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[2016] ZAGPPHC 580
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HMI Healthcare Corporation v Medshield Medical Scheme (A448/2014) [2016] ZAGPPHC 580 (10 June 2016)
HIGH COURT OF SOUTH AFRICA (GAUTENG
DIVISION, PRETORIA)
Not
reportable
Not
of
interest
to
other
Judges
DATE: 10 JUNE
2016
CASE
NO: A448 /12014
I
n
the matter
between:
HMIHEALTHCARE
CORPORATION
Appellant
and
MEDSHIELD
MEDICAL SCHEMEFirst Respondent
JOHANNES ZACHARIAS HUMAN MULLER N.O.
Second Respondent
MICHAEL MMATHOMO MASILO N.O.
Th
i
rd
Respondent
MASTER OF THE GAUTENG HIGH COURT,
PRETORIA
Fourth
Respondent
J
U
D
G
M
E
N
T
MAKGOKA.J
[
1]
This is an appeal against the whole judgment and order
of
Tlhapi J handed down
on 30 January 2014, in terms
of
which she rescinded an order granted by Van der Merwe
DJP
ex
parte,
at
the instance
of
the appellant, HMI Healthcare
Corporation
(H
M
I
)
on
1
8
December
2012.
The
rescission
application
was
brought
by
the
first
respondent, Meds
h
i
e
l
d
Medical
Scheme
(
M
eds
h
i
eld).
Tlhapi
J
also
set
aside certain
steps
taken
by
HMIpursuant
to
the
rescinded
order. HMIwas also ordered
to
pay
the
costs
of
the
appl
i
cation,
I
n
cl
u
ding
costs
of
two
counsel
and
costs
associated
with
the
steps
taken
by
H
M
Ipursuant
to
the
ex
parte
order.
H
MI
appe
a
l
s
to
t
h
i
s
Court
with
l
eave
of
the
court
a
quo,
granted
on
30
May
2014.
[2]
The rescinded application followed an ex
parte
order obtained by HMI for leave to defend an action
instituted by Medshield in this Court against a company in
liquidation and to
institute an action or a counterclaim against
Medshleld in the name
of
that
company. The details
of
that company and its centrality to this case are
set
out in paragraphs 4 - 7 below. HMI sought the above
relief in terms
of
ss
387(4) and 388
of
the Companies Act 61
of
1973 (the old Companies Act) and subject to it furnishing an
indemnity as to the costs
to
the
joint liquidators
of
the company in liquidation.
The
facts
[3] To understand the context in which
the rescission application was brought, the following brief
background is necessary. The
main adversaries in the matter are
Medshield and HMI. Medshield is a medical scheme registered in terms
of
the provisions
of
the
Medical Schemes Act 131 of 1998
. Its business entails,
among others, raising contributions from its members and paying the
claims lodged
by
them or by medical service providers on their behalf,
in accordance with Medshield's applicable rules and scales
of
benefits.
[4] HMI is a subsidiary within the
Bathabile Group
of
companies. HMI is the sole member
of
Calabash Health Solutions (Pty) Ltd (Calabash) and
consequently owns the entire issued capital
of
Calabash. Calabash specialised in the rendering
of
managed healthcare services in terms
of
the capitation agreements entered into
with
medical schemes such as Medshield. Broadly, the
capitation agreements entailed that Calabash would render
management/admi nistration
services, and assumed the risk in respect
of
healthcare services provided to beneficiaries
of
medical schemes. In return, Calabash was entitled to
capitation fees paid by the contracted medical schemes.
[5] On 26 October 2006 Medshield and
Calabash concluded a capitation agreement in terms
of
which Calabash assumed all risk of payment
of
claims lodged by Medshield's members on the conditions set out
above for a typical capitation agreement. The capitation agreement
had retrospective application from 1 January 2006, and was to endure
for three years until end
of
December 2008. During November 2007 a report was
presented at a meeting of HMI that Calabash was experiencing
financial difficulties
which was putting strain on its cash flow and
impacting on its ability to pay claims. The report further confirmed
that in terms
of
a capitation agreement with another medical scheme,
Moto Health, Calabash would
owe
Moto Health R35 million as from April 2008. Calabash
made
its
last payment in terms
of
the capitation agreement
with
Medshield in March 2008. In May 2008,
after
Calabash's financial position was brought to its attention,
Medshield suspended its capitation agreement with Calabash and
stopped
paying capitation fees to Calabash.
[6) Calabash was placed under voluntary
creditor's winding up in terms of a special resolution
of
HMI, which resolution was ragistered by the Registrar
of
Companies and Close Corporations on 17 July 2009. The
second and third respondents were finally appointed joint liquidators
of
Calabash
on 23 October 2009. At the
first
meeting
of
creditors on 22 September 2009, HMI proved a claim In
the amount
of
R3
530 000 against Calabash. At the second meeting of the creditors on
27 October 2009, HMl's related company, Agility Global Health
Solutions Africa Ltd (Agility), proved a claim in the amount
of
R9 959 829.96 against Calabash. During April 2011,
during a special meeting
of
creditors, Medshield proved a claim against Calabash in
the amount
of
R39
226 814.40.
[7] On 17 July 2012 the Master gave
written notice of expungement of all of the above claims in terms of
the provisions of
s 45
of
the
Insolvency Act 24 of 1936
. The Master noted that
this would afford the creditors an opportunity to prove their claims
by way of court action. This was followed
by written reasons on 3
September 2012 for that decision, in which the Master observed that
the factual disputes in the claims
were
of
'technical intensity' such that, as a quasi-judicial
officer, he was not equipped
to
investigate and adjudicate the claims. He concluded
that it would be prudent to expunge the claims and afford the
creditors the
opportunity to prove their claims by way of court
action. On 2 October 2102, at a further meeting
of
creditors, Medshield attempted to prove further claims
against calabash in the sum
of
R1 395 295, but this was rejected by the Master.
Medshield's action against Calabash
[8] On 29 November 2012 Medshield
instituted action in this Court under case number 63139/2012 against
the joint liquidators as
the representative of Calabash in which it
set out nine claims (claims 'A' to
'I')
totalling R40 622 109. Claims 'A' to 'G' amounted to R39 226
418.40. This represents the total of the claim proven against
Calabash,
but subsequently expunged by the Master, as explained in
the preceding paragraph. The balance of the amount claimed (R1 395
295)
formed
the basis
of
claims 'H' and 'I', which is the further amount
Medshie!d unsuccessfully sought
to
prove, as explained earlier.
[9] Medshield's claims arose from the
capitation agreement it had concluded
with
Calabash. Medshleld alleged, among others, that
Calabash had breached the capitation agreement in several respects,
including failure
to pay service providers for its members' claims;
failure to remain accredited as a managed organisation by the Council
for Medical
Schemes; failure to advise Medshie!d
that
it
had no entitlement to occupy
its
previously leased premises by virtue of its lease with
HMI having been terminated; failure
to
maintain accurate books and records; and failure to
advise Medshield
of
its
financial losses and massive liabilities.
[1
0]
Medshield's summons was served on the joint liquidators on 30
November 2012. HMIsays that Medshield's action came
to
the attention of
its
attorneys on 4 December 2012. On 6 December 2012, in
response to a telephone enquiry by Hml's attomeys, the joint
liquidators indicated
that they did not intend to defend Medshield's
action. The joint liquidators' stance was also conveyed in writing to
Medshield's
attorneys on the same day. The stance adopted by the
joint liquidators thus paved the way for Medshield to obtainjudgment
by default
in its claims against Calabash. Summons having been served
on the joint liquidators on 30 November 2012, the
dies
induciae
of
10 days for entering an appearance to defend the action
was set to lapse on 14 December 2012.
The
ex
parte
application
[1
1
]
On
1
1
December 2012
H
Ml's
attorneys directed an urgent
l
etter
to the Deputy Judge
Presi
d
ent,
setting
out the
above
si
tuation,
and
conveyed
their
i
nstructions
to
bring
an
appl
i
cation
for
l
eave
to
defend
Meds
h
i
e
l
d's
action
against
C
a
l
abash.
The attorneys
i
ndicated
that s
u
ch
application needed
to
be
moved quite urgently
i
n
order to
prevent
M
edshie
l
d
from
applying
and
obtaining default
judgment. An
i
ndulgence
was
therefore
sought from
the
Dep
u
ty
Judge
Presi
d
ent
to
grant
H
MI
access
to
the
unopposed
motion court of the week
of
1
7
-
21
December 20
1
2
to
move the
application. In response to that
request, the Deputy Judge President issued a directive for the matter
to be heard on 18 December
2012.
[
1
2)
On
1
2
December 20
1
2
H
MI
l
aunched
the ex
parte
application.
N
eedless
to
say,
the application was served ne
i
ther
on Medsh
i
eld,
nor on the joint
l
i
qu
i
dators.
W
ith
regard
to
the
joint
l
i
q
u
i
dators,
i
t
was simp
l
y
stated in
the
affidavit supporting
the
appl
i
cation
that the
second
respondent, one
of
the
joint l
i
quidators
of
Calabash,
had
been
i
nformed
telephon
i
cally
of the
i
nt
e
nt
i
on
to bring the application. The second
respondent,
i
t
was
said,
had
i
ndicated
to
H
Ml's
attorneys that the joi
n
t
l
i
qu
i
dators
wo
u
l
d
not
be
opposing
the
application
and
would
abide
the
Court's
decision.
N
othing
was
said
with
regard
to
service
on
Medshield
or
i
ts
attorneys
of
record.
[
1
3]
For the sake of
completeness,
I set
out
i
n
full, the relief soug
h
t
by
H
MI
i
n
the
ex
parte
appl
i
cation.
The
notice
of
motion
read
as
follows:
'
1
.
That,
i
n
terms
of
section
387(4)
and
section
388
of
the
old
Companies
Act,
61
of
1973:-
1.1
the app
l
i
cant
be
and
i
s
hereby empowered
to
defend the action
i
nstituted
by Medshield
Medical
Scheme
(Medsh
i
eld}
against
calabash
Health
Solutions
(pty}
Ltd
(in liquidation) (Calabash} out
of
the
above Honourable Court under case
number
2012159139,
in the
name
of
Calabash
and
subject to the applicant
fumishing an
i
ndemnity
as to
costs
to
the
du
l
y
appointed joint
l
i
quidators
of
Calabash,
Johannes
Zacharias Human
Muller N.O.
and
M
i
chael
M
malhomo
M8Silo N.O.
("the
joint
li
quidators")
the
applicant
be
and
i
s
hereby
empowered
to
defend
any
other
l
egal
p
roceedings
bro
u
ght
aga
i
nst
ca
l
abash
by
Medshield,
i
n
the name
of
calabash
and subject
to
the
applicant
fumish
i
ng
an
indemnity
as to costs
to
the
joint
l
iqu
i
dators;
the applicant be and is hereby empowered
to
institute action against Medshield, or
to
launch a counterclaim under case number 2012169139,
for the recovery of
the
claim articulated in the draft particulars of claim attached
to
the letter addressed by the applicant's attorneys
to
the joint Hquidators on 6 September 2012, as well as for any
other claim which Calabash may have against Medshield, In the name
of Calabash and subject
to
the
applicant furnishing an indemnity as
to
the
costs
to
the joint
liquidators;
2. That
the
costs of this application
be
costs in the action under case number 2012169139,
alternatively costs
In
the liquidation
of
Calabash, unless opposed
by
any third party, in which event such third party be ordered
to
pay the costs
of
this
application;
3 Further and/or alternative relief.'
[14] The affidavit supporting the
ex
parte
application was deposed to by Mr George Roper, a director
of
HM!.
Seeking to establish HMl's
locus
standi,
Mr
Roper stated that HMl and Agility are creditors
of
Calabash and had proved claims against Calabash in the
sums of R3 530 000 and R9 959 829.96, respectively, which claims were
also
expunged by the Master. He further stated that at that stage,
there were no proved creditors of Calabash from whom the joint
liquidators
could take directions, as contemplated in terms
of
s 386 of the old Companies Act. According to Mr Roper,
Calabash had a damages claim against Medshield, but the joint
liquidators
were not possessed of sufficient funds in order
to
defend the action instituted by Medshield, or to launch
a counterclaim against Medshield for the recovery of the alleged
damages.
[15]
As
a result
of
the above, so asserted Mr Roper on behalf
of
HMI, the joint liquidators could not be involved in the
litigation, and were accordingly, unable
to
protect the interests of the creditors and the sole
member of Calabash, HMI. Mr Roper submitted on behalf of HMI that
were the order
sought not be granted, Medshield's claim would proceed
undefended, and Calabash's claims against Medshield would not
be
pursued. Such a situation, it was contended, would be
contrary to the provisions relating to the winding up of companies as
contained
in the old Companies Act and the
Insolvency Act, and
would
not be just and beneficial, with disastrous
effect
on the estate of Calabash,
its
creditors and its members.
[16]
Attached to ex
parte
application,was the draft particulars of claim prepared on
behalf Calabash in terms
of
which Calabash would, in claim 'A', demand a total sum of
RS
631
01S,
alternatively
R16
893
045, from Medshield. In the further alternative,
Calabash would seek that Medshield render an account to it for the
period April
to May
2008,
alternatively, April to September
2008,
in respect of beneficiaries on the Access Options. In
claim 'B' Calabash would seek Medshield to render an account to it in
respect
of
its beneficiaries on the same options for the period January
to March
2008.
[17] The basis of
the
above claims is the alleged failure of Medshield
to
provide accurate monthly membership data to Calabash,
as a result of which Calabash allegedly made payments of claims which
ought
not to have been paid, as no contributions had been made or
received from members and where members were not entitled to submit
claims, for various reasons. Calabash alleged that the total value of
these claims amounted to
R13
601 89S,
which it paid when in fact,
it
ought not to have paid. In addition, Calabash claimed to have
paid prospective members or service providers before the members'
actual joining date or after the termination date of members'
membership
of
Medshield,
resulting in claims being paid where members in question were not
entitled to submit claims. The total value of those
claims was said
to
be
R3
291
1
5
0.
Calabash therefore alleged that the sum total of the
claims due to inaccurate information provided by Medshield was
R16
893 045.
[18]
According to the draft particulars
of
claim, Calabash only bore the
risk
in relation to claims paid by Calabash up to
31
May
2008.
It is also said that Medshield's alleged failure to
provide accurate monthly membership data
to
Calabash, amounted to a breach by Medshield of
its
obligations in terms of the capitation agreement.
Calabash
further
stated that as a result
of
the alleged breach of the capitation agreement, the sum total
of claims paid by it for the period April to May
2008,
which ought not
to
have been paid was
RS
631
01S,
which Calabash would claim as
its
damages. The alternative claim, also on the same basis,
for the period April to September
2008,
was
R16
893
045.
The
ex parte
order
[
1
9]
As
stated
earl
i
er,
as
per
the
Deputy
Judge
Preside
n
fs
direct
i
ve,
the
matter
was enrolled for
1
8
December 2012.
It
was on that
occasion that the Deputy Judge
P
resident
heard and granted the order
sought
by
H
MI, on an
ex
parte
basis. The
order granted mirrored the relief sought by HMI. Ihave, in
para 13 above,
set
out the relief
which
HMI sought.
To
recap,
in
essence
HMI
was
granted
pennission
to
defend
Medshield's
claims against
Calabash, and
to
i
n
stitute
an
action
against
Medshield, or launch a counterclaim
against Meds
h
i
eld
on behalf
of
Calabash.Pursua
n
t
to
the
order,
H
MIdelivered
the
following
documents:
(
a
)
n
otice
of
i
ntention to
d
efend
Medsh
i
eld's claim on behalf
of
C
a
l
abash;
(b) notice
of
substitution
i
n
terms of r
u
l
e
1
5(2)
of
the Un
i
form
Ru
l
es
of
Court; and
(c)
a special
p
l
ea,
p
l
ea over and a counterclaim
on behalf
of
Calabash.
I
n
i
ts special p
l
ea
and p
l
ea over, as well as the
counterclaim,
H
MI
p
l
eaded,
among
others,
that
Medshield's
claims had been extinguished by prescription
i
n
terms
of
s
1
2
>0(
2
>1
)
of the Prescription Act 68
of
1
969.
The
application
for
rescission
of
the
ex
parte
order
[20]
On 4 April
2013
M
eds
h
i
eld
brought an application for the rescission
of
the
ex
parte
order
gra
n
ted
i
n
favour of
H
MI
on
1
8
December
2012.
Medshield sought
the rescission
i
n
terms
of
ru
l
e
42(1)(1)(a)
of
the
Uniform
R
u
l
es
of
Court
(the
U
n
i
form
R
u
l
es)
on
the
ground
that
the
order
was
erroneously
sought
and
granted
i
n
its
absence.
Medshield asserted that it was an
i
nterested
party
i
n
the appl
i
cation
and it was as such, entitled
to
be
served
with
the application.
I
t
also soug
h
t
to
set
aside
the
steps that had
been
taken
by
H
MI
pursuant to the
ex
parte
application.
I
n
addition,Medsh
l
eld
sought an order declaring
that
H
MI
was not entitled to defend Medshield's action
against
Calabash
in the
name
of
Calabash;
or
to
defend
any
other
l
egal
proceedings brought
by
Medshi
e
l
d
against
Calabash,
or
to
i
nstitute
any
action
or counterclaim
against
Medsh
i
e
l
d.
[21]
Medshield's
appl
i
cation
was supported
by
an
affidavit
deposed
to
by
Mr Themba Lange, the
court-appointed curator of Medsh
i
eld.
M
r
Langa stated that to
i
ts
knowledge,
Meds
h
i
eld
had a direct and substantial
i
nterest
i
n
the r
e
l
i
ef
sought
i
n
the
ex
parte
appl
i
cation.
H
e
further stated that
H
MI
failed
to
disclose
n
umerous
'critical and material facts' about
its
own conduct
i
n
related
l
i
tigation
and
i
n
relation to the
li
q
u
id
ation
of Calabash.
The
alleged
facts
which
had
not
been
d
i
sclosed
i
ncluded
the
following:
(a)
That Medsh
i
eld
had,
i
n
affidavits
i
n
re
l
ated
l
itigation
between the parties and
correspondence,
alleged that the claims of
H
MI
a
n
d
Ag
i
l
ity
against Calabash
were
acquired
by
fraud,
and
that
the
allegation
has
never
been
answered,
i
n
all
li
kelihood
because
H
MI
and
Agility do
not
have
a
defence
to
i
t;
(b)
That
for
the
estate
of
Calabash
to
have
no funds
was
directly
l
i
nked
to
the
fra
u
dulent
manner
i
n
which
H
MI
and Agility
extinguished
their debts to Calabash
by retrospectively creating fictitious liabilities to Agility
on the part of
Calabash,
wh
i
ch
were
cre
d
i
ted
against
a
substantial
loan
accou
n
t
owing
by
H
MI
to Calabash, thereby
stripping Calabash of
i
ts
only substantial asset;
(c)
There was
no explanation
by
H
MI
and Agi
l
ity
as to why,
if
they
were
gen
u
i
ne
and
bona fide
creditors
of Calabash, they
did
not,
l
i
ke
Medshi
e
l
d,
i
nstitute
an action against Calabash
i
n
purs
u
i
t
of their alleged claims as creditors;
(d)
That HMI deliberately
m
i
sinformed
the Court about the nature and credibility of Medshield's
claims
against
Calabash,
i
n
particular
H
Ml's
statem
e
nt
that Medshield's
claim
comprised
an
u
n
liqu
i
dated
damages
claim.
Medshield de
n
i
ed
that
allegation
as misleading as
i
t
asserts that all
its
claims are
liquidated, credible and
justified;
(e)
That
HMI
and
the
deponent
to
the
ex
parte
application,
Mr
Roper,
were
in
possession
of certain
books
and
financial
records
of
Calabash,
and
had
refused
to
supp
l
y
them to Medsh
i
eld
or to the joi
n
t
l
i
q
u
i
dators,
thus deliberately preventing
the joi
n
t
l
i
quidators
from defending Medsh
i
e
l
d's
action against Calabash;
(f)
That
Calabash's
alleged
counterclaim aga
i
nst
Meds
h
i
eld
was
speculative
a
n
d
can never be proved, as
H
MI
had said as m
u
ch
i
n
one
of
the re
l
ated
interlocutory applications, by stating that it was not in
possession
of
the
inaccurate membership data.
[22] The
rest
of
Mr Lange's affidavit regarding the omission
of
alleged material facts is devoted to attempting to show
that the supposed counterclaim on behalf
of
Calabash has no merit. This, according to Mr Lange, was
because Calabash had stopped paying claims under the capitation
agreement
on 18 March 2008, despite
the fact that it continued to receive
payments from Medshleld in respect
of
the agreement until May 2008. Mr Lange referred to a
schedule of payments in substantiation of this contention. Mr Langa
referred
to the draft particulars of claim for the supposed
counterclaim by Calabash against Medshield. Ihave referred to the
draft particulars
earlier In paras 16 •18 above.
[23] Mr Langa said that that the said
draft particulars contained a series of inaccuracies and
contradictions. In particular, he
pointed out that the allegation
that Calabash had paid claims during the period April to September
2008, could not be correct given
his earlier statement that Calabash
stopped paying claims on 18 March 2008. Mr Langa further stated that
in any event, Calabash's
counterclaim,
if
any, had long since prescribed as Calabash's representatives
had knowledge
of
the
alleged inaccurate membership data as long ago as 2007.
[24] Among the reasons why Medshield
contended that the ex
parte
order was erroneously sought and granted, was the
following: For HMIto have been successful in the ex
parte
application,
it
was
required to have shown the Court either that the decision of the
joint liquidators not to defend Medshield's action was not
bona
fide
or, if it was, that
it
was so unreasonable that no reasonable liquidator would
have come to the same decision. Medshield pointed out that this
aspect was
not addressed at all in HMl's ex
parta
application. Mr Lange pointed out that HMI failed to even
allege that the decision of the joint liquidators was not
bona
fide.
Neither did HMI make out a case in its ex
parte
application
that the decision
of
the liquidators was so unreasonable that no reasonable
liquidator would have come to the same decision. Mr Lange then
set
out a number of grounds to demonstrate that the
decision was
reasonable, and
I
n
the circumstances, the order granted by Van der
Merwe
D
JP fell to
be
rescinded.
The
court a quo's judgment in
the rescission
appl
i
cation
[25]
I
n
its
judgment
handed down
on 30 January 2014,
all of
Medshield's arguments
found favour with
the
court
a
quo.
I
n
particular,
the
Court
found
that: Medsh
i
eld
was a party affected
by
the order
and
had substantial
i
n
terest
in the
ex patte
application;
there had
been
a non-disclosure
of
material
facts
in
the
ex patte
appl
i
cation;
Medshield had fa
i
l
ed
to make out a case
i
n
the
ex parte
appl
i
cation
as to why
it
had to
be
substituted for
the
joi
n
t
l
i
qu
i
dators;
that
H
Ml's
constitutional rig
h
ts
to
l
itigate
would
not
be
i
nfringed
if
H
MI
were not allowed to act as contemplated
i
n
the order; the order had been erroneously sought and granted as
contemplated in rule
42(1)(a)
of
the Uniform Rules.
Leave
to
appeal
[26]
H
MIsoug
h
t
l
eave
to appeal on several grounds, most
of
which are discussed
below.
I
n
granting
l
eave
to
appeal, the
l
earned
Judge
a
quo
observed
that
the parties
have
substantial
claims
against
each
other,
and
that it
wou
l
d
be
in
the
i
nterests
of
justice
for
another
Court
to
determine (a) whether
the judgment was
dispositive of the matter and therefore had
the effect
of
denyi
n
g
H
MI
and
i
n
particu
l
ar
Calabash the
opportun
i
ty
of
challenging
Medsh
i
e
l
d's
claims;
and
(
b
)
whether Medshield had a
substantial
i
nt
e
rest
i
n
the
ex parte
appl
i
cation.
I
ssues
that do not req
u
i
re
determination on
appeal
[27]
I
n
th
i
s
Court,
H
MI
did not p
u
rsue
i
ts
constitutional argument that if it were to
be
de
n
i
ed
the
right
to
defend
Medsh
i
e
l
d's
claims against
Calabash
and
to
i
nstitute
a
cou
n
terclaim
on
beha
l
f
of
Calabash against
Medshield,
this wou
l
d
constitute
a
violation
of
the constitutional rights
of Calabash, its
creditors and
H
MI,
i
n
terms
of
s 34
of
the
Constitution, to have these issues determined by a Court. What also
cannot
be
disputed
i
s
that
Medshield
wou
l
d
be
e
n
titled
to
have
the
steps
taken by
H
MIp
u
rsuant
to the
ex
patte
order,
set
aside,
i
n
the event the a
p
peal
i
s
dismissed. That would follow naturally, as those steps are dependent
on the ex
parte
order.
I
f
it
is rescinded, i.e. this appeal is dismissed, they fall
off,
consequentially. Similarly, Medshield's prayer for an order
precluding HMI
from
seeking similar relief
In the future does not arise in this appeal. That order was sought in
the rescission application. It was
not granted by the court a
quo,
it having found that Medshield had not made out a case for such
an order. There is no cross-appeal against that finding, and thus,
the issue does not arise before us.
[28] During the hearing of the appeal,
counselfor Medshield raised, for the first time, the issue whether
the judgment and order
of
the court a
quo
rescinding the ex
parte
order is appealable. Accordingly, the parties were directed to
file supplementary written submissions on this question, which they
did. Ishall briefly
set
out the contentions
of
the parties in this regard.
I
ssues for
determination
[29] The issues which fall to
be
determined in the appeal have thus crystallised into
the following four crisp questions:
(a)
whether the judgment and order rescinding the ex parte order is
appealable;
(b) whether Medshield is a party
affected by the ex
parte
application;
(c) whether there had been a
non-disclosure
of
material facts in the ex
parte
application;
(d) whether HMI, in seeking to replace
the liquidators' decision not to defend Medshield's action against
Calabash, made out a proper
case for that relief.
[30] I consider in tum, the above
issues.
Appealability
of the rescission order
[31] Relying mainly on the test
established in
Zweni v
Minister
of
Law
and
Order
[1]
counsel for Medshield contented that the rescission order does not
have the attributes of a final order as
it
is not definitive of the rights
of
the parties or disposing
of
at
least a substantial portion of the relief in the main proceedings.
But, as counsel correctly pointed out, the
Zweni
attributes are not cast in stone, as observed in
Moch
v
Nedtravel.
[2]
Even where a decision does not bear all these attributes it may
nevertheless be appealable if some other considerations are evident,
including that the appeal would lead to a just and reasonable prompt
resolution of the real issue between the parties.
[32] Counsel for Medshield contended
that the effect
of
the rescission order is to afford Medshield the
apportunity to ensure its version as to why the relief in the ex
pane
application ought not to have been granted, is placed before
Court. This, so is the argument, paves the way for the parties'
respective
versions to be fully ventilated, thereby ensuring a
resolution of the real issues between the parties. I disagree. The
real issues
between the parties cannot
be
resolved in application proceedings, as there are
distinct and clear disputes of fact. This is the reason why the
parties' respective
claims were expunged by the Master, directing
that the issues be resolved by way of action proceedings. Precisely
for that reason,
Medshield instituted an action against Calabash.
[33] The real issues between the parties
are set out In Medshield's action against Calabash, and Calabash's
draft particulars of
claim against Medshield. Both actions arise from
the capitation agreement. Those are the real issues between the
parties, and not,
as Medshield contends, whether HMI is entitled to
defend Medshield's action against Calabash. That, with respect, is an
ancillary
issue to the main issues between the parties. It
is
therefore disingenuous for Medshield, after heeding the
Master's call to have the disputes resolved through action
proceedings (by
instituting action against Calabash) to now seek to
reduce the dispute to HMl's entitlement to defend that action. In any
event,
that path
is
likely to prolong the determination of the real issues
between the parties, because if HMI were to
be
refused
permission
to defend Medshield's action, there would
be
the likelihood
of
an appeal against that order, which would further
prolong the determination
of
the
real issues between the parties.
[34] Counsel
for
HMI
argued,
correctly
in
my view, that the overriding
cons
i
deration
shou
l
d
be
that
of
the
i
nterests
of
justice,
with
reference
to
Philani-Ma-Afrika
v
Mailula.
[3]
There,
the
Supreme
Court
of
Appeal
adapted
the
general
principles
on the
appealabi
l
ity of
i
nterim
orders, and concluded that what
i
s
of paramou
n
t
i
m
portance
i
n
deciding
whether
a
judgment
i
s
appealable
i
s
the
i
nterests
of
justice.
The
approach
of
the Supreme
Court of Appeal received the
i
m
primatur
of the Constitutional Court in
Intl Trade
Administration
v SCAW
[4]
The Constitutional
Court
observed
that
the
Supreme
Court
of
Appeal had
adapted
the
general
principles
to
accord
with
the
eq
u
itable
and
the more
context-sensitive
standard
of
the
i
nterests
of
justice
favoured
by
the
Constitution.
[5]
[35]
For
all
the
above
cons
i
derations,
I conclude
that,
i
n
the
i
nterests
of
justice,
the order rescinding
the
ex
parte
order
i
s
appealable.
[36]
I
tum
now
to
the
issues
raised in
the merits
of
the appeal,
commencing
with
whether
Medshield
was
a
party
affected
by
the
ex
parte
order.
An
affected
party
[37]
The court a
quo
took a
view
that
Medshield was an affected party as it had a substantial interest in
the ex
parte
application, and stated the following reasoning
for that conclusion.
'The
procedural
i
rregularity
comp
l
a
i
ned
about
was
that
the
order
was
erroneously
sought
I
n
the
absence
of
the
applicant
(Medsh
i
eld)
despite
a
clear ind
i
cation
that
the
applicant
had
a
d
i
rect
and substantial
i
nterest
in
the
rel
i
ef
sought
i
n
the ex
parte
application
and
where
the
said
application
was
l
aunched
main
l
y
as
a
resu
l
t
of
the
action
i
nstituted
by
the
applicant
aga
i
nst
Ca
l
abash.'
[
38]
The
teamed
Judge, having
stated
that
Medsh
i
eld
had
'direct
a
n
d
substantial
i
nterest'
in
the
ex
parte
order, did
not
go
further to
explore
that concept.
As
I shall demonstrate
be
l
ow,
the
test
has
a
l
ways
been
whether
the right
of
a
party
not
before
the Court could prejudicially
be affected by the
judgment or order granted
ex
parte.
The starting point is the wording of
rule 42(1)(a) of the Uniform Rules, and how
it
has been interpreted by our courts over the years. The rule
provides:
'(1) A court may, in addition to any powers it may have,
mero
motu
or upon application
of
any
party
affected,
rescind or vary:
(a) An order or judgment
erroneously sought or erroneously granted in the absence
of
any
party
.'
affected thereby.
[39] The phrase 'any person affected' is a very wide one.
An
applicant for rescission of a judgment under Uniform
Rule of Court 42(1)(a) must show that
he
has an interest in the subject matter of the judgment
or order sufficiently direct and substantial to have entitled him to
intervene
in the original application upon which
the
judgment was given or order granted. See for example,
United
Watch
v
Disa
Hotels.
[6]
In
Standard
General v Gutman
[7]
Corbett
J
explained the concept of 'direct and
substantial interest' as follows:
'A direct
and
substantial interest can
be
connoted as an interest in the right which is the subject
matter
of
the litigation and ... not merely a financial interest which
is only an Indirect interest in such litigation. This view
of
what constitutes a direct and substantial interest has been
referred
to
and adopted in a number of subsequent decisions and it
is generally accepted that
what
is required is a legal interest in the subject matter
of
the action which could
be
prejudicially affected by the judgment or the order.'
[8]
[40] The test is the same as that
applied in intervention applications. Dealing with an intervention
application in Ex
Parle
Moosa
[9]
this Court remarked that:
'In an application for leave
to
intervene, the intervening
party
must show that that he has a legal interest,
not
merely a financial interest in the subject matter of
the litigation, and that his legal interest could
be
prejudicially affected by the judgment
of
the Court. It is not necessary for him to satisfy the Court
that it Will necessarily succeed in the litigation in which
it
seeks
to
intervene.
It is sufficient for him
to
make such allegations as would show that he has a
prlma
facie
case, and that his application is made seriously and is
not frivolous.•
[10]
(My underlining for emphasis)
[41] At 416E the Court remarked that at
the stage of application for leave to intervene, the Court must not
be over-concerned with
the intrinsic merits of dispute, which can
only be fully canvassed and fought out in the main proceedings. In my
view, the above
remarks are apposite to the present case. To
summarise on
this
aspect, the authorities
referred
to
above, amply demonstrate that a 'direct and substantial
interest' in a matter refers to a right which might
be
prejudicially
affected
by a court
order.
[421 In the present case Medshield's
right
to
pursue its action against Calabash has not
been
affected, let alone prejudicially so, by the ex
parte
order. That right remains intact and extant. What has been
affected is the manner of enforcement
of
the claims, i.e whether by way of default judgment or
by defendant action. Put in another manner, Medshield does not have
the right
to obtain default judgment against Calabash - it only has a
right to pursue its action through the normal court processes. It
should
therefore not complain about the process or the manner
of
enforcement. At the risk of repetition, the ex
parte
order did not deal with the factual and legal substratum
of
the dispute.
It
by
no means affected Medshield's existing rights and interests.
[43] To sum up on this point, the
audi
altaram partam
rule is not violated where the party who
claims that he or she was denied the opportunity to
be
heard fails
to
prove that he or she has rights and interests which
were prejudicially
affected.
[11]
To hold differently would, in my view, be putting form above
substance.
Non-disclosure
of
material
facts
[44] It is trite that in an ax
parte
application the
utmost good faith must
be
observed by an applicant. Failure
to
disclose fully and frankly all material facts known to
him or her may lead, In the exercise
of
the court's discretion, to the setting aside of the
order, on
that
ground
alone.
[12]
[45] In this regard,the
court a
quo
said:
'
Although
HMI
annexed
the
summons
to
the
application
it
failed
to
deal
with
the
numerous
allegations
against
i
t,
one
of
them
being
that
it
man
i
pulated
accounting
entries
to
transform HMI
and Agility
from
their
status as debtors
to
being
creditors
of
Calabash.
I
agree
with
submission on behalf
of
the applicant that HMI
was obl
i
ged
to
deal
with and challe
n
ge
documentary
evidence
placed
before
the
court,
even
though
the
said
court
a
quo
was
not
called
u
pon
to
determine
the
merits
of
such
allegations.
It
was
(sic}
trite
that
an
app
l
i
cant
I
n
an ex
parte
appl
i
cation,
has
a
duty
to
d
i
splay
the utmost
good
faith
and
to
d
i
sclose
all material
facts,
whether such
facts count
i
n
h
i
s
favour
or not. especially
where such
facts
m
i
ght
have
i
nfluenced
the
decision
of
the
court.'
[46]
The court a
quo
was correct
i
n
stating the general principle regard
i
ng
the duty for full disclosure
i
n
ex
parte
applications.
I
t
was
also
correct
i
n
stating that
even
if
HMI
had
disclosed
the
allegations
made
by
Medshield
against
it
and
Agility,
the
Court
was
not
called
upon
to
determine
the
merits
of
the
allegations. This
i
s
so
because
the
nature
and extent of
the disclosure
wo
u
l
d
always depend
on
the circumstances of each
case.
All
what
the
duty
e
n
tai
l
s
i
s
that all material facts which have an
i
mpact
on the order sought, should
be
disclosed.
[47]
Obviously, what is
material in each case, would depend on a number
of
factors,
i
ncluding
the nature of the relief sought and the
l
i
kely
i
mpact
the order
soug
h
t
wou
l
d
have
on
the
party
not
before
court.
As
poignantly
stated by
Lord
Stevn
i
n
R
v Oa
y,
[13]
'
i
n
l
aw
context
I
s
everything'. Therefore, the duty to make a full
disclosure
i
n
ex
parte
appl
i
cations
i
s
not
I
mmutable.
I
t
must
be
decided
i
n
the
context and
circumstances
of each case.
The 'one
size-fits-all'
approach
i
s
therefore
i
nappropriate.
I
n
Nortje
en
'n
Ander
v
Minister van
Korrektiewe
Dienste
en
Andere
[14]
it
was held
that the
audi
atteram partem
rule cannot
be
separated from the
context in which
i
t
i
s
applied.
[48]
The
context
i
n
the
present
matter
i
s
this.
The
parties
make
al
l
egations
and counter-allegations
against each other.
For example, Medshi
e
l
d
accuses
Calabash
of
having
breached
the
capitation agreement.
HMI, on the
other
hand,
makes the
same accusation against
Medshield, on behalf of Calabash. Attached to the ex
parte
application, were the following: Medshield's summons
against Calabash; a number
of
affidavits deposed to on behalf of Medshield;
correspondence and other documents referring to Medshield's claims;
and Calabash's
draft particulars
of
claim against Medshield. Even before the application
was launched, the Deputy Judge President was infonned
of
the extended litigation and various disputes between
the parties, in the letter dated 11 December 2012.
[49] Medshield's major complaint as far
as non-disclosure is concerned, is that HMI and Agility are not the
true creditors
of
Calabash, but in fact, its debtors. Medshield says that
HMI and Agility's claims against Calabash were created by
manipulating accounting
entries in terms
of
the agreements they concluded with Calabash. Medshield
says that it had repeatedly alleged in correspondence and in
litigation between
the parties that the transfonnation
of
HMI and Agility from debtors to creditors of Calabash
was fraudulent, to which HMI has not answered. For this reason,
Medshield
contends, HMI is not entitled to defend its action against
Calabash.
[50) While I agree that HMI did not
disclose the allegations
of
fraud made by Medshield against it and Agility, I do
not share Medshield's contention that the consequences
of
that failure should
be
the setting aside
of
the ex
parte
order. That contention is based on
an over-simplification of what the duty of disclosure requires. At
the risk
of
repetition, that duty requires the disclosure
of
material facts. Medshield's allegations remain exactly
that. They are not facts. That they have been repeated on numerous
occasions
without rebuttal, does not translate them into facts. Only
as a result of a trial, would a competent court find otherwise. The
court
a
quo
acknowledged that much when
it said that it the
Deputy
Judge
President was not called upon to determine the veracity of those
allegations at the stage of the ex
parte
order.
[51] Medshield contends that had its
allegations
of
fraud
against HMI and Agility been brought to the attention
of
Van der Merwe DJP, it would have
affected
his decision to grant HMI pennission to defend Medshield's
action and institute a counterclaim against Medshield on behalf
of
Calabash. Idoubt that. Given the clear importance
of
the matter, gleaned from the documents attached to the
ex
parte
application,
the huge sums
of
money being claimed by the parties against each other,
and the acrimonious tenor in the affidavits and correspondence,
it
is highly unlikely that the learned Deputy Judge President
would have allowed a situation where one of the parties would
ultimately
obtain judgment by default.
On
the contrary, those considerations, in my view, would
have impelled him to allow the issues to
be
ventilated in a trial.
As
stated earlier, the duty to disclose is
not
an inflexible one, and failure to adhere to it should
not always result in the setting aside of an order obtained ex
parte.
I therefore conclude that the lack of disclosure in the
present case was not material to the relief which was sought, and is
accordingly
of no consequence.
No
proper case
made to substitute
the liquidators' decision
[52] When a company is in liquidation,
proceedings on behalf
of
the company must be brought by the liquidator in the
name
of
the
company. However,
if
the liquidator refuses to do so, it is competent for the Court
to empower a member
of
the company to bring such proceedings in the name
of
the company, subject to an indemnity as to costs. This
is regulated by s 387(4) of the old Companies Act, which provides
that any
person aggrieved by any act or decision of the liquidator
may apply to the Court after notice to the liquidator and thereupon
the
Court may make such order as it thinksjust. That is the
sub-section which HMI relied on in its ex
parte
application.
[53]
As
stated earlier, the court a
quo
accepted Medshield's argument that for HMI to be permitted
to defend Medshield's action on behalf of Calabash,
it
was supposed
to
have shown that the decision of the joint liquidators
not
to
defend Medshield's action was mala
fide
or
unreasonable. The main hurdle for HMI, according to the learned
Judge, was that the liquidators had failed to explain their decision
not to defend Medshield's action, even after Calabash's books had
been handed over to them by HMI. It seems to have been the learned
Judge's view that in the absence
of
such explanation, it could not be assessed whether the
liquidators' decision was unreasonable or mala fide. Therefore, HMI
had to
be non-suited, since, according to the learned Judge, it had
failed to establish
ma/a
tides
or unreasonableness on the part of the joint
liquidators.
[54]
I
n
my
view,
the
court a
quo
was not
competent
to
delve
i
n
to
s
u
ch
an
enquiry.
I
n
esse
n
ce,
that enquiry concerns whether
H
MI
had established the necessary
jurisdictional
facts
to
bring
the
ex
parte
application.
According
to
Medshi
e
l
d,
the
jurisd
i
ctional
facts
are
e
i
ther
mala
fides
or
u
n
reasonableness,
absent
wh
i
ch,
H
MI
cou
l
d
not
be
permitted
to
defend
Medsh
l
e
l
d's
action
against
Calabash.Whether
H
MI
had
established the
necessary
jurisdictional
facts
i
n
the
ex
p
arts
application,
i
s
an
aspect
that
would
have
been
con
s
i
dered
by
Van
der
Merwe
DJP
when
granting
the
order.
I
f
HMIhad
failed
to
establish those,
i
n
spite
of
w
h
i
ch
the order
was
granted,
the
l
earned
Dep
u
ty
Judge
Pres
i
dent
would
have
comm
i
tted
an
error
of
l
aw.
Such
an
order
cannot be
subject
of
a
challenge
in
a rescission
application
in
the context of
ru
l
e
42(1)(a)
of
the
U
n
iform
Ru
l
es.
To
do
so,
wou
l
d
seek
to
confer
on
a
sing
l
e
Judge,
appeal
powers
over
another
Judge,
which,
of
course,
i
s
i
ncompetent
[55]
I
f
Medshield's
view
i
s
that
H
MI
had
not
establis
h
ed
the jurisdictional
facts to
substitute
the
decision
of
the
l
i
quidators,
the
course
open
to
i
t
shou
l
d
have
been
an
appeal
against
Van
der Merwe DJP's order,
i
nstead
of a resciss
i
on
appl
i
cation.
Medsh
i
e
l
d
co
n
tends
that
i
t
cannot
appeal
against
an
order
i
n
a
matter
in
which
it
was
not
party
to.
Th
i
s
i
s
not
correct.
A
party
can
of
course
do
so,
subject
to
i
t
establish
i
ng
that
it
has
a
direct
i
nterest
i
n
the
order or
judgment. See
National
Director
of
Public Prosecutions
v
Zuma.
[15]
[56]
The
court
a
quo
therefore
misdirected
i
ts
e
l
f
when
i
t
purported
to
review
or question the
correctness
of the
order
of Van
der
Merwe
DJP on the
basis that
HMI
had failed to
make out
a
case for
the
r
e
l
i
ef
i
t
sought.
I
agree with
the
contention
on behalf of
H
MI
that the bas
i
s
r
e
lied
u
pon
by Meds
h
i
etd
does not
fall
within
the amb
i
t
of
rule
42(1)(a) of
the
U
n
iform
Rules,
which
i
s
lim
i
ted
entire
l
y
to
i
nstances
of proced
u
ral
i
rregularity
or
mistake.
As
explained
i
n
the
preceding
paragraph, a
single
Judge
cannot
determine
an
appeal
i
n
respect
of
a
judgment or
order
of
another
Judge.
Put
differently,
a court
cannot
hear an appeal
i
n
respect of
i
ts
own
judgment,
and to
the
extent the teamed
Judge a
quo
purported
to do
so,
she
erred.
HMI,
says
that in
any
event,
i
t
had
made
out a case
for
the relief
it
had
sought.
I
t
mentions
factors,
which
it
submits,
demonstrate
i
ts
case. Given
the
view I take on
the
i
n
competence
of a court
to
con
s
i
der
an
appeal
i
n
respect
of
i
ts
own
judgment,
I
find
i
t
u
nnecessary
to
consider
H
Ml's
submissions.
This
i
s
such a trite principle
that there
i
s
no room for
any
other conclusion.
Concl
u
sion
[57]
For the
reasons
I have g
i
ven
earlier
i
n
this judgement,
I
am satisfied that
Van
der
Merwe
DJP
has
exercised
this
Court's
discretion
judiciously
i
n
gra
n
ting
the
ex
parte order, g
i
ven
the exigencies and circumstances of the case and the overarch
i
ng
i
nterests
of
fair
n
ess
and justice.
My
colleague Tuchten
J,
like
the
court a
quo,
non suits
H
MI
on
the
basis
that Medsh
i
eld
was a
p
a
rty
with
i
nterest
i
n
the
ex
parle
application,
and had
the
rig
h
t
to
be
served with the
application.
As
demonstrated with
reference to the a
u
thorities
earlier, that
i
s
on
l
y
part of the enquiry. A further, crucial
question,
is
whether any
of
Medshield's
rights had
been
prejudicially affected by
the
order
obtai
n
ed
ex
parle,
which,
i
n
the
present
case,
there
i
s
none.
[58]
As
stated
earlier
when
considering
the
appealability
of the
court
a
quo's
judgment,
it
i
s
I
n
the
i
nterests
of
justice
that the real
d
i
sputes
between the part
i
es
should,
without
delay,
be
ventilated
in
a trial. Medshield should not
be
permitted to
obtain
judgment by default
against Calabash in
circumstances
where
its
claims are
strenuously
disputed and
where
there
i
s
a
counterclaim
against
it.
Whether
H
MI
and Agil
i
ty
have
become
creditors
of
Calabash
through
fraud
and
ma
n
i
pulation,
or
whether
Calabash's
i
ntended
counterclaim has no merits or
has prescribed, are
I
ssues
that can only be determined
i
n
a trial.
I
f
Medshield's claims are as strong as stated
in
this
appeal,
it
should
not
be
bothered
to
put
them
to
the scrutiny of
a
trial
for
proper
ventilation.
[
59]
According
l
y,
I take a
view
that
the court a
quo,
for all
the reasons stated
i
n
th
i
s
judgment, erred
i
n
rescinding the ex
parle
order.
I
t
was not erroneously soug
h
t
or
granted. The order did
not
prejudicially affect any
of
Medshie
l
d's
rig
h
ts.
I
n
my view,
the
Court oug
h
t
to have dismissed Medsh
i
eld's
application. I wo
u
ld
therefore have
allowed
the appeal. With regard to costs, there
i
s
no reason why costs should not
follow
the event.
Both
parties have emp
l
oyed
two
counsel.
I
t
i
s
u
nderstandable,
given the nature of the
i
ssues
i
nvolved,
as well as the
i
mportance
of the matter to the
parties.
Costs shou
l
d
therefore
i
nclude
costs of two counsel.
[
60]
Given
that
th
i
s
i
s
a
minority
judgement, I
make
no order. But,
for
completeness'
sake, I would have allowed
the
appeal
with
the
following
order:
1.
The appeal succeeds;
2.
The order made by
Tlhapi
J on
30
January 2014 is set aside
and
its
place
the
following
order
is
substituted:
'The
application
for
rescission
of
the
order made
on
18
December
2012
is
dismissed
With
costs, including
costs
attendant
upon
employment
of
two
counsel.'
3.
The first respondent is
ordered to pay the costs of the appeal, inclusive of costs
attendant upon employment
of
two
counsel.
Tmakgoka
Judge of the High Court
Tu
c
hten
J
:
[6
1
]
The facts
are
set
o
u
t
in the judgment
of
Makgoka J which
I
h
ave
had
the
privilege
of reading in draft. I
regret that there
i
s
an
i
ssue
i
n
which I
differ
from the
conclus
i
on
reached
by
Makgoka
J, which means that I
thi
n
k
that the appeal should
not
succeed. The
i
ssue
i
n
question
i
s
whether the appellant was
obliged to g
i
ve
the first respondent
notice of
its
i
n
tention
to apply
i
n
the first
instance for the relief
sought
[16]
i
n
its
notice
of motion
dated
1
2
December 2012.
[
62]
The basis for the relief sought
by the appellant was that
the decision of the liquidators
not to
defend the action or
inst
i
tute
a
counterclaim
i
n
the
name
or
on
behalf of Calabash had the consequence that, absent an order
of court, it would not
be
legally competent for any party to defend the first
respondent's action against Calabash or recover in the name or on
behalf of
Calabash any money allegedly
owed
by the first respondent to Calabash.
[63] Although the decision in question
of the liquidators is not administrative action, I think that by
analogy the reasoning in
MEC for Health,
Eastern
Cape
and
Another
v
Kirtand
Investments
Va
Eye
&
Lazer
lnstitute
[17]
and
Oudekraal
Estates (Pty)
Ltd v
City
of
Cape
Town
and Others
[18]
is applicable. In paragraph
101
of
Kirtand,
the Constitutional Court held as
follows:
The essential basis of
Oudekraal
was
that invalid administrative action may not simply
be
ignored, but may
be
valid and effectual, and may continue to have legal
consequences, until
set
aside by proper process.
[64]
One of the grounds on which this conclusion was reached is
set
out in
Kirfand
at para
103:
The clarity and certainty of governmental conduct, on which
we
all rely in organising our lives, would be imperiled if
irregular or invalid administrative
acts
could be ignored because officials consider them
invalid.
[65] It is to my mind inconceivable that
in the administrative law context, an approach to a court to vary or
set
aside an administrative decision could competently be
made unless all those who had organised their lives on the basis of
the impugned
decision were given notice of the approach in question
to the court.
[66] Translating this concept
to
the present facts in my view means that notice should
have been given to those persons who had organised their lives on
that basis
of the liquidators' decision not to defend the action
which the first respondent had instituted against Calabash and not to
bring
a counterclaim against the first respondent. At that level, the
person most affected by the liquidators' decision was the first
respondent.
As
a
result of that decision, the first respondent was entitled to
organise its affairs on the footing that it need not prepare itself
for costly and prolonged legal proceedings, because the liquidators,
the only persons empowered by law to make the relevant decisions,
had
decided in the first respondent's favour. [67] In common law, it is
settled that, absent a waiver, a court will not deal with
issues in
which a third party has a direct and substantial interest unless that
party is joined in the suit or other adequate steps
are taken to
ensure that its judgment will not prejudicially affect that party's
interests.
[19]
As
is pointed out in Herbstein and Van Winsen,
The
Civil
Practice
of
the
High
Coutts
of
South
Africa,
[20]
to avoid this prejudice, it has been practice to order that a rule
nisi
should issue.
[68] The question is not in my view, as
found by Makgoka J,
[21]
whether the first respondent's right to pursue
its
action against Calabash was left intact but whether the
first respondent was bound to submit to that action's being defended
by
someone other than the liquidators and to meet a counterclaim
brought by someone other than the liquidators. One can test the
proposition,
again by analogy: where the Director
of
Public Prosecutions has declined to prosecute and an
application is brought to
set
the decision
of
the OPP aside, it is inconceivable that the applicant
for review will be excused from giving notice to the potential
subject
of
the
prosecution on the ground that such person's right to defend himself
in any prosecution brought pursuant to the review is not
affected.
[69] I accordingly make the following
order:1. The appeal is dismissed with costs, including the costs of
the application under
rule 27(1) and 49(6) brought by the appellant,
such costs to
be
taxed on the basis that the employment of both senior
and junior counsel was justified.
NB Tuchten
Judge of the High Court
I
agree
RG
Tolmay
Judge
of
the High Court
Date
of hearing: 27 January
2016
Supplementary
written
arguments: 10 February 2016
Judgment
delivered: 1
O
June 2016
Appearances:
For
the Appellant: Adv J.J. Brett SC
Adv.
E. Kromhout
I
nstructed
by: Gildenhuys Ma
l
atji
Inc., Pretoria
For
the Respondent: Adv.
A.
Subel SC
Adv.
N. Rajab-Budlender
I
nstructed
by:Hogan Lovells (South Africa)
I
nc,,
Johannesburg
Friedland
Hart Solomon & N
i
colson,
Pretoria
[1]
Zwerii v Minister of Law and Ol!Jer of the Republic of South Africa
1993 (1) SA 523 (A).
[2]
Moch v Nedtravel (Pty) Lid Ila Amel'fcan Expr11S8 Travel Setv/ce
1996 (3) SA 1(A)
at 10F-11C.
[3]
Philani-Ma-Aftika v Mallula 2010 (2) SA 573 (SCA).
[4]
'Intl Trade Administration Commission v SCAW SA (Ply) ltd 2012 (4)
SA 618 (CC).
[5]
Para 52.
[6]
United Watch & Diamond Co (Ply) Ltd v Disa Hotels Ltd
1972 (4)
SA 409
(C) at 415.
[7]
Standard General Insurance Co Ltd v
Gutman NO 1981 (2) SA 426 (C).
[8]
At 434.
[9]
'Ex Parte Moosa: In re Hassim v Ha/TOP AINn
1974 (4) SA 412
(T).
111 At 4148-C.
[10]
At 414B-C
[11]
11See for example, Mankatshu v Old Apostolic Church of Africa &
others
1994 (2) SA 458
(TkA) at 4620; Se/oadi & others v
sunInternational (Bophuthatswana} Ud
1993 (2) SA 174
(8) at
1791-180A; Masinga v Minister of Justice, Kwazulu Government
[1995] ZASCA 21
;
1995
(3) SA 214
(A) at 221J-224B; Gonion v Department of Health, KwaZulu
Natal
[2008] ZASCA 99
;
2008 (6) SA 522
(SCA);{2009] 1All SA 39 (SCA).
[12]
12 See for example, Estate Logie v Priest
1926 AD 312
at 323;
Sch/esinger v Sch/esinger1979 (4) SA
342 at 348E-350B; Trakman N.O. v
Livlshitz and others
[1995} 1All SA 434
(A) para 11.
[13]
R (Daly) v Secn1tary of State for Home Affaira (2001) 2 AC 532.
[14]
Nol1je en 'n Ander v Minister van Korrektiewe Dienst& en Andere
2001 (3) SA 472
(SCA) at 4791/J to 480C.Compare also Van Huyssteen’s
case at 305C-D WHERE THE Court held that what is of I mportance is
that ‘the principle and procedures which, in the particular
situation or set of circumstances, are right and just and fair'
are
applied.
[15]
National Director of Public Pros6culions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) para 85, and the authorities
cited there
[16]
The relief sought by the applicant is sat out in the judgment of my
leamed brother at pare 13 of his judgment.
[17]
2014 3SA 469 CC
[18]
2004 6 SA 222
SCA
[19]
Amalgamated Engineering Union v Minister of Labour
1949
3 SA 637
A 659
[20]
st11 ed, Vol 1291
[21]
Para 42 of his judgment.