Al-Rawas v Pegasus Energy Management Services (Pty) Ltd and Others (8088/2006) [2007] ZAWCHC 18 (9 May 2007)

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[2007] ZAWCHC 18
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Al-Rawas v Pegasus Energy Management Services (Pty) Ltd and Others (8088/2006) [2007] ZAWCHC 18 (9 May 2007)

IN THE HIGH COURT OF SOUTH
AFRICA
(CAPE OF GOOD HOPE PROVINCIAL
DIVISION)
Case no.
8088/2006
IMAN SAID ABDUL AZIZ
AL-RAWAS
Applicant
v
PEGASUS ENERGY MANAGEMENT SERVICES
(PTY) LTD
First
Respondent
MIDDLE
EAST SOUTH AFRICA ENERGY (PTY) LTD
Second
Respondent
HAROLD
ALAN PALMER
Third
Respondent
JUDGMENT DELIVERED THIS WEDNESDAY,
9 MAY 2007
CLEAVER
J
[1] This matter came before me on the
return day of a rule
nisi
which authorised the grant
of an
Anton Piller
order.
[2] Thamer
Said Ahmed Al-Shanfari (“Al-Shanfari”) previously participated in
a number of business ventures with Sheikh Khalifa
Bin Hamed Al-Thani
(“Sheikh Khalifa”) and Dr Issa Ghanem Al-Kawari (“Dr
Al-Kawari”). The ventures included, between 1999
and 2002, the
operation of a diamond mine in the Democratic Republic of the Congo
through a company known as Oryx Natural Resources
Limited (“Oryx”)
and in 2001 a company known as Pegasus Energy Limited (“Pegasus”).
The latter was registered in Mauritius.
The business of Pegasus is
the trading of oil products within the Southern African region and
the United Arab Emirates. Sheikh
Khalifa was the Emir of Qatar from
1972 to 1995. Dr Al-Kawari, who was previously head of the Palace,
Information Minister and Minister
of Diwan Amiri Affairs (the Royal
Court) of Qatar continues to advise Sheik Khalifa.
[3] Pegasus
was established as an oil trading company upon the proposal of
Al-Shanfari and was financed entirely by loan capital supplied
by
Sheikh Khalifa, initially personally, and thereafter by his
companies. Pegasus was dependent on the willingness of Sheikh
Khalifa
to provide finance in order to continue in business. By
March 2003 the loans advanced to Pegasus totalled approximately
US$6,5 million.
At that stage 102 shares in Pegasus had been issued,
these being held as to 34 each by Sheikh Khalifa, Dr Al-Kawari and
Al-Shanfari.
[4] It
is common cause that Al-Shanfari’s involvement in the management of
Oryx was effectively terminated in December 2002 after
he was cited
in a United Nations report into the illegal exportation of natural
resources and other forms of wealth of the Democratic
Republic of the
Congo. The respondents say that on 10 March 2003 Al-Shanfari was
also asked to resign from the board of Pegasus
and it is common cause
that on that day he did so resign. He also agreed to dispose of his
shareholding in Pegasus which he did
by transferring his shares to
his wife, Iman Said Abdul Aziz Al-Rawas (“Al-Rawas”), the
applicant in these proceedings.
[5] Sheikh
Khalifa and Dr Al-Kawari were unhappy about Al-Shanfari’s wife
remaining a shareholder in Pegasus. Al-Shanfari contends
that his
relationship with Sheikh Khalifa and Dr Al-Kawari had become strained
since he had commenced proceedings against Dr Al-Kawari
regarding a
BMW manufacturing venture in Egypt in which the two of them had been
involved.
[6] Because Pegasus did not wish to
have Al-Rawas as a shareholder, it consulted its South African and
Mauritian lawyers to consider
how the interest of Al-Rawas might
lawfully be terminated or
“alternatively
if this were not possible, how the imbalance caused by Al-Rawas’
failure to contribute any expertise or finance
to Pegasus might be
addressed”
. The advice
which Pegasus received was that
“
a. The existing shareholders’
loans made to Pegasus should be called in and steps taken to
re-capitalise the company by issuing
further shares to which a
sufficient value would attach;
b. These
shares should be offered to all existing shareholders in Pegasus. In
the event that Al-Rawas accepted and paid for the shares
offered to
her, she would have invested capital into Pegasus. In the event that
she did not accept this offer, these shares might
be allocated to
either of the other existing shareholders and, upon acceptance,
Pegasus would in any event be re-capitalised.”
Pursuant to this advice, demands for
the repayment of all the loans advanced to Pegasus were made and
following notice of these demands,
on 7 February 2005 the Board of
Pegasus met and agreed to issue 24 966 shares in Pegasus to each of
its existing shareholders at
a price of US$120 per share. Although
the total amount due in terms the loans had been US$10 505 000, the
value of the shares offered
was US$8 987 786. The difference was
apparently due to the fact that loans totalling some US$2,4 million
had been
subordinated
so that the company could remain solvent. Following the company’s
resolution, letters were addressed to each of the
three shareholders
on 7 February 2005 offering them each an allotment of 24 966 shares.
A form to indicate the acceptance of the
offer was provided which was
to be returned by 17h30 on 23 February 2005 after which time it was
stated that the offer would be deemed
to be declined. No acceptance
was forthcoming from Al-Rawas and on 26 February 2005 the Board of
Pegasus met and effected two resolutions.
By the first of these
resolutions Dr Al-Kawari and Sheikh Khalifa accepted the shares
offered to them and by the second Sheikh Khalifa
accepted also those
shares offered to but declined by Al-Rawas. In the result the
shareholding in Pegasus became the following:
Sheikh Khalifa 49 966
Dr
Al-Kawari 25 000
Mrs Al-Rawas
34
Total
75 000
[7] Al-Shanfari, the deponent in the
papers before me, says that he considers the transaction suspect and
through his attorneys caused
the records of Pegasus to be inspected
at the overseas registration agency known as OCRA (Mauritius) Limited
(“OCRA”) by his
attorneys. His attorneys reported that they were
not able to locate any directors’ resolutions, minutes of
directors’ meetings
or shareholders’ resolutions pertaining to
the loans which had been advanced by Sheikh Khalifa to Pegasus. The
attorneys were
also advised that no accounting records of Pegasus
were held by OCRA or held at OCRA.
[8] On 2 August 2006 the applicant
successfully applied
ex
parte
in this court for an
Anton Piller
order against the respondents. The order authorised the sheriff to
enter premises said to be premises of the first respondent for
the
purposes of searching for and taking delivery and retaining, pending
the directions of this court, the following items:
“
All documents, by which is
included reference to documents and information recorded in
photographic or electronic form (whether digitally
or otherwise):
1. relating to the loans allegedly
made by HH Sheikh Khalifa Bin Hamed Al-Tani and Beagle Equities
Limited, Fermor Investments Limited
and Watchhorn Business
Corporation, to Pegasus Energy Limited (‘
Pegasus
’),
which are in the respondents’ possession, including board
resolutions, loan agreements, correspondence evidencing such loans
and requests for repayment,
2. relating
to or evidencing the reason(s) for the decision of the board of
Pegasus taken on or around 14 June 2004 to allocate a
further 49 266
(or any other number of) additional shares in Pegasus to Sheikh
Khalifa and a further 24 966 (or any other number
of) additional
shares in Pegasus to Dr Issa Ghanem Al-Kawari (Dr Al-Kawari); and
3. relating
to Pegasus’ decision in or around February 2005 to invite
shareholders to subscribe for additional shares at USD120
per share,
including documents confirming or illustrating the financial position
of Pegasus at that time and/or documents explaining
the rationale for
pricing those additional shares at that price.”
[9] Although Al-Rawas is nominally the
applicant, the founding and replying papers are deposed to by her
husband Al-Shanfari and it
is clear that he continues to exercise
control in respect of the shareholding previously held by him in
Pegasus. Significantly,
from a legal point of view, Pegasus is not
one of the respondents which are:
1. Pegasus Energy Management Services
(Pty) Ltd (“PEMS”) (the first respondent), a company duly
registered as such in terms of
the company laws of South Africa
having its registered address in Cape Town and its principal place of
business in Sandton City,
Gauteng.
2. Middle
East South Africa Energy (Pty) Ltd (“MESA”) (the second
respondent), a company duly registered as such in terms of the
company laws of South Africa having its registered address in Cape
Town and its principal place of business in Sandton City, Gauteng.
3. Harold
Alan Palmer (the third respondent) who resides in Cape Town and who
is a director of Pegasus and of the first and second
respondents.
[10] The return day was initially set
for 7 September 2006, but on that day an order was taken by agreement
in terms whereof the Rule
was extended to 27 February and a timetable
for the exchange of further affidavits was provided. The order
provided further that
copies were to be made of the documents seized
from the respondents and that the original documents were to be
returned to the respondents
with the copied documents to be retained
in the possession of the sheriff pending directions by the court.
When the matter was argued
on 27 February, the respondents sought the
discharge of the order.
[11] The founding papers record that
the application mirrors similar applications against related
respondents in the English High
Court in London and in the Supreme
Court of Mauritius. The respective orders granted pursuant to those
applications were executed
simultaneously two days after the grant of
the
Anton Piller
order in this court. The description of the applications in
Mauritius as being
Anton
Piller
applications is not
entirely accurate. In that court the order granted was more of the
nature of an order for discovery.
[12] The grounds upon which the
respondents seek the discharge of the order are the following:
12.1 The applicants fail to disclose
certain material facts to the court when seeking relief on an
ex
parte
basis. It was also
contended that certain facts were misrepresented by the applicant.
12.2 The
requirements for an
Anton
Piller
order were not met
in that
12.2.1 The applicant had no real,
bona fide or reasonable apprehension that the documents listed in her
application would be hidden
or destroyed or in some manner spirited
away.
12.2.2 No cause of action was made
out against PEMS or MESA and the asserted cause of action against the
third respondent is not
bona fide.
12.3 The documents in question belong
to Pegasus which has not being joined in these proceedings. Pegasus
should have been joined
since it clearly has a direct and substantial
interest in the proceedings.
12.4 The applicant failed to comply
with paragraph 7 of the
Anton
Piller
order which directed
her to join PEMS and MESA to the pending substantive proceedings in
Mauritius within ten days of the order.
12.5 The applicant did not make out or
establish a case for the application to have been brought on an
urgent basis.
12.6 The issues identified in
paragraph 12.1 and 12.2.1 have been determined in a judgment of the
English High Court and are thus
res
iudicata
.
[13] The requisites for the grant of
an
Anton Piller
application in this country were set out in
Shoba
v Officer Commanding, Temporary Police Camp, Wagendrift Dam, and
Another
1
.
These are that
13.1 That the applicant has a cause
of action against the respondent which he intends to pursue;
13.2 That
the respondent has in his possession specific (and specified)
documents or things which constitute vital evidence in substantiation
of the applicant’s cause of action (but in respect of which
applicant can not claim a real or personal right);
13.3 That
there is a real and well-founded apprehension that this evidence may
be hidden or destroyed or in some manner be spirited
away by the time
the case comes to trial or to the stage of discovery.
This description has been followed and
approved in many cases, including recently in this Division, in
Rath
v Rees
2
.
FAILURE TO DISCLOSE MATERIAL FACTS
[14] On behalf of the respondents it
was contended that the applicant failed to disclose to the judge who
granted the interim order
material facts of which she was aware
relating to
* The loans to Pegasus
* The
order granted in Mauritius
* The delays in bringing the
application having regard to earlier threats that litigation would be
commenced against the respondents.
[15]
The
loans to Pegasus
:
The case made out by the applicant in
the founding affidavit was that the loans made to Pegasus by Sheikh
Khalifa were probably bogus.
The existence of the loans was
repeatedly questioned and this formed the basis of the applicant’s
submission that Dr Al-Kawari
and Sheikh Khalifa had embarked on a
fraudulent scheme to defraud the applicant. The following statements
appear in the founding
affidavit:
* ‘
“In
addition, it is also my belief that the share issue which occurred in
February 2005 was part of a fraudulent scheme devised
and or
negligently participated in by the respondents with the primary
purpose of diluting my wife’s shareholding in
[Pegasus]
.
I refer in particular to the following features of the share issue,
which are set out in full in TAS1-P:
(a)
I
am not aware of any commercial reason as to why the loans would have
been required;
”
(emphasis supplied)’
* ‘”The lack of information
available to support
the
existence of the loans
is I believe suspicious and given
[Pegasus’]
failure to furnish my wife
with any particulars to support these matters, she requires the
injunction in the terms sought to address
these questions”
(emphasis supplied)’
* ‘
“In
addition to the above, I also refer to the respondents’
unwillingness to provide my wife with any documentation which would
independently verify
the
existence of the loans in question
,
and
if the loans were
indeed advanced
,
that they were made for a genuine commercial purpose on commercial
terms.” (emphasis supplied)’
*
‘”My
wife and I had
serious
misgivings as to whether the loans had ever
been made
,
and if not, whether they were simply a scam to make my wife’s
shareholding in
[Pegasus]
negligible.
If
the loans were in fact made (which I seriously doubt)
,
we wondered whether they were made at arms length, what the purpose
of the loans and whether they were made purely for the purpose
of
creating the debt which would ‘require’ the share issue.”
(emphasis added)’
* “’The matter arises from what
I consider to be a deliberate scam and a bogus set of transactions on
the part of the respondents…
to make my wife’s shareholding in
the company essentially valueless. I cannot, at this stage, say with
certainty that the initial
loans themselves were bogus (
although
I strongly suspect that they were
),
but I am certain that the repayment of the loans via the share issue
and share allocation was in fact a scam. It is in essence
a fraud
against my wife ….”. (emphasis supplied)’
It is clear from the answering
affidavit filed on behalf of the respondents that Al-Shanfari was
well aware of the fact that substantial
loans had been made to
Pegasus by Sheikh Khalifa up to March 2003 when he resigned as a
director of Pegasus. There is also documentary
evidence to show that
he was aware of the existence of the loans made up to that date and
in Al-Shanfari’s witness statement in
the English proceedings his
knowledge of the loans is admitted. At the time of Al-Shanfari’s
resignation from the Pegasus Board,
Pegasus’ sole source of funding
had been loans from Sheikh Khalifa and or his companies and the
amount due in terms of those loans
stood at US$6 823 000, including
interest. After Al-Shanfari’s resignation, further loans were made
to Pegasus by Sheikh Khalifa’s
companies and as at February 2005,
these totalled US$ 10 405 000.
[16] Having admitted the existence of
the loans in the English proceedings and in effect the amount owing
in terms of such loans at
the time of his resignation as a director,
Al-Shanfari changed tack in his replying papers, contending that he
had no knowledge of
the loans made after the date of his resignation
and that his concern had always been the purpose behind the recall of
the loans.
Before me, counsel for the applicant supported this
latter contention and sought to make something of the difference
between the
amount said to have been owing in terms of the loans and
the amount for which shares were issued. This difference was
explained
by the respondents, but is in any event not material to the
issue of the applicant’s non-disclosure of his knowledge of the
loans.
That the references to supposedly bogus loans must have been
an important factor in persuading
Van
Zyl
J to grant the interim
order is underscored by the following submissions made by the
applicant’s solicitor in the London proceedings
which were embraced
in these proceedings.
“
I would respectfully suggest
that individuals who would engage in conduct such as
(a) Deliberately setting up
loans/loan documentation designed to create a series of debts (or the
appearance thereof) owed by the
company to a shareholder (Sheikh
Khalifa) and entities owned and controlled by him, which could then
be called in simultaneously
in order to justify a Share Issue taking
place without prior warning to Mrs. Al-Rawas alone out of the three
shareholders;
(b) using
the requirement on the part of the company to repay those ‘loans’
as a pretext for requiring the company to find the
necessary US$10.4
million cash via a rights issue;
(c) ensuring
that the opportunity to subscribe to the rights issue given to Mrs.
Al-Rawas alone out of the three shareholders was
extremely limited,
unreasonably short and remained open for acceptance by that
shareholder for less than the 14 day minimum period
required by the
applicable companies legislation and thus acting in breach of Section
55(2) of the Mauritius Companies Act 2001;
would be more than likely to
destroy potentially incriminating documentation (relating to such
conduct) in order to protect their
position in proceedings, unless
prevented by an order of the court. I therefore consider that there
is a real risk of documents
of the sort identified in Schedule B to
the draft order proposed by the Applicant being destroyed unless the
Search and Seizure Order
is granted.”
(I might say that the logic of the
conclusion reached on the strength of the averments in (c) is
difficult to follow.)
In my view the failure to disclose the
applicant’s knowledge that Pegasus had been funded by loans by
Sheikh Khalifa and of the
amounts due in terms of those loans as at
March 2003 was material and should have been disclosed to
Van
Zyl
J. The manner in which
the loans were dealt with was in fact misleading. Counsel for the
applicant referred to information contained
in the respondents’
answering affidavit which detailed the steps taken prior to the
resolution being passed in which shareholders
were called on to take
up additional shares and submitted that such evidence was an
indication of misconduct on the part of the shareholders
in respect
of
“dubious loan
accounts”
. Again, stress
was laid on the validity of the loans and importantly, the founding
papers do not make out a case that the loans
could not be called up.
[17]
THE
CHARACTERISATION OF THE ORDER GRANTED IN MAURITIUS
In the founding affidavit Al-Shanfari
stated that the application was aimed at
“mirroring
the relief already sanctioned by the Supreme Court of Mauritius
regarding the documents held by Pegasus in Mauritius”.
This statement is not correct. The application in this court was
for an order permitting the applicant’s representatives to enter
the respective premises of the respondents, to search for documents
and for the retention of such documents by the Sheriff pending
further court directions. The Supreme Court of Mauritius had not
“already sanctioned”
such an order. In Mauritius Pegasus was merely ordered to furnish
copies of certain categories of documents to the applicant’s
representatives in the presence of a court usher and the order did
not permit entry into the premises of Pegasus. The fact is that
the
applicant had initially sought a search and seizure order in
Mauritius, but in the event was not granted such an order and the
issue is whether that information and the nature of the relief
granted in Mauritius was material to the extent that it might have
influenced
Van Zyl
J in coming to a different conclusion. In the light of the view
which I take in respect of other issues raised by the respondents,
it
is not necessary to rule on this aspect.
THE DELAY IN BRINGING THE
PROCEEDINGS
[18] The paragraphs in the founding
affidavit on which the applicant relied to justify the
ex
parte
and urgent approach
to the court read as follows:
“
24. As I have mentioned above,
this is not the First time that the Applicant and I have become
victims of wrongful non-payment of
a shareholding at the apparent
instance of Sheikh Khalifa and Dr Al-Kawari.
26. I have little doubt that,
should either of these two gentlemen (together with the other
directors of Pegasus cited as Respondents
in Mauritius, including the
Third Respondent in these proceedings) be forewarned of this
application, they would obtain the destruction,
concealment or
spiriting away of whatever documentary evidence exists to prove the
Applicant’s cause of action in Mauritius. They
will most probably
also have occasion to create fictitious documentation. I
respectfully say that it is implicit in the orders of
the Supreme
Court of Mauritius (Bankruptcy Division), in granting the “
Anton
Piller
” orders there, that
the information sought is vital and that there is a well-founded
apprehension that the documents would be destroyed,
concealed or
spirited away in the absence of a preservation order.”
These averments plainly indicate that
the respondents had not been alerted to the fact that the applicant
intended to bring proceedings
against the respondents and why notice
ought not to have been given to the respondents. The fact is,
however, that as long ago as
21 February 2005, after Al-Rawas had
received the communication in which she was given the option to take
up 24 966 new ordinary
shares, her solicitors addressed a letter to
the third respondent in his capacity as Chief Executive Officer of
Pegasus in which
they recorded that they required full particulars of
resolutions passed relating to the
“loans
referred to”
and other
details regarding the repayment terms and interest, as well as copies
of other relevant documents to confirm that the transactions
were
transacted at arms length. In the letter, the third respondent
was advised that unless
copies of the documents and correspondence requested were received
together with confirmation that the new
share issue would be
suspended, the applicant would make immediate application to the
court for an order protecting her and for injunctive
relief
preventing the new share issue from being completed. On 23 February
2005 Pegasus replied, stating that after taking advice,
the company
was not obliged to provide the applicant with the documents or the
information requested, but that the applicant was
entitled to inspect
“such documents in
accordance with and adhering to the laws and regulations governing
the operations of the company”.
No
response to this invitation was received and no proceedings were
instituted. In January 2006, the applicant’s present English
solicitors inspected Pegasus’ registered office in Mauritius in
order to inspect such documents as were held there. The solicitors
were not permitted to take copies of the documents inspected (in
accordance with Pegasus’s understanding of Mauritius law) and
as a
result threatened a court action. No proceedings were instituted.
[19] These letters appear as annexures
to the copy of the affidavit filed in support of the petition filed
in Mauritius, which was
in turn referred to in the founding
affidavit. These papers run to some 350 pages and having regard to
the importance of the letters,
I am of the view that the judge’s
attention ought to have been drawn to them specifically in the
founding affidavit. The respondents
would have had ample time to do
away with the documents should they have chosen to do so and had the
presiding judge been alerted
to the fact that so much time had passed
since the first threat to take legal action had been made, he might
possibly have concluded
that the matter was not urgent and/or that it
would not be appropriate to hear it
ex
parte
. In
National
Director of Public Prosecution v Braun and another
3
,
the failure to disclose correspondence between the applicant and the
respondent prior to the grant of an
ex
parte
order granted as a matter of urgency resulted in the order being
discharged. The applicant explained the delay in taking steps as
being due to Al-Shanfari not being possessed of liquid funds with
which to prosecute the matter at the time and also to incorrect
advice (not explained) being given to her by her solicitors. The
explanation for the delay is however not the issue. What is
important
is that the delay in bringing the application after the
respondents had been threatened with proceedings is what should have
been
brought to the judge’s attention.
[20] It is of course trite that in
ex
parte
proceedings an
applicant is obliged to observe the utmost good faith in placing all
material facts before the court and the failure
to do so may result
in the order being set aside on the grounds of non-disclosure alone.
Furthermore,
* In
ex
parte
applications all
material facts must be placed before the court which might influence
a court in coming to a decision;
* the
non-disclosure or suppression of facts need not have been wilful or
mala fide
to incur the penalty of rescission; and
* the
court, apprised of the true facts, has a discretion to set aside the
former order or to preserve it.
4
The failure to disclose the threats to
take legal action against the respondent also plays a role in
considering the applicant’s
averments that she had a real and
genuine apprehension that documents would be destroyed, concealed or
spirited away and will be
dealt with under that heading.
NO APPREHENSION OF DESTRUCTION OR
CONCEALMENT OF DOCUMENTS
[21] The case for the applicant under
this heading is extremely thin. After alleging that the respondents
have in their possession
certain specific documents or things which
constitute vital evidence in substantiation of the applicant’s
cause of action, Al-Shanfari
makes the following statement which is
unsupported by any factual
evidence:
“
There is a real and well-founded
apprehension that this evidence may be hidden or destroyed or in some
manner spirited away by the
time the case comes to trial or the stage
of discovery is reached.”
To this may be added the statements
quoted in para [18] and the further anodyne statement that Sheikh
Khalifa and Dr Al-Kawari
“
by virtue of their majority
shareholding in Pegasus and, by implication, their control over the
board of directors of the First and
(Second)
Respondents (being Pegasus subsidiaries), are in the best position to
ensure the disappearance of whatever Pegasus-related documentation
may be in the possession of the Respondents at any time.”
These statements do not meet the test
that the risk of evidence being hidden or destroyed must be based on
more than mere speculation
5
.
As I have already indicated, the main
thrust of the applicant’s case was that the dishonesty imputed to
Sheikh Khalifa and Dr Al-Kawari
formed the basis for the applicant’s
belief that the loans made to Pegasus were bogus. In that regard
Al-Shanfari has been shown
to have had full knowledge of the loans
which had been advanced by Sheikh Khalifa’s companies up to the
time of his resignation
as a director and also the fact that the sole
source of Pegasus’ funding had been from such loans. That being
so, there can be
nothing untoward by further loans being made to
Pegasus after his departure as a director.
Absent
any grounds for imputing dishonesty to Sheikh Khalifa and Dr
Al-Kawari in respect of the loans of which he had knowledge, there
is
no reason to infer that Sheikh Khalifa, Dr Al-Kawari or the directors
of the companies were likely to destroy any documents relating
to the
loans, or as counsel for the applicant would now have it, the calling
up of the loans.
It
must be remembered that the question as to whether the loans were
improperly called up is not the issue before me. The Board of
Pegasus may well have followed the procedure which it adopted in
order to achieve the ultimate dilution of the applicant’s
shareholding.
However, as is plain from the answering papers and
from the documents disclosed therein, that course was followed on the
strength
of legal advice. The legality of that procedure, including
the time afforded the applicant to respond to the offer, will
presumably
be debated in another court.
[22] When the grant of the
Anton
Piller
order was
reconsidered in the English court,
Ramsey
J found that in the absence of the ground that the loans had been
deliberately or fraudulently set up, there was little left on the
case of the destruction of the documents. I share that view.
[23] Counsel
for the applicant placed much reliance on the discovery, during the
inspection of Pegasus’ records in Mauritius in
January 2006, of the
following resolution which had been passed by the directors on 14
June 2004:
“
To Issue, at par value, (US$1.00
per share), a further 49,966 shares to HH Sheik Khalifa Bin Hama Al
Thani and a further 24,966 to
Issa Ghanem Al Kawari, thereby
increasing the issued share capital of the Respondent No. 1 to
US$75,034”
The fact that the resolution recorded
that the shares were to be issued at par whereas the resolution which
was subsequently implemented
provided for the shares to be allotted
at a premium was an indication, so it was submitted, that the
directors had embarked on a
fraudulent scheme to reduce the
applicant’s shareholding to a meaningless one. In my view, the
existence of this resolution, instead
of advancing the applicant’s
case that there existed a real and genuine apprehension that
documents relating to the loans or their
calling up would be
destroyed does just the opposite. Surely that resolution, which
clearly could not be enforced and which Al-Shanfari
recorded had not
been implemented, would have been removed or destroyed had the
directors wished to cover their tracks. After all,
they had been
threatened with a court action in relation to the resolution which
was subsequently passed.
[24] Apart from the fact that the
Board of Directors would probably have destroyed or concealed the
documents once they had received
the applicant’s threat to apply to
court in February 2005 had they intended to do so, the mere fact of
such threat suggests that
at the time of making the threat and again
when it was repeated in February 2006, the applicant did not have a
real or genuine belief
that the documents would be destroyed.
[25] Furthermore,
I agree with the submission by respondents’ counsel that since the
applicant relied on the hypothesis that those
who engage in dishonest
conduct [i.e. the fraudulent creation of loans] are likely to destroy
or conceal evidence, the opposite holds
good, namely that those whose
conduct is lawful or at least who honestly believe their conduct to
be lawful, are unlikely to destroy
or conceal evidence.
[26] Finally, there is the nature of
the documents sought by the applicant which must be borne in mind,
namely the source documents
in respect of the repayment of the loans,
board resolutions and the allotment of shares. It is difficult to
conceive why documents
of this nature should be concealed or
destroyed; one would expect such documents to be preserved in order
to reflect the genuineness
of transactions, were such transactions to
be bogus, as the applicant would have it.
[27] For
these reasons I am satisfied that the applicant has failed to
establish a genuine apprehension that the documents would be
destroyed or concealed. As for the suggestion that the respondents
might have manufactured or created new documents, that is not,
as far
as I am aware, a ground for the granting of an order of the nature in
question.
NO CAUSE OF ACTION AGAINST
RESPONDENTS AND THE NON-JOINDER OF PEGASUS
[28] All the
authorities are to the
effect that an applicant for an
Anton
Piller
order must make out
a cause of action against the party against whom the order is
sought
6
.
In
Rhino
Hotel and Resort v Forbes and Others
7
the
court held that an
Anton
Piller
order
could not be granted against a respondent cited as a representative
of another party against whom the applicant had asserted
a cause of
action (where relief was not sought against that other party). It is
common cause that
“the
documents sought to be seized are those of Pegasus, but are in
respondents’ possession”
(as per Al-Shanfari).
[29] The relief is sought against the
first respondent on the basis, according to Al-Shanfari, that most of
Pegasus’ day to day
management decisions were generally made in
South Africa, although higher level policy decisions were generally
made in London
“from its
representative office in South Africa”.
The third respondent lives in Cape
Town and is according to Al-Shanfari is believed to work between his
home and the respondents’
offices in South Africa. The following
further averments are made by Al-Shanfari:
“
I respectfully submit that,
given the role of the First and Second Respondents in Pegasus’
operations, and the involvement of the
Third Respondent in
particular, it is most probable that the absence of the documents in
question from Pegasus’ registered office
in Mauritius may be
explained by their existence at the Respondents’ premises in South
Africa.”
Interestingly, the letterhead of
Pegasus, on which the applicant relies, reflects its address in
Mauritius and the wording
“Representative
office in South Africa for correspondence Pegasus Energy Management
Services (Pty) Ltd”
and
an address at the V & A Waterfront in Cape Town (with a telephone
number as well as an address in Bryanston, Gauteng, with
a telephone
number). Having regard to the address for the second respondent as
furnished by the applicant, neither of the addresses
on the
letterhead appears to be that of the second respondent.
[30] Recognising that the applicant
had not made out a cause of action against Pegasus, counsel for the
applicant shifted the emphasis
of his submission, asserting that the
applicant was entitled to the order which had been granted because
she had a serious cause
of action against Pegasus in another court
and that the documents in question were necessary for that cause of
action. The thrust
of the application was said to be that of an
interlocutory nature in order to preserve evidence, even though the
party against whom
the cause of action existed was not before the
court. Counsel conceded that as yet there appears to be no authority
to support the
submission that an
Anton
Piller
order can be granted
in these circumstances, but submitted that there was room for the
ambit of the order to be expanded, as had been
done in terms of the
initial order. In the
Shoba
case,
Corbett
CJ
held that it was not necessary to decide whether the
Anton
Piller
principle had any
scope in our law other than that indicated in the judgment
8
.
With this as his starting point and relying on the fact that the
remedy in
Shoba
was sought against the officer who had custody of the equipment in
question, counsel for the applicant moved to Voet
9
in which it was explained that the court in which a thing is situated
would have jurisdiction to entertain an action in
rem
for the ownership or possession of the thing. The submission was
that an
Anton
Piller
application
is equivalent to an action in
rem.
In order to deal with the problem that Pegasus is not before the
court, he referred to
Brown
v MacDonald
10
in
which both the applicant and the respondents were
peregrini.
The
applicant was granted an order restraining the sale of a horse which
had been hypothecated to him, pending an action to be brought
against
the respondent in a competent court. Finally, counsel referred to
Pohlman
and others v Van Schalkwyk and others
11
in
which the court, in listing the common features of an
Anton
Piller
application, recorded one such feature as
“It
is alleged that the respondent or others closely associated with the
respondent in some way threatened that interest of the
applicant”.
Significantly, however, in both
Shoba
and
Pohlman
,
the parties against whom the applicants’ causes of action lay were
cited as respondents. In my view the argument advanced on
behalf of
the applicant is contrived. The reference to Voet clearly relates to
an action in
rem
and the relief sought in
Brown
v MacDonald
bears no
resemblance to the relief sought in an
Anton
Piller
application which
has been tailored to meet specific circumstances.
There
may well be room for the principle, although I make no such finding,
that an
Anton Piller
order
may be issued against a respondent which is not the party against
whom the cause of action is made out if it can be shown that
the
respondent is the privy of or so closely connected with the party
against whom the cause of action lies as to justify the granting
of
the order. Such a decision would depend on the particular
circumstances of the case and might be justified on the interlocutory
nature of the order to preserve documents which might otherwise be
done away with. However, such a decision would in my view have
to be
subject to the ryder that the court granting the order would have
jurisdiction over the party against whom the cause of action
lies.
To confirm the order in the present case would be to permit ancillary
and interlocutory procedural relief in this court to
be utilised in
another court against a party not subject to the jurisdiction of this
court. Having regard to the need to use this
particular form of
relief sparingly, there is in my view no basis for extending the
relief in the manner sought by the respondents
and no basis for not
following the decision in the
Rhino
Hotel
case.
[31] Having come to this conclusion it
was not necessary to deal with the submissions that no case has been
made out against the respondents.
THE DEFENCE OF RES IUDICATA
[32] In my view this defence also
succeeds. I have found in para [21] that the applicant failed to
establish a genuine apprehension
that the documents forming the
subject matter of the application would be destroyed or concealed.
That that
was
also the basis for the English court discharging the order which had
been granted there, as appears from the following extract
from the
judgment of
Ramsey
J at para 76
“
In the absence of that ground,
there is little left on the case on the destruction of documents. In
addition, the claimant delayed
from February 2005 to July 2006 in
relation to the application, and the fact that documents clearly were
not destroyed in that period
negates such a conclusion. In addition,
the documents show that the defendants were keen to have on record
all the documentation
to show that the share transaction was
legitimate. I do not consider that, in the absence of the loans
allegation, the claimant
can properly say that there was clear
evidence that the defendants would destroy documentation before an
inter partes hearing could
take place.”
In the English proceedings it had also
been contended that the applicant’s failure to disclose her
husband’s knowledge of the
loans had been material. In that regard
the court held at para 91
“
In such circumstances, I need
not go on to consider the question of non-disclosure. However, I
have come to the conclusion that the
evidence provided by Mr
Al-Shanfari contained a central and material non-disclosure in
relation to the loans. I do not consider
that the non-disclosure can
be described as innocent, or limited to knowledge of the loans made
after March 2006.”
[33] On behalf of the applicant it was
contended that these two issues were not
res
iudicata
as between the
parties to the application and for the following grounds:
1) The
judgment of
Ramsey
J
was not final and was under appeal.
2) The judgment was not between the
same parties as in the application before me in that neither PEMS nor
MESA were party to the
English proceedings.
3) The test for the grant of
Anton
Piller
relief is stricter
in English law than in South African law.
[34] As regards the finality of the
appeal, it was held in
Liley
v Johannesburg Turf Club
12
that the noting of an appeal does not suspend the finality of a
judgment for the purposes of the application of the
res
iudicata
doctrine. What is suspended is the execution thereof and the
judgment itself stands until set aside. At the time of the hearing
of this application, leave to appeal against the judgment of
Ramsey
J
had been refused and before delivering this judgment I was notified
that a renewed application for permission to appeal against
the order
of
Ramsey
J had been refused by the Court of Appeal.
[35] It is so that neither PEMS nor
MESA were cited in the English proceedings. However, it is clear
that these two respondents were
cited in this court as being
representatives of Pegasus. P J Rabie, writing in Lawsa, records the
following:
“
The words ‘same persons’ do
not mean only the identical individuals who were parties to the
proceedings in which the judgment
which is raised as
res
iudicata
was given, for they
include persons who are in law identified with those who were parties
to the proceedings.”
13
A number of examples are then given.
In the
Liley
case
the court regarded two turf clubs as being the
“privies”
of the Jockey Club of South Africa for the purposes of adjudicating
on a plea of
res iudicata
.
In the present case I am of the view that, having regard to the
basis for citing the two companies, they are sufficiently identified
with Pegasus for the purposes of the
exceptio
rei iudicatae.
[36] Whatever the differences between
the English law and the South African law may be in respect of proof
of a cause of action for
the granting of
Anton
Piller
relief, it was not
suggested on behalf of the applicant that there was any difference in
the approach to the requirement of an apprehension
of the destruction
or concealment of evidence or the issue of a material non-disclosure.
[37] For these reasons the plea of
res
iudicata
is in my view also
fatal to the application.
[38] Because
of the various findings which I have made, it is not necessary to
deal with the remaining ground of opposition which
was to the effect
that the applicant had failed to comply with terms of the South
African order.
[39] One other issue remains to be
dealt with, namely an application to strike out certain portions of
the respondents’ answering
affidavit. While the passages which
have been challenged
do
reflect the opinion of the deponent Palmer concerning Sheikh
Khalifa’s reluctance to provide further funding to Pegasus and the
wish of Sheikh Khalifa and Dr Al-Kawari to regularise the position by
the implementation of the special resolution, the opinions
expressed
are based on facts which are not controversial. The passages are not
disputed and can be said to be the inferences drawn
from facts which
are not in dispute. In any event, the three short passages are
insignificant in relation to the application and
the facts placed on
record. In the circumstances the striking out of the passages need
not follow.
[40] For
the reasons which I have given, I conclude that the respondents must
succeed and I accordingly make the following order:
The order granted in this court on 2
August 2006 is discharged with costs, which costs are to include the
costs attendant upon the
employment of two counsel.
________________
R
B CLEAVER
1
1995
(4) SA 1 (A) 15 H-I
2
2007
(1) SA 99 (C) 109 A-C
3
2007
(1) SA 189
4
Schlesinger
v Schlesinger
1979
(4) SA 342
(W) at 349 A-B;
The National Director of Public Prosecutions v Braun and another
2007 (1) SA 189
(C) at para [22], p196
5
Hall
& another v Heyns and others
1991
(1) SA 381
(C) at 390 D
6
Shoba
v Officer Commanding, Temporary Police Camp, Wagendrift Dam, and
Another
1995 (4) SA 1
(A)
15 G-I/J and also
Roamer Watch Co SA and
another v African Textile Distributors also t/a M K Patel Wholesale
Merchants and Direct Importers
1980 (2) SA 254
(W) at 272 D-G
Universal City Studios
Inc and others v Network Video (Pty) Ltd
[1986] ZASCA 3
;
1986
(2) SA 734
(A) at 755 A-B
Hall and another v Heyns
and others
1999 (1) SA 381
(C) at 388 F-389 G
Shoba v Officer
Commanding, Temporary Police Camp, Wagendrift Dam, and Another
1995
(4) SA 1 (A)
15 G-I/J
7
2000
(1) SA 1180
(W) at 1183 A-H
8
Shoba
p16 D
9
Commentary
on the Pandects Book V.76 (Gayne’s translation)
10
1911
EDC 423
11
2001
(1) SA 690
(E) at 697 I
12
1983
(4) SA 548
at 552 C
in
fine
13
Second
Edition, Vol 9, para 637