About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2014
>>
[2014] ZAGPPHC 14
|
|
Blue Cell (Pty) Ltd v Blue Financial Services Limited and Others (3489/07 , 8456/07) [2014] ZAGPPHC 14 (14 February 2014)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA NORTH GAUTENG HIGH COURT,
PRETORIA
CASE
NO: 3489/07 and
CASE
NO:8456/07
DATE:
14 FEBRUARY 2014
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In the matter between:
BLUE CELL (PTY)
LTD (IN
LIQUIDATION)
...................................................
APPLICANT
and
BLUE FINANCIAL
SERVICES LIMITED
..................................................
1
st
RESPONDENT
BLUE EMPLOYEE
BENEFITS (PTY) LTD
................................................
2
nd
RESPONDENT
VAN NIEKERK,
DAVE
..................................................................................
3
rd
RESPONDENT
SMIT,
WESSEL
..............................................................................................
4
th
RESPONDENT
VAN DER
WESTHUIZEN,
RENIER
........................................................
5
TH
RESPONDENT
MOSTERT, WAYNE
ANTON
....................................................................
6
TH
RESPONDENT
IN
RE:
................................................................................................................
CASE
NO: 3489/07
BLUE
CELL (PTY) LTD (IN
LIQUIDATION)
.................................................
1
st
APPLICANT
WAYNE
ANTON
MOSTERT
...........................................................................
2
nd
APPLICANT
and
BLUE
FILNANCIAL SERVICES
LIMITED
..............................................
1
ST
RESPONDENT
BLUE
EMPLOYEE BENEFITS (PTY)
LTD
..............................................
2
nd
RESPONDENT
VAN
NIEKERK,
DAVE
..................................................................................
3
rd
RESPONDENT
SMIT,
WESSEL
.............................................................................................
4
TH
RESPONDENT
JSE
LIMITED
................................................................................................
5
TH
RESPONDENT
AND
IN
RE:
....................................................................................................
CASE NO: 8456/07
BLUE
FINANCIAL SERVICES
LIMITED
.......................................................
APPLICANT
And
BLUE
CELL (PTY) LTD (IN
LIQUIDATION)
.............................................
RESPONDENT
JUDGMENT
MATAJANE
J:
[1]
This
is an application by a co-liquidator brought in terms of the common
law powers of the Court and in the alternative in terms
of Uniform
Rules of Court, 42(1 )(c) aimed at firstly, setting aside the
judgment of Bertelsmann J under case number 3489/07 in
its entirety
and directing that the order granted in favour of the respondents be
amended in the terms identified, secondly, that
the costs order
granted on 8 May 2007 under case number 8456/07 be set aside and
substituted with the order directing the respondents
to pay costs de
bonis propriis.
Background
[2]
First respondent held two thirds of the issued
share capital in the applicant and was registered as a member in the
applicant’s
register of members prior to the date of
applicant’s liquidation. The sixth respondent held the
remaining one third of the
share capital.
[3]
In terms of the agreement concluded between the
parties, sixth respondent, was obliged to contribute in respect of
his one third
share in the equity of applicant, his know-how,
contacts, goodwill and management of the applicant and first
respondent contributed
in respect of its two third share in the
equity of the applicant, its funding on agreed basis.
[4]
First respondent breached its funding obligations
to applicant on the alleged dismal failure of applicant to achieve
either of its
budgets over the period that purportedly substantiated
the failure and lack of the financial future of the respondent. The
applicant
brought an application (“the first application “)
seeking a statement of account and payment of its revenue from the
first respondent. The respondents not only opposed the relief sought
but countered by bringing an application seeking the winding-
up of
the applicant on the alleged applicant’s poor financial
performance. Applicant was liquidated at the instance of the
First
and Second respondents and mulcted with costs. Subsequently, the
applicant’s liquidators approached the Court for an
account of
profits made by the respondents as a result of the unlawful
appropriation of the applicant’s business both pre
and post
liquidation, the application was also opposed.
[5]
It became common cause that the respondents had
prior to applicant’s liquidation unlawfully diverted a large
portion of income
that should have accrued to the now insolvent
company into their pockets. Further, the respondents had in both
earlier applications
materially misrepresented the financial state of
affairs of the applicant. Bertelsmann J found in the accounting
application that
deponents to the founding affidavits that caused
applicant to be liquidated were fully aware of the fact that they
painted a picture
for the court that was designedly distorted and did
not disclose relevant facts relating to the turnover and profit of
the company
now in insolvency as a result of such misrepresentation.
[6]
The Court ordered first and second respondent to
pay to the applicant both its pre and post liquidation net profits as
reflected
in the first and second respondent’s accounting in
the amounts of R 717 094.00 and R1 177 464.00 respectively. The Court
further ordered punitive costs of the accounting application and that
the papers in the application be referred to the Director
of Public
Prosecution to investigate circumstances under which the liquidation
order came to be made.
[7]
The Supreme
Court of appeal dismissed first and second respondent’s
application for leave to appeal rendering the liquidator’s
application final. The liquidator’s application replaced the
relief sought in the “first application” and the
winding
up application has been overtaken by events, the cost orders are the
only portion still alive. In these proceedings applicant
in his heads
of argument and in court has distanced itself from the initial relief
sought in the notice of motion and now seeks
rescission of the costs
orders in the two applications, contending that they had been
obtained because the respondents had misled
the court by deliberately
misrepresenting and concealing material facts from the court with
regard to the financial feasibility
of the applicant’s
business. It was submitted on behalf of the applicant that, had the
court known the true facts, the orders
would not have been granted.
[8]
In opposing
the application for rescission the respondents submitted, correctly
in my view, that the relief sought by applicants
in the notice of
motion is unsustainable as applicant’s case is prefaced on
fraud which is perforce deliberate and not a
result of a mistake as
applicant was unaware of the fraud. See
Tshivhase
Royal Council v Tshivhase
1992(4) SA 852 (A)
at 863 . Rule 42(1)( c) provides :
“
42. Variation and rescission of orders
(1)
The
court may, in addition to any other powers it may have, mero motu or
upon the application of any party affected, rescind
or vary:
(a)…
(b)…
an order or judgment granted as the result of a
mistake common to the parties”
[9]
Counsel for
the respondents further correctly, in my view, submitted in his
heads of argument and in Court that under common law,
applicant
would only be entitled to a
restitutio in
intergrum
if he can show that the “first
application” was obtained by the defendants’ fraud. See
Robinson v Kingswell
1915
AD 277.
It follows therefore that this court, not being a court of
appeal has no power to amend the judgment in the terms identified.
[10]
A Court may
however, assume its inherent jurisdiction to rescind in the interest
of justice. In terms of the common law a judgment
can be set aside on
the grounds of fraud if it can be shown that the fraudulent evidence
diverged to such an extend from the true
facts that the Court would,
if the true facts had been placed before it, have given a judgment
other than what it was induced by
the incorrect evidence to give. See
Chiiderley Estate Stores v Standard Bank of SA
Ltd
1924 OPD 163
,
Nyingwa
v Moolman NO
1993 (2) SA 508
(TK),
De
Wet and Others v Western Bank Ltd
1979 (2) SA
1031
(A). In the instant case it is common cause that the judgment
was predicated on fraudulent evidence and the respondents intended
to
mislead the court. In my view, it would be manifestly inequitable and
not in the interest of justice for the respondents to
benefit from
cost orders made as a result of fraud deliberately committed upon the
Court, the applicant and its creditors.
[11]
The
submission that applicant has not demonstrated that the court would,
had the true facts been placed before it, given a judgment
other than
what it was induced by the incorrect evidence to give, is fallacious.
It must surely be so that the Court repeatedly
had regard to the
alleged financial failure of the applicant asserted by the
respondents in their founding affidavits. In its judgment
on the
winding up application, the Court stated
inter
alia
that “
the
projected results were not achieved; on the contrary
,
the results of the first applicants activities
were nothing short of poor- a meagre total of 78 cellular were sold
until November
2006".
.
the
lack of the first applicant’s commercial success...”.
"...
there is every indication that the
first applicant has struggled to take off....”.
[12]
It can
hardly now be contended that the deliberate and dishonest
misrepresentation of the financial standing of the applicant did
not
result in the Court refusing the relief sought in the “first
application” and granting the relief sought in the
liquidation
application. The facts are common cause, the Court has been misled
leading to a winding up and demise of the applicant
and the
appropriation of its growing business for no value. The costs orders
in favour of the respondents could only have been
reached on the
basis that costs followed the result. I can see no reason why,
considering the Court’s common law powers of
rescission, I
should not order the rescission of the costs orders so that the
liquidated company is not saddled with costs obtained
through
dishonesty. This will, in my view, to some extend right the wrong
perpetrated against the liquidated company even if it
can’t be
resuscitated.
[13]
The
contention that because the applicant sought an order for specific
performance in the first application and Betelsmann J found
that
applicant had made out a
prima facie
case but in the exercise of his discretion, refused to grant an order
for specific performance is in my view, equally without merit.
In the
application for leave to appeal in the accounting application the
Bertelsmann J found that “
there
was
ample evidence that the Court
was
inveigled into granting a liquidation
order by skewed
-
if
not designedly false presentation of facts”
it is because of this deceit that the court concluded that there was
no compelling evidence that applicant would become financially
self
supporting and refused to grant an order for specific performance.
[14]
Another
issue remains to be addressed briefly. Respondents expressly conceded
that income due to the applicant was unlawfully diverted
into their
pockets and now raises technical arguments to prevent the applicant
in its quest to reverse its inequitable mulcting
in costs. In my
view, opposition in the present proceedings was ill advised in the
light of the deceitful conduct of the respondent.
A punitive costs
order as a mark of disapproval of respondents reprehensible conduct
is warranted.
[15]
The
following order is made:
1.
The cost
order made on 8 May 2007 under case number 3489/07 is set aside and
substituted with an order that the First to Fourth
Respondent jointly
and severally pay the costs of the application for specific
performance on a scale as between attorney his own
client.
2.
The cost
order made on 8 May 2007 in the Liquidation application under case
number 8456/07 is set aside and substituted with an
order directing
the first respondent, jointly and severally with the second to fourth
respondents, pay the costs of the liquidation
inclusive of
applicant’s full costs of opposition thereto on a scale as
between attorney and his own client.
3.
The First to
Fourth Respondents jointly and severally are ordered to pay the costs
of this application on the scale as between attorney
and own client.
K
E MATOJANE
JUDGE
OF THE HIGH COURT