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2020
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[2020] ZALMPPHC 42
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Moropa and Another v Pather and Others (2987/2020) [2020] ZALMPPHC 42 (29 June 2020)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(LIMPOPO
DIVISION, POLOKW ANE)
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES: YES/
NO
(3)
REVISED
CASE
NO: 2987/2020
In
the matter between:
HLAHLEDI
FRANK MOROPA
FIRST APPLICANT
MAHLODI
LILLY NOHLALA
SECOND APPLICANT
And
KINESH
SACHIDANANDAN PATHER
FIRST RESPONDENT
MOGOMPANE
CHROME (PTY) LTD
SECOND RESPONDENT
MARULA
COMMUNITY CHROME (PTY) LTD
THIRD RESPONDENT
THE BOARD OF
DIRECTORS OF
FOURTH RESPNDENT
MOGOMPANE
CHROME (PTY) LTD
THE BOARD OF
DIRECTORS OF MARULA
FIFTH RESPONDENT
COMMUNITY
CHROME (PTY) LTD
MASTER OF THE
HIGH COURT, POLOKWANE SIXTH
RESPONDENT
ESTATE LATE
ELIAS TSHIDI MOHLALA
SEVENTH RESPONDENT
COMPANIES AND
INTELLECTUAL PROPERTY EIGHTH
RESPONDENT
COMMISSION
FINANCIAL
INTELLEGENCE CENTRE
NINTH RESPONDENT
FIRST NATIONAL
BANK UNITED (FNB)
TENTH RESPONDENT
STANDARD BANK
LIMITED
ELEVENTH RESPONDENT
BAJABOHWA
CRHOME (PTY) LTD
TWELFTH RESPONDENT
REASONS
FOR JUDGMENT
MAKGOBA
JP
[1]
This matter came
before me, on urgent basis, as an anticipation of the return date
(Rule 6(8)) and reconsideration of an interim
order (Rule 6(12)(c))
granted in favour of the Applicants on 26 May 2020.
[2]
Upon hearing Counsel for the parties I
granted the following order:
"1.
The order granted on 26 May 2020 under the above-mentioned case
number, by Mudau
J is reconsidered and set aside.
2.
The rule nisi is discharged.
3.
The Applicants are ordered to pay
the costs on an attorney and client scale."
[3]
What
follows are my reasons for the order.
[4]
On
26 May 2020 the Applicants sought and obtained an ex parte order of a
wide ranging nature. The order provides:
"1. This
application is dealt with as an urgent application for the purposes
of being dealt with in
terms of Rule 6(12) read with the prevailing
rules and forms of the Honourable Court and the said rules and forms
of the Honourable
Court are dispensed with.
2.
Pending the outcome and
finalization of an application to declare the First Respondent and or
any inflicted Directors delinquent,
which application should be
instituted within 21 (twenty one)
days
from the date of issuing of this
interim order.
3.
The First, Fourth and Fifth
Respondents are interdicted and prohibited from having access to all
bank accounts of the Second and
Third Respondents, which includes
online banking, withdrawals and making payments.
4.
The First, Fourth and Fifth
Respondents are prevented and prohibited from executing and or
carrying on any duties as a director
of the Second and Third
Respondents , pending the outcome of the application referred to
above.
5.
The First and Second Applicants
and Shadrack Mokgale Matjie are appointed as the interim Directors of
the Second and Third Respondents
pending the finalization of the
application referred to above.
6.
The Applicants are granted leave
to supplement their papers.
7.
A rule nisi issued calling upon
the Respondents on the
20
th
of AUGUST 2020
to show cause
why this rule nisi should not be confirmed.
8.
The First Respondent is ordered
to pay the costs of this application as on attorney and own client
scale, the one paying the other
to be absolved."
[5]
My reasons for setting aside the interim
order and discharging the
rule nisi
are based on one or more of the
following aspects:
5.1.
Applicants' lack of standing
(Locus Standi).
5.2.
None - Joinder of a Trust.
5.3.
Absence of Jurisdiction.
5.4.
Non - disclosure of material
facts.
5.5.
Abuse of
Ex
parte
proceedings.
[6]
Before dealing with
the aforesaid aspects I proceed to deal with the Court order as it
affects the Fourth and Fifth Respondents,
being the Board of
Directors of Second and Third Respondents companies.
As it appears from the papers the Fourth
Respondent is simply described as "the Board of Directors of
Magompane Chrome (Pty)
Ltd" ("Magompane") and the
Fifth Respondent is described as "the Board of Directors of
Marula Community Chrome
(Pty) Ltd" ("Marula").There
are some thirteen directors comprising the Boards of Magompane and
Marula. All of them
are subject to the prohibitions contained in the
order. Yet, a consideration of the founding affidavit makes no case
against any
of these directors other than the First Responden,t Mr
Pather.
Even
in their replying affidavit, the Applicants made no case against the
other directors.
[7]
Apart from the sweeping and unsupported
. assertions contained in the founding affidavit, no specific
allegations are leveled against
the other directors of Magompane and
Marula, yet they are stripped of their duties and rights as directors
of the companies.
Counsel
for the Applicants readily conceded, correctly so, that no case is
made against the aforesaid directors and consequently
the order
against them falls to be discharged.
Lack of Standing
(Locus standi)
[8]
The First Applicant
purported to come to Court on the basis that he was the major
shareholder of the Second Respondent. In support
of this assertion,
he attached what he described as a "shareholder certificate"
being annexure "HFM1" to the
founding affidavit. It turned
out, however that annexure "HFM1" is not a share
certificate at all. It is a resolution
by representatives of Tswako
Mohlala Community. The First Applicant is shown not to be a
shareholder in his own right but merely
a nominee of the mentioned
community. The community is not the shareholder. The Tswako Mante
Trust holds 90% shares in the company
on behalf of the community as
beneficiaries. Beneficiaries cannot act on behalf of the Tswako Mante
Trust.
Therefore,
the First Applicant as a beneficiary has no
locus standi
to
institute the present proceedings.
[9]
The Second Applicant bases her alleged
standing on the fact that she is the widow of the late Elias Mohlala
and the heir of his
shares to which he was allegedly entitled. The
Applicants attached the death certificate of the late Mr Mohlala
which indicates
that he was "never married".
This anomaly is not addressed even in the
replying affidavit. Counsel for the Applicants did not address this
issue at the hearing
of this application. Such failure is fatal to
the Second Applicant's
locus standi.
In
any event in terms of a resolution by the Board of Directors of
Magompane dated 21 September 2012 it is confirmed that the shares
held by the late Mr Mohlala were "trust shares" and these
shares had been transferred to a new nominee, referred to as
KW
Mohlala.
Non-
Joinder of Trust
[10] The
Tswako Mante Trust is the majority shareholder of Magompane. The
Trust clearly has a direct and
substantial interest in the outcome of
this matter. The Trust acts and holds shares on behalf of the
community. The community is
the beneficiary of the dividends paid to
the Trust. The relief sought by the Applicants includes having all
the directors of Magompane
declared delinquent. The Trust manifestly
has a direct and substantial interest in this relief- ABSA Bank
Limited vs Naude NO 2016(6)
SA 540 (SCA).
It follows that the failure to cite the Trust
and the trustees is fatal to this application.
Absence of Jurisdiction
[11]
The Applicants make a bald and
unsubstantiated assertion that this Court has the necessary
jurisdiction as the whole cause of action
arose within the Court's
area of jurisdiction. With respect, the cause of action is extremely
difficult to discern in this matter.
In the papers, the First, Second, Third, Fourth
and Fifth Respondents are reflected as being in Sandton. The two
banks (Tenth and
Eleventh Respondents) are cited with addresses in
Johannesburg.
[12]
It is common cause that the First to
Fifth, Tenth and Eleventh Respondents fall within the High Court of
Johannesburg's jurisdiction.
The Second and Third Respondents have
their registered office and carry on business in the jurisdiction of
Johannesburg.
In the result this Court does not have
jurisdiction to entertain this matter, as the majority of the
parties, as cited by the Applicants,
are situated within the High
Court of Johannesburg's jurisdiction.
Non-
disclosure of material facts
[13]
The omission of material facts may be
either willful or negligent. Regardless, the Court may on this ground
alone dismiss an ex
parte application.
In
Schlesinger v Schlesinger 1979(4) SA 342
(W)
an order obtained ex parte was set aside with costs on an
attorney and client scale because the applicant had displayed a
reckless
disregard of his duty in making full and frank disclosure of
all known facts that might influence the court in reaching a just
conclusion.
[14]
In the present case it is a fact that
one Mr Shadrack Matjie was dismissed as the Chairman and director of
the Magompane on 31 July
2019 on account of mismanagement of the
company. The Applicants proceeded to obtain an ex parte order in this
matter appointing
Mr Matjie as their co-director in the two
companies, Magompane and Marula. This was a material non-disclosure.
It was critical
to the relief sought and obtained ex parte.
In regard to the Court's discretion as to
whether to set aside an ex parte order because of non-disclosure, Le
Roux J said in
Schlesinger
(Supra):
"Unless there is
a
very cogent practical reason why an
order should not be rescinded, the Court will always frown on an
order obtained ex parte on
incomplete information and will set aside
the order even if relief could be obtained on
a
subsequent application by the same
applicant."
[15]
It is furthermore evident from the
papers that the Applicants failed in their duty to disclose the
following material facts:
15.1
The First Applicant is not a shareholder
but rather a nominee of the Trust. He failed to disclose that
Annexure "HFM1"
is not a shareholders certificate but a
resolution passed long ago on 17 August 2007.
15.2
The Applicants failed to disclose the
proper shareholding of Magompane and, in particular that the Trust
held 90% of the shares
15.3
The Applicants failed to disclose that
the shares of the late Elias Mohlala were transferred to KW Mohlala
and as such the Second
Applicant had no locus standi.
15.4
The Applicants failed to disclose the
facts concerning Mr Matjie's position and in particular the
circumstances giving rise to his
removal as a director.
[16]
All of these facts were highly material
and the Applicants (and their legal advisors) were under a duty to
disclose them since they
chose to proceed ex parte. The failure to
disclose material facts in an ex parte application constitutes a
basis for setting aside
any order obtained.
[17]
In
Recycling and Economic Development Initiative of South Africa v
Minister of Environmental Affairs 2019 (3) SA 251 (SCA)
the
Court emphasized the longstanding principle of full disclosure in ex
parte applications. The Court stated:
"[45] The principle
of disclosure in ex parte proceedings is clear.
In NDPP v Basson this court said:
"Where an order is sought ex parte it
is well-established that the utmost good faith must be observed. All
material facts must
be disclosed which might influence
a
Court in coming to its decision, and
the withholding, or suppression of material facts, by itself,
entitles
a
Court
to set aside an order, even if the non-disclosure or suppression was
not willful or
ma/a
fide
(Schlesinger v Schlesinger 1979(4) SA 342 (W) at 348E-349B)
[46] The duty of
utmost good faith, in particular the duty of full and fair
disclosure, is imposed because
orders granted without notice to
affected parties are
a
departure
from
a
fundamental
principle of the administration of justice, namely
audi
alteram partem.
The law
sometimes allows
a
departure
from the principle in the interest of justice but in those
exceptional circumstances the ex parte applicant assumes
a
heavy responsibility to neutralize
the prejudice the affected party suffers by his or her absence.
[47] The applicant
must thus be scrupulously fair in presenting her own case. She must
also
speak
for the absent party by disclosing all relevant facts she knows or
reasonably expects the absent party would want placed before
the
court. The applicant must disclose and deal fairly with any defences
of which she
is
aware
or which
she
may
reasonably anticipate. She must disclose all relevant adverse
material that the absent respondent might have put up in opposition
to the order. She must
also
exercise
due care and make such enquiries and conduct such investigations as
are reasonable in the circumstance before seeking ex
parte relief She
may not refrain from disclosing matter asserted by the absent party
because she believes it to be untrue. And
even where the ex parte
applicant
has
endeavoured
in good faith to discharge her duty,
she
will be held to have fallen short if
the court finds that matters regarded
as
irrelevant
was
sufficiently material to require
disclosure. The test
is
objective."
[18]
The duty of good faith extends also to
legal representatives
See:
Recycling and Economics
Development Initiatives (Supra) at para 40; and
Cubitt v Stannic [2000]3 ALL SA
16E at 18g
Abuse
of Ex Parte Proceedings
[19]
The use of ex parte procedure was both
inappropriate and shambolic in this matter. The notice of motion
states that should any of
the respondents oppose the applicant they
were required to inform the applicants' attorneys of such opposition
by 1 June 2020,
after the date of the set down and after the order
had been taken (on 26 May 2020)
Having proceeded ex parte, one would have
expected the applicants to take the necessary steps to inform the
respondents of both
the Court order and the basis upon which it was
obtained. But this did not occur. There was no service of the order
upon the respondents.
The First Respondent only became aware of the
Court order - handed down on 26 May 2020 - on 2 June 2020 when he
received a copy
of the order from the banks. This in my view, is a
strange or bizarre manner of litigation.
[20]
Rule 6 makes provision for both
applications on notice and ex parte applications. However, ex parte
applications are regarded as
exceptional. Where relief is sought
against a respondent ex parte a substantial case must be made out in
order to proceed in such
ashion. The present case is not remotely of
that sort.
[21] It is a
fundamental principle of the administration of justice that relief
should not be granted without
permitting such affected person to be
heard. In the context of an ex parte application, the Court in
South
African Airway SOC v BDFM Publishers (Pty) Limited
2016 (2) SA 561
(GJ)
observed that "the principle of
audi alteram partem
is sacrosanct in the South African Legal System" and that
the "only times that the Court will consider a matter behind
a
litigant's back are in exceptional circumstances"
The Supreme Court of Appeal in
Recycling and
Economic Development Initiative (Supra)
stated:
"[80] It is fundamental
principle of the administration of justice that relief should not be
granted against
a person without allowing such person to be heard.
Very rarely is a case so urgent that there is no time to give notice.
In other
cases, there may be a reasonable and substantiated
apprehension that giving notice would defeat the applicant's
legitimate purpose
in seeking relief, for example because the
respondent would dispose of property or evidence that the applicant
wishes to claim
or have preserved. In cases of this kind a court may
be willing to dispense with the need to give notice but this power
should
be exercised with great caution and only in exceptional
circumstances. The procedure adopted is even more objectionable if
the
applicant’s case rests largely on untested hearsay, which
it was in this case."
[22]
The relief sought and obtained ex parte
in this matter effectively strips the rightful directors of the
companies involved in their
statutory duties to manage the affairs of
the companies. Moreover, it inserts interim directors whose
eligibility does not withstand
scrutiny. One of those so inserted,
was previously dismissed as a director. This order has far-reaching
consequences in the corporate
world. There was inadequate
justification for proceeding ex parte at all. In my view this
constitutes abuse of the ex parte procedure.
Costs
[23]
The Respondents asked for and were
granted an order for the discharge of the rule nisi with costs
awarded on an attorney and client
scale. In my view such a cost order
is justified.
[24]
The Applicants levelled the most serious
allegations of money laundering, fraud and theft on the part of Mr
Pather, the First Respondent
without any admissible evidence
whatsoever. There was simply no factual substratum for the case
advanced. The Applicants were repeatedly
invited in the answering
affidavit to withdraw these unsubstantiated allegations of
criminality failing which a punitive order
of costs would be
requested. Remarkably the Applicants declined this invitation. In the
replying affidavit, however, the allegations
of criminality were
baldly repeated but without any substantiation whatsoever.
In these circumstances a punitive order of
costs is manifestly justified. In my view the ex parte application
brought by the Applicants
has been abusive in multiple respects.
[25]
Our Courts have awarded punitive costs
where a party abuses the process of the Court as in the present case.
See:
Schlesinger v Schlesinger 1979
(4) SA 342 (W) at 354
Van Staden and Others v Pro-Wiz Group (Pty)
Limited
2019 (4) SA 532
(SCA) at paras 15 & 22
Manuel v Economic Freedom Fighters and
Others
2019 (5) SA 210
(GJ) at paras 80 & 84
[26]
In the present case the Applicants have
made reckless and serious allegations against Mr Pather in
particular. None of the allegations
are justified.
Furthermore, in the present case there has been
a reckless disregard for the duty of disclosure in ex parte
proceeding. In addition
the applicants made reckless and
unsubstantiated allegations of criminality and declined to retract
same when invited to do so.
[27]
It is for all the
above reasons that I granted the order discharging the rule nisi on
23 June 2020.
E M MAKGOBA
JUDGE PRESIDENT OF THE
HIGH COURT, LIMPOPO DIVISION,
POLOKWANE
APPEARANCES
Heard
on
: 23 June 2020
Order
Pronounced on
:23 June 2020
Reasons
Furnished on
: 29 June 2020
For the
Applicants
: Adv. TP
Kruger SC
Instructed
by
: Rachidi Inc Attorneys
For the
Respondent 1
st,
4
th
, 5
th
&
12
th
: Adv. K Wilson
Instructed
by
: Maluks Attorneys
c/o Corrie Nel & Kie Attorneys