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[2021] ZAGPJHC 461
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Educated Risk Investments 54 (Pty) Ltd v The Master of the High Court, Johannesburg and Others (18358/2020) [2021] ZAGPJHC 461 (27 September 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES:
NO
REVISED:
CASE
NO
:
18358/2020
DATE
:
29
th
September 2021
In
the matter between:
EDUCATED
RISK INVESTMENTS 54 (PTY) LIMITED
Applicant
and
THE
MASTER OF THE HIGH COURT, JOHANNESBURG
First Respondent
POLLOCK
,
RICHARD KEAY N
O
Second Respondent
SYKES
,
MARYNA ESTELLE N
O
Third Respondent
KOTZE
,
OLGA N O
Fourth Respondent
[The
second to fourth respondents are cited
nomine officio
in
their official capacities as the duly appointed joint liquidators of
FARM
BOTHASFONTEIN (KYALAMI) (PTY) LIMITED (in liquidation)
]
NEDBANK
LIMITED
Fifth Respondent
IMPERIAL
HOLDINGS
LIMITED
Sixth Respondent
Coram:
Adams J
Heard
:
19 July 2021 – The ‘virtual hearing’ of the
application was conducted as a videoconference on
Microsoft
Teams
.
Delivered:
29 September 2021 – This judgment
was handed down electronically by circulation to the parties'
representatives by email,
by being uploaded to
CaseLines
and by release to SAFLII. The date and time for hand-down is deemed
to be 11:00 on 29 September 2020.
Summary:
Company – Winding-up – s 408 of the Companies
Act 61 of 1973 — confirmation of liquidation and distribution
account
by joint liquidators – have the same effect as final
judgment of a Court –
Re-opening
of L & D Account –
section 157
of the
Insolvency
Act 24 of 1936
– nothing done under that Act shall be invalid
by reason of a formal defect or irregularity, unless a substantial
injustice
has thereby been done –
in casu
substantial
injustice has not been done by confirmation of the L & D Account
–
Motion
court procedure – applicant’s case to be made out in
founding papers.
ORDER
(1)
The applicant’s application for a stay of the main application
in
terms of its notice of motion dated 29 June 2021 is dismissed;
(2)
The applicant’s application for leave to deliver a
supplementary
replying affidavit in terms of the notice of motion
dated 28 May 2021 is dismissed;
(3)
The applicant’s main application in terms of the notice of
motion
dated 11 July 2020 is dismissed;
(4)
The applicant shall pay the costs of the second to fourth respondents
and the fifth and sixth respondents, in respect of all three
applications, on the attorney and client scale, including the costs
occasioned by the employment of two counsel, where so employed.
JUDGMENT
Adams J:
[1].
The litigation between the parties in
this opposed application has had a long and a tedious history dating
back to July 2004 when
an agreement was concluded between the then
shareholders of Farm Bothasfontein (Kyalami) (Pty) Limited (‘Farm
Bothasfontein’)
and the fifth respondent (‘Nedbank’)
and the sixth respondent (‘Imperial’), in terms of which
the latter
companies acquired sixty percent shareholding in Farm
Bothasfontein. This company, which at that time was the owner of the
renowned
Kyalami Race Track, has since been liquidated and it is the
finalisation of that liquidation which is at the heart of the opposed
applications before me presently.
[2].
As has become the norm in the litigation
between the parties, there are a myriad of peripheral issues and
preliminary and interlocutory
disputes between them in addition to
the main dispute. So, for example, the applicant, to which I shall
refer to as ‘Educated
Risk’ for ease of reference, apply
for an interim order staying the main application. Also, shortly
before the hearing of
the applications, Educated Risk filed an
application for leave to file a supplementary replying affidavit. I
intend giving short
shrift to these applications for the simple
reason that my finding on the main application dispenses with the
need for me to deal
in detail with these issues.
[3].
In the main application, Educated Risk
applies for the re-opening of the second and final liquidation and
distribution account (‘the
second L & D Account’) in
respect of Farm Bothasfontein (In Liquidation) (‘Farm
Bothasfontein’). This account
was duly confirmed by the Master
of the High Court on 1 June 2020 in terms of section 408 of the
Companies Act, Act 61 of 1973
(‘the 1973 Companies Act’).
Pursuant to such confirmation, the second, third and fourth
respondents (‘the liquidators’)
commenced with the
distribution of dividends to the shareholders of Farm Bothasfontein
in terms of the second L & D account,
and payments were made to
Nedbank and to Imperial. The liquidators also tendered payment to
Educated Risk of the amount of the
distribution due to it in terms of
the said account.
[4].
Section 408 of the 1973 Companies Act
provides that the Master’s confirmation –
‘
...
shall have the effect of a final judgment, save as against such
persons as may be permitted by the Court to re-open the account
after
such confirmation but before the liquidator commences with the
distribution.’
[5].
In view of s 408, so the respondents
contend, the orders prayed for by the applicant, the effect of which
would be to re-open the
L & D Account, are not competent and
therefore the main application must fail for this reason alone.
[6].
In
Wispeco
(Pty) Ltd v Herrigel NO and Another
[1]
the principle applicable after payment of a dividend was stated as
follows:
‘
It
is perfectly clear from the wording of the section that, if in fact a
dividend had been paid under the account, the Court would
have no
power to reopen the account.’
[7].
In the present matter, as already
indicated, the Master confirmed the second L & D
account on 1 June 2020 and the
distribution in terms thereof had
commenced on 5 June 2020 in that two payments of R3 435 227.23
each were made to Nedbank
and to Imperial on the said date.
[8].
I therefore find myself in agreement
with the submission made on behalf of the Liquidators and Nedbank and
Imperial. The Court has
no power to reopen the account. The wording
of the section is peremptory and, in my view, once the distribution
had commenced,
the confirmation, which has the effect of a final
judgment, stands. For this reason alone, the main application should
be dismissed.
[9].
In sum, Educated Risk applies for an
order setting aside the second L & D account as it is aggrieved
by the fact that Nedbank
and Imperial received distributions on the
basis of their sixty percent shareholding in the liquidated company.
This sixty percent
shareholding, so Educated Risk contends, was
acquired unlawfully during 2004 by Nedbank and Imperial and in
contravention of section
38 of the 1973 Companies Act, in that the
company had financed the purchase of its own shares. The difficulty
with the case of
Educated Risk is that the dispute relating to s 38
was settled and compromised between all of the interested parties,
including
Educated Risk, on 14 November 2018, when a settlement
agreement was made an Order of this Court by Van der Linde J under
case number
19943/2016. Under this case number Educated Risk and its
related entities and persons had counter-applied for an order that
the
acquisition of the sixty percent shareholding in Farm
Bothasfontein be set aside. As already indicated, that claim by
Educated
Risk was compromised as part and parcel of the settlement
agreement, which was made an Order of Court on 14 November 2018.
[10].
Therefore, as matters stand, Educated
Risk is not entitled to the relief claimed in the main application.
No purpose would be served
by ordering a re-opening of the second and
final L & D Account even if there is merit in the
technical issues raised
by Educated Risk, such as the fact that there
has not been proper compliance with the formalities relating to the
advertising and
publication of the said account. This is so because
the second and final L & D Account was in accordance with the
factual and
legal position at the time, taking into account the
aforementioned settlement agreement.
[11].
In order to overcome this hurdle,
Educated Risk instituted action out of this Court on 19 March 2021
under case number 14038/2021
against all of the interested parties,
including the respondents in this application. In the said action,
Educated Risk and its
aligned entities and persons claim, rather
belatedly and some twenty-eight months after the fact, a setting
aside of the settlement
reached between the parties in November 2018
and a rescission of the Court Orders making the settlement agreements
orders of this
Court.
[12].
The success of the main application is
dependent on the prospects of success of the aforementioned action,
which, in essence, is
based on the fact that, according to Educated
Risk, the settlement agreements were concluded unlawfully. The
unlawfulness of the
agreements, which were made Orders of Court by
Van der Linde J, stems from the fact, so I understand the case for
Educated Risk,
that there was an unlawful Contingency Fee Agreement
in place between Educated Risk and its attorneys at the time, namely
Schindlers
Attorneys. Nedbank and Imperial are of the view that there
are no prospects of success for this action. I agree. How can it be
that the attorney and client agreement between Educated Risk and
Schindlers Attorneys can have an effect on the validity of the
agreement with Nedbank and Imperial? I ask this question
rhetorically.
[13].
The point is that Educated Risk cannot
overcome an insurmountable hurdle, that being
section 157
of the
Insolvency Act, Act
24 of 1936 (‘the
Insolvency Act&rsquo
;),
which provides that nothing done under that Act shall be invalid by
reason of a formal defect or irregularity, unless a substantial
injustice has thereby been done. In this matter, it cannot possibly
be said that a substantial injustice had been done by the
confirmation of the second L & D Account by the Master as it
accorded with the prevailing factual and legal position at the
time.
In my view, Educated Risk has failed to demonstrate any such
substantial injustice.
[14].
Moreover, Educated Risk bears the
further onus of having to show the Court that there is merit in the
reopening of the account,
since a Court will not reopen an account if
it cannot be shown that the applicant has some prospect of success of
having the account
varied or corrected. The main application cannot
succeed because no such prospect has been established.
[15].
The express provisions of a settlement
agreement concluded on 14 November 2018, which was made an order of
Court on the same day,
and in terms of which Educated Risk had
finally and unconditionally abandoned the Section 38 issue, counts
against Educated Risk.
I am of the view that the action has no merit
whatsoever. The Section 38 issue is not capable of being revived.
[16].
The main application therefore stands to
be dismissed and the applicant’s other interlocutory
applications should suffer the
same fate. In that regard, the
application for leave to file a supplementary replying affidavit
should be dismissed for the simple
reason that, even if I have regard
to the issues raised by the applicant in the supplementary affidavit,
the main application is
still doomed. Therefore, that application –
which, in any event, has not been properly motivated by Educated Risk
–
should be dismissed as should the application for the stay of
the main application. There is no point in staying an application
which should fail however one views same.
[17].
Moreover, as correctly argued by Mr
Botha SC, who appeared for Nedbank and Imperial together with Mr
Kromhout, as a general rule
Educated Risk cannot and should not be
allowed to make out a case in its replying papers if one is not made
out in its founding
affidavit. Even more so, in an application a case
cannot be made out by an applicant at some future date, many years
after the
final adjudication of its action. Moreover, in my view,
that action, in any event, has no prospects of success as it faces an
insurmountable
hurdle in that the issue raised therein has been
settled and compromised.
[18].
In sum, the cause of action of Educated
Risk in the main application is incomplete on its own version. It is
trite that in motion
proceedings, you cannot make out a case other
than in your founding papers. Even more so, an applicant cannot issue
an application
whilst its cause of action is still being developed,
which is exactly what Educated Risk is doing
in
casu
. For this reason, the main
application stands to be dismissed as does the other applications by
Educated Risk.
[19].
I am also satisfied that Educated Risk
should, in terms of the general rule that a successful party should
be awarded costs, pay
the costs of the second to sixth respondents in
respect of the applications.
[20].
The
next question is whether a punitive costs order should be granted
against Educated Risk, as submitted by Mr Botha, as well as
by Mr
Smit, who appeared on behalf of the Liquidators. It is trite that the
rationale for a punitive attorney and client costs
order is more than
mere punishment of the losing party. Tindall JA explained it as
follows in
Nel
v Waterberg Landbouwers v Ko-operatiewe Vereeniging
[2]
:
‘
[t]he
true explanation of awards of attorney and client costs not expressly
authorised by Statute seems to be that, by reason of
special
consideration arising either from the circumstances which give rise
to the action or from the conduct of the losing party,
the court in a
particular case considers it just, by means of such an order, to
ensure more effectually than it can do by means
of a judgment for
party and party costs that the successful party will not be out of
pocket in respect of the expense caused to
him by the litigation.’
[21].
And
see further:
Swartbooi
v Brink
[3]
.
The issue of costs is a matter for the discretion of a trial court.
Smalberger JA elaborated on the nature of this discretion
as follows
(in the context of an agreement between parties that attorney client
costs be paid) in
Intercontinental
Exports (Pty) Ltd v Fowles
[4]
at para 25:
‘
The
court’s discretion is a wide, unfettered and equitable one. It
is a facet of the court’s control over the proceedings
before
it. It is to be exercised judicially with due regard to all relevant
consideration. These would include the nature of the
litigation being
conducted before it and the conduct before it and the conduct of the
parties (or their representatives). A court
may wish, in certain
circumstances, to deprive a party of costs, or a portion thereof, or
order lesser costs than it might otherwise
have done as a mark of its
displeasure at such party’s conduct in relation to the
litigation.’
[22].
Applying these principles
in
casu
, I am persuaded that a punitive
costs order would be appropriate. I agree with the submissions on
behalf of the respondents that
the present proceedings are clearly
frivolous and vexatious, both in intent and in effect. The
application is also an abuse of
the processes of this Court.
Order
[23].
Accordingly, I make the following order: -
(1)
The applicant’s application in terms of its notice of motion
dated
29 June 2021, for a stay of the main application is dismissed;
(2)
The applicant’s application for leave to deliver a
supplementary
replying affidavit in terms of the notice of motion
dated 28 May 2021 is dismissed;
(3)
The applicant’s main application in terms of the notice of
motion
dated 11 July 2020 is dismissed;
(4)
The applicant shall pay the costs of the second to fourth respondents
and the fifth and sixth respondents, in respect of all three
applications, on the attorney and client scale, including the costs
occasioned by the employment of two counsel, where so employed.
L
R ADAMS
Judge
of the High Court
Gauteng
Local Division, Johannesburg
HEARD
ON: 9
th
July 2021 – in a ‘virtual hearing’ during a
videoconference on
Microsoft Teams.
JUDGMENT
DATE: 27
th
September 2021 – judgment handed down electronically
FOR THE
APPLICANT: Advocate
P F Louw SC, together with Advocate J W Steyn
INSTRUCTED
BY:
Van Hulsteyns Attorneys, Sandton
FOR
THE FIRST RESPONDENT:
No appearance
INSTRUCTED
BY:
No appearance
FOR
THE SECOND, THIRD AND
FOURTH
RESPONDENTS:
Advocate
Johan E Smit
INSTRUCTED
BY:
Reitz Attorneys, Johannesburg
FOR THE FIFTH
RESPONDENT: Advocate A C
Botha SC, with Advocate E Kromhout
INSTRUCTED
BY:
Lowndes Dlamini Attorneys, Sandton
FOR THE SIXTH
RESPONDENT: Advocate A C
Botha SC, with Advocate E Kromhout
INSTRUCTED
BY: Tugendhaft
Wapnick Banchetti Attorneys, Sandton
[1]
Wispeco
(Pty) Ltd v Herrigel NO and Another
1983 (2) SA 20
(C) at 28A-C
[2]
Nel
v Waterberg Landbouwers v Ko-operatiewe Vereeniging
1946 (1) AD 597
at 607;
[3]
Swartbooi
v Brink
2006 (1) SA 203
(CC) par 27;
[4]
Intercontinental
Exports (Pty) Ltd v Fowles
1999 (2) SA 1045
(SCA).