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[2018] ZAGPJHC 515
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Naidoo and Another v Hlano Financial Services (Pty) Ltd and Others (29859/2015) [2018] ZAGPJHC 515 (3 September 2018)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 29859/2015
In
the matter between:
Naidoo
Indrani
1
st
Applicant
Hlano
Investments (PTY)
LTD
2
nd
Applicant
and
Hlano Financial
Services (Pty)
LTD
1
st
Respondent
Rakitzis,
Constantine
2
nd
Respondent
Beck, Bradley
Elan
3
rd
Respondent
Companies & Intellectual
Property
4
th
Respondent
Commission
Investec Bank
Limited
5
th
Respondent
Judgment
on first, second and third respondent’s application for
dismissal of the main application on the grounds of no cause
of
action alternatively foreseeable factual disputes.
Van
der Linde, J:
Introduction
[1]
The first applicant (“Naidoo”) was dismissed as an
employee of the first respondent (“HFS”), and challenges
that dismissal in another court. She was also a director and removed
as such but disputes that removal. The second applicant (“HI”)
is the sole member of the first respondent (“HFS”). The
second (“Rakitzis”) and third (“Beck”)
respondents are directors of HFS. The applicants ask that this court
declares Rakitzis a delinquent director in terms of s.162(2)(a)
and
(b)(i), read with s.162(5)(c)(i), (iii), (iv)(aa) and (iv)(bb),
alternatively in terms of s163(1)(a), 163(1)(b) and s.163(2)(f)(ii)
of the Companies Act 71 of 2008 (the “Act”). They also
ask that Surenda Naidoo and Tantaswa Fubu be appointed as directors
of HFS in the place of Rakitzis and Beck in terms of s.163(2)(f)(i)
of the Act.
[2]
The fourth respondent was joined for its official interest, and the
fifth respondent (“Investec”) for its commercial
interest. The latter is a substantial creditor of HFS but, although
represented in the proceedings described below, did not participate
actively in them. The fourth respondent did not appear.
[3]
The applicants ask for the relief indicated above in their notice of
motion. They initially gave notice however that before
this court
they would ask for a referral of the main application to oral
evidence. Investec does not oppose a reference to oral
evidence. The
first three respondents’ position is different; they resist a
referral on the basis that the application should
be dismissed for
foreseeable factual disputes and because, in any event, the
applicants do not in their affidavits establish a
case. They rely on
Valentino Globe BV v Phillips & Ano, 1998(3) SA 775 (SCA) at 779
for the entitlement to adopt this latter
procedure.
[4]
In that case Harms, JA (then) recognised the validity of such a
procedure, pointing to the fact that it was seen as akin to
exception
procedure but of course not identical to it, because evidence was
included, whereas that did not apply in a summons.
Harms, JA
explained the procedure thus (emphasis supplied):
“
Initially the appellant wished
to argue the first point with reference to the allegations contained
in the founding affidavit only
as was done in the court below.
There
are a number of cases which recognise the right of a respondent, in
spite of having filed an answering affidavit, to argue
at the outset
that the founding affidavit does not make out a
prima
facie
case for the relief claimed. They for two
reasons suggest that the procedure is akin to an exception based on
the ground that a
summons or similar initiating process does not
disclose a cause of action: The founding affidavit alone falls to be
considered,
and the averments contained therein must be accepted as
true
. An important difference with an exception is, however, that
the application contains evidence and not only allegations of fact,
and what might be sufficient in a summons may be insufficient in a
founding affidavit (see eg
Hart v Pinetown Drive-in Cinema
(Pty) Ltd
1972 (1) SA 464 (D),
Pearson
v Magrep Investments (Pty) Ltd and others
1975 (1) SA 186 (D),
and latterly,
Hubby’s Investments (Pty) Ltd v Lifetime
Properties (Pty) Ltd
1998 (1) SA 295 (W)
297A–E). The usual object of the procedure is to enable a
respondent to meet an application
for referral to evidence or the
like and relieve the court of considering the conflicting allegations
of fact (cf.
Bader and another v Weston and
another
1967 (1) SA 134(C) 136F–G).”
[5]
The point is, the argument is by definition limited to the
applicants’ papers. Harms, JA went further. The learned judge
said (emphasis supplied):
“
It seems to me to be wrong
to permit the use of this procedure in a court of first instance
where there is no real conflict of fact
on the papers, as is the case
here. But having used the procedure unsuccessfully at that level,
does not mean that an appellant
is entitled to use it again on
appeal. In any event,
it seems to me that the analogy with
the exception procedure may be inappropriate and that the comparison
should rather be with
an application for absolution from the instance
in a trial action.
Having lost an application for
absolution, a defendant cannot thereafter lead evidence and on appeal
argue that absolution should
have been granted at the end of the
plaintiff’s case. A court of appeal no doubt will consider all
the evidence on record.
Likewise, having lost an exception, it can
hardly be reargued after completion of the trial.”
[6]
The relevance of these remarks for present purposes is that whether
the applicants make out a case ought to be considered on
all of their
evidence, meaning all of their affidavits, as if after the close of
their case as plaintiffs in a trial action. As
it happens, counsel
for the first three respondents accepted the challenge on those
terms.
[7]
Pursuant to the parties’ opposing positions, the Deputy Judge
President, after hearing them in chambers, issued directions
for the
further conduct of the case. These included the exchange of further
affidavits and of witness statements, and that the
matter would be
heard during the period Wednesday 29 August 2018 to Friday 7
September 2018.
[8]
Further, it was envisaged that the argument of the first to third
respondents would be raised at the commencement of the hearing;
if
the argument was upheld, that would be the end of the matter. If the
argument was dismissed, the hearing of oral evidence would
proceed
forthwith, the implication being that there was no scope for further
resistance to such a referral.
[9]
Matters took a different turn. When the case was called on Wednesday
morning 29 August 2018, I was informed by Mr Eloff, SC
for Naidoo
that the first to third respondents had filed further witness
statements which came to his knowledge only on Sunday
evening 26
August 2018. He was consequently not ready to proceed to deal with
the matter and would, save for the two issues to
which next I refer,
ask that the main application be postponed. Mr Mundell, SC appearing
for HI made common cause with that position.
[10]The
two issues were the first to third respondent’s argument that
the application should be dismissed and, if that argument
was
dismissed, Naidoo would apply for a separation and prior adjudication
of an issue that can be decided on the papers; and argument
would –
if the separation was granted - be presented on that issue.
[11]None
of the parties, including Mr Van Nieuwenhuizen, SC who appeared with
Mr Heher for the first to third respondent, and Mr
Fine, SC who
appeared with Messrs Antonie, SC and Iles for Investec, had objection
to me hearing the first to third respondents
first, and the course to
be followed after judgment will have been given on their application,
to be reserved for determination
thereafter. That is the basis on
which the matter commenced on Wednesday morning until after lunch on
Thursday 30 August 2018,
when I reserved judgment until Monday 3
September 2018 at 10h00. This then is that judgment.
Application
by first to third respondents: introduction
[12]In
the main application the parties filed sets of affidavits beyond the
normal three sets envisaged by the rules. Some of these
were filed
late, and condonation would in the ordinary course be required before
they were admitted into the court record. After
some initial
uncertainty, it was agreed that I could proceed to hear the first
three respondents’ application on the basis
of all the
affidavits that had been filed by the applicants. As indicated, this
agreement fits the notion that the first three
respondents’
application is akin to an application for absolution from the
instance at the close of a plaintiff’s case
in a trial action.
[13]This
concession by the first three respondents, fairly made, impacts
really only the cause of action point, because foreseeable
factual
disputes raised in the applicants’ subsequent affidavits after
their first (founding) sets would have come too late
for motion
proceedings not to have been engaged upon in the first place. I
therefore start with the foreseeable factual disputes
point.
Foreseeable
factual disputes
[14]
The fact that logically only the initial founding affidavits must
count against the applicants in considering whether they
should
initially have engaged rouw actie procedure rather than motion
procedure, does not, as I see it, have as it logical corollary
that
the applicants’ subsequent affidavits must be wholly ignored
when considering whether – assuming foreseeable factual
disputes – the main application should now be dismissed.
[15]This
is so because it would be sacrificing substance at the altar of form
to ignore – in the context of the present debate
- the
resources and time, including the DJP’s directive, that have
since been invested in the matter. That is relevant, I
believe,
because this court must make an order now that is relevant now. I
return to this issue below.
[16]
A further consideration that is here relevant, is that these
applicants have not set out first to attempt to persuade the court
that relief should be granted on the affidavits. They have accepted
final relief does not avail on the affidavits. This consideration
is
relevant, because it seems to me that notionally only two purposes
could conceivably be served by sweeping aside now the judicial
material that has since been created and requiring of the parties to
start afresh.
[17]The
first is that the applicants should be punished for not adhering to
the strictures of the rules. This was not put to Mr
Van Nieuwenhuizen
but knowing him, I suspect he would have eschewed any reliance on
such a proposition. The second purpose is prejudice
- prejudice
suffered by the first three respondents in having had to answer a
case that has been unpleaded from the get-go and
has since Topsy-like
grown exponentially as the affidavits have grown.
[18]
This is a more serious consideration. In civil proceedings in our
accusatorial system of litigation courts have power only
to decide
issues that are properly placed before them by the parties; and
parties are only able properly to place matters before
courts when
the issues will have been defined, and proper discovery in regard
thereto will have occurred.
[19]
Is this object achieved by dismissing the applicants’ case and
sending them back to the drawing board? I do not believe
so. The
parties have invested substantially in setting out their respective
versions on affidavit and witness statement, and this
investment
should be harvested rather than debunked. And it seems to me this can
be achieved when the court hearing the application
for referral is
addressed on the identification of the issues that will be referred
for determination.
[20]With
these introductory remarks out of the way, one can now turn to the
specifics of the submissions put up by the parties.
[21]
The first three respondents did not in their attack distinguish
between the foreseeable disputes issue and the no cause of
action
issue, but it will be necessary to do so here. Their argument began
by taking the court through the heads of argument prepared
on their
behalf on 28 September 2017, from paragraph 11 onwards. The first
section of those heads, up to paragraph 28, deals with
Naidoo’s
alleged lack of locus standi, and the next section, up to paragraph
34, with HI’s alleged lack of locust standi.
Paragraphs 35 to
44 deal with the submission that no case is made out for the relief
sought by HI.
[22]Section
G, consisting of paragraphs 45 to 58, deal with the request for a
referral. In three paragraphs there are submissions
that the
application should be dismissed for foreseeable factual disputes: 45;
48; and 51. Those paragraphs are in general terms
and do not identify
any specific factual assertion by the applicants in respect of which
it is said that a bona fide and real dispute
of fact was foreseeable.
[23]The
first three respondents then dealt with their heads of argument dated
June 2018. Those heads of argument do however not
deal with the
applicants’ original founding affidavits and, as I have pointed
out, there is no logical scope to submit that
because the applicants’
subsequent affidavits raise foreseeable factual disputes, the
original application should not have
been issued: by then, the fact
that the original application will have been issued was a fait
accompli.
[24]The
first three respondents then moved to their supplementary heads of
argument dated August 2018. Those heads attack the second
applicant’s
replying affidavit for having been filed out of time, and for
containing new matter in reply. The first point,
the lateness, was
not persisted in. I return to the issue of the new matter, but would
point out en passant that if an application
is en route to oral
evidence for determination of defined issues, the rule in motion
proceedings that an applicant should make
out it case in its founding
affidavit and not in reply, loses its applicability, because the
witnesses will be called respectively
to support the applicants’
cause or destroy it, as the case may be. This third set of
heads of argument on behalf of
the first three respondents do not
however, address the point about dismissal for foreseeable factual
disputes at all.
[25]In
the course of oral submissions counsel was asked to specify the
points they were relying on. Two points were indicated: that
it was
foreseen that the non-production of annual financial statements had
an exculpatory version, and that the nature of the allegations
against the second and third respondents was such that they would
obviously be disputed.
[26]
It seems to me the answer must be, that it is one thing to anticipate
that a response of sorts will be put up, but quite another
to
anticipate that real, bona fide disputes of fact will be put up.
After all, as Cameron, JA (then) said in Fakie NO v CCII Systems
(Pty) Ltd,
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA) (footnotes omitted):
“
[55]
That conflicting affidavits are not a suitable means for determining
disputes of fact has been doctrine in this court for more
than 80
years. Yet motion proceedings are quicker and cheaper than trial
proceedings and, in the interests of justice, courts have
been at
pains not to permit unvirtuous respondents to shelter behind patently
implausible affidavit versions or bald denials. More
than 60 years
ago, this Court determined that a Judge should not allow a respondent
to raise 'fictitious' disputes of fact to delay
the hearing of the
matter or to deny the applicant its order. There had to be 'a bona
fide dispute of fact on a material
matter'. This means that an
uncreditworthy denial, or a palpably implausible version, can be
rejected out of hand, without
recourse to oral evidence.
In Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd,
this Court extended the ambit of uncreditworthy
denials. They now
encompassed not merely those that fail to raise a real, genuine
or bona fide dispute of fact but also allegations
or denials
that are so far-fetched or clearly untenable that the Court is
justified in rejecting them merely on the papers.
[56]
Practice in this regard has become considerably more robust, and
rightly so. If it were otherwise, most of the busy motion
courts in
the country might cease functioning. But the limits remain, and
however robust a court may be inclined to be, a respondent's
version
can be rejected in motion proceedings only if it is 'fictitious' or
so far-fetched and clearly untenable that it can confidently
be said,
on the papers alone, that it is demonstrably and clearly unworthy of
credence.”
[27]
I refer to this case to make the point that a litigant is generally
well-advised to commence litigation by means of motion
proceedings,
precisely because courts have become more robust in looking through
put-up versions in answering affidavits. So, it
is not a
straight-forward endeavour to predict in advance whether the version
that will come with the answering papers will be
capable of being
rejected on paper.
[28]I
accept that there are cases where a litigant must clearly see that a
version will come that can only ever be decided on viva
voce
evidence, but where a case is concerned, as is this one, not with
uncomplicated facts but with nuanced facts, the call is
far more
difficult to make.
[29]
Accordingly, taking into account the point made at the outset of this
section about resource investment, the point about the
lack of
specificity of the first three respondents’ attack, and now the
point about the difficult call to be made in cases
such as this, I do
not believe that it is interests of the administration of justice to
dismiss the application for foreseeable
factual disputes.
No
cause of action
[30]
The first three respondents’ submissions were again set out in
the three sets of heads of argument to which I have referred.
Two
initial remarks are necessary. The first is that this part of their
argument conceded that the issue concerning the annual
financial
statements could potentially found a cause for the relief claimed.
The second is that it was accepted, rightly so, that
if the
application is not dismissed for foreseeable factual disputes, then
all the substantive affidavits of the applicants must
be considered.
[31]
The applicants’ initial notice of motion was for relief only in
terms of s.163 of the Act, that being for relief from
oppressive
conduct, known as s.252 relief under the previous Act, Act 61 of
1973. The amended notice of motion now includes, in
the first place,
relief under s.162 of the Act, that being for delinquency relief,
obtainable under s.219 of the old Act.
[32]Naidoo
deposed to her founding affidavit in her capacity as director of HFS
on 21 August 2015. On 17 September 2015 she deposed
to a
supplementary founding affidavit. In it she says that pursuant to her
application, HFS represented by Rakitzis purported to
dismiss her as
employee and contended that her directorship was terminated because
she was an ex officio director. She does not
accept the legal
validity of this conduct. On 9 September 2016 she deposed to a
replying affidavit. It runs to 193 pages without
annexures, and joins
issue with the respondents’ answering affidavits.
[33]
In her founding affidavit her case for the relief claimed is, in
broad outline, that Rakitzis and Beck served on HFS’s
board in
a manner that unduly preferred the interests of Investec; that
Rakitzis and Beck were remunerated directly by Investec
at an unknown
number, and debited to HFS; that Rakitzis was wont to bullying,
intemperate, vitriolic attacks on her, shutting down
her ability as
an independent director to serve the interests of HFS; that Rakitzis
and Beck procured the appointment of Matusson
& Associates to
assume daily managerial control of HFS, without board approval; that
this appointment stripped Naidoo of her
executive functions as
employee and executive director; that Rakitzis claimed at a board
meeting that Investec could dismiss the
whole board and replace it
with directors of its choosing; that Rakitzis forced the resignation
of Meiring as director at Investec’s
behest; that Rakitzis
claimed that Investec had perfected its security cession and pledge
of the issued shares in HFS and had thus
become its sole shareholder;
that there were substantive examples of lack of proper corporate
governance; that there were substantive
examples of mismanagement;
and that there were substantive examples of victimization.
[34]The
supplementary founding affidavit mentions also a case of alteration
of board minutes, and the replying affidavit is, as
I have indicated,
comprehensive.
[35]It
bears stating what to lawyers may be self-evident: that this court is
not concerned at this stage with the merits of these
assertions, and
in fact not even with their truth or otherwise. It is only concerned
with whether they make out a prima facie case
for the relief claimed.
[36]I
hope I do their helpful argument no disservice if I say that in the
course of the first three respondents’ submissions,
there was a
recurring tendency to assess the applicants’ factual
allegations in the light of the explanations given for them
by the
respondents. That approach then formed the plank for the conclusion
that it would serve no purpose referring the application,
certainly
not all of it, for the hearing of oral evidence.
[37]
Examples of this approach are the contentions that Naidoo had no
locus standi; that HI had no locus standi; that HFS’s
answering
affidavit explains that HI seeks to circumvent the effect of the
cession of shares in favour of Investec; that Rakitzis
explains in
his answering affidavit that he was aware of his fiduciary duties and
discharged them properly; that HFS’s answering
affidavit
Govender sets the facts right concerning the financial position of
HFS; that – in the context of the alleged victimization
–
Rakitzis explains in his answering affidavit that in fact he found
himself in direct opposition to Investec at times; and
that –
in the context of the Nimble agreement – Rakitzis reinforces
the difference between “balance” and
“value”
by setting out the legal opinion HFS obtained as to the complexities
of the legal enforceability of the ROU
Housing Loan portfolio against
government.
[38]As
has been pointed out, it is impermissible to take into account the
respondents’ version if what one is attacking is
whether the
applicants’ assertions make out a case. It is precisely because
the respondents’ version potentially disables
the applicants’
case that the applicants are now applying for the matter to be
referred to oral evidence for the truth to
out.
[39]Relief
under s.162 and s.163 are of the most complex civil cases that come
to our courts. This is because hardnosed commercial
calls are often
judged from a slightly removed, perhaps anodyne perspective. All
factors are taken into account and weighed before
what is often a
value judgment is made. It is not possible at this juncture to call
out the applicants’ case as being without
substance.
Conclusion
[40]
It follows that the first three respondents’ application must
fail. I make the following order:
(a) The application by the first,
second and third respondents for the dismissal of the applicants’
application for foreseeable
factual disputes, alternatively for
failure to make out a prima facie case, is dismissed.
(b) The first, second and third
respondents are to pay the costs of the application jointly and
severally.
WHG van der Linde
Judge, High Court
Johannesburg
Date
argued: 29, 30 August, 2018
Date
judgment: 3 September, 2018
For
the 1
st
applicant: Adv. CM Eloff, SC
For
the 2
nd
applicant: Adv. ARG Mundell, SC
Instructed
by:
Meiring
and Partners
1st
and 2nd Applicant’s Attorneys
48
Grosnor Road,Turnberry Office Park
1st
Floor, Platinum Place
Brynston
Tel
087 945 0660
Email
: map@mapgroup.co.za
Ref:
Ms L.C O’Flaherty(1st applicant) (J.Meiring 2nd applicant)
For
the 1st to 3rd respondents: Adv. S Van Nieuwenhuizen, SC
Adv.
JM Heher
Instructed
by:
Dale
Friedland Attorneys
57,
11th Road
Kew
Johannesburg
2090
Tel:
072 638 8108
Email:dale@dfa-attorneys.com
Ref:
Dale Friedland
For
the 5th respondent: Adv. DM Fine, SC
Adv.
MM Antonie, SC
Adv.
DK Iles
Instructed
by:
Werksman
Attorneys
11th
Floor,The Central
96
Rivonia Road, Sandton
2196
Tel:
011 535 8439
Fax:
011 535 8639
jstockwell@werksmans.com
Ref:
J Stockwell/Ai/INVE7601.1249