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[2018] ZAGPJHC 683
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Transnet Second Defined Benefit Fund v Regiments Fund Managers (Pty) Limited and Others (29652/2017) [2018] ZAGPJHC 683 (18 December 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
(COMMERCIAL
COURT)
CASE
NO: 29652/2017
In
the matter between
:
Transnet
Second Defined Benefit
Fund Applicant
and
Regiments
Fund Managers (Pty)
Limited 1
st
Respondent
Regiments
Capital (Pty)
Limited 2
nd
Respondent
Regiments
Securities
Limited 3
rd
Respondent
Magandheran
Niven
Pillay 4
th
Respondent
Litha
Mveliso
Nyhonyha 5
th
Respondent
Coral
Lagoon Investments 194 (Pty)
Limited 6
th
Respondent
Ash
Brook Investments 15 (Pty)
Limited 7
th
Respondent
Ergold
Property No 8
CC 8
th
Respondent
Marcytouch
(Pty)
Limited 9
th
Respondent
Legae
Securities (Pty)
Limited 10
th
Respondent
Capitec
Bank Holdings
Limited 11
th
Respondent
Kgoro
Consortium (Pty)
Limited 12
th
Respondent
Cedar
Park Properties 39 (Pty)
Limited 13
th
Respondent
K2017377463
(South Africa) (Pty)
Limited 14
th
Respondent
Registrar
of Deeds:
Pretoria 15
th
Respondent
J
U D G M E N T
Van
der Linde, J
:
Introduction
[1]
There are required for decision applications for discovery, for
contempt of court, and for substituted security. The hearing
commenced on Wednesday 5 December 2018 when the bulk of the discovery
application was argued, and then continued on Monday 11 December
2018
when the remaining aspects of the discovery applications, and the
other two applications, were argued.
[2]
These interlocutory applications are but further battles in a greater
war between the applicant as plaintiff and thirteen defendants.
The plaintiff instituted action against the defendants in 2017 for
claims in excess of R230 million based on various causes of
action
arising from a contractual relationship between the plaintiff and
some of the defendants in terms of which the latter managed
the
plaintiff benefit fund. On the plaintiff’s case the
management was in fact a mismanagement. I will refer to the
parties,
mostly, by their designations in the pending action, and will
indicate later which of the defendants are joined as respondents
in
these proceedings.
[3]
The history of the relevant earlier interlocutory proceedings between
the parties is set out in the affidavits. This includes
an
interim security application before Adams, J in March 2018; an
anti-dissipation application in April 2018 before Tsoka, J who
gave
an order on 20 July 2018 restraining the principal defendants from
dissipating their assets; and an urgent
ex parte
application
by the plaintiff for Anton Piller relief on 17 August 2018 before
Keightley, J who gave an order with immediate effect
but in the form
of a rule
nisi
returnable to an ultimately extended date in
February 2019. There also currently pends an urgent full court appeal
ostensibly in
terms of
s.18(4)
of the
Superior Courts Act 10 of 2013
against a part of the order that Tsoka, J made on 23 August 2018 when
he granted the principal defendants leave to appeal his restraint
order of 20 July 2018.
The
discovery application: the parties’ positions
[4]
The first application to be discussed is that brought by the 1
st
,
2
nd
, 3
rd
, and 4
th
respondents (1
st
,
2
nd
, 3
rd
and 10
th
defendants in the
action) (“
the defendants
”) to enforce their
Rule
35(14)
notice dated 11 September 2018. That notice requires the
plaintiff in terms of
Rule 35(14)
“
to make available for the
purposes of pleading
” a list of nine categories of
documents. The first prayer in the defendants’ application is a
prayer for relief in
terms of
Rule 35(13)
, meaning an order that the
provisions of Rule 35 of the Uniform Rules of Court relating to
discovery should apply, with the necessary
changes, to the pending
Anton Piller application.
[5]
If discovery in terms of Rule 35(13) for purposes of the Anton Piller
application were ordered now, the effect will be akin
to early
discovery in the pending action, given the potential overlap of
issues. Essentially therefore it is an application brought
by the
defendants to compel discovery by the plaintiff both for purposes of
the pending Anton Piller application, and for purposes
of pleading in
the pending trial action. Self-evidently the defendants have
not yet pleaded in the pending action. In fact,
they have excepted to
the plaintiff’s particulars of claim, and that exception is
pending.
[6]
The plaintiff’s primary attitude to the defendants’
application was that no relief can be granted on it since the
defendants are in contempt of the restraint order granted by Tsoka, J
on 20 July 2018. As indicated, that order restrains
the
defendants from disposing of their assets pending the action so that,
were the plaintiff successful in the action, it would
obtain
satisfaction of its judgment debt.
[7]
The plaintiff also opposed the discovery application on the basis
that it is premature for the defendants’ failure first
to have
obtained the prior permission of the court to invoke Rule 35(14) in
an application before serving a notice. The permission
referred is
said to flow from Rule 35(13), in terms of which the provisions of
Rule 35 relating to discovery generally apply to
applications, but
only “
in so far as the court may direct
”.
[8]
Here reliance is placed on the judgment of Sutherland, J in
Investec
Bank Ltd v Blumenthal, NO and others,
[2012] JOL 28596
(GSJ)
paras 5 to 7, in which, following two judgments by Southwood, J in
the now Gauteng Division, Pretoria, he held: “
There is
therefore no room for applications to be brought at the same time
under Rule 35(13) for leave to procure discovery, and
to compel a
reply to a Rule 35(14) request.”
[9]
The plaintiff submitted further that in any event no proper case is
made out under either Rule 35(13) or (14). As to the
plaintiff’s defence on the merits to the discovery application,
the plaintiff contended: that the documents are not necessary
for the
purposes of pleading; the Rule 35(14) notice lacks the required
specificity; and finally, no case has been made out for
the
provisions of Rule 35(14) to apply in application proceedings.
[10]
The essence therefore of the opposing positions in the present matter
is first, that the defendants’ asserted contempt
of the Tsoka,
J order persists and therefore precludes them from obtaining any
relief; second, whether Rule 35(13) should in principle
be made
applicable to the Anton Piller application; and third, whether the
documents specified in the Rule 35(14) notice ought
to be compelled
despite their asserted lack of specificity.
The
discovery application: defendants’ submissions
[11]
In argument before the court, Adv Morison, SC who appeared with
Messrs Horn and Scott for the applicant defendants, addressed
the
following issues: First, the plaintiff’s argument that
since the defendants are in contempt of the order of Tsoka,
J they
ought not to be afforded any relief; next, the prematurity point
raised by the plaintiff, that unless a court will first
have given a
direction under Rule 35(13), a notice under Rule 35(14) is
incompetent; third, the plaintiff’s argument that
the documents
sought by the defendants are not necessary for the defendants to
plead; fourth, the plaintiff’s attack on the
specificity of the
documents listed in the notice in terms of Rule 35(14); and finally
the question of the discretion of the court
under Rule 35(13) to
permit the application of Rule 35(14) to the Anton Piller
proceedings.
[12]
Mr Morison submitted that the asserted contempt is in any event not
an absolute bar; he referred to
Di Bona v Di Bona and Another
[1993] 3 All SA 624
(C) in which Rose-Innes, JP said that the rule
that a person in contempt of court will not be heard is not absolute.
It applied
only to the case where the person in contempt brings a
voluntary application in which that person asks for relief from the
court;
but not to a case where the person in contempt is seeking to
be heard in defence of a cause brought against that person.
[13]
By parity of reasoning, Mr Morison submitted that in this matter it
is – in substance - the defendants who are seeking
to oppose
the substantive Anton Piller relief sought by the plaintiff against
them; and this discovery application is a step, necessary
at that, in
the legitimate process of defending themselves. Mr Morrison submitted
that it followed that the defendants’ striking
out application
was good (to strike out the contempt of court defence) and should
therefore succeed under Rule 6(14), in terms
of which a court may on
application order to be struck out from any affidavit any matter
which is scandalous, vexatious or irrelevant.
[14]
As to the sequence of events leading to the plaintiff taking the
contempt of court point, Mr Morison explained that there was
an
initial application by the plaintiff for contempt of court; that was
withdrawn on the 19
th
November 2018 after the defendants
had given notice under Rule 30 that the application was incompetent
because it sought unilaterally
to set the matter down before Tsoka,
J. However, two days before the application was withdrawn, on
17
th
November 2018, the plaintiff re-launched the contempt
of court application and that is the application which has been set
down
for hearing on Monday 10 December 2018.
[15]
With reference to the full court judgment in the Gauteng Division,
Pretoria on 18 August 2017 under Case Number 80978/2016
in the matter
of
The Minister of Finance v Oakbay Investments (Pty) Limited and
Others
, Mr Morison submitted that the irrelevant matter should be
struck out because otherwise they threaten to derail the merits of
the
proceedings. That applies, according to the submission,
squarely in this matter.
[16]
At that step in the process I raised with Mr Morison whether it would
not be appropriate to consolidate under Rule 10 the current
discovery
application – given the contempt of court defence raised by the
plaintiff – and the substantive contempt
application, and its
counterapplication, set down for Monday 10 December 2018. Both
parties agreed that that would be an
appropriate course, and so I
made an order on 5 December 2018, in the course of the hearing,
consolidating the two applications.
This consolidation includes the
interlocutory strike out application by the defendants in the
discovery application and the defendants’
counter-application
for substituted security in the substantive contempt of court
application.
[17]
Mr Morison then addressed the specificity point. He did so with
reference to their heads of argument in reply at page
6 paragraph 7.
He also, from the Bar, limited the Rule 35(13) relief sought in
prayer 1 of the notice of motion, to the documents
listed in the Rule
35(14) notice; thus he eschewed general discovery relief.
[18]
As to the history of the matter, he explained that the crux of the
plaintiff’s claim in the pending action against the
defendants
is for damages resulting from a payment which the plaintiff had made
- at the instance of the Regiments defendants
- of about R229 million
to an adviser not of the plaintiff but of Transnet SOC Limited.
But, explained Mr Morison, the interest
rate swap transactions
between the plaintiff and Transnet SOC Limited is being implemented
and in terms of its implementation,
Transnet SOC Limited is currently
paying to the plaintiff not only the interest rate differential in
respect of which the plaintiff
sought protection in the interest rate
swap transaction with Transnet SOC Limited, but also the fee which
the plaintiff had paid
to Transnet SOC Limited’s adviser.
In the end-result, Transnet SOC Limited will have paid the full fee
to the plaintiff,
and the plaintiff will not have suffered any loss.
[19]
Mr Morison submitted that the documents specified in the Rule 35(14)
notice will reveal the cogency of this fee agreement defence,
namely
that the payment of the fee is, by agreement with the plaintiff,
occurring and therefore the plaintiff has, in fact and
in law,
suffered no loss. The argument is that the documents called for are
not to show the
facta probantia,
but indeed the
facta
probanda
, and in fact they constitute the “
material
facts upon which he relies
” for the purposes of Rule
22(2). Mr Morison emphasized in this regard that it has
throughout this litigation been known
to the plaintiff the
defendant’s defence is that there is no loss because the
plaintiff agreed with Transnet SOC Limited
that the latter will pay
to the former the R229 million disbursed by the former in respect of
advice and advisory services relating
to the interest rate swap
transactions.
[20]
As to whether the identified documents may be called for under Rule
35(14), the defendants submitted that the documents were
“
necessary
”
to enable the defendants to plead. Mr Morison pointed out that
although, strictly speaking, the defendants were able
simply to
assert that agreement, the annotations on the documents will prove
that the intention of Transnet SOC Limited in paying
the
differentials to the plaintiff was not only in discharge of its own
obligations under the Interest Rate Swap Agreement, but
also in order
to repay the advisory fee.
[21]
He referred the court to page 230 of the discovery application, read
with page 231, where the annotation “
structuring and
arranging fee – 20 basis points
” appears, as an
example of the annotation to which he refers. This supports the
payment defence and proves, he submitted,
that the repayment of the
fee by Transnet SOC Limited to the plaintiff is occurring.
Other examples appear at page 245, 259
and 273. He handed up a
document headed “
20 Basis Point Payment
” which
lists five instances in the answering affidavit in the Anton Piller
application in which the defendants explained
that the quote for the
interest rate swap transactions included a spread of 20 basis points
added to the fixed rate payable by
Transnet SOC Limited to the
plaintiff over the life of the swaps.
[22]
As to the prematurity point raised by the plaintiff the defendants,
although accepting the obligation to show the existence
of
“
exceptional circumstances
” before a court acting
under Rule 35(13) will direct discovery in application proceedings,
submitted that this has been shown.
Mr Morison pointed to paragraphs
6.8.1 through 6.8.9 of the defendants’ heads of argument in
reply. Included within
those nine points is the submission that
the payment defence raised by the defendants was not disclosed by the
plaintiff in its
founding papers when it launched the Anton Piller
proceedings.
[23]
All that was disclosed there was in paragraph 21 of the founding
affidavit (page 29) of the Anton Piller application where
the
following is said:
“
The respondents
do not dispute that Regiments Fund Managers removed these amounts
from the fund bank account over which it had signing
powers pursuant
to the portfolio management agreements. Their version is that
the amounts were legitimately appropriated
to pay the fees of
Transnet’s transaction advisers in relation to four tranches of
interest rate swap transactions that Regiments
Fund Managers
purported on behalf of the fund to conclude with Transnet to hedge
the floating interest risk assumed by Transnet
in respect of a series
of loans described as ‘the club loan’.
”
Also,
at page 54 paragraph 62 the deponent said that:
“
Rather than
attempting to put words into the mouths of the respondents, I have
been advised to draw the attention of this court
to the defences and
versions advanced by the respondents in the restraint application,
the respondents’ application for leave
to appeal against the
(restraint order) judgment of Tsoka, J …, and the respondents’
suspension application. (Under
section 18(3).
”
[24]
Finally, Mr Morison referred to the judgment of Binsward, J in
Matthias International Limited and another v Baillache and others,
2015 (2) SA 357
(WCC) at paragraph [45]. Concerning the
“
exceptional circumstances
” that would be required
for the exercise by the court of a discretion under Rule 35(13), Mr
Morison referred also to the
judgment of Plasket, AJ (as he then was)
in
Premier Freight (Pty) Limited v Breathetex Corporation (Pty)
Limited
2003 (6) SA 190
(SE) at paragraphs [13] to [22]. He
stressed that, as in that matter, in this matter the claim is for a
substantial amount
of money.
The
discovery application: plaintiff’s submissions
[25]
Mr Chaskalson, SC, who appeared with Mr Luthuli for the plaintiff,
began by dealing with the striking out application and the
question
of contempt of court. He submitted that the striking out application
was an abuse. The discovery application was launched
on the 20
th
October 2018 and set down for the 23
rd
October 2018, long
before any application for contempt of court was brought by the
plaintiff. The discovery application was
then again set down
for the 30
th
October 2018.
[26]
There was, so submitted counsel, a clear attempt to have the
discovery application heard before the contempt of court
application.
The submission was that the court has a discretion
whether or not to non-suit an applicant for relief who is in contempt
of court.
There is, in any event, no necessity for the contempt
of court application first to have been decided before an innocent
party
is entitled to raise the contempt of court of an applicant for
relief, as a defence to such relief. It follows, so submitted
counsel,
that the strike out application is fatal and irrespective of
what happens on the plaintiff’s application for contempt of
court, that strike out application must be dismissed with costs.
[27]
Before dealing with the defences to the merits of the defendants’
discovery application, counsel dealt with three preliminary
points:
The first, that the plaintiff allegedly withheld documents from the
court in the Anton Piller application; the second,
the swap
transactions and the question of the fee being repaid; and the third,
the point that the discovery application is a mere
interlocutory
application to enable the defendants properly to oppose the Anton
Piller application.
[28]
As to the first point, counsel submitted that the plaintiff did not
put up the documents in the Anton Piller founding papers,
because
they were not relevant. They were attached to the plaintiff’s
earlier amendment of May 2018; the judgment of
Tsoka, J was only
handed down on 20 July 2018, so that there was ample time for the
defendants to place these documents –
had they so wished –
before that court.
[29]
As to the swap transactions and the fee payment defence, counsel
pointed out that the first two swap transactions were between
the
plaintiff and Nedbank and not between the plaintiff and Transnet SOC
Limited. Only the third and the fourth swap transactions
were
between the plaintiff and Transnet SOC Limited. As regards the
first two swap transactions, Nedbank pays the plaintiff
a fixed
interest rate, and the plaintiff pays Nedbank the variably interest
rate, both on the nominal amount. There is no contract
between the
plaintiff and Transnet SOC Limited on these.
[30]
The plaintiff has indeed ratified the Nedbank swaps. But as
regards the third and fourth swap transactions, these were
not
ratified; they were renegotiated between the plaintiff and Transnet
SOC Limited. There is now a written agreement with
different
terms, including obligations on Transnet SOC Limited, as well as,
importantly, a provision whereby “
Party A and Party B shall
each bear its own costs and expenses associated with the negotiation,
conclusion and implementation of
confirmation A, confirmation B1,
confirmation B2, confirmation B3, the agreement, the credit support
annex and any other transaction
document and any related
arrangements, including all legal fees and any advisory fees,
commissions or the like
”. The point was that Transnet
SOC Limited assumed responsibility for its own advisory fees.
[31]
On the third preliminary point, that is the interlocutory nature of
the discovery application, counsel submitted that the reach
of the
Anton Piller order was very narrow. He referred to the Anton
Piller papers at page 881 paragraphs 2.1 to 2.7 and further.
The point about referring those paragraphs was to stress the
protection built in for the defendants in relation to the documents
obtained upon the execution of the Anton Piller order. The object of
the Anton Piller application was thus to preserve, not observe,
evidence. There is therefore no prospect of any harm being suffered
by the defendants, according to the argument. That being
so, no
“
exceptional circumstances
” as would be required
to invoke Rule 35(13) in these proceedings, have been shown to exist.
[32]
Further, counsel submitted with reference to the Anton Piller
founding papers at page 54 paragraph 61 and following, as well
as the
restraint application at page 594 and following (which form part of
the Anton Piller papers), that the entire defence of
the defendants
was there set out. There can therefore be no issue about
non-disclosure on the part of the plaintiff. This
applies also
to the application for leave to appeal which forms part of the Anton
Piller papers.
[33]
Counsel then turned to deal with the argument concerning Rule
35(14). He submitted that the judgment in
Sanlam Limited v
Group 5 Limited
[2018] ZAGPJHC54 was bound by precedent to have
followed
Cullinan Holdings Limited v Mamelodi Stadsraad
1992
(1) SA 645
(T) at 647F unless it could be concluded that the earlier
judgment was clearly wrong – which the court in
Sanlam
did not set out to do.
[34]
But in any event, on the submission the request for discovery in
terms of Rule 35(14) is outside of the scope of that rule
for two
reasons: First, the notice in terms of Rule 35(14) was filed at
a time when there was as yet no obligation at all
on the part of the
defendants to plead; and, in any event, such an obligation may never
arise because of the pending exceptions
that the plaintiff’s
particulars of claim are said to disclose “
no cause of
action
”.
[35]
Further, the submission was that the documents were not “
necessary
”
to enable the defendants to plead. There were principally two
issues in the trial action: The first was whether the
amount of R229
million was authorised to be dispersed out of the plaintiff’s
bank account and, second, whether it was being
repaid by Transnet SOC
Limited to the plaintiff. But, submitted counsel, the
defendants have in the affidavits fully pleaded
their cases on both
these defences.
[36]
As concerns the authority defence: This was pleaded in great detail
as appears from the Anton Piller papers page 453 paragraph
30 (re the
authority defence); page 455 para 39, and also page 459 para 52
and 53, so far as concerns the defence that a
new contract was
entered into or that ratification has occurred.
[37]
So far as concerns the payment defence, it is alleged by the
defendants that payments have occurred by means of the collateral
security through Nedbank and also by means of repayment by Transnet
SOC Limited to the plaintiff. This has been pleaded at
page 457
paragraphs 47, 48 and 50. The defendants are therefore fully
able to formulate their pleading.
[38]
So far as concerns the collateral payment defence, this appears in
the restraint application page 607 paragraph 9.2, page 608
paragraph
10.4, page 610 paragraph 11, and paragraphs 12.1 to 12.13. Counsel
referred to page 1414 of the restraint application,
explaining that
the schedule reflects accounting between Nedbank and the plaintiff in
respect of the interest rate swap transaction
between them. Page 1414
reflects the fixed rate payable by Nedbank, and page 1415 reflects
the variable interest rate payable by
the plaintiff.
[39]
Counsel pointed to the supplementary affidavit by the plaintiff’s
attorney Mr Kanyane dated 19 October 2018, in which
Mr Kanyane
explains that the sum of 20 basis points of the notional amounts used
in calculating each Nedbank swap payment made
to the plaintiff up to
31 August 2018 comes to R46 986 668-39. Compared to that, the
payments that are to be made to the
plaintiff by Transnet SOC Limited
in connection with the swap transactions between the plaintiff and
Transnet SOC Limited up to
31 August 2018, comes to R50 722 656.90.
It followed, went the submission, that it is fanciful to suggest that
the defendants
still need the documents sought in Rule 35(14) to
enable them to plead either to the pending action or to the Anton
Piller application.
The plaintiff’s position is that the
payments by Transnet SOC Limited to the plaintiff therefore cannot
include repayment
of the R229 million which was dispersed from the
plaintiff’s account.
[40]
Counsel submitted that in the current application the defendants in
fact do not say why they need more information or documents.
The
closest they come is at page 379 paragraph 22.3.2(f) where they
criticised the use of the word by Mr Kanyane of “
notional
”,
which they say “
conceals and underplays the true extent to
which the fund is being paid and thus suffering no loss
”.
But, submitted counsel, the word “
notional
” comes
from the contents of the swap transactions themselves, and not from
Mr Kanyane. The same nomenclature is used
at page 243 of the
discovery application.
[41]
Counsel therefore submitted that there was no dispute that amounts
were being paid by Transnet SOC Limited to the plaintiff,
so
documents cannot be “
necessary”
to plead that
defence. The defendants really want the documents so that they
can use it in the Anton Piller application to
enable them to argue
non-disclosure on the part of the plaintiff.
[42]
On this note the application was postponed to Monday 10 December 2018
at 10h00 to receive the end section of Mr Chaskalson’s
submissions on the discovery application and thereafter for the
hearing to be continued in respect of the contempt application
by the
plaintiff and the counter-application for substituted security by the
defendants.
[43]
On Monday 10 December 2018, concerning the discovery application, Mr
Chaskalson referred further to the plaintiff’s heads
of
argument in the contempt application at page 41 paragraph 67, where
there is reliance on the founding English case of
Hadkinson v
Hadkinson
[1952] 2 All ER 567
(which has repeatedly been followed
in our courts as appears from the footnote 65 at page 41 of the
plaintiff’s heads of
argument in the contempt application), the
essential
dictum
of which is the following:
“
The second is
that no application to the court by such a person will be entertained
until he has purged himself of his contempt.
”
[44]
Concerning the attack on the lack of specificity in the defendants’
application for relief under Rule 35(14), Mr Chaskalson
relied on
Cullinan,
the judgment by Van Dijkhorst, J at page 247, where
the learned Judge stressed the specificity requirement in Rule 35(14)
which
is different from the description of documents required to be
disclosed under Rule 35(12). In Rule 35(14) the target is “
a
clearly specified document
”, whereas under Rule 35(12) the
target is “
any document
” to which “
reference
is made
”. Mr Chaskalson submitted that if this test
were applied, then all that remains available for disclosure of the
documents
listed in items 1 and 3 of the defendants’ Rule
35(14) notice but not the remainder.
The
contempt of court application: background
[45]
Dealing now with the contempt application, the relief sought is to
declare the 1
st
to 5
th
respondents (“
the
defendants”
) in contempt of court in respect of both the
Tsoka, J order; to declare the 2
nd
respondent/defendant in
contempt of the order of Adams, J; and to interdict the defendants
from concluding certain transactions
in breach of the restraint order
granted by Tsoka, J. The order of Adams, J directed the
defendants to put up certain security
pending the judgment of Tsoka,
J. In other words, when the Tsoka, J judgment was given on 20
July 2018 the Adams, J order
lapsed. In the contempt
application there is a counterapplication by the defendants to vary
the order of Tsoka, J by substituting
for the restraint a pledge of
shares.
[46]
The essential timeline necessary to appreciate the issues arising in
this application is the following. The plaintiff sued
the defendants
in August 2017. In February 2018 the plaintiff applied to interdict
the defendants from dissipating their assets
and to oblige them to
disclose assets. The parties agreed that the defendants would
furnish security pending finalisation
of the restraint application
but they could not agree the form and amount of such security.
[47]
They went to Adams, J in an interim hearing to fix the amount and
form of the security. It is this “
interim security
hearing
” which led to the order of Adams, J on 15 March
2018 directing the 2
nd
defendant, being Regiments Capital
(Pty) Limited, to furnish security to the plaintiff in the amount of
R430 million by placing
Capitec shares to the value of R430 million
in escrow. I will return to this aspect more fully below, but
it is the plaintiff’s
case that the 2
nd
defendant
never complied with the order of Adams, J.
[48]
What the 2
nd
defendant did instead was to place in escrow
shares in a company called Ash Brook Investments 15 (Pty) Limited
(who is not sued
in the action, but is the 7
th
respondent
here), a private company that held the entire issued share capital of
the 6
th
respondent, Coral Lagoon Investments 194 (Pty)
Limited (also not sued in the action), which in turn held Capitec
shares.
It is the plaintiff’s case that this form of
security was expressly debated before Adams, J, considered by him,
and expressly
rejected by him. This then founds the alleged
contempt of the order of Adams, J.
[49]
The restraint application was argued before Tsoka, J on 17 April 2018
and on 20 July 2018 he granted the plaintiff’s
application. In
terms of the restraint order by Tsoka, J the defendants were
interdicted from in any way diluting any of their
assets except in
the ordinary course of business. And, apart from orders aimed
at giving effect to this principal restraint,
each of the Regiments
defendants were to furnish an affidavit within 15 days (by 13 August
2018) providing details of all assets
held directly and indirectly by
them.
[50]
This order was not complied with and instead the Regiments defendants
applied for leave to appeal that order and also brought
an urgent
application declaring that the operation of the order of Tsoka, J was
suspended as contemplated in
section 18(1)
of the
Superior Courts Act
10 of 2013
, alternatively that the order was suspended as
contemplated in
section 18(3)
of that Act, since “
exceptional
circumstances”
as there envisaged, prevailed. That
(“suspension”) application was set down for 13 August
2018, but was struck from
the roll for want of urgency by Keightley,
J. That was not the end of the suspension application, because
there appears to
be some debate between the parties as to whether
Tsoka, J, when he granted leave to the defendants to appeal his
restraint order,
also considered aspects of this urgent suspension
application.
[51]
On 17 August 2018 the plaintiff launched urgent contempt proceedings.
On 23 August 2018 Tsoka, J granted the Regiments defendants
leave to
appeal, and expressly stated that the restraint order was to continue
to operate pending the appeal. There is a difference
between the
parties as to whether Tsoka, J in so doing made an order in terms of
s.18
; or whether he was simply clarifying that his order was in fact
interlocutory as envisaged in
s.18(2).
The plaintiff argues that it
was the latter, and that the defendants’ application in terms
of
s.18
(“the suspension application”) did not, as a
fact, serve before Tsoka, J. That application was initially struck
off
the roll for lack of urgency, and then – at the hearing of
the application for leave to appeal before Tsoka, J – the
defendants resisted the incorporation of the suspension application
in those proceedings.
[52]
Either way, on 31 August 2018 the defendants noted an automatic
appeal ostensibly under
s.18(4)
against that part of the order of
Tsoka, J of 23 August 2018 which directed that the restraint order
was to continue to operate
pending the appeal. In the meantime the
plaintiff’s contempt of court application was met by the
Regiments defendants serving
a
Rule 30
notice, on the basis that the
plaintiff’s notice of application conveyed that the application
would be heard by Tsoka, J.
[53]
From 21 September 2018 to 7 November 2018 the parties were locked in
settlement negotiations relating to the restraint order,
but these
came to nought. The plaintiff withdrew its contempt of court
application to which the defendants objected, and
on 12 November 2018
launched the current contempt of court application which now cited
other parties as well, having regard to
information that came to
light in the period 21 September 2018 to 7 November 2018.
[54]
The current contempt of court application included fresh dissipation
assertions, and these found the interdictory relief now
claimed. They
include: that the Regiments defendants were negotiating, in breach of
the restraint order of Tsoka, J, a transaction
known as the Kgoro
property transaction in which Regiments Capital (the second
defendant) was indirectly interested, which development
was sold for
R1.2 billion. There was also a restructure of the indirect
Capitec holding of Regiments Capital worth approximately
R1 billion,
to render that interest more liquid.
[55]
Further, the Regiments defendants disclosed what is called the
Tropical Trade transaction, which the plaintiff asserted had
been
negotiated in breach of the restraint. The plaintiff argued that the
Tropical Trade transaction evidences clear dissipatory
conduct in
conflict with the order of Tsoka, J. What it entails is the
following. The Regiments defendants explained
that Coral Lagoon
has an option to buy further Capitec shares, until 15 December 2018,
with Capitec’s consent. Capitec
was not prepared to give
the consent. The option particulars are as follows. The
strike price per share is approximately
R440. The current
trading price of the share is R1100. The option pertains to 240 000
shares. The purchase price of
240 000 shares at the option
price is R105 600 000 whereas the aggregate of the list price is R264
000 000, meaning that the value
of the option is R158 400 000.00.
[56]
Therefore there is an upside in exercising the option of R158 400
000, but R105 600 000 would have to be found to pay the option
price.
The option has been sold for R25 000 000, in effect meaning that
asset value of R158 400 000.00 was sold for R25 million.
[57]
The plaintiff challenged the exposition of the Tropical Trade
transaction as set out by the Regiments defendants. In fact,
said the
plaintiff, the actual transaction is that Coral Lagoon sells 240 000
Capitec shares with an aggregate market value of
R264 million for
R130 600 000 to Tropic Paradise Trading 527 (Pty) Limited.
Therefore this sale is substantially below value
and, said the
plaintiff’s deponent, it appears to be an attempt to shift
value from the Regiments defendants to Tropical
Paradise.
[58]
Despite a detailed setting out in the plaintiff’s replying
affidavit of the loss in value to Coral Lagoon of R133 400
000
resulting from the sale of the option, in the Regiments defendants’
replying affidavit in the counter-application for
substituted
security, this exposition was not challenged. It was the case of the
plaintiff that this illustrated clear breach of
the order of Tsoka, J
and contempt of court.
The
contempt of court application: the plaintiff’s submissions
[59]
The plaintiff’s case for contempt of court in respect of the
orders of Adams, J and Tsoka, J was as follows. As
regards the
order of Adams, J, the proposition is that Regiments Capital (the 2
nd
defendant/respondent) was directed to place Capitec shares in escrow
but did not do so. Importantly, submitted Mr Chaskalson,
although the initial defence by Regiments Capital was that it could
not place Capitec shares in escrow since it did not own them
- Coral
Lagoon did - hours after Tsoka, J handed down his order in the
application for leave to appeal on 23 August 2018, the Regiments
defendants conveyed that it was possible that they “
could
negotiate that Capitec shares were placed in escrow
”. The
plaintiff’s contention was that this
volte face
by the
Regiments defendants has never been explained.
[60]
The order of Tsoka, J has already been referred to above. The
argument for the plaintiff was that that order was not complied
with
(the first order): in that the Regiments defendants have
disposed of their interest in the Kgoro development; in that
they
have negotiated a restructure of their billion rand interest in
Capitec shares; and in that they have concluded the Tropical
Trade
transaction whereby an option worth some R158 million was sold for
R25 million. It was submitted that the third transaction
(Tropical Trade) was certainly dissipatory; and although the first
and second transactions may not have been dissipatory, the Regiments
defendants have in any event failed to comply with the sixth order
which obliged them to furnish on affidavit within 15 days details
of
all assets held by them directly or indirectly.
[61]
So far as concerns the contravention aspect of the case for contempt
of court. The plaintiff’s submissions concerning
the
legal aspects follow below. But the plaintiff also submitted
that in August 2018 it transpired that the Regiments companies,
and
Messrs Pillay and Wood in particular, have been involved in a
wide-ranging money-laundering scheme to divert public funds from
state-owned enterprises and public sector pension funds to entities
associated with the Gupta family, and to launder these funds
through
the bank accounts of the Regiments companies. Those submissions
essentially come down to the proposition that the
Regiments
defendants are plainly exposed to massive claims from organs of
state, public sector pension funds, and SARS; and that
being so, it
is essential that the restraint order issued by Tsoka, J should be
enforced to its full extent because otherwise the
plaintiff as
concurrent creditor for its damages claim could conceivably be left
without any recompense in respect of its loss.
[62]
Concerning the legal principles applicable to contempt of court, the
plaintiff referred to judgments in the Constitutional
Court that have
affirmed what is by now the iconic judgment in point of
Fakie NO v
CCII Systems (Pty) Limited
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA) at paragraph
[42]
. The substance of the submissions here was that for contempt
proceedings all that an applicant need show was that an order was
granted against the respondent; that the respondent had knowledge of
the order; and that the respondent either disobeyed it or,
in fact,
simply neglected to comply with it. Then wilfulness and mala
fides are inferred. And wilfulness includes
dolus
eventualis.
[63]
Once this has occurred, there shifts to the respondent not an
onus
but an evidential burden in relation to wilfulness and
mala
fides
. A respondent wishing to discharge that evidential
burden should advance evidence that establishes a reasonable doubt as
to whether or not the non-compliance was wilful and
mala fide
.
If such evidence is advanced, then the applicant will have failed to
prove beyond a reasonable doubt that the respondent
disobeyed the
court order wilfully and with
mala fides.
If such evidence is
not advanced, then contempt of court will have been established
beyond a reasonable doubt.
[64]
Importantly however, the standard of proof beyond a reasonable doubt
applies only should the applicant press for committal
for criminal
contempt of court. If lesser relief is sought, such as a
declaratory order and other appropriate remedies, these
remain
available by proof on a balance of probability. Here reliance
was generally placed on
Meadow Glen Homeowners Association v
Tshwane Metropolitan Municipality
,
2015 (2) SA 413
(SCA) at para
[16].
[65]
It was argued by Mr Chaskalson that the order of Tsoka, J was clearly
one as envisaged in
section 18(2)
of the
Superior Courts Act, since
it was an interlocutory order not having the effect of a final
judgment, and therefore it was not automatically suspended pending
the application for leave or an appeal. Here the argument was
that anti-dissipation orders were by definition only interlocutory
and not having the effect of a final judgment, because it was, on the
authority of
Atkin v Botes
2011 (6) SA 231
(SCA), open to the
court that granted the anti-dissipation order to reconsider the
order, and that court would be entitled to vary
or even rescind the
order, if this was in the interests of justice having regard to the
practical experience of implementing the
order. On that basis it was
held in
Atkin
that such an order made in interdict proceedings
cannot be said to have final effect.
[66]
It was submitted that in fact the Regiments defendants implicitly
acknowledge that the Tsoka, J order was subject to variation
since
this underlied their very counter-application to vary the restraint
order by them putting up substituted security.
[67]
The plaintiff argued also for so-called “
constructive
contempt of court
” which applies where a party takes action
which is calculated to render a hearing at first instance incapable
of meaningfully
granting the relief claimed. Here, contending
that the Regiments defendants were guilty of constructive contempt,
Mr Chaskalson
relied on the irreversible disposal of the Kgoro
development, the freeing up of the investment in the Capitec shares,
and the value
dissipation in the Tropical Trade transaction.
[68]
The plaintiff relied squarely on the asserted
mala fides
of
the Regiments defendants. Here the argument was that the
Regiments defendants applied in their suspension application
under
section 18
of the
Superior Courts Act for
an order declaring that the
restraint order had automatically been suspended by the lodging of
their application for leave to appeal
(which would apply if
section
18(1)
applied meaning that it was a final order); but –
importantly - in the alternative they applied conditionally for an
order
in terms of
section 18(3)
of the Act suspending the operation
of the restraint order, thereby implying that they appreciated that
the Tsoka, J order was
an interlocutory order not having final
effect.
[69]
The argument was that by definition this illustrated
dolus
eventualis
; in other words it illustrated that the Regiments
defendants appreciated the possibility that, in law, the order of
Tsoka, J was
not suspended and therefore they were obliged to act in
accordance with the restraint of 20 July 2018, but patently they had
failed
to do so. Mr Chaskalson also relied on an exchange which
occurred during the application for leave to appeal hearing between
him
and Mr Morison, SC for the Regiments defendants, but I am not
persuaded that this exchange is admissible.
[70]
The plaintiff relied also on the failure of the Regiments defendants
to take the court into their confidence concerning the
Kgoro
development, even in the present application; and also on the
submission that they, despite a specific invitation,
disclosed no
facts relating to any steps they took in March 2018 in order to
implement the order of Adams J. The plaintiff
relied also on
the Tropical Trade transaction to which I have already referred.
[71]
The consequence of these facts concerning contempt of court,
according to Mr Chaskalson, was that there is a complete defence
to
the discovery application referred to at the outset of this judgment;
and equally a complete defence to the application by the
Regiments
defendants to substitute Capitec shares in pledge as security for the
restraint – albeit that as pledgee of the
Capitec shares, the
plaintiff would be a secured creditor to the extent of the value of
the shares.
[72]
So far as concerns the counter-application, the plaintiff argued that
the security tendered is inadequate; the plaintiff would
require the
pledge of 750 191 Capitec shares to provide it with adequate security
for its claims.
The
contempt of court application: the defendants’ submissions
[73]
The 1
st
to 9
th
, 12
th
and 13
th
respondents in the application for contempt joined in opposing the
application. Of those respondents, the 6
th
, 7
th
,
8
th
, 9
th
, 10
th
, 11
th
,
12
th
, 13
th
, 14
th
and 15
th
respondents are not joined as defendants in the action. The 5
th
respondent, Mr Nyhonyha, is the 11
th
defendant in the
action and he was separately represented before me by Messrs
Wasserman, SC and Ayayee.
[74]
The overarching submissions of the other respondents (to whom I shall
continue to refer as “
the defendants
”) was that
the plaintiff refused to accept adequate alternative security and was
baselessly inflating the sum of security
required to an extent that
bears no relation to its claim. They submitted too that the
Regiments defendants have tried to
restructure the ownership of the
Capitec shares so that they might directly own them and therefore
pledge them, rather than through
their interests in Ash Brook which
owns the shares in Coral Lagoon, which in turn owns the Capitec
shares.
[75]
They contended also that if the court does not intervene this will
result in the liquidation of the Regiments defendants in
circumstances where the plaintiff has not yet proved its claim and
where the plaintiff is, in any event, being repaid the capital
amount
of R229 million which forms the subject-matter of the bulk of its
claim.
[76]
As to the principles applicable to contempt of court proceedings they
relied on the judgment of the Constitutional Court in
Matjhabeng
Local Municipality v Eskom Holdings Limited; Mkhonto v Compensation
Solutions (Pty) Limited
2018 (1) SA 1
(CC), which affirmed that
contempt of court will only be found where there was an unlawful and
intentional disobedience of a court
order. They emphasized
that, as was held in
Fakie
, a “
genuine disregard is
not enough, since the non-complier may genuinely, albeit it
mistakenly, believes him or herself entitled to
act in the way
claimed to constitute the contempt. In such a case, good faith avoids
the infraction. Even a refusal to comply
that is objectively
unreasonable may be bona fide …
”. Their
submissions concerning the standard of proof echoed that of
plaintiff, being that proof beyond a reasonable
doubt is required for
committal whereas for other relief in disobedience of court orders,
the civil standard of proof is sufficient.
[77]
As to the order of Adams, J, the argument was that the 2
nd
respondent could not comply with the order because it did not own
Capitec shares; it submitted that the plaintiff was aware that
the
2
nd
respondent could not comply with the Adams, J order,
and instituted a flawed urgent application to declare the 2
nd
defendant in contempt of court, this was dismissed by Mudau, J. The
defendants also pointed out that they applied to vary the Adams,
J
order and their affidavit said that that application would be handed
up from the Bar at this hearing; regrettably this never
occurred.
[78]
In the Regiments defendants’ answering affidavit in the
restraint application, Mr Nyhonyha, now the 5
th
respondent, explained on behalf of the Regiments defendants that the
2
nd
defendant owned only 62% of the shares in Ash Brook
which in turn owned 100% of the shares in Coral Lagoon which in turn
owned
1 354 435 shares in Capitec Bank Holdings Limited, at a total
value of R1.2 billion. The deponent explained that the value
of
Ash Brook’s Investment in Coral Lagoon is therefore at face
value 62% of R1.2 billion being R730 million. The argument
was that
it would therefore be sufficient if the Ash Brook shares were placed
in escrow.
[79]
That answering affidavit served as the defendants’ answer in
the interim security application; it was followed by the
plaintiff’s
replying affidavit in which the plaintiff explained why it considered
that the offer which the Regiments defendants
had made in relation to
the Ash Brook shares was unacceptable.
[80]
As regards the restraint order of Tsoka, J the Regiments defendants
argued that this order is final in effect as envisaged
in
section
18(1)
of the
Superior Courts Act; that
the order remained suspended
despite Tsoka, J ordering on 23 August 2018 that it will be operative
immediately, because
section 18(4)(iv)
of the Act provides that the
Tsoka, J order will automatically be suspended pending the outcome of
an appeal against an order putting
into operation and execution a
final judgment and order under exceptional circumstances, as
envisaged in
section 18(1)
of the Act. The Regiments defendants
pointed to their appeal on 31 August 2018 against the immediate
operation of the enforcement
order by Tsoka, J in his judgment of 23
August 2018.
[81]
The Regiments defendants tackled an important difference between the
plaintiff and the Regiments defendants: this is
whether Tsoka,
J when he made his order on 23 August 2018 found the existence of
exceptional circumstances under
section 18(1)
of the Act (the
Regiments defendants’ argument); or whether Tsoka, J was simply
providing clarity in respect of his order
of 20 July 2018, implying
that it was an interlocutory order not having the effect of a final
judgment, as envisaged in
section 18(2)
of the Act (the plaintiff’s
argument).
[82]
Whichever argument holds, the effect of the order of 23 August 2018
is of course that the order of 20 July 2018 remained in
operation and
subject to execution, and therefore not suspended. In answer to the
argument that Tsoka, J was simply providing clarity,
the Regiments
defendants attack this as tautology, which would run into the trite
presumption against tautology.
[83]
Substantively, the Regiments defendants argued that the
anti-dissipation order is final in effect because paragraphs 1 and
2
irreversibly invade their privacy and freedom to conduct their
economic lives. The Regiments defendants submitted that the plaintiff
has not made out a case for the final interdictory relief they seek.
They submitted also that the plaintiff failed in showing
that it did
not have an alternative remedy, because the Regiments defendants have
offered appropriate alternative security, this
being the
subject-matter of the counter-application.
[84]
The Regiments defendants explained that they are currently engaged in
negotiations to restructure the Capitec shares so that
one-third of
the Capitec shares held by Coral Lagoon would have no restriction
against disposal (as currently exists in respect
of all of the shares
held by Coral Lagoon); and the other two-thirds would be repurchased
by Capitec Holdings. They submitted
that the net effect of this
would be that Coral Lagoon would be able to transfer the 451 478
Capitec shares that it will be retaining,
up into its holding
company, Ash Brook, proportionate to the shareholding of the
shareholders in Ash Brook. This would have
the effect that the
shareholders of Ash Brook will be holding unencumbered Capitec
shares. Since one of the shareholders
in Ash Brook is the 2
nd
defendant, the 2
nd
defendant would therefore hold those
Capitec shares direct, and would be able to place them in escrow.
[85]
As to the counter-application, the Regiments defendants submitted
that they were not seeking to vary the Tsoka, J order; they
were
entitled to substitute the restraint order, as of right, with
appropriate security. They relied on two bases:
the first
is the alleged concession by the plaintiff; and the second, that as a
matter of law they were and should be entitled
to substitute the
security with adequate alternative security. In this latter
regard they submitted that whether or not the
security that they
offered in substitution was adequate, must be determined with
reference to the nature and purpose of the order
that was being
substituted by security; the security need not go beyond that.
[86]
In their supplementary heads of argument the Regiments defendants
submitted that the plaintiff has not shown
mala fides
for
purposes of contempt of proceedings since the Regiments defendants
were acting on legal advice. Here they relied amongst others
on
Maccsand CC v Macassar Land Claims Committee and others,
2005
(2) All SA 469
(SCA) at paragraphs [26], [27].
[87]
As to the adequacy of the security offered, the Regiments defendants,
adopting the position of the plaintiff’s expert,
Mr Winter, and
especially at page 1231, submitted that it was more than adequate.
That page contains in table form M Winter’s
summary and
recommendations; in it he projects the value of the Capitec
shares into the future over variously a six month
period, a one year
period, a two year period, a three year period and a four year
period. Over the six month period 750 191
Capitec shares at the
current trading price of R1 100 per share reflected a downside of
52.62% to the plaintiff for it to be collateralised.
[88]
This projection is based on an increasing expected return on the
Capitec shares, it provides for standard deviations of returns,
and
it discounts for liquidity. Mr Winter therefore opined, based
on his six months’ anticipated realisation (so instructed),
that 430 000 Capitec shares would not be adequate collateral, but 750
191 Capitec shares would be adequate collateral. Mr Morison
submitted
that a more realistic period for when the security would potentially
be required to be realised, would be two years;
then there would be
no downside but in fact an upside to the plaintiff of 14.95% to the
Capitec shares being collateralised.
[89]
The submissions by Mr Wasserman for the 5
th
respondent
(11
th
defendant in the action) were limited to the case
for contempt. He submitted that in effect the plaintiff is
claiming R1.5
billion as security as is evidenced by the plaintiff’s
letter of 25 August 2018, paragraph 3.7. As concerns the Adams,
J order he submitted that it has come and gone and has historical
value only, to be dealt with in accordance with the usual law
of
criminal procedure, and there was no need for it to be revisited in
these proceedings.
[90]
As to the
section 18(4)
appeal he submitted that there was a viable
argument that will be considered by the full court in the pending
appeal, and it would
be inappropriate for this court now to engage
upon that debate. And, regarding
mala fides
, he submitted that
this cannot be inferred because the client was simply acting on legal
advice.
Discussion
Background
[91]
The urgent circumstances under which these applications were heard,
and under which a judgment and order are required to be
delivered,
compel a judgment that will have been more comprehensive had more
time been available.
[92]
The departure point is that the plaintiff is a defined benefit fund
who holds funds earmarked for payment to members of the
fund.
These members are individuals who did not acquire their membership as
a high-risk commercial speculation, but to the
contrary acquired
their membership as a conservative long term investment in their
retirement, as Tsoka, J observed. As a general
proposition the
plaintiff has, in these circumstances, a legal duty to ensure that
the funds are safeguarded and responsibly protected
and invested.
[93]
The next proposition that informs a consideration of the present
matter is that it is selfevidently not possible to decide
whether the
plaintiff’s claims against the defendants in the pending action
are good. Given their complexity, being
related as they are to
the recovery of a sizeable fee related to interest rate swap
transactions, particularly given the defence
of payment included
within the interest rate differential payments by Transnet SOC Ltd,
it is challenging to decide on affidavit
whether the defendants’
defence of payment is spurious as the plaintiff would have it, or
self-evidently dispositive of the
plaintiff’s claims, as the
defendants would have it.
[94]
At this stage of the litigation what has engaged my colleagues Adams,
J and Tsoka, J has been the appropriateness and, if so,
the extent of
security that ought to be provided for the event that the plaintiff
is successful in preferring its claim against
the defendants. In that
exercise no discount is allowed for the eventuality that the
plaintiff’s claim is bad. The alleged
breach of those orders,
and the offer of security in substitution of what has already been
ordered, together with the discovery
application, are what come
before this court. The point is, and this becomes pertinent later,
the orders of Tsoka, J are pivotal
to what has to be decided here.
[95]
Ultimately, when the contentious opposing positions in these many
papers are considered, the essential questions are, as I
see it,
whether: the judgement and order of Adams, J was clear; whether
there is a credible argument to be made that Tsoka,
J issued a
restraint (and disclosure) order that qualifies as a (final) decision
under
section 18(1)
or whether that argument is deliberately
opportunistic; whether the discovery relief should be granted at this
stage; whether substituted
security should be ordered as an
alternative and, if so, in what number of Capitec shares; and,
finally and inevitably, the question
of costs. I address these topics
below.
Contempt
of court: the test
[96]
The offence of contempt of court and its scrupulous enforcement by
the courts is indispensable for our rights order. Without
it, respect
for the administration of justice through our courts and for the rule
of law will not hold. The application for contempt
of court is a
unique phenomenon in our law, combining as it does the elements of
criminal conduct with a civil enforcement process.
And it is
primarily left to civil litigating parties to
enforce
it, although criminal prosecution is not precluded. The applicant for
relief, being a party in whose favour an order was
made, not the
prosecuting authority, brings the cause before the court, usually by
way of application procedure.
[97]
The criminal element of the offence, that which potentially carries
committal, must be proved on the usual criminal law standard,
that is
beyond a reasonable doubt, but then in a civil court. But if less
coercive relief is claimed, like a declaratur and other
appropriate
remedies, these remain available on proof on a balance of
probabilities.
[98]
The elements of the offence are a court order, the respondent's
knowledge of it, breach of the order by the respondent, and
wilfulness and
mala fides
. The parties in this matter were
agreed about the way the onus works in contempt proceedings and, with
respect, I agree. But it
is necessary to say something more about the
requirement of wilfulness and
mala fides.
[99]
As I see it, what is required for criminal contempt of court is
disdain for the court’s order, and not mere obduracy
in the
bona fide
belief that it is justified. This element is put as
follows by the Supreme Court of Appeal in
Fakie
(emphasis
supplied, footnotes omitted):
“
9. The test for when
disobedience of a civil order constitutes contempt has come to be
stated as whether the breach was committed
‘
deliberately
and mala fide
’. A deliberate disregard is not
enough,
since the non-complier may genuinely, albeit
mistakenly, believe him- or herself
entitled to
act in the way claimed to constitute the contempt
. In such
a case good faith avoids the infraction. Even a refusal to comply
that is objectively unreasonable may be bona fide (though
unreasonableness could evidence lack of good faith).
10. These requirements – that
the refusal to obey should be both wilful and mala fide, and that
unreasonable non-compliance,
provided it is bona fide, does not
constitute contempt – accord with the broader definition of the
crime, of which non-compliance
with civil orders is a manifestation.
They show that the offence is committed not by mere disregard of a
court order, but by
the deliberate and intentional violation of
the court’s dignity, repute or
authority
that this
evinces. Honest belief that non-compliance is justified or proper is
incompatible with that intent.”
Contempt
of court: the order of Adams, J
[100]
It is necessary now to look more closely at the judgment and order of
Adams, J. It records that the 2
nd
defendant had tendered
interim security in the form of 879 Ash Brook Investments 15 (Pty)
Limited shares to be placed and kept
in escrow with its attorney
pending the outcome of the main application before Tsoka, J.
The judgment expressly records that
the 2
nd
defendant owns
62.13% of the shares in Ash Brook, which owns all of the shares in
Coral Lagoon, which in turn owns approximately
1.3 million shares in
Capitec Bank Holdings Limited. It records further that
according to the plaintiff, the 2
nd
defendant’s
indirect share in Capitec as of the end of February 2018 was worth
R730 million. It also records that the
plaintiff argued for a
pledge of cash or of the underlying Capitec shares.
[101]
Having expressly recorded and considered these submissions, Adams,
J: directed the 2
nd
defendant immediately to place
Capitec Bank Holdings Limited shares to the value of R430 million
with its attorney, to be placed
and kept in escrow; restrained
the 2
nd
defendant from dissipating the value of these
shares in escrow; directed the 2
nd
defendant in the
alternative to provide interim security to the plaintiff in the
amount of R430 million by way of a bank guarantee
or other form of
security determined by the Registrar; and directed the costs be
in the cause of the main anti-dissipation
application.
[102]
It seems to me that, given the papers that came before Adams, J, and
given the terms of his reasoning, there can be no doubt
that the very
issue, or at least one of the very issues, before him was whether the
2
nd
defendant, Regiments Capital (Pty) Limited, ought to
be directed to put up as security pending the anti-dissipation
application
before Tsoka, J, Capitec shares and, if so, in what
number of shares. Adams, J specifically considered the
contentions before
him and he directed the 2
nd
defendant
to put up the Capitec shares.
[103]
It seems to me that it does not really matter whether or not the 2
nd
defendant was the owner at that time of Capitec shares. It
could procure them, even if on loan from Coral Lagoon, and put
them
up as security. The 2
nd
defendant’s answer,
that it could not comply with the order because it did not own those
shares, was argued to the court,
was considered by the court, and
rejected by it. The 2
nd
defendant did not avail itself of
the alternatives referred to in the court order. Instead, it put up
the Ash Brook shares. That
response was to brush aside the order and
to offer precisely that which the learned Judge had rejected. The 2
nd
defendant’s version therefore does not, in my view, disturb the
inference of wilfulness and
mala
breach of the court order.
[104]
The 2
nd
defendant’s operating mind was that of the
10
th
and 11
th
defendants, being the 4
th
and 5
th
respondents here, who controlled the Regiments
companies. That allegation was expressly made in paragraph 90
of the plaintiff’s
founding affidavit and not disputed by the
Regiments defendants. The inference is thus justified that the 2
nd
defendant’s conduct was informed by their decision.
[105]
The 2
nd
defendant and the 4
th
and 5
th
respondents have not discharged their evidential burden of placing
facts before the court that would disturb a conclusion that,
on a
balance of probability, their conduct in failing to comply with the
order of Adams, J was wilful and
mala fides
. I conclude
therefore that the 2
nd
defendant, controlled by the 4
th
and 5
th
respondents, acted in contempt of court of the
order of Adams, J.
[106]
The plaintiff does not in prayer 2.1 of its notice of motion ask for
criminal contempt of court sanctions against the 4
th
and
5
th
respondents following on a finding of contempt of the
court order of Adams, J. It asks only for a declaratur that the 2
nd
defendant was in contempt of that court order. Such an order will
issue below.
Contempt
of court: Tsoka, J
[107]
I now deal with the order of Tsoka, J. It is necessary to start with
the debate concerning the nature of the 20 July 2018
restraint order
of Tsoka, J that is being appealed, because it is relevant not only
in the context of the contempt of court relief
claimed in prayers 2.2
and 3 of the notice of motion, but also in the context of the
interdictory relief claimed by the plaintiff
in prayers 4 to 10 of
its notice of motion.
[108]
If Tsoka, J’s restraint order was a final order or, more
correctly put, an order having the effect of a final judgment,
then –
as was the position at common law – the operation and execution
of such an order which is subject to an (application
for leave to)
appeal, are automatically suspended pending the decision of the
(application for leave to) appeal. The successful
party (usually the
winner) in such a matter could however under the then
Rule 49(11)
,
and can now under
s.18
of the
Superior Courts Act, apply
to the court
to put such a final order into operation and execution despite the
fact that it is subject to an appeal.
[109]
Under the
Superior Courts Act the
applicant for relief must show the
existence not only of exceptional circumstances but also that on a
balance of probability he
or she will suffer irreparable harm if the
order remains suspended, and that the other party will not suffer
irreparable harm if
the operation and execution of the order were put
into operation.
[110]
Where the impugned order is an interlocutory order not having the
effect of a final judgment, then despite the noting of an
appeal, the
operation and execution of the interlocutory order are not suspended,
and the order goes into operation forthwith.
Again, the court now has
the power to order otherwise under exceptional circumstances, but the
applicant for relief (this time
usually the loser) must show that the
balance of irreparable harm were the order to continue in operation
and execution, weighs
heavier on its side than on the side of the
other party were the order suspended.
[111]
In my view an anti-dissipation order such as the one that Tsoka, J
granted on 20 July 2018 is not a final judgment for purposes
of
section 18(1)
of the
Superior Courts Act, but
an interlocutory order
not having a final effect as envisaged in
section 18(2)
of the said
Act. That conclusion founds mainly on two bases: first, the
language of
s.18(2)
, that of “
an interlocutory order not
having the effect of a final judgment”
, harks back to the
earlier requirement of “
finality”
for an
appealable order, being that it should dispose of a portion of the
relief claimed in the action.
[112]
Here the anti-dissipation order does not have such effect. No part of
the relief claimed in the main action is disposed of
by the grant of
such an order; it is, in a sense, ancillary or adjunctive to the main
action, and is evidence of a court’s
inherent power under
section 173 of the Constitution to protect its own process. The
second basis on which my conclusion founds,
is the notion that such
orders may be altered by the court that gave them, depending on the
practical effect of their implementation.
[113]
It must be accepted that, as the plaintiff has argued, a breach of
the order has been established. The real question here
is whether the
contrary contention by the Regiments defendants destroys or supports
the inference of wilfulness and
mala fides
arising from that
breach. That question is determined in turn, as I see it, by the
extent of the inherent merits of the defendants’
contention.
[114]
Despite my own view, I cannot on these affidavits conclude that the
opposite view is so devoid of merit that it can be concluded
that it
was cynically designed surreptitiously to draw a curtain across
mala
fides
and wilfulness. A try-on argument is not per se
contemptuous of the standard view, even if the standard view is
embodied in a court
order. It follows that in my view the defendants
have placed sufficient before the court by way of explanation to
disturb the inference
of wilfulness and
mala fides,
and a
finding of contempt of court beyond a reasonable doubt cannot be
made. Prayer 3 of the notice of motion thus cannot be granted.
[115]
This conclusion does not foreclose the argument that the defendants’
contention does not meet the evidential threshold
of disturbing the
inference, on a balance of probabilities, of wilfulness and
mala
fides.
And in my view the defendants’ contention does in
fact not meet that threshold, substantially for the reason that
anti-dissipation
orders will be denuded of any effect at all if the
operation and execution of such an order could be evaded by the
simple device
of a notice of application for leave to appeal.
[116]
It is no answer, as I see it, to suggest that it always remains open
to the beneficiary of such an order to apply under s.18(1)
to put the
order into operation and execution pending the application for leave
to appeal. The s.18(1), read with s.18(3), standard
would in effect
then require of the successful applicant for an anti-dissipation
order to re-argue its case, and at a considerably
higher standard,
that despite the fact that the “
finality”
of the
order resides – on the defendants’ argument – in
the self-serving notion that the order has some legal
effect.
[117]
After all, it is difficult to conceive of any order, even a
declaratur, that does not of itself have an effect that can be
considered as “
final”
, if “
final”
is to have the wide reach and unrestricted meaning which the
defendants’ submission necessarily implies. The concept of
“
finality”
must, for it to have meaningful
content, be circumscribed by another consideration. And as I see it,
that consideration is whether
it deposes of part of the relief
claimed in the main proceedings.
[118]
This conclusion does not affect the question whether the order which
Tsoka, J issued on 23 August 2018 is currently suspended
on the basis
that the defendants’ s.18(4) appeal has that consequence. If
the conclusion to which I have come is correct,
then the order of
Tsoka, J of 20 July 2018 was interlocutory; then the operation and
execution of the order was not suspended by
the leave to appeal; then
the order of Tsoka, J on 23 August 2018 to the effect that the
restraints he ordered on 20 July 2018
remained in operation pending
the appeal added nothing but clarity to what already applied; and
then the noting of an appeal under
s.18(4) did not suspend anything
that applied before 23 August 2018. After all, s.18(4) expressly
refers only to an order made
under s.18(1).
[119]
The defendants will have remained bound to comply with the court
order of 20 July 2018, but failed to do so. It follows that
an order
in terms of prayer 2.2 of the notion of motion will issue.
Interdictory
relief
[120]
The plaintiff has asked for interdicts in prayers 4 to 10 of its
notice of motion. These interdicts are all in the nature
of
refinements - brought about by greater facts discovery – of the
anti-dissipation order made by Tsoka, J on 20 July 2018;
in fact, the
interdicts all found on that order. The legal basis for such orders
was considered by Tsoka, J and held to have been
established. The
factual basis of a case for the orders in terms of prayers 4 to 10 of
the notice of motion has, in my view, been
established of the
affidavits and must then follow as a matter of course. Orders in
terms of those prayers will follow.
The
discovery application
[121]
That brings me to the question of the discovery and the application
by the Regiments defendants under Rule 35(13) and Rule
35(14).
Concerning the former, the essential question as I see it is whether
in a civil proceeding in which final relief
is being sought in a
trial action, relief under section 35(13) should be granted. I
appreciate that that relief is being
sought in relation to the Anton
Piller application; but the Anton Piller application is itself merely
adjunctive to the main trial
action. It seeks to protect
evidence for purposes of that action. It does not of itself
result in final relief.
I am therefore disinclined to grant the
relief sought in terms of Rule 35(13).
[122]
There are other reasons why I would not grant this relief. First
among these is my conclusion that the defendants are in contempt
of
court of the order of Tsoka, j of 20 July 2018. That contempt has not
been purged and persists. I also consider myself bound
by
Blumenthal
.
[123]
As regards Rule 35(14), I have sympathy for the argument of the
Regiments defendants that throughout everyone knew that their
defence
to the main action has been and will be payment. But there are
a number of reasons why this relief should not be
granted. First,
there is the contempt of court issue to which I have referred. Next,
there is the
Blumenthal
judgment to which I am bound. Third,
at this time the defendants’ plea is some distance away, given
the material and substantive
exceptions which have not yet been
resolved.
[124]
And fourth, I have difficulties with the breadth of the relief
claimed in the Rule 35(14) notice. I agree with Mr Chaskalson
that
the items are, overwhelmingly, too wide in their reach, and not of
the kind of specificity demanded by Rule 35(14).
The fact that
two of them may be sufficiently defined does not save the notice,
since I do not believe it is acceptable to wield
a shotgun on the
basis that, accepting that the spread of the shot is too wide, one or
two pellets in the middle have great accuracy.
Substituted
security
[125]
That leaves the question of the counter-application of the Regiments
defendants for substituted security as an alternative
elective.
Here I believe that the more conservative approach of Mr Winter is to
be preferred. Although the trial action may
only see a court in two
years’ time, the future of litigation is notoriously difficult
to predict, and matters may take a
dramatic turn much earlier, when
the Capitec shares will, for the purposes of the present
consideration, still be under the water.
I believe the proposed
draft order by the plaintiff is appropriate.
Order
[126]
In the result I make the following order:
(a) An order issues in terms of
prayers 2, and 4 to 11, of the notice of motion dated 12 November
2018.
(b) The counter-application for
substituted security is granted, and the applicants in reconvention
are permitted, as an alternative
to the restraints and discovery
obligations imposed by the order of Tsoka, J of 20 July 2018, to
provide security to the Transnet
Second Defined Benefit Fund in the
terms set out in Annexures “FSA2” and “FSA3”
of the answering affidavit
of Transnet Second Defined Benefit Fund in
the counter-application for substituted security, at pages 1183 to
1212 in Volume 14
of the papers.
(c) The applicants in reconvention are
directed to pay the costs of the counter-application for substituted
security, jointly and
severally, such costs to include the costs
consequent upon the employment of two counsel.
(d) The application dated 16 October
2018 for relief under Rule 35(13) and Rule 35(14) is dismissed with
costs including the costs
consequent upon the employment of two
counsel.
_________________
WHG
van der Linde
Judge,
High Court
Johannesburg
For
the applicant: Adv M Chaskalson, SC
Adv
N Luthuli
Instructed
by: Moeti Kanyane Inc
Applicant’s
Attorneys
1
st
– 4
th
Floor Block D
Corporate
66 Office Park
269
Von Wielligh Avenue
Die
Hoewes
Centurion
Tel:
(012) 003 6471/087 352 2751
Fax:
(086) 416 2255
Ref:
M Kanyane/BC/M00002
Email:
moeti@kanyane.co.za
bridget@kanyane.co.za
c/o
Malatji Kanyane Inc Suite 39, 5
th
Floor
Catherine
and West Building
114
West Street
Sandton
Tel:
(011) 072 2600
Ref:
S Eloff
For
the 1
st
to 4
th
, 6
th
to 9
th
,
12
th
and 13
th
respondents: Adv L J Morison SC
Adv
N J Horn
Adv
T Scott
Instructed
by: Smit Sewgoolam Inc
Attorneys
for 1
st
to 4
th
, 6
th
to 9
th
,
12
th
and 13
th
Respondents
12
Avonwold Road
Saxonwold
Johannesburg
Tel:
(011) 646 0446
Email:
tiaan@smitsew.co.za
peto@smitsew.co.za
Ref:
MAT29435/OCJ/CVS
For
the 5
th
respondent: Adv J G Wasserman, SC
Adv
A E Ayayee
Instructed
by: Moroka Attorneys
Attorneys
for 5
th
Respondent
Email:
moroka002@gmail.com
c/o
Kekana Hlatswayo Radebe Inc
31
Princess of Wales Street
Parktown
Email:
peppy@khrinc.co.za
moroka002@gmail.com
Date
argument:Wednesday 5 December 2018, and Monday 11 December 2018
Date
judgment: Tuesday 18 December 2018