
removed from Honeydew to Savannah Lodge at Parys. He furthermore
provided an explanation
how some of the stock was sold at a market
and some of the stock were consumed by visitors and guests at
Savannah Lodge. Mr Hartslief
thus, in principle had no objection to
the stock being removed from his premises and held by the liquidator
of Blue Lawn as prayed
for by the applicants in the Notice of Motion.
[15]
Even though Mr Hartslief, to a great extent, complied with the
interim order granted on 5 July
2022 in that he disclosed the
location of the stock and goods listed in the inventories to the
sheriff and stated under oath the
whereabouts of Blue Lawn’s
stock listed in the inventories, he nonetheless decided to oppose the
application with the result
that the return day of 4 August 2022 had
to be postponed to the opposed roll, Mr Hartslief to pay the wasted
costs including the
actual travelling costs of the applicants’
legal representatives. In his answering affidavit he does not
challenge the substantive
relief sought but confines his evidence to
attempts to justify and explain why the stock was moved to Savannah
Lodge to avoid being
ordered to pay the costs.
COSTS
[16]
The applicants seek the following costs orders against Mr Hartslief:
16.1
that he reimburses the applicants for the vouched costs incurred by
it in respect of the sheriff’s costs of attaching,
removing and
storing Blue Lawn’s goods and stock; and
16.2
that Mr Hartslief pays the applicants’ costs of the application
on the scale as between attorney and client.
[17]
It is well established that the general rule regarding costs is that
the unsuccessful party pays
the costs of the successful party on the
party and party scale.
[1]
The purpose of an award of costs to a successful litigant is to
indemnify him for the expenses to which he has been put through
having been unjustly compelled to initiate or defend litigation, as
the case may be. However, due to the process of taxation,
the
award is usually not a complete indemnity.
[18]
The determination of an appropriate costs order is in the discretion
of the court which discretion
is based on a number of factors in
order that such discretion be exercised judiciously. These factors
include consideration of
the facts of each case, weighing the issues
in the case, the conduct of the parties and any other circumstance
which may have a
bearing on the issue of costs and then make such
order as to costs as would be fair and just between the parties.
[2]
[19]
Mr. Lamplough SC argued that Mr Hartslief had no right to deal with
Blue Lawn’s assets
whilst it is under the control of the Master
and acted in flagrant breach of the agreement regarding the
safekeeping of the stock.
Mr Hartslief did not inform the applicants
that he intended to or had removed the stock from the cage kept in
the warehouse at
Honeydew and had relocated same to Savannah Lodge at
Parys.
[20]
The answering affidavit filed by Mr Hartslief are in excess of fifty
pages with significant portions
containing entirely irrelevant
information, unsubstantiated facts and hearsay evidence. He failed to
establish any possible justification
for his actions and has put the
applicants to costs they ought not to be required to bear.
[21]
Me Van der Sandt, counsel on behalf of Mr Hartslief contended that a
punitive cost order is not
justified on the basis that the applicants
proceeded with an
ex parte
application on 5 July 2022, while
they could merely have asked Mr Harslief where the stock was prior to
launching the urgent application.
This matter could have been settled
without the need for the court’s intervention and the resultant
costs implications.
[22]
On 29 June 2022 the applicants’ attorney of record addressed
correspondence per email to
the attorney acting on behalf of Mr
Hartslief requesting confirmation by close of business that all the
stock kept under lock and
key remains at the warehouse. To date of
hearing the application no response had been received from Mr
Hartslief or his attorneys.
[23]
I therefore agree with the contention on behalf of the applicants
that Mr Hartslief’s deceptive
conduct necessitated the
application by the applicants on an
ex parte
basis. Mr
Hartslief acted in bad faith. The dishonest and deceptive
conduct by Mr Hartslief is deserving of censure
by this court and
constitutes exceptional circumstances justifying a punitive cost
award. On 4 August 2022, the return day set
in the order granted on 5
July 2022, only Me Nieuwoudt, junior counsel on behalf of the
applicants appeared for the postponement.
I furthermore agree with
the argument raised by Mr Lamplough SC that the application, with
annexures amounting to 376 pages, appears
to be one of importance and
of substance and I am satisfied that the costs of two counsel who are
based in Johannesburg are justified.
[24]
ORDER
:
In the result the
following order is granted:
1.
Pending the duly appointed liquidator (or provisional liquidator) to
the second respondent
taking possession and control of the assets of
the second respondent:
1.1
The first respondent is interdicted from disposing of any of the
second respondent’s assets including
any products forming part
of the stock listed on the inventory lists attached to the founding
affidavit of Cornelia Johanna van
Graan as FA 9 and FA 10.
1.2
The Sheriff of the High Court is directed to hold in safekeeping the
goods removed from the premises of the
third respondent and/or the
residential address of the first respondent situate at Savannah
Lodge, Woolridge 65, Parys, Free State
Province on 6 July 2022 until
such goods can be surrendered to the liquidator appointed to the
second respondent.
1.3
The Sheriff of the High Court is authorised to enter onto any
premises where the goods of the second respondent,
including the
products listed in FA 9 and FA 10 to the founding affidavit are
situated, to take possession of such goods, and to
place the goods in
safekeeping.
1.4
The Sheriff’s costs of attaching, removing and storing the
goods arising from orders 1.2 and 1.3 above,
shall be paid by the
applicants.
2.
The first respondent is ordered to reimburse
the applicants the vouched costs incurred by it under paragraph
1.4
above.
3.
The first respondent is ordered to pay the applicant’s costs of
this application on
the scale as between attorney and client, such
costs to include the costs of two counsel, where so employed and the
actual travelling
costs of the applicants’ attorneys and
counsel who are based in Johannesburg.
VAN
RHYN, J
On
behalf of the Applicants: ADV.
A. LAMPLOUGH SC
ADV
M H NIEUWOUDT
Instructed
by: MCINTYRE
VAN DER POST ATTORNEYS
BLOEMFONTEIN
On
behalf of the First Respondent: ADV.
N VAN DER SANDT
Instructed
by: SPANGENBERG
ZIETSMAN & BLOEM
ATTORNEYS
BLOEMFONTEIN
[1]
Maloney’s Eye Properties v Bloemfontein Board Nominees
1995
(3) SA 249
at 257 F-G.
[2]
Erasmus Superior Court Practice D5 -6.