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[2016] ZAKZDHC 45
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Shaikh v Trafford Trading (Pty) Ltd (in liquidation) and Others (1518/2016) [2016] ZAKZDHC 45 (29 November 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE
NO: 1518/2016
In
the matter between:
ABDUL
KADER HOOSEN
SHAIKH APPLICANT
vs
TRAFFORD TRADING (PTY)
LTD (IN LIQUIDATION) FIRST
RESPONDENT
NATIONAL BARGAINING
COUNCIL FOR THE
LEATHER INDUSTRY OF
SOUTH AFRICA SECOND
RESPONDENT
JOHN DOUGLAS
MICHAU THIRD
RESPONDENT
THE MASTER OF THE HIGH
COURT, DURBAN FOURTH
RESPONDENT
ORDER
The following order is
granted:
a. The application is
dismissed.
b. The applicant shall
pay the costs of the second respondent, such costs to include the
costs of senior counsel.
JUDGMENT
D.
Pillay J
Introduction
[1]
The applicant,
Abdul Kader Hoosen Shaikh
seeks
to interdict the second and third respondents from interrogating him
under ss 414, 415, 416 of the Companies Act 61 of 1973
(CA). Trafford
Trading (Pty) Ltd (Trafford) is the first respondent of which Mr
Shaikh was its sole director and manager. The National
Bargaining
Council for the Leather Industry of South Africa (the Council) is the
second respondent and only creditor of Trafford.
John Douglas Michau
is the third respondent and is the liquidator of Trafford. The Master
of the High Court is the fourth respondent.
The third and fourth
respondents abide the decision of this court.
[2] The second
respondent’s claim against Trafford is for underpayment of
remuneration due to the Council on behalf of the
latter’s
former employees. On 2 November 2005 an arbitrator declared the
amount of the claim to be R282 853.53. On 3 March
2006 the Council
applied to liquidate Trafford. On 23 March 2012 Vahed J granted the
provisional order for winding-up. Mokgohloa
J confirmed the final
order for liquidation on 5 November 2013 and refused leave to appeal
to the Supreme Court of Appeal. The
Supreme Court of Appeal refused
the petition for leave to appeal.
Ancillary Grounds
[3]
Mr O. A. Moosa who had represented Mr Shaikh and Trafford throughout
the various proceedings until this hearing had included
in his heads
of argument submissions that the Council’s claim had prescribed
and that the liquidator was partial to the Council.
Mr Findlay now
appearing for Mr Shaikh correctly abandoned these submissions.
Manifestly the chronology above shows that the liquidation
interrupted prescription.
[4]
In so far as the prescription point is pitched at protecting Mr
Shaikh against prejudice he would suffer as a result of the
delay in
the prosecution of claims against him personally, this contention
must also fall away. Mr Shaikh has been the principal
architect of
the delay of more than ten years in settling the Council’s
claim. The history of the Council’s claim dates
back over a
decade. Mr Shaikh applied unsuccessfully on behalf of Trafford for an
exemption to the Council’s Exemptions Committee.
That dispute
wound its way to arbitration, the Labour Court,
[1]
the Labour Appeal Court
[2]
and
eventually to the Constitutional Court, which on 15 September 2011
conclusively rejected Trafford’s appeal. At every
step Trafford
and Mr Shaikh failed in their bid to avoid the Council’s claim.
[5]
To compound the delay, Mr Shaikh applied for the same relief as in
this application in his previous application launched on
20 May 2015
under case no 5050/2015. His erstwhile attorneys had failed to
deliver heads of argument in time for that matter which
was enrolled
on the opposed roll for 18 February 2016. The Council consented to Mr
Shaikh withdrawing that application and tendering
its costs. Almost
simultaneously with negotiating the withdrawal and with no indication
to the Council or its attorneys of his
intentions, Mr Shaikh launched
this application. Even before 18 February 2016 Mr Shaikh signed the
founding affidavit in this application
and filed it on 17 February
2016 for substantially the same relief.
[6] Why Mr Shaikh had to
withdraw the application instead of applying formally for an
adjournment and tendering the costs of the
other side becomes clear
from the response from the Council to Mr Shaik’s request for
the adjournment. The Council’s
attorney pointed out that
‘
given
the very long history of filibustering by your client. . .my client
is entirely unwilling to allow your client to delay the
matter any
further.’
[3]
Thereafter,
Mr Shaikh followed with the offer to withdraw the application
altogether and tender costs. Seemingly Mr Shaikh and his
attorney
accepted that no court would accede to his application for a
postponement notwithstanding Mr Shaikh’s tender of
costs
because of his conduct.
[7] In these
circumstances, Mr Shaikh’s lament that the Council
‘
has
every intention of not affording [him] an opportunity of presenting
this matter for argument’ and that ‘any difficulty
[in
pursuing the matter to finality] cannot be attributed to [him]’
[4]
is
insincere.
[8] As for the alleged
partiality of the liquidator, notwithstanding Mr Findlay’s
concession, elucidating the role and function
of the liquidator is
material to assessing what scope, if any, would the liquidator have
of subjecting Mr Shaikh to ‘vexation
and oppression’,
which is his principle challenge to the interrogation.
[9] Because the Council
is funding the costs of the liquidator does not necessarily indicate
partiality or bias on his part. The
liquidator in a compulsory
winding-up has the statutory duty to consider the interest of
creditors. The function of liquidators
is not to speculate but:
‘
.
. .to pursue the interests of creditors and members, which in the
case of a company unable to pay its debts means its creditors.
That
is doubly important in the present case because the only source of
the finance to pursue the present litigation is the creditors
of the
company.’
[5]
[10] In rejecting the
Cape decision in
James v Magistrate Wynberg & others
1995
(1) SA 1
CPD at 16C-D, upon which Mr Shaikh relied the Appellate
Division in
Receiver of Revenue, Port Elizabeth v Jeeva &
others; Klerck & others NNO v Jeeva & others
[1996] ZASCA 5
;
1996 (2) SA
573
(A) opined that even though
‘
.
. .the liquidator has fiduciary duties towards, say, creditors, [it]
does not mean that he can always be evenhanded. He is obliged,
should
the occasion arise, to dispute a creditor’s claim or to impeach
a transaction between a creditor and the company.
I do not accept as
a general proposition that in such circumstances the relevant
creditor can object to an examination or litigation
on the ground of
the liquidator’s perceived bias.’
[6]
In short, the liquidator
acts
‘
in
neither an administrative nor quasi-judicial capacity. He is not in a
position of authority
vis-à-vis
with the witness. He does not determine or affect any of his rights.
He simply represents the company in liquidation at the inquiry.’
[7]
Given
the legislative scheme expatiated further below a liquidator has
little scope to act out any bias even if he was subjectively
so
inclined.
Principal Ground
[11]
The singular issue in dispute remaining for my determination is
whether the interrogation in terms of ss 414, 415, 416 of the
CA is
illegitimate, if the purpose is to enable the Council to establish
whether it has a claim against Mr Shaikh in order to sue
him
personally in terms of s 424. Would such interrogation be an
‘oppressive, vexatious, unfair and/or impermissible
’
use of s 414.
[12]
In this application Mr Shaikh no longer regards the purpose of the
interrogation to be ‘actuated by an ulterior purpose’
as
he did when he opposed the liquidation of Trafford. In all the
proceedings against Trafford and potentially Mr Shaikh the Council
has been forthright about its intentions to recover its claim.
Throughout all the proceedings the Council has enjoyed unqualified
success. Therefore Mr Shaikh can hardly be surprised now that its
pursuit has been relentless and unwavering.
[13] The Council’s
aim in liquidating Trafford for purposes of interrogating Mr Shaikh
and eventually proceeding against him
under s 424 was pleaded, argued
and rejected by two judges of this Division and two from the Supreme
Court of Appeal. If the two
judges of this Division were wrong on
this point, which is a point of the law, then the Supreme Court of
Appeal would not have
refused leave to appeal. Assuming in favour of
Mr Shaikh that different considerations apply now when deciding the
point in an
application to interdict the interrogation, I examine the
requirements for s 414 of the CA. Manifestly the requirements for
liquidation
are different from the requirements for interrogation
under s 414 and litigation under s 424 of the CA.
[14] Section 414(2) of
the CA provides:
‘
(2) The Master or
officer who is to preside or presides at any meeting of creditors,
may subpoena any person-
(a)
who is known or on reasonable grounds believed to be or to have been
in possession of any property which belongs or belonged to
the
company or to be indebted to the company, or who in the opinion of
the Master or such other officer may be able to give material
information concerning the company or its affairs, in respect of any
time before or after the commencement of the winding-up, to
appear at
such meeting, including any such meeting which has been adjourned,
for the purpose of being interrogated; or
(b)
who is known or on reasonable grounds believed to have in his
possession or custody or under his control any book or document
containing any such information as is referred to in paragraph
(a)
,
to produce that book or document or an extract therefrom at any such
meeting or adjourned meeting.’
[15]
For Mr Shaikh, it was submitted that there is a distinction between
an interrogation conducted by a creditor or liquidator
into the
affairs of the liquidated company, as opposed to an interrogation
designed to establish whether a creditor has a claim
against a third
party. The former purpose is legitimate and permissible on the basis
of
Cooper & others NNO v SA Mutual
Life Assurance Society & others
[2000] ZASCA 153
;
2001 (1) SA 967
(SCA)
but not the latter.
[16]
First, Mr Shaikh is not a third party but the managing and sole
director of Trafford.
So
was Mr Kebble the sole surviving director of the company
in liquidation in
Kebble
v
Gainsford
2010 1 SA 561 (GSJ)
.
Because
of Mr Shaikh’s fiduciary duties the Council has a stronger case
for interrogating him than it would for a third party.
[8]
Furthermore, s 414 allows the Master to subpoena ‘any person’
who has material information about the company.
[17]
Second, it is for the Master to believe or form the opinion that the
person to be subpoenaed may be able to give material information
concerning the company or its affairs.
[9]
So the issue of the Council’s motive or purpose is immaterial.
Furthermore, the primary purpose of an interrogation by any
creditor
or liquidator is to establish whether claims of creditors can be
recovered, be it from the company, its office bearers,
employees,
debtors or any other person. There would be no point in incurring the
costs and inconvenience of conducting an enquiry
for any subversive
purpose if the prospects of recovering the claims of creditors are
non-existent. This is especially so in the
case of Councils that are
statutory bodies funded partly by workers’ wages.
[18]
Third, the notion of ‘oppression’ arises from the
prospect of the person interrogated incriminating himself and
risking
prosecution.
[10]
However, s
415 (1) which gives effect to the constitutional protection against
self-incrimination would address his concerns. As
a general rule an
interrogation in terms of subsection (1) would not be admissible as
evidence in criminal proceedings in a court
of law against Mr Shaik
if he gives any incriminating answer or information. He risks
prosecution if he gives false evidence, makes
a false statement or
fails to answer lawful questions fully or satisfactorily.
[11]
What he may not do at such interrogation is to refuse to answer any
question upon the ground that the answer would tend to incriminate
him.
[12]
In so far as this
application is Mr Shaikh’s preemptive strike to achive what he
may not at the interrogation it must fail.
[19] Fourth, in
Receiver
of Revenue, Port Elizabeth
above the court went on to clarify
that it is the commissioner, or in this instance the Master:
‘
.
. .who has to act in a quasi-judicial capacity. He has the main duty
to examine the witnesses. He has to regulate and control
the
interrogation. Should he fail in his duty to apply procedural
fairness appropriate to this forum, an aggrieved party may approach
the Court for suitable relief. . . .
’
[13]
[20]
The Master is in charge of the interrogation process, not the Council
and the liquidator. Mr Shaikh advances no criticism of
the Master;
consequently, any contention that the Master will not afford him a
fair hearing is unfounded and at least premature.
[21]
Fifth, in substantiation of his submission that the interrogation
would
‘
amount to oppressive,
vexatious, unfair and/or an impermissible use of s 415,’ Mr
Shaikh relied on
James v Magistrate
Wynberg & others
1995 (1) SA 1
(CPD) at 16C-D;
Simon
& another
v The Assistant Master & others
1964
(3) SA 715
(TPD) at 718E and
Anderson &
others
v
Dickson & another
NNO
(Intermenua (Pty) Ltd Intervening)
1985
(1) SA 93
(NPD) at 111H. On the basis of these decisions, purportedly
confirmed in
Cooper,
it was submitted that the interrogation would be ‘
impermissible’
in law.
[22]
Contrary to this submission,
Cooper
applied
Simon
and
James
and considered
Anderson
but only in the context of determining that delictual claims did not
concern the company or its affairs in terms of s 414(2).
[14]
These cases did not bar an interrogation in contemplation of
prosecuting claims under s 424 for carrying on business recklessly
or
fraudulently. As a general rule in South Africa following
Cooper
and the United Kingdom
[15]
the
courts would not allow oppressive interrogation or production of
information. Citing
Ex
Parte
Brivik
1950
(3) SA 790
(W) at 791E-H Harms JA reminded:
‘
The
Court is careful to see that the inquisitorial powers of the section
are not used for purposes of vexation or oppression. .
.but an
applicant is not required to make out a
prima
facie
case that there has been misfeasance or actionable conduct of any
kind. It is sufficient if the Court is satisfied that there is
a fair
ground for suspicion ... and that the person proposed to be examined
could probably give information about what is suspected.’
[16]
[23]
Sixth, if the Master or the presiding officer had no grounds for
issuing the subpoena, Mr Shaikh could have applied to the
court to
have it set aside on review under
s 151
of the
Insolvency Act 24 of
1936
read with
s 339
of the CA. Prudently Mr Shaikh did not resort to
this avenue. After all, who else but the sole director and manager of
Trafford
could
‘give material information concerning the
company or its affairs’?
Once the Master
issued the subpoena to secure Mr Shaikh’s attendance on 25 June
2015, the Council and the liquidator were
entitled invoke all their
rights flowing from it to interrogate
Mr Shaikh.
[24]
Seventh, Mr Shaikh’s plea of ‘vexation or oppression’
would be facetious if it were not cynical, having
regard to the nature, origin and purpose of the
Council’s
claim. The debt arises in terms of the Labour Relations Act 66 of
1995 (LRA) read with subordinate legislation in
the form of
agreements of the Council that are extended to employers and
employees in the leather industry, and the common law
of contract.
The amount claimed constitutes a portion of the minimum prescribed
wages of Trafford’s employees payable to
the Council on their
behalf. An employer can be exempted from paying over this portion to
the Council if it shows good cause to
an Exemptions Committee of the
Council.
[25]
The rationale for creating a statutory right and enforcement
mechanism for payment of minimum wages was to redistribute wealth
and
resources
in
order to promote the constitutional values of
‘
human
dignity, the achievement of equality and the advancement of human
rights and freedoms’.
[17]
Furthermore,
the stated purpose of the LRA is:
‘
(a)
to give effect to and regulate the
fundamental rights conferred by section 23 of the Constitution of the
Republic of South Africa,
1996. . .
(
c)
to provide a framework within which
employees
and their
trade unions
, employers and
employer’s organisations
can –
(i)
collectively bargain to determine wages, terms and conditions of
employment and other matters of mutual interest. . . .
’
[18]
[26]
Unmistakeably, the constitutional and statutory scheme aims to
achieve social transformation through redistribution of resources
and
protection of vulnerable persons who, in this instance, are workers
who find themselves between the rock of low wages and the
hard place
of unemployment. The Council as the collective voice that endeavours
to balance the interests of employers, trade unions
and their
respective members has constitutional and statutory obligations to
enforce its agreements. Conversely, employers like
Trafford and Mr
Shaikh have corresponding obligations to abide by such industry
agreements.
[27]
Eighth, constitutional and statutory obligations aside, the profound
moral principle,
based
upon good faith
and
foundational human values embedded in the common law prescript
pacta
servanda sunt
quite simply means:
agreements
must be kept.
[19]
This
principle
should
be intrinsic, if not intuitive generally but especially when
compliance is called for as a patriotic commitment to social
transformation and, at its most basic, a commitment to simply obey
the law. Mr Shaikh, who as a businessman of some forty-seven
years
should appreciate the moral principle of keeping to agreements.
[28]
Instead, as the mind and manager of Trafford, Mr Shaikh did
everything to avoid his legal and moral obligations. Impermissibly
and unconscionably Trafford’s business was so structured that
its survival was premised on avoiding its liability to the
Council
from the outset.
[20]
[29]
Ninth, to the economic, social and other incalculable costs of all
the processes Mr Shaikh and Trafford initiated unsuccessfully
must be
added the costs of his failed opposition of the liquidation
application and the aborted predecessor to this application.
Throughout Mr Shaikh engaged the services of senior counsel. On any
estimates his litigation costs to date must at least equal
if not
exceed the claim. What motivated this relentless resistance to pay
not only a legal but also a moral and social debt is
a question Mr
Shaikh has yet to answer. Equally curious is the fact that the
Council, whose trade union’s members are ‘soft
targets’
for recalcitrant employers, is the only creditor. Why? In these
circumstances there is not merely a belief but a
strong suspicion
that Mr Shaikh must have material information about Trafford and its
affairs.
[30]
In conclusion, Mr Shaikh is so insensitive to the social needs of
poor workers dependant on minimum wages for survival that
it hardly
lies in his mouth to plead ‘vexation or oppression’.
Public interest compels the court to be less concerned
about his
oppression arising from the interrogation.
[21]
Nothing from the text and purpose of s 414 of the CA prohibits, as a
matter of law, the interrogation of the managing and sole
director of
a company for the purposes of determining whether there is a basis to
sue him personally in terms of s 424 of the CA.
Trafford’s
failure to pay the claim of the Council is therefore not only a
breach of a statutory and contractual duty, but
also a moral
dereliction.
[31]
In my view the proverbial horse has bolted. Mr Shaikh allowed the
subpoena to be issued unchallenged; he cannot now seek to
withdraw or
impede the rights of the Council and the liquidator flowing from it.
Whatever process, if any, the Council and liquidator
intend to invoke
to recover the claims of creditors, be it s 424 or any other means is
their prerogative and would depend on whether
the prerequisites for
such process are met at that stage. It would be premature to
pronounce on the propriety of proceedings in
terms s 424 at this
stage and no relief is claimed in respect of such proceedings.
[32]
Section 424 can be invoked even without liquidating the company.
[22]
With liquidation comes the opportunity and tactical advantage of
interrogating ‘any person
…
able to give material information concerning the company or its
affairs’.
Consequently,
the next predictable step after confirming the order for liquidation
has always been the interrogation in terms of
s 414, 415, 416 of the
CA. Mr Shaikh should have been in no doubt that the Council would
implement its plan to interrogate him
as pleaded in the liquidation
proceedings and, depending on his responses, proceed to hold him
personally liable in terms of s
424 of reckless trading. If Mr
Shaikh did not carry on the business ‘recklessly or with intent
to defraud creditors
…or for any fraudulent purpose
’
he
should have no concerns about the interrogation, which then may not
even lead to s 424 proceedings.
[33]
Mr Shaikh has no choice but to comply with the subpoena failing
which, he ‘shall be guilty of an offence’
[23]
punishable
on conviction to a fine or imprisonment for a period not exceeding
six months, or both such fine and imprisonment.
[24]
The Order
[34] In the premises, I
grant the following orders:
a. The application is
dismissed.
b. The applicant shall
pay the costs of the second respondent, such costs to include the
costs of senior counsel.
________________
D.
PILLAY J
APPEARANCES
Counsel
for the Applicant
: A. Findlay
SC
Instructed
by
: Mohamed
Khan & Associates
Tel: (031) 208 1785
Ref: mka@live.co.za
Counsel
for the 2
nd
, 3
rd
Respondent
: L.B
Broster SC
Instructed
by
: Cox
Yeats
Tel:
(031) 536 8500
Ref:
ahay@coxyeats.co.za
Date of Hearing
: 17
November 2016
Date of Judgment
: 29
November 2016
[1]
Trafford
Trading (Pty) Ltd v National Bargaining Council for the Leather
Industry of SA & others
[2010]
1 BLLR 95 (LC).
[2]
Trafford
Trading (Pty) Ltd v National Bargaining Council for the Leather
Industry of SA & others
DA11/09)
[2011] ZALAC 35
(1 January 2011).
[3]
Page
28 of Pleadings email from Mr Hay to Mr Khan.
[4]
Para
9.5-9.6 of Mr Shaikh’s Founding Affidavit. Pages of the
indexed bundle?
[5]
Motala
& others
v
Master
of the High Court & others
(313/13)
[2013] ZASCA 185
(29 November 2013) para 14.
[6]
Receiver
of Revenue, Port Elizabeth
at
579E-F.
[7]
Above
at
579I-580A.
[8]
Cloverbay
Ltd (joint administrators) v Bank of Credit and Commerce
International SA
[1991]
1 All ER 894;
[9]
Cooper
above
para 11;
Henochsberg
on the Companies Act 61 of 1973
(5ed)
vol 1 issue 26at 873.
[10]
Cloverbay
900.
[11]
S
415 (5).
[12]
S
415 (3).
[13]
At 579H-I.
[14]
Cooper
para 12.
[15]
Cloverbay
at
894;
Re
Mid East Trading Ltd v Lehman Bros Inc v Phillips and Others
[1998] 1 All ER 577
at 585.
[16]
Cooper
para
13.
[17]
Section
1(a) of the Constitution of the Republic of South Africa, 1996.
[18]
Section
1
of the
Labour Relations Act 66 of 1995
.
[19]
Barkhuizen
v
Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) at 349.
[20]
This
was the finding of the Labour Appeal Court in
Trafford
above.
[21]
Cloverbay
above
904.
[22]
Body
Corporate of Greenwood Scheme v 75/2 Sandown (Pty) Ltd and others
1999
(3) SA 480
(W) at 487G-H.
[23]
Section
414(3) of the Companies Act 61 of 1973.
[24]
Section
441(1)(f) above.