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[2019] ZAFSHC 165
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Van der Walt and Others v Magistrate of the District Court Hoopstad and Others (2845/2018) [2019] ZAFSHC 165 (13 September 2019)
IN THE HIGH COURT
OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No: 2845/2018
In
the matter between:
SAREL
VAN DER WALT
1
ST
APPLICANT
RIETTE
VAN DER
WALT
2
ND
APPLICANT
ERNIE
VAN DER
WALT
3
RD
APPLICANT
CORNELIUS
COETZEE
4
TH
APPLICANT
And
THE
MAGISTRATE OF THE
1
ST
RESPONDENT
DISTRICT
COURT HOOPSTAD,
HIS
WORSHIP MR. MMUSI
THE
MASTER OF THE HIGH COURT
2
ND
RESPONDENT
BLOEMFONTEIN
CLOETE
MURRAY NO
3
RD
RESPONDENT
(Cited
herein in his capacity as duly
Appointed
provisional trustee in the
Insolvent
estate: Sarel Jacobus
Van
der Walt: B85/2017)
RUWANE
SMITH NO
4
TH
RESPONDENT
(Cited
herein in his capacity as duly
Appointed
provisional trustee in the Insolvent estate:
Sarel
Jacobus
Van der Walt: B85/2017)
CORAM:
MBHELE, J
et
MOENG, AJ
JUDGMENT:
MOENG, AJ
HEARD
ON:
26
AUGUST 2019
DELIVERED
ON:
13
SEPTEMBER 2019
I.
INTRODUCTION
[1]
This is an application in terms of rule 53 of the Uniform Rules of
Court. The applicants seek an order in the following terms:
1.
That
the first respondent’s decision dated 11 May 2018 refusing the
applicants’ legal representative, Mr. FJ Senekal
to appear on
their behalf is reviewed and set aside;
2.
That
the second respondent’s decision dated 20 April 2018
authorising the holding of an enquiry in terms of section 152 of
the
Insolvency Act 24 of 1936 (as amended) is reviewed and set aside;
3.
That
the witness summonses issued by the second respondent pursuant to the
decision sought to be reviewed and set aside in terms
of paragraph 2
is set aside;
4.
The
warrants of arrest issued by the first respondent pursuant to the
decisions in paragraph one and two above is set aside;
5.
Costs
of the application be paid by the 3
rd
and 4
th
respondent jointly and severally, the one to pay and the other to be
absolved, on an attorney and client scale.
[2]
Prior to the filing of this application, the applicants brought an
urgent application to suspend the warrants of arrest issued
by the
first respondent (the magistrate) and the summonses issued by the
second respondent (the Master), pending the finalisation
of this
review. Interim relief suspending the warrants of arrest and
summonses pending the review was subsequently granted on 7
June 2018.
[3]
The magistrate and the Master filed notices to abide whereas the
third and fourth respondents (the trustees) opposed the relief
sought. In compliance with the notice of motion, the Master and the
magistrate provided the applicants with all documents which
had a
bearing on the impugned decisions. These included all records and
documents which the magistrate and the Master were by law
required to
provide.
II.
FACTUAL
BACKGROUND
[4]
A
short outline of the facts is essential to comprehend the issues at
hand. The estate of the first applicant was provisionally
sequestrated on 4 October 2017 and the third and fourth respondents
were appointed as provisional joint trustees in the insolvent
estate.
This order was made final by an order of this Court on 1 November
2018.
[5]
On 9 April 2018, the trustees applied to the Master to conduct an
enquiry in terms of
section 152
of the
Insolvency Act (the
Act) and
permission was granted on 20 April 2018. The Master subsequently
issued summonses to the applicants to appear before the
magistrate on
11 and 28 May 2018.
[6]
On this date, the applicants failed to appear before the magistrate.
They were represented by their attorney, Mr FJ Senekal
(Senekal) in
their absence. Senekal sought to argue that the summonses were
invalid. The third respondent objected to Senekal’s
appearance
at the enquiry. He informed the magistrate that Senekal, at the time
of the first respondent’s sequestration,
was a partner at a law
firm (Matsepes), which represented Kempston Finance (Kempston), one
of the creditors in the insolvent estate.
[7]
The third respondent submitted before the magistrate that, in his
opinion, Senekal will be conflicted to act on behalf of the
insolvent
as his firm acted for Kempston. The magistrate concluded that there
would indeed be a conflict of interest should Senekal
represent the
applicants at the enquiry and he excluded him from the proceedings.
Warrants of arrest were subsequently issued for
all the applicants.
This course of events led to the urgent application and subsequent
review application.
[8]
I propose to first deal with the grounds relating to the Master’s
decision to hold the section 152 enquiry and his/her
decision to
issue the summonses (the Master’s decision). I will then deal
with the magistrate’s decision to exclude
Senekal from the
section 152 proceedings and his decision to authorise warrants of
arrest against the applicants (the magistrate’s
decision).
III.
THE
MASTER’S DECISION
[9]
Counsel for the applicants, Mr Pruis conceded during the hearing that
in as far as the first and second applicants were concerned,
the
Master was justified in authorising the section 152 enquiry. Counsel
likewise conceded that the subpoenas in respect of the
first and
second respondents were properly issued. Counsel however maintained
that there were no grounds which warranted the enquiry
in respect of
the third and fourth applicants.
[10]
I find it difficult to comprehend how the Master could have been
justified in authorising the enquiry in respect of certain
witnesses
and not the others. As will be seen later in this judgment, the
Master was, in my view, justified in authorising the
enquiry and
issuing all the summonses pursuant thereto.
[11]
In this case, a distinction should be drawn between the Master’s
decision to hold the enquiry and his/her decision to
subpoena the
witnesses as reflected in the summonses. This distinction is
reflected in the manner in which the notice of motion
was drafted. In
paragraph two of the notice, the applicants sought the review and
setting aside of the Master’s decision
in authorising the
enquiry in terms of section 152. Separate thereto, in paragraph 3 of
the notice, the applicants sought the setting
aside of the summonses
issued against them. This distinction is also made in the applicants’
heads of argument.
[12]
The decision to authorise the enquiry was premised on a number of
considerations, in addition and other than the information
which was
sought from the applicants. As it is evident from the record of the
proceedings provided by the magistrate, two other
witnesses were
subpoenaed, apart from the applicants. One of the witnesses already
commenced with his testimony.
[13]
Inasmuch as the applicants were required to provide crucial
information in determining the affairs of the insolvent estate,
there
seem to be no sustainable objection to the interrogation of all the
other witnesses, save for the third and fourth applicants.
For
this reason, it is clear that the Master’s decision to
authorise the enquiry was justified in light of the concession
that
was made by counsel for the applicants.
[14]
My understanding of the concession is that, what is challenged is not
the Master’s decision to hold the enquiry, but
his/her decision
to issue the subpoenas against the third and fourth applicants. It is
not the discretion to hold the enquiry that
is in dispute but
the
permissible scope of the enquiry in as far as it relates to the
witnesses that had to be subpoenaed.
The
discretion to hold the enquiry and the decision to issue the
summonses is therefore separate. It is the latter decision that
is in
issue.
[15]
What therefore has to be considered, in relation to the Master’s
decision, is whether there were grounds to issue the
subpoenas
against the third and fourth applicants and not whether the
discretion to authorise the enquiry in itself was properly
exercised.
[16]
Section 152(2) provides that:
‘
If at any time
after the sequestration of the estate of a debtor and before his
rehabilitation, the Master is of the opinion that
the insolvent or
the trustee of that estate or any other person is able to give any
information which the Master considers desirable
to obtain,
concerning the insolvent, or concerning his estate or the
administration of the estate or concerning any claim or demand
made
against the estate, he may by notice in writing delivered to the
insolvent or the trustee or such other person summon him
to appear
before the Master or before a magistrate or an officer in the public
service mentioned in such notice, at the place and
on the date and
hour stated in such notice, and to furnish the Master or other
officer before whom he is summoned to appear with
all the information
within his knowledge concerning the insolvent or concerning the
insolvent's estate or the administration of
the estate.’
[17]
It goes without saying that the Master’s decision to conduct
section 152 enquiries and to subpoena witnesses is reviewable.
Contrary to what counsel for the applicants submitted, I did not
understand Mr Zietsman, counsel for the third and fourth respondents,
having contended that the decision at hand is not reviewable. He
submitted that the Master’s decision is reviewable but that
the
Master properly exercised his/her discretion.
[18]
The purpose of an interrogation is to enquire on all matters relating
to the insolvent, his business or affairs, whether before
or after
the sequestration of his estate. It is trite that the potential scope
of such an enquiry is extremely wide.
[19]
The fundamental question is whether the decision of the Master to
issue the summonses is for a purpose contemplated by the
Act. Once it
is accepted that there was a permissible purpose in causing a witness
to be summoned to an enquiry, the summons would
have been validly
issued.
[20] The approach to be
followed in determining the Master’s powers in issuing
subpoenas is appositely stated in
Mantis
Investment Holdings (Pty) Ltd v Eastern Cape Development Corporation
and Others
2018
(4) SA 439
(SCA)
at
paragraph 6
:
‘
The
very essence of our Bill of Rights is that an individual should
not be subjected to unreasonable intrusions on their liberty
or
the privacy of their person, property or effects. The Master has no
reservoir of power outside the statutory instruments that
authorise
an intrusion upon those rights, and thus no general authority to make
an order that impinges on those rights. A subpoena,
even one at the
hands of the Master, is a significant invasion of the rights of an
individual and must therefore be exercised
within certain
clearly defined limits’.
[21]
As in other cases where discretionary powers are exercised, a Court
will not generally interfere if the person concerned has
acted within
the terms of his authority and has applied his mind to the
proper exercise of his discretion. See
Leech and Others v
Farber NO and Others
2000
(2) SA 444
(W).
Although
it is said that the Master has an
unfettered
discretion
to
authorise
an
enquiry and subpoena witnesses, such discretion may not be exercised
capriciously.
[22]
The Constitutional Court warned courts in
Bernstein
and Others v Bester and Others NNO
[1996] ZACC 2
;
1996
(2) SA 751
(CC) that examinations of the kind conducted at these
enquiries is open to abuse and that the proceedings ought to be
watched carefully.
It was held that
the
judiciary is to ensure that the 'examination is not made an
instrument of oppression, injustice or of needless injury to the
individual’.
[23]
The principles enunciated in
Roering
NO and Another v Mahlangu and Others
2016
(5) SA 455
(SCA)
,
though with reference to section 417 of the Companies Act, are
equally applicable to section 152 enquiries. Wallis JA held as
follows at 464G-H
:
‘
Section
417(1) sets out the permissible scope of the enquiry. Any person who
is known or suspected to have in their possession any
property of the
company, or is believed to be indebted to the company, or any person
deemed capable of giving information concerning
the trade, dealings,
affairs, or property of the company, may be summoned to give evidence
or produce documents’.
[24]
There is no doubt that courts have the power, and indeed the
obligation, to restrain the use of the power to authorise an enquiry
and to summon witnesses where the discretion was not rationally
exercised. The decision to issue the summonses should therefore
be
rationally related to what the Act aims to achieve, that is to
enquire into the affairs of the insolvent.
[25]
The
applicants contended in the founding affidavit that the mere fact
that the third applicant is the son of the first applicant
was not
sufficient to warrant a subpoena being issued against him. They
submit, similarly, that the mere fact that the fourth respondent
is a
member of the SRE Trust, did not justify his subpoena.
[26]
The high water mark of the applicants’ contention, as set out
in the founding affidavit, was that the letter addressed
to the
Master by the third respondent, marked as CM2 dated 2 November 2017,
was not part of the material which was considered by
the Master when
the decision to hold the enquiry was made. They in addition alleged
that the annexures to the letter marked CM3,
addressed to the Master
by Gerrit Coetzee Attorneys, representing one of the creditors,
Cargill RSA (Pty) Ltd, (Cargill) were similarly
not placed before the
Master when the decision was made. They contended that the holding of
the enquiry in the absence of these
documents, was not justified.
[27]
Contrary to these averments, counsel for the applicants conceded
during the hearing that CM2 and the annexures to CM3 were
at the
disposal of the Master when the decision to hold the enquiry was
made. These documents were indeed attached to the record
that was
provided by the Master in compliance with the provisions of rule
53(1) (b).
[28]
The contents of CM2 and the annexures to CM3 were fatal to the
applicants’ case. The fact that the third applicant was
the son
of the first applicant and that the fourth applicant was a trustee of
the SRE Trust should not be viewed in isolation but
in light of all
the documents that were provided to the Master. The Master was
expected to consider all these documents as a whole
to exercise
his/her discretion.
[29]
The fact that the third applicant had intimate knowledge of the
farming operations should be viewed in light of the following
circumstances that were disclosed in CM 2 and the annexures to CM3:
The documents disclosed that some assets belonging to the first
applicant were sold prior to his sequestration and that such sales
may be impeachable. The documents further reflect that Cargill
had a
special and general notarial bond over the first applicant’s
moveable assets. The first applicant, at the time of the
registration
of these bonds, had declared moveable assets totalling more than R69
million but assets worth less than R2 million
were recovered on the
first applicant’s farm after his sequestration. Maize and
sunflower, the proceeds of which had to be
paid to Cargill, was sold
to another institution and the proceeds were not paid over to
Cargill.
[30]
The third applicant allegedly had intimate knowledge of the
activities on the first applicant’s farm and, in the trustees
view, he could provide valuable information regarding the above.
Considering this information in totality and avoiding a piecemeal
consideration of the fact that the third applicant was the first
applicant’s son, I am satisfied that he can provide information
regarding the insolvent’s assets on the farm.
[31]
With regard to the fourth applicant, the documents disclosed that the
insolvent estate held 100% shares in Karis Boerdery (Pty)
Ltd
(Karis). The fourth applicant replaced the first applicant as the
sole director of Karis shortly before his sequestration.
Payments
totalling more than R3, 3 million were made by the first applicant to
Karis shortly before his sequestration. These payments
may be
impeachable. The trustees allege that these payments and additional
‘intergroup’ payments made to Karis, in
their view, had
to be subjected to the enquiry. The fourth applicant was in a
position to provide valuable information regarding
these aspects.
[32]
Having regard to the above, I am satisfied that the Master properly
exercised his/her discretion in issuing the summonses against
the
third and fourth applicants. The third and fourth applicants were in
my view able to give information which the Master considered
desirable concerning the insolvent or concerning the insolvent's
estate or the administration of his estate.
IV.
THE
MAGISTRATE’S DECISION
[33]
Not
only did the applicants take issue with the magistrate’s
decision to exclude Senekal from the enquiry, they also contended
that the trustees did not have
locus
standi
to raise the issue of his purported conflict of interest before the
magistrate.
[34]
Mr Pruis submitted that Kempston should have raised Senekal’s
entitlement so to act at the enquiry and not the trustees.
Counsel
contended that ‘it does not lie in the mouth of a non-client to
raise an objection to a legal representative appearing
based on a
conflict of interest’. It was submitted that the magistrate
ought to have dismissed the objection since it was
not raised by
Kempston.
[35]
I will first deal with the issue regarding the trustees’
locus
standi
in raising the objection to Senekal’s appearance. A trustee
occupies a position of trust, not only towards creditors but
also
towards the insolvent himself. The trustee also
stands
in a fiduciary relationship to the insolvent and to the creditors.
Essentially this entails that he should act honestly and
with good
faith in all his dealings in the course of his administration of the
estate.
See
Merskin’s
Insolvency Law
service issue 50 at 4-27.
There is further a view, though criticised, that the role of a
trustee is akin to that of an officer of court. Compare
Shokkos
v Lampert NO
1963 (3) SA 421 (W) at 426 and
Gilbert
v Bekker and Another
1984 (3) SA 774 (W) at 778–781.
[36]
The
Insolvency Act prescribes
a procedure whereby once a surrender of
an estate is accepted or a person's estate is declared insolvent a
concursus creditorum
is instituted with a trustee who is
invested with the assets of the estate, including the
insolvent's property rights and
obligations. The trustee is under an
obligation to hold and administer the estate and distribute the
proceeds amongst the competing
creditors in the manner and order of
preference laid down in the
Insolvency Act. See
Meskin’s
Insolvency Law
.
[37]
Considering that the trustees acted
concursus
creditorum
and that Kempston was not represented at the enquiry, the third
trustee, in my view, had to raise the issue relating to the possible
conflict of interest. As was stated in
Shokkos
supra
‘
The
trustee is an officer of the Court upon whom the duty devolves of
doing everything necessary for or collateral to the administration
and distribution of the estate of the insolvent'.
[38]
It
would, in my view, have been improper for the trustees not to have
brought this under the magistrate’s attention. It was
then for
the magistrate to decide whether such purported conflict warranted
Senekal’s exclusion from the proceedings. I am
satisfied that
it was not improper for the third trustee to raise the issue relating
to Senekal’s purported conflict of interest.
[39]
It is common cause that Senekal enquired from the legal
representative acting for Kempston whether he had any objection if
he
(Senekal) acted for the applicants. This was done after his exclusion
from the proceedings and in anticipation of the review
proceedings.
Kempston subsequently deposed to an affidavit in which it renounced
any legal privilege and disputed that such conflict
existed. This was
however not the position when the matter served before the
magistrate.
[40]
After the magistrate was informed that
Senekal
was a partner at a law firm which represented one of the creditors in
the insolvent estate
at
the
time of the first applicant’s sequestration, the following
exchange took place between the magistrate and Senekal:
‘
COURT: Were you
aware at the time that Batsepis was involved in this insolvency or
this insolvency matter?
MR SENEKAL: The Kempston
matter?
COURT: Ja the Kempston
matter.
MR SENEKAL: It might have
been discussed. You discuss cases and matters but I have never been
intimately involved, I don’t
even know what the relationship
insofar as the relationship between Mr Van Der Walt and Kempston is.’
[41]
In their answering affidavit, the trustees attached correspondence
between Matsepes, Erasmus De Klerk Inc and Sechaba Trust.
The
correspondence relates to Kempston Finance and SJ Van Der Walt (the
first applicant). The reference to all these letters is
‘NOORDMAN/Senekal’.
[42]
Counsel for the applicants submitted that these letters were
irrelevant as they were not at the magistrates’ disposal
when
the impugned decision to exclude Senekal from the proceedings was
made. I disagree. The magistrate may not have been aware
of these
facts but the letters are in my view relevant in as far as they
indicate Senekal’s knowledge of the relationship
between the
first applicant and Kempston when he appeared before the magistrate.
[43]
It is in this regard important to note that Senekal informed the
magistrate that ‘
I
have never been intimately involved, I don’t even know what the
relationship insofar as the relationship between Mr Van
Der Walt and
Kempston is’.
Senekal
submitted to the magistrate that it is trite law in relation to
conflicts of interest that it will have to be shown that
he has
knowledge in his possession that he can use to the detriment of the
previous client.
[44]
The correspondence suggests that Senekal was one of the references in
the communication with Erasmus De Klerk Inc and Sechaba
Trust. The
letters further indicate what the exact relationship between Van Der
Walt and Kempston was. The heart of the correspondence
relates to
Kempston’s assertion that its assets that were in possession of
Van Der Walt did not form part of the insolvent
estate. The letters
further suggest that the instalment sale agreements between Kempston
and Van Der Walt were cancelled prior
his sequestration.
[45]
Logic dictates that a person referred to as a reference in a letter
should have knowledge of the contents thereof. The objective
facts
therefore indicate that Senekal previously represented one of the
creditors and that he had knowledge of the relationship
between the
first applicant and Kempston. The
de facto
position before the
magistrate was that Senekal represented the first applicant against
whom he previously acted. Kempston, which
was previously his client,
was now his adversary.
[46]
Mr Pruis referred us to the decision in
Wishart
and Others v Blieden NO and Others
2013
(6) SA 59
(KZP) in his heads of argument. This decision is in my view
distinguishable from the facts before us.
In
that case, the applicants were not clients of the legal
representatives and they had not disclosed any confidential
information
to them. There was no possibility that the legal
representatives could use their secrets against them as they were
never their
clients.
[46]
On appeal to the SCA, cited as
Wishart and others v Justice P
Blieden NO and Others
[2014] 4 All SA 334
(SCA), Lewis JA
held that our law affords protection to the former client of a legal
practitioner such that he will be precluded
from acting against a
former client where the practitioner has confidential information
about the former client that may be misused.
[47]
The SCA referred with approval to
Robinson v Van Hulsteyn,
Feltham and Ford
1925 AD 12
at 21 where Wessels JA said
the following:
‘
According
to our law a solicitor is an officer of the Court; the Court
exercises a jurisdiction over him and will see that in the
conduct of
his professional work he displays towards the Court and towards his
clients a very high standard of conduct. In order
to advise a client
as to his legal position the solicitor must know all the
circumstances of his client’s case, and therefore
a client is
often compelled to reveal to his solicitor the most intimate
circumstances of his life. The solicitor may thus become
the
repository of the most vital secrets of the client. These confidences
reposed in him he may not divulge, and if he does the
Court will
punish him for his breach of duty towards his client. If a solicitor
who in the course of advising a client has become
possessed of his
client’s secrets is engaged by another person to act against
his former client, his knowledge of the latter’s
secrets may be
of great advantage to his client’s opponent. Although the
solicitor may conscientiously endeavour to do his
duty to his new
client without revealing the secrets of his old client, yet he may
find himself in an invidious position and his
knowledge of the
secrets of his former client may unconsciously affect him in doing
his duty towards the other. In order to avoid
such a dilemma the
Court will restrain a solicitor in whom confidences have been reposed
by a client from acting against such a
client where it is made clear
to the Court in the words of Cozens-Hardy M R [in
Rakusen
v Munday & Clarke
(1912
1 Ch D 831
, 835)], ‘that real mischief and real prejudice will
in all human probability result if the solicitor is allowed to act’.’
[48] Considering the
objective facts before us, I am satisfied that confidential
information was imparted or received as a result
of the
attorney-client relationship between Kempston and Matsepes. Logic
dictates that the information remains confidential. The
information
is relevant to the matter at hand since it relates to a creditor and
debtor relationship that existed between Kempston
and the first
applicant. All that is required is that there should be a
possibility that he may use such information to the
detriment of his
former client. I am also satisfied that at the time of the enquiry
before the magistrate, the trustees were satisfied
that the interests
of the first applicant were adverse to those of Kempston.
[49]
As
was stated in
Robinson
,
even if the attorney may conscientiously attempt to do his duty to
his new client without revealing the secrets of his old client,
he
may find himself in an impossible position and his knowledge of the
secrets of his former client may unconsciously affect him
in doing
his duty towards the other. In order to avoid such a dilemma the
magistrate correctly restrained Senekal in whom confidences
may have
been entrusted. The magistrate was thus, in my view, justified in
excluding Senekal from the proceedings.
[50]
Although counsel did not concede that the warrants of arrest against
the first and second applicants were valid, a logical
result of the
concession is that the warrants of arrest were validly issued against
them. These warrants were issued pursuant to
the master’s
decision to issue the summonses against them.
[51]
Conversely stated, if accepted that the subpoenas were valid, nothing
prevented the magistrate from issuing the warrants against
the first
and second applicants. Having concluded that the summonses against
the third and fourth applicants were valid, it follows
that the
warrants issued by the magistrate were also lawful. The applicants
did not appear before the magistrate and he was thus
correct in
issuing the warrants.
[52]
I will in the result make the following order:
1.
The
application is dismissed
2.
The first
to fourth applicants are ordered to pay the costs of the application
jointly and severally the one paying the others being
absolved.
_____________________
L.B.J.
MOENG, AJ
I
concur .
_____________________
N.M
MBHELE,
J
On
behalf of the Applicants: Adv. D.A Pruis SC and Adv. A. Sander
Instructed
by: FJ Senekal Inc
Bloemfontein
On
behalf of the third and fourth respondents: Adv. Paul Zietsman SC
Instructed
by: Gerrit Coetzee Attorneys Potchefstroom
c/o
Horn and Van Rensburg
Bloemfontein