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[2015] ZAGPPHC 734
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Juliana and Associates CC v Fikeni N.O. and Others (25388/2013) [2015] ZAGPPHC 734 (22 May 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
22/5/15
Case
number: 25388/2013
In
the matter between:-
JULIANA
AND ASSOCIATES
CC
PLAINTIFF
And:
SAMADODA
PATRICK MAYIBONGWE FIKENI N.O
1
st
DEFENDANT
GCWALISILE
CYNTHIA KABANYANE
N.O
2
nd
DEFENDANT
MOROKA
ISAAC BUTCHER MATUTLE
N.O
3
rd
DEFENDANT
ZANDILE
QUEENETTE LAVINIA MDHLADHLA N.O
4
th
DEFENDANT
MZAMO
MICHAEL MLENGANA
N.O
5
th
DEFENDANT
MATSHIPSANA
MERIAM MOLALA
N.O
6
th
DEFENDANT
TLHOTSE
ENOCH MOTSWALEDI
N.O
7
th
DEFENDANT
NANDISILE
FLAVOUR THOKO MPUMLWANA N.O
8
th
DEFENDANT
PHELISA
NKOMO
N.O
9
th
DEFENDANT
RASHID
AMOD SADECK PATEL
N.O
10
th
DEFENDANT
ZAKHEL
ALEX TUMMY ZITHA
N.O
11
th
DEFENDANT
Heard
on 12
th
May 2015
Delivered
on 22
th
May 2015
JUDGMENT
NCONGW
ANE
AJ.
1.
In
this matter the plaintiff is cited as Juliana and Associates CC, a
close corporation with registration number CK 2002/056967/23.
Summons
against eleven trustees of Independent Development Trust ("the
Trust") or ("the defendant") was issued
on the 30th
April 2013 for contractual damages in excess of R5 114 700.00 with
interest.
2.
The
defendant defended the claim and filed a plea o the 19th June 2013.
Plaintiff filed its replication on the 30th July 2013 and
litis
contestatio
was reached.
3.
It
is common cause that on the 25th November 2013 defendant amended its
plea by introducing a special plea to the plaintiff's claim.
The
special plea reads in the following:
"1.
Plaintiff sues
in
his
capacity
as
a
legal
or juristic person described
as a
close corporation incorporated
in terms of the
laws
of
the
republic
of
South Africa, with registration
number
CK
2002
1
056967
1
23. This Honourable
Court has
jurisdiction
to
determine
such
disputes
brought
before
it by
inter
alia
legal juristic
persons
who
are
incorporated
as such in terms
of the relevant
legislation. The plaintiff
has
since
been
deregistered
by
the
Commission
for
Intellectual
Property
and
Companies ("CIPC'')
as such
juristic
person
in
terms of the relevant legislation and
it
no
longer
exists."
A
copy
of
the
print
out
from the
CiPC
confirming
deregistration
is
attached
marked
!!I
DT
-
A
1.
2.
The
plaintiff
does
not,
as
a
result,
have
locus
standi
to
institute these
proceedings
describing
itself
as
per
close
corporation incorporated in terms of the laws of the Republic of
South Africa.”
[1]
4.
Annexure
IDT- A1 reflects the status of the plaintiff to have been
deregistered but the reasons for such deregistration do not appear
from the annexure. I will deal with this aspect later on hereunder.
At this juncture, it suffices to say that it is the status
of
the plaintiff that has caused disquiet from the defendant culminating
to the issue being argued before me. Henceforth I shall
refer to the
purported plaintiff as the deregistered close corporation or
deregistered entity.
APPEARANCES.
5.
5.1.
Mr P W Makhambeni placed himself on record as counsel for the
defendant. Mr G J Dobie appeared on behalf of the attorneys who
issued the summons and acted in the proceedings on behalf of the
deregistered close corporation but, withdrew from record three
days
before the date of trial. There was no appearance on behalf of the
deregistered close corporation inevitably owing to reasons
that the
effect of deregistration as a close corporation renderers the entity
non-existent as I expatiate elsewhere in this judgment.
5.2.
Prior to the commencement of the hearing and in chambers I was
informed by Mr Makhambeni that the defendant had served the firm
of
attorneys, who acted for the deregistered entity, Leonard Singer
Attorneys on the eve of the date of set down for trial, with
an
interlocutory application in terms whereof the defendant seeks an
order that:
"1.
The firm of attorneys Leonard Singer Attorneys, attorneys
who were acting on behalf of the plaintiff/ respondent
be ordered to
pay the costs of this action on an attorney and own client basis,
from the date of commencement to the present day.
2.
The
costs
of
this
application
be
paid
by
the
firm
of attorneys,
Leonard Singer
Attorneys
on
an
attorney and own
client
basis."
6.
6.1.
On the morning of the 12
th
May 2015, being the date of
trial, I was informed that the matter shall not proceed to trial.
Both counsel agree that I was required
only to deal with the
interlocutory application and determine an appropriate course to
follow regarding the main action.
6.2.
I allowed the matter to stand down until 14h00 to afford Leonard
Singer Attorneys an opportunity to consider the interlocutory
application and answer as to why such an order should not be made. At
approximately 11hOO, the said attorneys filed an answering
affidavit
resisting an order of costs
de bronis propriis
against the
attorneys as sought by the defendant.
6.3.
During argument Mr Dobie concurs that the purported plaintiff is a
deregistered close corporation and as such, concedes that there
is no
plaintiff before me. Mr Dobie further requested to make a submission
on behalf of a certain Ms Moratwe Juliana Makapan ("Makapan"),
an erstwhile member of the deregistered close corporation and I shall
revert to the specific submission made on behalf of Makapan.
6.4.
For comprehensive reasons that are set out hereunder, the effect of
the deregistration of the deregistered entity principally
rendered the matter incapable of proceeding on trial and
attaining finality of the claim by the deregistered entity.
ISSUES
TO BE DETERMINED
BY THE COURT.
7.
The
issues for determination are the following:
7.1.
What is the effect of the deregistration of the close corporation by
the companies office on its
locus standi?
7.2.
What is the appropriate course open at the trial, to the defendant
who is embroiled in litigation with such a deregistered entity?
7.3.
Whether costs
de
bonis
propriis
should
be ordered against an attorney who acted for the deregistered entity.
8.
Mr
Makhambeni submits that there is no plaintiff and the action against
the defendant is non-existent and he moved fer he dismissal
of the
action. ! was not inclined to agree with Mr Makhambeni that the order
dismissing the action against the deregistered entity
is the apposite
order to make and my view in that regard has remained unmoved. I was
however inclined to consider an order striking
out of the summons and
the particulars of claim of the deregistered entity and I invited Mr
Makhambeni during the course of his
argument to address me on whether
such a course will be legally tenable. Mr Makhambeni accepted the
invitation with alacrity and
submitted that it was an appropriate
order to seek, thus proceeded to move for an order that the summons
and the particulars of
claim by the deregistered entity be strike out
and judgment be entered in favour of the defendant as his first
price. Alternatively,
he sought for an order that the judgment be
entered in favour of the defendant.
9.
9.1.
During the course of argument, Counsel for the defendant submitted
that there is no reply to a special plea, this amounts to a
concession of the allegations as set out in the special plea.
9.2.
Counsel indicated that he had authority for such proposition, which
he would e-mail and make available to the court on the morning
subsequent to the hearing.
9.3.
On perusal of the authorities, I established that they do not support
counsel's proposition and do not have any relevance to the
issues
before me.
10.
Mr
Dobie relied on Walker Engineering CC
t/a
Atlantic
Steam Services v First Garment Rental (Pty) Ltd
2011 (5) SA 14
(C)
where in Bills- Ward J provides some incite as to how this procedural
conundrum may be resolved.
11.
In
that case the plaintiff's close corporation had been deregistered by
the Registrar of Close Corporations in terms of
Section 25
of the
Close Corporations Act No 59 of 1984
as the consequence of its
failure to file its annual return. In that case the plaintiff has
been deregistered on the 15th July
2010 and the matter was set down
for trial to be heard on the 25th June 2011.
12.
12.1.
Section 26 of the Close Corporation Act 69 of 1984 is similar to the
provisions of Section 73 of the Old Companies Act, Act No
61
of 1973 and currently, the provisions applicable for
deregistration of a registered company is Section 82 and Section
83
of
the
Companies Act No
71
of
2008
,
which
provisions,
however
make
provision
for
a
different
regime. The
differences
governing
deregistration
by both the
Close
Corporation
Act
and the
Companies Act, are
with regards to the process and reasons
for
deregistration, of no relevance for purposes of
this
judgment.
[2]
12.2.
It
is
trite
that
the
effect
of
deregistration
puts
an
end
to
the
existence
of
the
close
corporation
or
company.
Its
legal
personality seizes to exist.
[3]
12.3.
In
Miller and Others v Nafcoc Investment Holdings Company Ltd
and
Others
2010
(6)
SA
390
(SCA)
at
395 para
11
it
was remarked
as
follows:
"deregistration
... puts
an
end
to
the existence
of
the
company.
Its
corporate
personality ends
in
the
same
way
that
a
natural person seizes to exist at death."
12.4.
Rule 39
(3) provides:
"If,
when the trial is called, the defendant appears and the plaintiff
does not appear, the defendant shall be entitled to
an order granting
absolution from the instance with costs. But may lead evidence with a
view to satisfying the court that final
judgment should be granted in
his favor and the court, if so satisfied, may grant such judgment."
12.5.
Relying on
the Walker
Engineering
judgment,
Mr Dobie
submitted
that
the
order
sought
by
the
defendants
cannot
be
sustained unless the state is joined
as a party
to the action since the
state
has
sufficient
interest
after
the
property
of
the
deregistered entity has
vested
to
the
state
as
bona
vacantia
upon
deregistration.
[4]
On
behalf
of
Ms
Makapan,
he
requested
that
the
matter
be
postponed
and
Ms Makapan
tenders
wasted
costs
in
her
personal
capacity. I
am
unable
to
accede
to
this
request as
Ms
Makapan
is
not
a
party
before
me.
The
appropriate
cause
in
my
view
may
be
located
in the
ipsissima
verba
of
Bills-Ward
J
in
the Walker
Engineering
decision, would be,
at first
impression,
postpone
the
trial
with
a
directive
to
the
defendant,
that
if
it wishes,
in the
event
of
non-appearance
on behalf
of
the
plaintiff
on
that
date,
to
seek
absolution
from
the
instance,
to
give
reasonable
notice
to
the
Minister
of
Finance
before that
date,
substituting
him as the
plaintiff
in place
of the
deregistered close corporation.
It
was
necessary
to resort to this course
due to the
difficulty that the
non-existence
of the plaintiff
precluded
the
operation
of
Rule 39
(3)
of
the
Uniform
Rules
of
Court.
[5]
12.6.
If there is no plaintiff in the proceedings who can be said to be in
default of appearance, Rule 39 (3) of the Uniform Rules has
no
relevance and cannot find application.
"A
non-existence
person cannot be in default of the appearance, nor
could
the
defendant
in
the
circumstances
seek
judgment
in
terms of the
second
part of the
sub-rule''
[6]
12.7.
I therefore conclude that the order sought by the defendant in that
final judgment be granted in its favour against the non
existent
plaintiff to be inappropriate.
13.
The
facts in the Walker Engineering case are slightly distinguishable
from the facts put before this court. I do not for instance,
have
evidence before me on the reasons for the deregistration of the close
corporation. In addition to deregistration occurring
out of failure
to file annual return, it can also occur where the close corporation
or company having being dissolved or being
inactive from business. It
is not in all of those instances that the property of the
deregistered entity will vest with the state
as
bona
vacantia.
I do not also for instance, have evidence
before me as to whether the deregistration of the plaintiff occurred
prior to the commencement
of the action or after the claim has been
instituted.
14.
In
the circumstances, I conclude that there was in fact no action before
me when the matter came for trial as the summons by the
deregistered
close corporation (the purported plaintiff) is
nul
and
void
ab
initio.
Consequently, there are no effective proceedings before court.
The appropriate order in the circumstances is to strike the matter
from the roll.
15.
COSTS.
The
attorneys acting on behalf of the deregistered entity set the action
down for trial on the 22nd August 2014 for the 12
th
May
2015. This set down was implemented by the attorney (Ms Monique Anne
Shlagman) for the deregistered entity notwithstanding
the knowledge
by her that the purported client does not effectively exist, contrary
to what is pleaded in the particulars of claims.
16.
16.1.
The parties continued to prepare for trial scheduled for the 1ih May
2015 but, four days before trial, defendants' attorneys were
served
with a notice of withdrawal of attorneys from record. The reasons
furnished by the attorney for deregistered entity for
the withdrawal
is that "...
the plaintiff
is
deregistered
and
as such
the
attorneys
cannot
act on
its
behalf'.
(my
own underlining)
16.2.
It is this notice of withdrawal that caused consternation on the part
of the defendant resulting in the interlocutory application
referred
to above.
17.
Mr
Makhambeni's submission is that the attorney's firm that represented
the deregistered entity acted dishonorably by continuing
to litigate
in this matter when they knew that there was no basis for them to
litigate the way they did when they, in fact should
have withdrawn
much earlier. They made, so the argument went, the defendant
to incur unnecessary costs and the litigation
pursued by them, was
nothing else but the vexatious abuse of the court's process, which
justifies a court visiting such "bad
behavior" with a
punitive order against the erstwhile attorney and not the lay client
who cannot be said to know anything
about the effects of the position
of the "plaintiff".
18.
That
conduct remained unchanged even after the attorneys for the defendant
again brought it to her attention that there is no plaintiff
in the
action and this they did by dispatching two (2) letters to the
attorney acting for the deregistered entity, being a letter
dated the
29th April 2015, annexure "SMS 6" and the letter dated 28
th
April 2015 annexed as "SMS 10" to the interlocutory
application. It is this conduct that should be frowned upon by the
court and indeed the court expresses its displeasure in the manner in
which the attorney acted under the prevailing circumstances.
It is
indeed so that the legal profession expects the gentleman and ladies
of the legal profession to treat each other collegially
with
integrity and desist any conduct that may be construed as
amounting to misleading a colleague. The attorney for
the
deregistered entity is found wanting of these essential
characteristics.
LEGAL
PRINCIPLES ON COSTS.
19.
19.1.
The basic
rule is undoubtedly the one that an award of costs is in
the
discretion
of the
court.
The
court's
discretion
must
be
exercised judicially
after
considering
all the
applicable facts and circumstances.
[7]
19.2.
The general rule is that costs follow the event, that is, the
successful party is awarded his/her costs. In this matter, there
is
no successful party in the action.
19.3.
The court
will in appropriate circumstances award costs
de
bonis propriis
against
an
attorney.
The
usual
approach
is
that,
courts are
reluctant
to
order
costs
against
the
legal
representatives
personally
as
attorneys
and counsel
are called
upon to
present their cases fearlessly and vigorously
but within
the content
of the
normal
professional and ethically acceptable
rules.
[8]
It
is
the
attorney
and
not the
lay
client
who
must
have
anticipated
that
litigation
will
not
reach
finality
due
to
the
status
of
the
deregistered
close
corporation.
It needs to
be
emphasized
that
litigation is
the not
a
game
where a
party
may
seek
tactical
advantages
by
concealing facts from
his
opponent and thereby occasioning unnecessary costs.
[9]
19.3.
I do not agree with counsel for the defendant that the attorney for
the deregistered entity has conducted the proceedings vexatiously.
I
do not accept, from the facts, that she had the intention to be
vexatious. I am however troubled by her conduct of pursuing the
claim
on behalf of the purported plaintiff whilst she knew and accepted
that her client will in due course be proved to have
no basis to sue
due to lack of legal standing and when the shoe started to pinch, she
will remove her name from record. At least
she should have
communicated her plan of the conduct of the proceedings to the
defendant's attorneys, more so, that it was doomed
not to bear any
fruits for her client, as a matter of high probability. The defendant
was simply kept second guessing the plaintiff's
attorney on the issue
of the legal standing of the deregistered entity, hence the decry by
the defendant that she unabatedly dragged
the matter deliberately in
the hope that the defendant would
"commit
a
misstep"
and delivers a gainful situation to her
client from the litigation.
19.4.
It does not assist the attorney to contend that she proceeded with
litigation on instructions from client. She knew better than
the lay
client. She was frivolous in her approach towards1the issue of the
special plea. I find the attorney to have committed
a grave
misconduct which has caused grave effect in the proceedings. She
acted unreasonably and her conduct in turn has mulcted
the defendant
with unnecessary costs and this is a ground upon which I should
exercise my discretion to award costs
(de bonis propriis)
against the attorneys who soldiered, on behalf of the
deregistered entity.
20.
20.1.
Our
courts
have
penalized
dishonest,
improper
or
fraudulent
conduct,
or
conduct where
cases
are
presented with false evidence, and where there has been a concocted
case.
[10]
20.2.
The
court
expects
attorneys
acting
on
behalf
of their
client,
as
professional
officers of this court to display objectivity and sound common sense
in
assisting
clients.
[11]
21.
21.1.
From the affidavit filed by Shlagman, it is clear that the aspect of
withdrawal of the attorneys has not been discussed with Makapan
at
any other stage prior to the time of the withdrawal, on or about the
4th May 2015. It therefore could not have been on Makapan's
instructions that the attorneys must remain on records for the
deregistered entity if she could
have
been advised by her attorneys that there was no other option
but to withdraw.
21.2.
A situation where an attorney continues unabatedly to act on behalf
of a deregistered close corporation or company can be likened
to a
scenario where an attorney acts on behalf of a natural person lying
in a hospital bed in a coma but the attorney claims to
act on direct
instructions from such a person or even a deceased person. What is
even more concerning is that in her answering
affidavit she deposes
to the fact that she obtained Senior Counsel's opinion about the
legal personality of the deregistered entity
and Counsel's opinion
was that the plaintiff had to be re-registered to have any success in
the matter. Notwithstanding having
received the opinion from Senior
Counsel the attorney for the purported plaintiff simply continued
with litigation to seek success
for the plaintiff as if the
locus standi
of the plaintiff was not in issue.
22.
22.1.
With regard to cases where an award of costs
de bonis
propriis
against any attorney would be
appropriate, according to the learned author Cilliers, in
Cilliers
Law of costs (LexisNexis Butterworth's Durban 2000, at para
1025), after referring to
Rautenbach v
Symington
1995 (4) SA 583
(0),
says:
"The
court made it clear, however, that its discretion to award costs
de
bonis propriis
is not restricted to cases of dishonest,
improper or fraudulent conduct and that no exhaustively existed: it
includes all cases
where special circumstances or considerations
justify an order."
22.2.
It seems to me that what must be done in this case, is to mark the
court's disapproval of Ms Shlagman's conduct and to ensure that
such
abuse of court process is discouraged.
23.
Ms
Shlagman was in court during the hearing, edged me through her
counsel, not to make an order of costs against her firm, but,
if I do
grant the application I should make an order against her personaliy
rather than against her firm.
24.
In
respect of the main action and in the exercise of the courts inherent
powers, I therefore make the following order:
24.1.
That the action by the deregistered close corporation (the purported
plaintiff) is
nul
and void ab initio;
24.2.
The main action is strike from the roll with no order as to costs.
24.3.
That Ms Shlagman is ordered to pay costs
de bonis propriis
on a party and party scale, from the date of the 25th November
2010 to the 4th May 2015, including costs of the interlocutory
application.
___________________
NCONGWANE
AJ
ACTING
JUDGE
OF THE
HIGH COURT
Advocate
for Plaintiff:
Adv G J Dobie
Attorney:
Leonard Singer Attorneys
C/O Helen Karsas
Attorneys
194 Pienaar Street
Brooklyn, Pretoria
Advocate
for Defendant: Adv P W Makhambeni
Attorney:
Mokuena Attorneys
CIO
Matshego
Ramagaga Attorneys
515 Protea Towers
Building
246 Paul Kruger Street
Pretoria
[1]
It
is
evident
that
annexure
IDT/
Al
is the
company
search
from
the
records
of
the
Companies
and
inteiiectuai
Property
Registration
Office,
which
has
been
obtained
through
LexisNexis
and
the
search was
conducted
o
the
1
4/10/2013.
[2]
See Walker
Engineering
CC t/a Atlantic Steam Services v Fits Garment
Rental
(Pty) ltd 2011 (5) SA
1
4
(C)
[3]
In Walker
Engineering's
case, the court held that the effect of deregistration
company is
that all its property, including any claims it might have against
third parties, thereupon vest in the state as
bona
vacantil,
page
80 para C-E of
the
judgment.
[4]
This
contention
has
its
roots
in
the
Rainbo\v
Diamond
(ED./!S
PBK
en
t
i
.ndere
v
Suid
Afrikaanse
Nationale Lewensassuransie
Maatskapy
1
984
Vol 3 SA
1(A))
[5]
The Provisions of Rule 39 {3
j
are
referred to in para
1
2.4
above.
[6]
Walker Engineering case page 25, para B.
[7]
Kruger
Bros and
Wasserman
v Raskin
1
9
1
8
AD
63
Act
69
[8]
In Multi Links Telecommunication
v Africa
Pre-paid
2014 (4) SA
265
at
288
para J
Fabricius
J
states
that
legal
practitioners must
present
their case fearlessly
and
vigorously,
but always
within the context of said ethical rules
that
pertain to
them, and which are aimed at preventing practitioners from becoming
parties to deception of the court. It
is in
this
context that society and the courts and professions demand
absolute
personal
integrity and scrupulous
honesty of
each practitioner
[9]
See Kekana v Society of Advocates
of South
Africa
1
998
(4) SA 698
(SCA)
[
1
998]
(3) All SA 577
at 6551-
656B
See
Niewoudt v joubert
1988 (3) SA 84
(SE) 88 para H.
[10]
See
Friedirich
Klingmbh
v
Continental
Jewellers
Manufactures
1
995
(4) SA 966
(C)
at 975
(C-F); and
Spieth v
Nagel
{1997)
(3)
Al!
SA
316W
at 325
(B-D).
[11]
See Clemson v Clemson
(2000) All
SA 622
{W)