Executive Officer, Financial Services Board v Ovation Global Investment Services (Pty) Ltd and Others (2197/2007) [2007] ZAWCHC 33; 2008 (3) SA 69 (C); [2007] 4 All SA 741 (C) (14 June 2007)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2007
>>
[2007] ZAWCHC 33
|

|

Executive Officer, Financial Services Board v Ovation Global Investment Services (Pty) Ltd and Others (2197/2007) [2007] ZAWCHC 33; 2008 (3) SA 69 (C); [2007] 4 All SA 741 (C) (14 June 2007)

IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
REPORTABLE
CASE
NO. 2197/2007
In
the ex parte application of:
EXECUTIVE
OFFICER OF THE
FINANCIAL
SERVICES BOARD
APPLICANT
And
In
re the business of:
OVATION
GLOBAL INVESTMENT
SERVICES
(PTY) LTD
1
ST
RESPONDENT
(Registration
No. 1998/00620/07)
OVATION
GLOBAL INVESTMENT
NOMINEES
(PTY) LTD
2
ND
RESPONDENT
(Registration
No. 1998/019798/07)
With
the following applicants for leave to intervene:
OVATION
RESERVATION PENSION FUND
1
st
Intervening Applicant
OVATION
PRESERVATION PROVIDENT FUND
2
nd
Intervening Applicant
OVATION
PRESERVATION ANNUITY FUND
3
rd
Intervening Applicant
METROPOLITAN
LIFE LIMITED
4
th
Intervening Applicant
JUDGMENT
DELIVERED ON 14 JUNE 2007
DLODLO,
J
INTRODUCTION
[1] This is an application in
terms of section 5 (1) of the Financial Institutions (Protection of
Funds) Act 28 of 2001 (‘The FI
Act”). In terms of that section
‘The registrar may, on good cause shown, apply to a division of the
High Court having jurisdiction
for the appointment of a curator to
take control of, and to manage the whole or any part of, the business
of an institution.”
The Applicant is the Executive
Officer of the Financial Services Board appointed in terms of section
13 (1) of the Financial Services
Board Act 97 of 1990 (‘the
Executive Officer’ and ‘The FSB Act’). He is thus ‘the
registrar’ as defined in the FI Act.
‘Registrar’ is defined in
section 1 of the (Protection of Funds Act) as meaning, amongst other
things, the executive officer
defined in section 1 of the FSB Act.
Section 1 of the FSB Act in turn defines the ‘executive officer’
as meaning the person appointed
as such in terms of section 13 of the
FSB Act.
[2] The First and Second
Respondents are Ovation Global Investment Services (Pty) Ltd
(‘Ovation Services’) and Ovation Global
Investment Nominees (Pty)
Ltd (‘Ovation Nominees’). With effect from 17 December 2004,
Ovation Services has been licensed as
financial services provider in
terms of section 8 of the Financial Advisory and Intermediary
Services Act (“the FAIS Act”). It
is thus an ‘institution as
defined in the FI Act. ‘Institution’ is defined in section 1 of
that Act as including ‘a financial
institution’, which is in turn
defined with reference to that expression in section 1 of the FSB
Act. ‘Financial institution’
is defined in the FSB Act as
including ‘any authorized financial services provider … as
defined in
section 1
(1) of the
Financial Advisory and Intermediary
Services Act, 2002
’. ‘Authorized financial services provider’
is defined in section 1(1) of the FAIS Act as meaning ‘a person who
has been granted
an authorization as a financial services provider by
the issue to that person of a licence under section 8’. Ovation
Nominees is
a wholly owned subsidiary of Ovation Services, and is
therefore also an ‘institution’ as defined in the FI Act.
‘Institution’
is defined in the Protection of Funds Act as
including ‘(b) any person, partnership, company or trust in which,
or in the business
of which, a financial institution or an
unregistered person has or had a direct or indirect interest’.
[3] Save as set out hereunder,
the application is unopposed. On 2 March 2007 this Court granted an
order in terms of which the whole
of the business of the Respondents
was placed provisionally under curatorship in accordance with section
5 (2) of the FI Act (‘the
provisional order’) coupled with a
rule
nisi
calling upon
the Respondents and other interested parties to show cause why the
appointment of the curators should not be confirmed.
On 2 May 2007,
the curators appointed in terms of the provisional order, Mr. John
Adrian Levin and Mr. Barend Petersen delivered
a report in accordance
with paragraph 8.7 of the provisional order. On the same day, the
Ovation Preservation Pension Fund, the Ovation
Preservation Provident
Fund and the Ovation Retirement Annuity Fund (‘the Ovation
Retirement Funds’) delivered a notice of intention
to oppose, and
notice that on the return day of the
rule
nisi
, which was
initially scheduled for hearing on 15 May 2007, they would seek leave
to intervene. These notices were accompanied by
an affidavit by
William Herbert Hunter Thyne (“Mr. Thyne”), a duly appointed
trustee of the Ovation Retirement Funds.
[4] On or about 8 May 2007 the
Applicant delivered a notice of application with respect to the
confirmation of the rule nisi and an
affidavit in support thereof. On
15 May 2007, my brother, Veldhuizen J granted an order by agreement
between the parties, (with the
leave of the Judge President), in
terms of which the matter was postponed for hearing on 31 May 2007
and a timetable was provided
for the filing of further affidavits by
the Ovation Retirement Funds and the Applicant. On or about 17 May
2007 the Ovation Retirement
Funds delivered a Replying Affidavit, and
on 23 May 2007 the curators delivered a supplementary curators’
report. Finally, on the
evening of 25 May 2007 the Ovation Retirement
Funds served a further affidavit on the Applicant’s attorneys of
record. On 30 May
2007 the Fourth Applicant to intervene
(Metropolitan) delivered an application to intervene coupled with an
application for condonation
for late filing. This application was
accompanied by an Affidavit deposed to by one Willem Abraham van
Schalkwyk – the Group Officer
of Metropolitan. Mr. Binns-Ward SC
(with Ms Du Toit) appeared for the Applicant; Mr. Fine SC (with Mr.
Goldman) appeared for the
Ovation Retirement Funds; Mr. Oosthuizen SC
(with Mr. Blumberg) appeared for Metropolitan. Mr. De Villiers
watched brief on behalf
of certain investors who also had money
invested in the Ovation Pension Funds.
THE BASIS OF OPPOSITION (BY
THE INTERVENING APPLICANTS)
[5] The Ovation Retirement
Funds do not oppose the granting of a final order of curatorship. The
Ovation Retirement Funds do, however,
oppose certain aspects of the
final relief which was sought on the return day. These aspects are
the following:
(a) That ‘investments in
or administered by the business or companies shall not without prior
approval of the Registrar be withdrawn,
transferred or otherwise
disinvested from the business or companies’ and that the curators
will continue to be authorized to do
the following:
‘
to take custody of the
cash, cash investments, stocks, shares and other securities held or
administered by the companies, and of
other property or effects
belonging to or held by or on the instructions of the companies or
any entity directly or indirectly
controlled by, affiliated to or
associated with the companies’; and
‘
to take control of and
to operate or freeze existing banking accounts of the companies and
of their subsidiaries, holding or affiliated
companies and of any
director or official of the companies insofar as money entrusted to
the companies has been deposited into
such latter banking account…’;
and
(b) That the curators will
continue to be authorized to:
pay such reasonable
expenses and costs as may be necessary or expedient for the
curatorship and control of the business and operations
of the
Respondents from the assets held, administered or under the control
of the companies, (although these parts of the provisional
order are
not expressly referred to, it is clear that the Ovation Retirement
Funds oppose not only the payment of the remuneration
of the
curators from the assets held on behalf of its members, but also
other costs associated with the curatorship).
to defray reasonable
charges and expenses incurred by the engagement of legal, accounting
and administrative, or other professional
or technical assistance as
they may deem reasonably necessary for the performance of their
duties from the assets held or under
control of the companies; and
to be remunerated from the
assets of, held by or under the control of the companies.
The opposition by the Ovation
Retirement Funds can be summarized as relating to two broad classes
of relief. The first is relief which
is aimed at vesting the curators
with control over the investments administered by the Respondents,
subject to the Registrar’s
approval that these may be withdrawn or
transferred. The second is relief which is aimed at ensuring that the
costs of the curatorship,
including the remuneration of the curators
is payable out of the assets administered or held by the Respondents.
[6] The Ovation Retirement
Funds’ opposition to the first class of relief is only insofar as
it ‘is in conflict with the terms
and conditions of the
administration and nominee agreements …’ and prevents ‘the
payment of benefits to members and/or other
beneficiaries of the
Ovation Retirement funds pursuant to the rules of the said Funds, the
Pension Funds Act and the Financial Institutions
Act, as and when
such benefits fall due. In terms of the administration agreements
Ovation Services was appointed as the administrator
of the Funds and
was required to ‘administer on behalf of the Fund the investments
of the Fund’ to make investments ‘in accordance
with the request
of the members’. It was also required to do the following: ‘pay
benefits to members or parties entitled thereto
in terms of the rules
and the Act’ (Annexure
‘A9’
and
‘A11’
),
‘determine the amount of the benefits’ (Annexure
‘A9’
and ‘
A11’
),
‘ensure that all benefits are calculated accurately in accordance
with the rules and in accordance with the records of the Fund
maintained by Ovation’ (Annexure
‘A9’
and
‘A11’
),
‘pay the benefits due in terms of the rules to the members or
beneficiaries entitled to such benefits’ (Annexure
‘A9’
and
‘A11’
).
The nomination agreements provided that ‘The business of the
Nominee Company shall be to take title of immovable property, money
or marketable securities in trust for and on behalf of clients as
nominee for, or representative of, such clients and to hold and
otherwise deal with such immovable property, money or marketable
securities strictly in accordance with any directions given by the
respective clients from time to time to the Nominee Company’
(Annexures
‘A12’,
‘A13’ and ‘A14’
).
Ovation Nominees was also required to open one or more bank accounts
in its name and to hold money in terms of the agreement in
that
account (Annexures
‘A12’,
‘A13’
and
‘A14’
).
In other words, the Ovation Retirement Funds’ stated intention is
not to transfer the investments of their members off the Ovation
platform to another Linked Investment Services Provider (‘LISP’).
What the Ovation Retirement Funds seemingly do want is for
benefits
to be paid to their members as and when they fall due in terms of the
rules of the Funds and the
Pension Funds Act 24 of 1956
. The periodic
annuities payable to retired members of the funds are, and have been,
paid by the curators. The Pension Funds’ opposition
to the
confirmation of the rule nisi in the form proposed is predicated on
the concern that the trustees will not be able to pay
matured capital
savings to members on retirement.
[7] What is central to the
opposition by the Ovation Retirement Funds is the fact that the
assets administered and invested by Ovation
Services and Ovation
Nominees constitute ‘trust property’. There is no dispute between
the Applicant and the Ovation Retirement
Funds on the proper
characterization of the assets under administration by the curators
as trust property within the meaning of section
4 (5) of the FI Act.
The effect of section 4 (5) is that ownership of the trust property
does not vest in the financial institution
to which it has been
entrusted. The nature of the dispute between the parties goes to the
powers that can competently be vested in
curators in respect of
dealing with trust property under the FI Act. In this respect, the
Ovation Retirement Funds contended that
the effect of section 4 (5)
of the FI Act, which relates to the status of trust property, is
‘irreconcilable with the conduct of
the curators to the extent that
the owners of the assets constituting the trust property are
precluded from dealing with such funds
which ought to be available to
pay benefits to members of the Ovation Retirement Funds’. This is
also the basis for the Ovation
Retirement Funds’ opposition to the
second class of relief.
Section 4 (5) of the FI Act
provides that ‘
Despite
anything to the contrary in any law or the common law, trust property
invested, held, kept in safe custody, controlled or
administered by a
financial institution or a nominee company under no circumstances
forms part of the assets or funds of the financial
institution or
such nominee company’
.
[8] The Ovation Retirement
Funds also argue that the powers conferred upon a court by section 5
of the FI Act are limited and that
the relief sought in this
application in the terms described above, if confirmed, would fall
outside of the ambit of that section.
They argue that
‘…it
is not competent for a court to confer a power upon the curators
which falls outside the ambit of the Financial
Institutions
Act and which curtails or interferes with the rights and obligations
of the Ovation Retirement Funds, Ovation Services
and Ovation
Nominees in terms of the administration and nominee agreements …’
Finally, the Ovation Retirement
Funds argue that
“there
is no basis to withhold the payment of benefits to members of the
Ovation Retirement Funds as and when they fall due on account
of the
Common Cents losses when such losses ought to be factored in the
value of benefits relating to those members of the said Funds
who
were invested in the Common Cents Portfolio as aforesaid. It
therefore follows members of the Ovation Retirement Funds that are
not invested in the Common Cents Portfolios are entitled to the
payment of their full benefits as and when they fall due.”
This argument, which is based on the premise that the losses should
be borne where they fall, is also premised on there being a proper
separation of assets and full information regarding the losses which
have been incurred. This aspect will be dealt with further
infra.
[9] On behalf of the Ovation
Retirement Funds, Mr. Fine SC placed heavy reliance on
Alpha
Bank Ltd v Registrateur van Banke en Andere
[1995] ZASCA 84
;
1996 (1) SA 330
(A), a case which concerned a curatorship under
section 40 (5) of the Banks Act. He submitted that there is congruity
between an
order for curatorship and an order for the judicial
management of a company in that, in his submission, both are aimed at
divesting
existing management of control of the company and providing
the company with a moratorium. It was pointed out to me that judicial
management as dealt with in sections 428 to 437 of the Companies Act,
61 of 1973 circumscribes the ambit of an order which the Court
is
empowered to make. Relying on the authorities such as
Lief
v Western Credit (Africa) (Pty )Ltd
1966 (3) SA 344
(W) at 348,
S
v Cohen Ltd v Johnston
1970 (4) SA 332
(SWA) at 336 and
Venter
v Williams
1982
(2) SA 310
(N) at 315, the submission was made that the grant of a
provisional judicial management order does not have the effect of
instituting
a
concursus
creditorum
. I was
also referred to
Goodricke
and Son v auto Protection Insurance Co. Ltd
1968 (1) SA 717
at 722-723. Mr. Fine SC referred me to
Wire
Steel Products & Engineering Co (Coastal) Ltd v Surtees NO and
Heath NO
1953
(2) SA 531
(A) where the court was called upon to consider section
196 of the then Companies Act, 46 of 1926 which laid down what
judicial management
order shall contain and which included, amongst
other matters, the following quote ‘such other directions as to
management of the
company, or other matters incidental thereto, as
the court may deem fit to give, which may include power to the
judicial manager
to raise money on debentures or otherwise without
the authority of shareholders but subject to the right of creditors’.
The section
is in almost identical terms to the present section
427(C) of the present Companies Act. The court held that the power of
the court
to make order under sections 195 to 198 of Act 46 of 1926
(as amended) was limited to the express provisions; and it held
further
that a court had no power to grant an order to judicial
managers of a company of building contractors restraining a building
owner
from paying directly to sub-contractors. The decision of the
Court was that there was no express power conferred upon the court to
interfere with legal rights or lawful interests of other persons.
[10] Mr. Fine SC submitted that
a court is not entitled to ignore or avoid the provisions of the
Companies Act by conferring authority
on a judicial manager for which
no provision is made in the Act. The
Wire
Industries
judgment
has been consistently followed and applied (see
Klopper
en Andere NNO v die Meester en Andere NNO
1972 (2) SA 477
(T)). In his submission the same limitation applies
to section 5 (1) of the FI Act and the court was not entitled to
ignore or avoid
the provisions of the section or to confer upon the
curators powers for which no provision was made in the said Act. In
his submission
the FI Act does not confer any express authority on
curators, nor can such authority be inferred from the wording of the
section.
Accordingly, in Mr. Fine SC’s view, the claim for costs
has no legal basis and the Court order should be modified. I
undertake
to deal exhaustively
infra
with these submissions. It suffices at this stage to mention without
observations that I am concerned that Mr. Fine SC likened the
scenario of curatorship to judicial management of companies.
[11] The issues raised by
Metropolitan are three-fold, namely:
that the grant of the final
order of curatorship in terms that arguably authorize (at least
ostensibly) the pooling or aggregation
of the trust property was an
impermissible and unlawful practice;
the timing of withdrawals by
investors of their investments placed with the companies; and
the liability of investors to
contribute to the costs of the curatorship.
[12] The aggregation issue, in
my understanding, is no longer an issue which Metropolitan is still
pursuing. I was told Metropolitan’s
concerns in this respect may
have arisen from its reading of the curators’ report. Aggregation,
as I am told, is not at all an
option considered by the curators. On
the contrary, I am led to understand that the curators intend to act
in this respect in accordance
with the advice obtained by them from
Advocates Manca and Pillay, which all the parties legally represented
in these proceedings
accept as correct. In any event in the unlikely
event that the curators were to purport to deal with the trust
property under their
control on the basis of ‘aggregation’, the
affected parties would be entitled to oppose such conduct by way of
proceedings in
terms of section 5 (8) of the FI Act.
[13] The Applicant takes issue
with the contention by Metropolitan Life that the provisions of
paragraphs 5.6 and 5.12 of the provisional
order are susceptible of
being read so as to authorize ‘aggregation’. The Applicant
contended that the fact that the curators
are authorized thereby to
take custody and control of the trust property for the purpose of the
curatorship does not affect the character
of the ownership of the
trust property, nor the duty of the curators in the context of the
other provisions of the provisional order
and proposed final order to
account for the trust property to the owners thereof. Paragraph 1 of
the order, for example makes it
plain that the curatorship is in
terms of the FI Act. That necessarily also connotes recognition of
the other provisions of the Act,
including the definition of ‘trust
property’ in section 1 thereof and the provisions of section 4 (5).
Paragraph 5.3 of the provisional
order enjoins the curators to give
consideration to the best interests of the investors in the
companies. Paragraph 8.2 of the provisional
order directs the
curators to compile a reconciliation statement of investor funds (an
exercise directed to give effect in a curatorship
context, to the
obligation that the companies had in terms of section 19 of the FI
Act in respect of trust property under their control
or
administration). Mr. Binns-Ward SC submitted that the proposed final
order confirms the duty of the curators to reconcile assets
found in
or under the control of the companies with the owners thereof. In his
submission on this aspect, the provisional order and
the proposed
final order do not in any manner mandate the curators to take
ownership of the trust property or to deal with trust
property in the
manner suggested by the term ‘aggregation’ in the sense it has
been used by Metropolitan. The aggregation is
clearly a non-issue
between the parties and that must be the reason why Metropolitan in
Mr. Oosthuizen SC’s oral submissions appeared
to have abandoned
this aspect altogether.
[14] Metropolitan has
approximately R1.4 billion invested with the Ovation companies, and
that such investments are “in the nature
of trust assets” is not
disputed. Mr. Oosthuizen SC invited my attention to the definition of
“trust property” in section 1
of the FI Act. “Trust property”
is defined as meaning:
“
any corporeal, or
incorporeal, movable or immovable asset invested, held, kept in safe
custody, controlled, administered or alienated
by any person,
partnership, company or trust for, or on behalf, another person,
partnership, company or trust, and such other person,
partnership,
company or trust is hereinafter referred to as the principal”.
Mr.
Oosthuizen SC submitted that the powers which the court exercised in
applications brought in terms of section 5 of the FI Act
derive from
the Act itself, and not from the court’s inherent jurisdiction to
regulate proceedings before it. In his submissions,
it follows that
the question of what costs orders may be made by the court must be
answered, in the first place, by having regard
to the empowering
legislation. It is not for the court to usurp the legislature’s
function, in order to cure any lacuna in an Act,
he argued. He
referred to what was pointed out by De Villiers CJ in
De
Kock v Resident Magistrate of Caledon
(1896) 13 SC 386
namely,
“the
safer course is …to observe the literal and grammatical sense of
the words employed, and to leave it to the Legislature –
which is
always at hand for the purpose – to amend the law in case such a
construction should not carry out its real intention”
.
(See also
Boxall v
Johannesburg City Council
1948 (1) SA 907
(T) at 914)
[15] Metropolitan proposes in
paragraph 5 of the draft order, annexed as annexure A to its notice
of application, that the restriction
on withdrawals save with the
leave of the Registrar apply only until the completion of a
reconciliation in respect of the trust property
previously
administered by the companies. It was submitted on behalf of the
Applicant that this proposal fails to acknowledge sufficiently
that
the efficiency and viability of the curatorship requires that the
curators should be required to release investments only when
it is
appropriate to do so in the context of the management of the
curatorship as a whole. The reality is that whereas one of the
ultimate objects of the curatorship is to identify and restore the
trust property to its rightful owners, the curators can only
effectively
achieve this object and the other if they are able to
manage the business of the companies in a way that enables them to
maintain
the staffing requirements and operational infrastructure
necessary for the tasks. The curators are undoubtedly heavily reliant
in
this respect on maintaining the income stream provided by the
management fees on the existing investments. It is important that the
curators, subject to the oversight of the Registrar, be able to
manage the withdrawal of investments in accordance with the
operational
exigencies of the curatorship. The investors are assured
a safeguard against unreasonable conduct in this respect by either
the curators
or the Registrar by the availability of a remedy in
terms of s 5 (8) of the FI Act.
[16] In Mr. Oosthuizen SC’s
submission the power to recover curatorship costs from the owners of
trust property would have to be
conferred on the FSB expressly, or by
necessary implication, in the enabling legislation. He dealt with the
provisions of sections
4 (5) and 5 (5) of the FI Act and contended
that in section 4 (5) the Legislature unequivocally spelt out that
trust money does not
form part of the assets of the financial
institution holding such property, in order to ensure that such
property is not linked to
the fate of such financial institution and
is not in any way imperiled by a downturn in the fortunes of such
institution. This submission
cannot indeed be assailed. It represents
what I also accept to have been the expressed intention of the
lawmaker in enacting section
4 (5). What concerns me though is that
Mr. Oosthuizen SC went on to submit that it would make little sense,
and defeat the very purpose
for which the Legislature enacted section
4 (5) if the owners of trust property held by an institution were
held liable for the curatorship
costs of such institution.
[17] Justifying his submission
that the investors should not bear the expense of curatorship, Mr.
Oosthuizen SC advanced two (2) contentions,
namely:
(a) “The framework created by
the FI Act is intended for the benefit of investors generally, and
the protection of the investment
community. It serves a remedial
purpose, by allowing for applications for curatorship in respect of
specific financial institutions,
where good cause is shown, and a
preventative purpose by requiring financial institutions to deal with
funds invested by them in
a particular manner. There is thus, in
principle, no reason why the costs of any shortfall in the
curatorship proceedings should
not be borne by the investing public
generally, rather than by those whose funds have been placed with the
specific institution under
curatorship (especially where the
Legislature is at pains (in section 4 (5)) to provide that trust
properties shall not form part
of the assets of the institution under
curatorship.
(b) In
terms of section 16 of the Financial Services Board Act, No 97 of
1990, read with Section 15A thereof, the FSB is in any event
funded
by levies imposed on financial institutions. Any shortfall in the
curatorship costs would therefore be borne ultimately by
such
financial institutions, and not by the tax paying public generally.
This, it is submitted, would accord with the intention of
the FI Act
of regulating the manner in which financial institutions generally
deal with funds.”
These submissions will further
be dealt with holistically
infra
.
SECTION 5 OF THE FI ACT
[18] Section 5 (2) of the FI
Act makes provision for the provisional appointment of a curator ‘to
take control of, and to manage
the whole or any part of, the business
of the institution on such conditions and for such a period as the
court deems fit’; and
simultaneously to grant ‘rule nisi calling
upon the institution and other interested parties to show cause on a
day mentioned in
the rule why the appointment of the curator should
not be confirmed’.
Section5 (4) provides that ‘if
at the hearing pursuant to the
rule
nisi
the court is
satisfied that it is desirable to do so, it may confirm the
appointment of the curator’.
Section 5 (5) provides the
following:
‘
The court may make an order
with regard to-
the suspension of legal
proceedings against the institution for the duration of the
curatorship;
the powers and duties of the
curator;
the remuneration of the
curator appointed provisionally under subsection 2 (a) or finally
under subsection (4);
the costs relating to any
application made by the registrar under subsection (1);
the costs incurred by the
registrar in respect of an inspection of the affairs of the
institution concerned in terms of the
Inspection of Financial
Institutions Act, 1998
, …; or
any other matter which the
court deems necessary’.
(underlining added)
[19] The FI Act repealed the
Financial Institutions (Investment of Funds) Act 39 of 1984 (the
‘1984 Act’). The latter act was
repealed by reason of section 11
of the FI Act with effect from 23 November 2001. Although the test
was slightly different under
the 1984 Act (the appointment of the
curator had, in the opinion of the registrar to be ‘desirable’)
and such application was
designed to follow an inspection of the
affairs of a financial institution, the 1984 Act also made provision
for the ‘appointment
of a curator to take control of and to manage
the whole or any part of the business of that financial institution’
(section 6 (1)).
[20] In
Conze
v Masterbond Participation Trust Managers (Pty) Ltd and Others
1996 (3) SA 786
(C), a curatorship order made in the Masterbond
matter in accordance with section 6 of the 1984 Act was characterized
as being cast
in the ‘widest possible terms’ (797I-J). In
referring to an earlier decision by a differently constituted Full
Bench that the
Masterbond curatorship order did not affect the rights
of debenture holders who had invested money through the company,
Friedman
JP, Brand and Farlam JJ (as they then were) held:
‘
There is … no warrant
for construing the order in the narrow terms suggested in the Full
Bench judgment. The Court was influenced
in coming to the conclusion
to which it did by its view that s 6 of the FI Act could not have
been intended by the Legislature to
permit an order with such
far-reaching effects on the rights of third parties as, on our
interpretation, the present curatorship
order has. This view of s 6,
which is also worded in the widest terms, fails, in our respectful
opinion to afford sufficient weight
to the fact that it was intended
to enable the Director of Financial Institutions to approach the
Court for an order which would
protect the public from the potential
consequences of a large-scale financial disaster involving a
‘financial institution’ as
defined in the Act’
(798A-C).
[21] It is clear then that the
legislation which preceded the FI Act has been interpreted to confer
wide powers upon a court in the
public interest. The provisions of
the 1984 Act pertaining to the appointment of a curator were in very
similar terms to those in
the FI Act. The FI Act, however, spells out
what the powers which the courts may exercise in relation to the
appointment of a curator
in greater detail, while pragmatically not
confining them to the categories expressly listed. The provisions of
section 5 (5) (f)
of the FI Act are consistent with the postulate
that the Court may grant whatever order it deems necessary to assist
in the achievement
of the objects of a curatorship. Subject to what
is stated below, there was no equivalent in the 1984 Act of paragraph
5 (5) in the
FI Act.
The only part of section 5 (5)
of the FI Act which had an expressly equivalent provision in the 1984
Act is section 5 (5) (c). In
this regard section 6 (8) of the 1984
Act provided that ‘The curator is entitled to receive such
remuneration
out
of the funds of the financial institution
concerned as the court may direct’ (emphasis added). It is clear
that section 5 (5) (c) of the FI Act is cast in much wider terms
than
section 6 (8) of the Investment of Funds Act. Whereas the latter
restricts the source of the remuneration of the curator to
the ‘funds
of the financial institution’ the current Act leaves the court’s
discretion entirely open with regard to the remuneration
of the
curator. In the draft order which was handed up as a proposed court
order the court is asked to direct that the curators first
utilize
the resources of the Respondents, jointly and severally, to pay the
expenses and costs of the curatorship, including the
costs of the
application and the fees of the curators,
and
only if those resources are not sufficient, to utilize the assets or
investments of investors
administered by or under the control of the Respondents (emphasis
added).
[22] In my view, the Court is
empowered to make an order which may affect the rights of third
parties and also to make any direction
as to the remuneration of the
curators as it deems necessary. Given that in all likelihood the
assets of the Respondents will not
be sufficient to cover the
remuneration of the curators and the costs of the curatorship (a
situation, which inherent probability
suggests would not be uncommon
where maladministration of a financial institution necessitates the
intervention of a curatorship),
this Court would, in my view, be
justified in making an order in terms of which these costs are to be
paid out of the assets held
in trust on behalf of the Ovation
Retirement Funds and Metropolitan. The remedy of curatorship of a
financial institution is after
all primarily for the benefit and
protection of investors in the institution; cf.
Financial
Services Board and another v De Wet NO and other
2002 (3) SA 523
(C) at para [176]; p. 590, where the Registrar is
described in the context of both the
Pension Funds Act and
the FI Act
as ‘the guardian of the interests of members of pension funds’.
[23] Contrary to what the
Ovation Retirement Funds argue, section 4 (5) of the FI Act has no
bearing on the question, as the Court’s
powers in respect of the
administration of a curatorship are not limited to defraying the
costs associated with such curatorship
from
‘assets
or funds of the financial institution or … nominee company’
.
Nor does the fact that property comprises ‘trust property’ mean
that losses should not be borne by the investors whose investments
are affected by negligent or fraudulent activity giving rise to the
necessity of a curatorship. In a situation where the extent and
incidence of the loss has not yet been established, that property
constitutes trust property cannot justify members receiving their
benefits as and when they fall due to the potential prejudice, not
only of other investors, but of other members. That the loss should
be borne where it falls appears to be common cause. In my
understanding, it is not the Applicant’s argument that losses
sustained
by other investors should be spread among members of the
Ovation Retirement Funds. The administration of the curatorship is
intended
to redound to the benefit of all the investors. It is
reported in the curator’s report that the operational expenses of
Ovation
Services exceed its monthly income. The difficulty of
profitably operating a business such as that of the Respondents is
explained
in the curators’ report. The curators will not be able to
discharge their functions in terms of those provisions of the order
to
which the Ovation Retirement Funds have no objection effectively
if the substratum of the operational income of the business under
curatorship is diminished by reason of investors withdrawal of
investments with the attendant diminution of the basis to maintain
the level of administration fees. It is apparent from the curators’
report that much administrative work needs to be done to achieve
the
objects of the curatorship. They point out that they need to retain
and deploy staff to render the requisite services. They would
also
need to maintain the requisite systems to manage the business in the
interest of investors until the discharge of the curatorship.
[24] As pointed out by Mr.
Binns-Ward SC with regard to costs associated with the curatorship,
that all of the funds under the control
of the Respondents are trust
property as defined in section 1 of the FI Act. If the expenses of
the curatorship, including the remuneration
of the curators were not
to be paid from the trust property, it is not at all apparent how
most curatorships in terms of the FI Act
could ever effectively
operate save where the institutions under curatorship were
sufficiently solvent to meet these charges from
their own resources.
The Financial Services Board Act 97 of 1990 closely defines the use
to which funds of the Financial Services
Board may be put (section
16), and there is no reason that the expense of a curatorship under
the FI Act should be borne by the general
public as opposed to those
investors whose interests are most directly served by it.
[25] The FSB is there to ensure
that the interests of the public are protected. The section of the
public affected and on whose interests
the curatorship came to
existence is the investors. It is only common sense that they are
called upon to contribute (if necessary)
should the funds of the
Financial Institution prove to be insufficient for the purpose.
Having regard to the total sum under administration
by the
Respondents (an amount of nearly R4,5 billion), the individual
contributions likely to be required from investors should,
on a pro
rated basis, not be large. The proposed order permits capital
withdrawals with the permission of the Registrar. The Ovation
Retirement Funds have not given instances of actual cases where
capital payments have fallen due under the rules of the respective
funds. They do not give any indication that they have sought the
permission of the Registrar (who is also the Registrar of Pension
Funds). They also give no indication of what amount in this respect
is expected to fall due within the next few months. The papers
do not
afford any basis to determine the effect on the effectiveness of the
curatorship of permitting any withdrawals on the basis
postulated by
the Ovation Retirement Funds, nor do they contain any indication of
an appreciation by the trustees that terms of withdrawal
could
notionally be structured to make provision for the costs issues
discussed above. Any unreasonable refusal by the Registrar
to reach
agreement with the trustees in any given case would be amenable to
challenge in terms of section 5 (8) of the FI Act.
[26] The reliance by the
Ovation Retirement Funds on the obligations of the trustees in terms
of the rules of the respective funds
and the provisions of the
Pension Funds Act 24 of 1956
construed in isolation of the
curatorship is artificial. The reality is that the trustees’
ability to meet the funds’ obligations
to members is affected by
the unfortunate fact that investments have been made by the funds
with institutions that were being mismanaged
and have consequently
been placed under curatorship. The trustees’ obligations to
affected members fall to be determined with regard
to the incidence
of the curatorship and not on the basis that the
Pension Funds Act or
the rules of the respective Funds exempt the trustees or the
membership of the Funds from the consequences of the curatorship.
[27] The judgment of the SCA in
Louw NO and Others
v Coetzee and Others
2003 (3) SA 329
(SCA) should not be misconstrued to hold that the
owner of trust property within the meaning of section 4 (5) of the FI
Act is entitled
to demand its property from the curators of the
financial institution holding it in the face of a provision in the
curatorship order
forbidding such withdrawal. The issue which is
raised by the Ovation Retirement Funds in this matter did not arise
in
Louw’s
case.
On the contrary it appears from the judgment that the issue in
Louw’s
case followed upon an application in terms of section 5 (8) (a) of
the FI Act.
[28] The connection sought to
be drawn by the Ovation Pension Funds, relying on
Alpha
Bank Bpk en ander v Registrateur van Banke en andere
[1995] ZASCA 84
;
1996 (1) SA 330
(A), at 351-352, between certain aspects of a
curatorship in terms of section 40 (1) of the (long since repealed)
Banks Act 23 of
1965 and the concept of curatorship in terms of
section 5 of the FI Act must be approached with extreme caution. The
connection described
by the Ovation Pension Funds provides the
platform for the argument advanced on behalf of these entities. The
provisions of section
40 of the old Banks Act, quoted at page 351E of
the judgment in
Alpha
Bank
, expressly made
the provisions of sections 433, 434(2), 436, 437 and 440 of the
Companies Act (all of which pertain to judicial management)
applicable to a curatorship established in terms of section 40 of the
Banks Act. There is no equivalent provision to section 40 of
the old
Banks Act in this respect in the FI Act. I would agree with Mr.
Binns-Ward SC that this is not surprising having regard to
the
fundamental difference between a curatorship under the FI Act and a
judicial management of a company. The essential object of
a judicial
management is the protection of the company; whereas the essential
object of a curatorship of a financial institution
under the FI Act
is the protection of the interests of investors and the promotion of
a safe investment environment in the public
interest.
[29] The fallacy coupled with
the danger of equating judicial management with a curatorship under
the Financial Institutions (Investment
of Funds) Act 39 of 1984 was
forcefully expressed by Marais JA in
ABP
4x4 Motor Dealers (Pty) Ltd v IGI Ins Co Ltd
1999 (3) SA 924
(SCA). At 930 A-B the learned judge of appeal (in
whose judgment Smalberger JA, Grosskopf JA, Meleunsky AJA and
Madlanga AJA concurred)
held:
“
Curatorship of the kind
provided for by s 6 of Act 39 of 1984 is not akin to judicial
management. Not only is there recognition given
by the Legislature in
this and other statutes to curatorship and judicial management as
separate and distinct concepts, but an analysis
of the two concepts
shows that they cannot be equated with one another.”
And
at 934A-E of the judgment, Marais JA stated:
“
First, judicial
management is a creation of the Legislature which has no counterpart
in the common law. That it resembles a curatorship
in some respects
does not make it anything other than what it is: a concept which is
sui generis and has its own legislatively determined
field of
application and its own special name. There is no more warrant for
forcing the concept of judicial management into the mould
of
curatorship than there is for forcing the concept of curatorship into
the mould of judicial management. The fact that, when enacting
statutes providing for the placing of certain institutions under
curatorship, the Legislature has sometimes made it possible for
such
curators to have the same powers as a judicial manager does not
detract from the existence of the two phenomena as separate
and
distinct conceptions in law. Secondly, there are many instances to be
found in South African statutes of the Legislature referring
to those
phenomena by their respective names in a way which shows that it does
not regard them as capable of being described by one
and the same
generic name. I content myself with referring to ss 4 (2) (b) (ii)
and (iii) of the Stock Exchanges Control Act 1 of
1985;
ss 57
(7) (c)
and (d) of the
Mutual Banks Act 124 of 1993
; and ss 5 (6) (a) (ii)
and (iii) of the Financial Markets Control Act 55 of 1989.”
[30] What is striking when
comparing section 40 of the old Banks Act and the provisions of the
FI Act is that whereas section 40 of
the old Banks Act defined the
powers and functions of a curator appointed in terms of the Act with
reference to certain of the provisions
dealing with judicial managers
under the Companies Act, the FI Act provides that the powers of a
curator appointed in terms of section
5 of the FI Act fall to be
defined by the court in terms of its order. There appears to be is no
statutory restriction on the ambit
of the powers that might be
confirmed. See:
Conze
case
supra.
The current provisions in section 5 of the FI Act are expressly wider
than those that pertained when
Conze
was decided.
[31] The argument advanced by
the Ovation Pension Funds that the court has no authority to confer
powers on a curator which curtail
the rights of third parties is
premised on a line of authority which deals with the powers that may
be given to a judicial manager.
Those authorities, founded on the
judgment of the Appellate Division in
Wire
Industries Steel Products & Engineering
supra
,
are premised on an interpretation of the Companies Act. The
provisions of section 5 of the FI Act in respect of curatorship
orders
are materially different to the provisions of the Companies
Act pertaining to the content of a judicial management order. Whereas
the provisions of section 5 (5) (f) of the FI Act are unrestricted in
their ambit, the provisions of section 428 (2) (c) and 433
(3) (c)
of the companies Act are restricted to the matters referred to in
those paragraphs; viz.
“directions
as to the management of the company, or any matter incidental
thereto, including directions conferring upon the final
judicial
manager the power, subject to the rights of the creditors of the
company, to raise money in any way without the authority
of
shareholders.”
[32] Therefore, in terms of the
FI Act it is the Registrar, not the Court, which is expressly
empowered to give the curator “instructions
with regard to any
matter arising out of, or in connection with, the control and
management of the business of the institution”
(under curatorship).
See: section 5 (6) of the FI Act. A judicial manager obtains such
directions from the Court in terms of the
Companies Act. I am in
agreement with Mr. Binns-Ward SC that this highlights the different
and much wider character of the matters
to which a Court may give
attention in terms of any order issued in terms of section 5 (2) (a)
or section 5 (5) of the FI Act. The
argument by the Ovation Pension
Funds, in my view, indeed begs the question why there is an
institution of curatorship for financial
institutions and why a
curatorship is a remedy additional to and distinguishable from the
remedies of the judicial management and
winding up. The submission
that the curators are obliged to give effect to the administration
and nominee agreements is, in my view,
rather simplistic. The proper
position is that they are obliged to give effect to those agreements
within the exigencies of the curatorship.
The curatorship is an
incident which is statutorily provided and which supervenes on the
administration of the assets in question
in terms of the
administration and nominee agreements.
THE LOSS (POSTULATED IN THE
PAPERS)
[33] The papers reveal that the
extent and incidence of loss has not as a matter of fact been finally
established by the curators.
What follows hereinafter is what in
brief represents the content of the Affidavits filed by the applicant
and the curators’ reports.
Some 143 912 un-reconciled clearing
entries were found in the accounting records of the Respondents. The
risks inherent in the fact
that the reconciliations in respect of the
asset accounts, bank accounts and the clearing accounts were not kept
up to date include
that there are undisclosed losses and receipts in
respect of which no investments were made. As at 2 may 2007 the
curators were in
the process of obtaining direct confirmation from
individual investors of their investment balances.
[34] As at 2 May 2007 the
curators had ascertained that cash in the amount of R147 972 810 paid
into the Common Cents cash pool had
been misappropriated. A further
amount of R42 558 609 in cash had been disinvested from the Common
Cents cash pool but not paid to
Ovation Nominees. A further amount of
R19 000 000 which passed through the Ovation Nominees bank account
may have been lost. It does
not appear from the curators’ report
which investors this loss was associated with. Apart from the
aforementioned losses, most
of the assets held by the various asset
managers through whom investors’ money was invested, had been
accounted for ‘subject
to the final reconciliations being
performed’.
[35] The reconciliation of the
clearing accounts and the client asset accounts might result in
further losses being identified and
as at 2 May 2007 the curators
were accordingly not in a position to express themselves with regard
to the losses incurred. As at
8 May 2007
“the
reconciliation process to match investor assets with liabilities to
investors [had] not been completed”
;
and as at 21 May 2007 the curators had not yet completed the process
of checking that
there
is an asset for every investment reflected in the Ovation books as
being owed (sic) by an investor’ and were not in a position
to say
positively that ‘particular assets belong to particular investors,
including the Retirement Funds”.
[36] The ovation Retirement
Funds appear to rely for their argument that this reconciliation
process has been completed on the fact
that a ‘finding by Advocates
Manca and Pillay that
“detailed
records of the identity of the investors and the amount of their
investment as well as the units purchased on their behalf
by Nominees
are kept by Nominees” and that “[s} uch records accordingly
identify the owners of the assets held by the Nominees”
.
This was in fact not a ‘finding’ which was made by the counsel
referred to in an opinion which they furnished to the curators,
but
clearly an assumption which they were instructed to make for the
purposes of the opinion sought.
[37] The Ovation Retirement
Funds have subsequently sought to show that contrary to what the
curators say in their reports, they have
in fact completed the
reconciliation process. They do this by placing reliance upon a
document which Mr. Vincent Vermaak, the managing
director of the
Respondents had furnished to Mr. Thyne on 7 May 2007, entitled
‘Ovation Global Investment Services (Pty) Ltd Key
Deliverables –
Finance Project’, and a document which was apparently furnished by
Ovation Services to the principal officer of
the Ovation Retirement
Funds entitled ‘Retirement Funding’ (‘the schedule’). A
cursory glance at these documents and the
affidavit to which they are
attached reveals the following:
(i) Although by 7 May 2007,
statements had been obtained from asset houses and had been
summarized and totaled (independently), a
third item referred to as
‘independent check’ had not yet been completed. (The statement
that ‘the assets held by Ovation Services
and Ovation Nominees were
verified by the task team appointed by the curators by 15 March 2007’
appears to be incorrect and not
supported by Annexure A to the
supplementary affidavit of Mr. Thyne);
(ii) As at 30 march 2007
Ovation Services, and apparently the curators, were in possession of
a schedule which listed the Ovation
Retirement Funds, the asset
management company through which their investments were managed, the
fund in which their investments
were invested and ‘the market value
as at 30 March 2007 associated with each investor
according
to the fund
on the
Ovation Platform in which the aforesaid assets are invested’
(emphasis supplied).
Nothing in the schedule or the
affidavit to which it is attached suggests that the reconciliation
process has been completed. On the
contrary, the schedule includes as
items on pages 6, 12, 13 and 20 of the schedule the values of the
Common Cents portfolios, which
are rather overstated, given that
these monies have been misappropriated. The schedule also contains
funds managed by Fidentia Ayanda
Collective Investments.
[38] Accordingly, even if I
have wrongly accepted the argument put forth by the Applicant, in my
view, the opposition by the Ovation
Retirement Funds must fail.
Metropolitan’s contentions, well reasoned and articulated as they
were, must similarly fail. The dictates
of justice demand that the
costs of curatorship in this matter must be borne by the investors
(including those involved in the Ovation
Retirement Funds as well as
Metropolitan).
[39] To the extent that the
terms of a curatorship order render performance according to the
strict tenor of an agreement impossible,
the result in the
contractual context is indistinguishable in conceptual terms from any
other supervening partial impossibility of
performance. (See eg.
RH
Christie – The Law of contract in South Africa
5
th
ed. At 473 in fine - 475). In this regard it is important to
emphasise that the proposed final order does not, act to prevent the
curators, with the leave of the Registrar, from substantially
performing in terms of the relevant contracts where it would be
reasonable
to do so in the context of the overall administration of
the curatorship. It is also important to recognize that the fact that
the
effect of the curatorship might result in some trust property
being applied to defray costs does not result in the owners of the
trust property forfeiting their claims against the companies for the
value of any trust property not returned to them.
[40] Having
read all the documentation filed of record and having heard all
Advocates involved in this matter and for the reasons
set out
supra
,
I make the following order as proposed by the Applicant:
The order made on 2 March
2007 placing the whole of the business of
OVATION
GLOBAL INVESTMENT SERVICES (PROPRIETARY) LIMITED
(Registration
No. 1998/006620/07); and
OVATION GLOBAL INVESTMENT
NOMINEES (PROPRIETARY) LIMITED
(Registration
No. 1998/019798/07)
(‘the business’)
under curatorship in
accordance with the provisions of section 5 of the Financial
Institutions (Protection of Funds) Act 28 of
2001 (‘the Act’), is
confirmed on the terms further provided below.
The appointment of Mr John
Adrian Levin and Mr Barend Petersen (‘the curators’) as curators
of the whole of the business of
the companies referred to in
paragraph
The order made on 2 March 2007 placing the whole of the business of
above (‘the companies’) is confirmed and the curators are
absolved from furnishing security.
The business is hereby
confirmed to be under the curatorship and management of the
curators, subject to the supervision of the Registrar
of Financial
Services Providers (‘the Registrar’), and it is confirmed that
any other person (including, but not limited to,
the directors of
the companies) vested with the management of the business prior to
the order of 2 March 2007 remains divested
thereof.
4.1
All
actions, proceedings, the execution of all writs, summonses and
other processes against the companies are stayed for the duration
of
the curatorship and shall not be instituted or proceeded with
without the leave of the Court.
Investments in or
administered by the business or companies shall not without the
prior approval of the Registrar be withdrawn,
transferred or
otherwise disinvested from the business or companies.
The curators are hereby:
authorised to maintain
control of, and to manage and investigate the business and
operations of and concerning the companies,
together with all
assets and interests relating to such business, such authority to
be exercised subject to the control of the
Registrar in accordance
with the provisions of section 5(6) of the Act, and with all such
rights and obligations as may pertain
thereto;
vested with all executive
powers which would ordinarily be vested in, and exercised by, the
board of directors or members of the
companies, whether by law or
in terms of their articles of association, and the present
directors, members or managers of the
companies continue to be
divested of all such powers in relation to the business;
directed to give
consideration to the best interests of the investors in the
companies who have entrusted money to the companies
or whose money
has been invested with the companies, or is being managed or
administered by or on the instruction of the companies;
directed to exercise the
powers vested in them with a view to conserving the business and
not without the leave of the Court to
alienate or dispose of any of
the property of the companies or the business, save to the extent
and for the purposes set out
hereunder;
authorised, in their
discretion and depending on available resources, to maintain
payments to annuitants, pensioners and other
beneficiaries who
receive regular payments;
directed to take custody of
the cash, cash investments, stocks, shares and other securities
held or administered by the companies,
and of other property or
effects belonging to or held by or on the instructions of the
companies or any entity directly or indirectly
controlled by,
affiliated to or associated with the companies;
authorised to conduct any
investigation with a view to locating the assets belonging to and
or administered and or controlled
by the companies or the business,
including such assets held by way of securities, in cash or liquid
form,
and assets
which may have been acquired with funds stolen or otherwise
unlawfully diverted from the companies or the business
,
and for the purpose of the investigation the curators:
shall have the powers
conferred by
sections 5
,
6
and
7
of the
Inspection of
Financial Institutions Act, Act
No. 80 of 1998, on an inspector
appointed under that Act;
may in addition to the said
powers obtain the issue by the Registrar of this Court of any
subpoena in order to procure the attendance
of any person or to
obtain access to and possession of relevant documents, including
records of banking accounts, from any
person, if they have reason
to believe that such person has, or such documents may contain,
information relating to the investigation;
subject to paragraph
In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph In funding the expenses and costs
of the curatorship referred to in paragraphs subject to paragraph below authorised to incur such reasonable expenses and costs as
may be necessary or expedient for the curatorship and control of the business and operations of the companies, and to pay same from
the assets held, administered or under the control of the companies; and subject to paragraph below permitted to engage such assistance
of a legal, accounting, administrative, or other professional or technical nature, as they may reasonably deem necessary for the
performance of their duties in terms of this order and to defray reasonable charges and expenses thus incurred from the assets held
by or under control of the companies; above and the applicant’s costs of this application referred to in paragraph subject to paragraph
below authorised to pay the applicant’s costs as provided for in paragraph below without requiring the applicant first to excuss
any other party against whom an order for costs may have been granted by the court. above, the curators shall first utilise the resources
of the companies, jointly and severally, and only if those resources are insufficient for that purpose, and only to the extent of
any such insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata
the value of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph, below. below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph below permitted to engage such assistance of a legal, accounting, administrative, or other professional or technical
nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and to defray reasonable
charges and expenses thus incurred from the assets held by or under control of the companies; above and the applicant’s costs of
this application referred to in paragraph subject to paragraph below authorised to pay the applicant’s costs as provided for in
paragraph below without requiring the applicant first to excuss any other party against whom an order for costs may have been granted
by the court. above, the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources
are insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors
administered by or under the control of the companies pro rata the value of such assets or investments of each investor in relation
to the total value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007;
alternatively as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of
the consideration provided in terms of paragraph, below. below permitted to engage such assistance of a legal, accounting, administrative,
or other professional or technical nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and
to defray reasonable charges and expenses thus incurred from the assets held by or under control of the companies; above and the
applicant’s costs of this application referred to in paragraph subject to paragraph In funding the expenses and costs of the curatorship
referred to in paragraphs subject to paragraph below authorised to incur such reasonable expenses and costs as may be necessary
or expedient for the curatorship and control of the business and operations of the companies, and to pay same from the assets held,
administered or under the control of the companies; and subject to paragraph below permitted to engage such assistance of a legal,
accounting, administrative, or other professional or technical nature, as they may reasonably deem necessary for the performance
of their duties in terms of this order and to defray reasonable charges and expenses thus incurred from the assets held by or under
control of the companies; above and the applicant’s costs of this application referred to in paragraph subject to paragraph below
authorised to pay the applicant’s costs as provided for in paragraph below without requiring the applicant first to excuss any
other party against whom an order for costs may have been granted by the court. above, the curators shall first utilise the resources
of the companies, jointly and severally, and only if those resources are insufficient for that purpose, and only to the extent of
any such insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata
the value of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph, below. below authorised
to pay the applicant’s costs as provided for in paragraph Save as provided in paragraph 11, below, the costs of these proceedings,
as between attorney and own client, and the costs and remuneration of the curators shall be payable by the companies, jointly and
severally, and to the extent that the assets of the companies are insufficient for that purpose, and only to the extent of any such
insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata the value
of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph 10, below. below without
requiring the applicant first to excuss any other party against whom an order for costs may have been granted by the court. above,
the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources are insufficient
for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors administered by
or under the control of the companies pro rata the value of such assets or investments of each investor in relation to the total
value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007; alternatively
as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of the consideration
provided in terms of paragraph, below.
below
authorised
to incur such reasonable expenses and costs as may be necessary or
expedient for the curatorship and control of the
business and
operations of the companies, and to pay same from the assets held,
administered or under the control of the companies;
subject to paragraph
In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph In funding the expenses and costs
of the curatorship referred to in paragraphs subject to paragraph below authorised to incur such reasonable expenses and costs as
may be necessary or expedient for the curatorship and control of the business and operations of the companies, and to pay same from
the assets held, administered or under the control of the companies; and subject to paragraph below permitted to engage such assistance
of a legal, accounting, administrative, or other professional or technical nature, as they may reasonably deem necessary for the
performance of their duties in terms of this order and to defray reasonable charges and expenses thus incurred from the assets held
by or under control of the companies; above and the applicant’s costs of this application referred to in paragraph subject to paragraph
below authorised to pay the applicant’s costs as provided for in paragraph below without requiring the applicant first to excuss
any other party against whom an order for costs may have been granted by the court. above, the curators shall first utilise the resources
of the companies, jointly and severally, and only if those resources are insufficient for that purpose, and only to the extent of
any such insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata
the value of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph, below. below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph below permitted to engage such assistance of a legal, accounting, administrative, or other professional or technical
nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and to defray reasonable
charges and expenses thus incurred from the assets held by or under control of the companies; above and the applicant’s costs of
this application referred to in paragraph subject to paragraph below authorised to pay the applicant’s costs as provided for in
paragraph below without requiring the applicant first to excuss any other party against whom an order for costs may have been granted
by the court. above, the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources
are insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors
administered by or under the control of the companies pro rata the value of such assets or investments of each investor in relation
to the total value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007;
alternatively as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of
the consideration provided in terms of paragraph, below. below permitted to engage such assistance of a legal, accounting, administrative,
or other professional or technical nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and
to defray reasonable charges and expenses thus incurred from the assets held by or under control of the companies; above and the
applicant’s costs of this application referred to in paragraph subject to paragraph In funding the expenses and costs of the curatorship
referred to in paragraphs subject to paragraph below authorised to incur such reasonable expenses and costs as may be necessary
or expedient for the curatorship and control of the business and operations of the companies, and to pay same from the assets held,
administered or under the control of the companies; and subject to paragraph below permitted to engage such assistance of a legal,
accounting, administrative, or other professional or technical nature, as they may reasonably deem necessary for the performance
of their duties in terms of this order and to defray reasonable charges and expenses thus incurred from the assets held by or under
control of the companies; above and the applicant’s costs of this application referred to in paragraph subject to paragraph below
authorised to pay the applicant’s costs as provided for in paragraph below without requiring the applicant first to excuss any
other party against whom an order for costs may have been granted by the court. above, the curators shall first utilise the resources
of the companies, jointly and severally, and only if those resources are insufficient for that purpose, and only to the extent of
any such insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata
the value of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph, below. below authorised
to pay the applicant’s costs as provided for in paragraph Save as provided in paragraph 11, below, the costs of these proceedings,
as between attorney and own client, and the costs and remuneration of the curators shall be payable by the companies, jointly and
severally, and to the extent that the assets of the companies are insufficient for that purpose, and only to the extent of any such
insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata the value
of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph 10, below. below without
requiring the applicant first to excuss any other party against whom an order for costs may have been granted by the court. above,
the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources are insufficient
for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors administered by
or under the control of the companies pro rata the value of such assets or investments of each investor in relation to the total
value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007; alternatively
as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of the consideration
provided in terms of paragraph, below.
below
permitted to
engage such assistance of a legal, accounting, administrative, or
other professional or technical nature, as they
may reasonably deem
necessary for the performance of their duties in terms of this
order and to defray reasonable charges and
expenses thus incurred
from the assets held by or under control of the companies;
authorised to institute or
prosecute any legal proceedings on behalf of the companies and to
defend any litigation against the
companies;
authorised to invest such
funds as are not required for the immediate purposes of the
business, with a registered bank;
authorised to take control of
and to operate or freeze existing banking accounts of the companies
and of their subsidiaries, holding
or affiliated companies and of
any director or official of the companies insofar as money
entrusted to the companies has been
deposited into such latter
banking account; and to open and operate any new banking accounts
for the purposes of the curatorship;
directed and authorised, at
any time during their term of office, to report to the Registrar
should they deem it necessary or
expedient that application be made
to this court for the extension of their powers to any other
company (including any holding
company or subsidiary) or other
institution affiliated to or associated with the companies; or for
the liquidation of the companies;
or for any relief as envisaged by
s 6 of the Act against the companies or any of their
directors, members or managers;
authorised to claim all
costs, charges and other expenditure reasonably incurred by the
curators in the execution of their duties
in terms of this order,
including their own remuneration, as administration costs, in the
event of the liquidation of any of
the companies ensuing;
subject to paragraph
In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph In funding the expenses and costs
of the curatorship referred to in paragraphs subject to paragraph below authorised to incur such reasonable expenses and costs as
may be necessary or expedient for the curatorship and control of the business and operations of the companies, and to pay same from
the assets held, administered or under the control of the companies; and subject to paragraph below permitted to engage such assistance
of a legal, accounting, administrative, or other professional or technical nature, as they may reasonably deem necessary for the
performance of their duties in terms of this order and to defray reasonable charges and expenses thus incurred from the assets held
by or under control of the companies; above and the applicant’s costs of this application referred to in paragraph subject to paragraph
below authorised to pay the applicant’s costs as provided for in paragraph below without requiring the applicant first to excuss
any other party against whom an order for costs may have been granted by the court. above, the curators shall first utilise the resources
of the companies, jointly and severally, and only if those resources are insufficient for that purpose, and only to the extent of
any such insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata
the value of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph, below. below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph below permitted to engage such assistance of a legal, accounting, administrative, or other professional or technical
nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and to defray reasonable
charges and expenses thus incurred from the assets held by or under control of the companies; above and the applicant’s costs of
this application referred to in paragraph subject to paragraph below authorised to pay the applicant’s costs as provided for in
paragraph below without requiring the applicant first to excuss any other party against whom an order for costs may have been granted
by the court. above, the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources
are insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors
administered by or under the control of the companies pro rata the value of such assets or investments of each investor in relation
to the total value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007;
alternatively as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of
the consideration provided in terms of paragraph, below. below permitted to engage such assistance of a legal, accounting, administrative,
or other professional or technical nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and
to defray reasonable charges and expenses thus incurred from the assets held by or under control of the companies; above and the
applicant’s costs of this application referred to in paragraph subject to paragraph In funding the expenses and costs of the curatorship
referred to in paragraphs subject to paragraph below authorised to incur such reasonable expenses and costs as may be necessary
or expedient for the curatorship and control of the business and operations of the companies, and to pay same from the assets held,
administered or under the control of the companies; and subject to paragraph below permitted to engage such assistance of a legal,
accounting, administrative, or other professional or technical nature, as they may reasonably deem necessary for the performance
of their duties in terms of this order and to defray reasonable charges and expenses thus incurred from the assets held by or under
control of the companies; above and the applicant’s costs of this application referred to in paragraph subject to paragraph below
authorised to pay the applicant’s costs as provided for in paragraph below without requiring the applicant first to excuss any
other party against whom an order for costs may have been granted by the court. above, the curators shall first utilise the resources
of the companies, jointly and severally, and only if those resources are insufficient for that purpose, and only to the extent of
any such insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata
the value of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph, below. below authorised
to pay the applicant’s costs as provided for in paragraph Save as provided in paragraph 11, below, the costs of these proceedings,
as between attorney and own client, and the costs and remuneration of the curators shall be payable by the companies, jointly and
severally, and to the extent that the assets of the companies are insufficient for that purpose, and only to the extent of any such
insufficiency, out of the assets or investments of investors administered by or under the control of the companies pro rata the value
of such assets or investments of each investor in relation to the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March 2007; alternatively as may be proposed by the curators in terms of paragraph
9.2.7, below and sanctioned by the Court in the context of the consideration provided in terms of paragraph 10, below. below without
requiring the applicant first to excuss any other party against whom an order for costs may have been granted by the court. above,
the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources are insufficient
for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors administered by
or under the control of the companies pro rata the value of such assets or investments of each investor in relation to the total
value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007; alternatively
as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of the consideration
provided in terms of paragraph, below.
below
authorised
to pay the applicant’s costs as provided for in paragraph
Save as provided in paragraph 11, below, the costs of these proceedings, as between attorney and own client, and the costs and remuneration
of the curators shall be payable by the companies, jointly and severally, and to the extent that the assets of the companies are
insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors administered
by or under the control of the companies pro rata the value of such assets or investments of each investor in relation to the total
value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007; alternatively
as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of the consideration
provided in terms of paragraph 10, below.
below without requiring the applicant first to excuss any other
party against whom an order for costs may have been granted by
the
court.
Save as provided in
paragraph 11, below
,
the costs of these proceedings, as between attorney and own client,
and the costs and remuneration of the curators shall be payable
by
the companies, jointly and severally,
and
to the extent that the assets of the companies are insufficient for
that purpose, and only to the extent of any such insufficiency,
out
of the assets or investments of investors administered by or under
the control of the companies pro rata the value of such
assets or
investments of each investor in relation to the total value of
investors’ assets or investments administered by or
under the
control of the companies on 2 March 2007
;
alternatively as may be proposed by the curators in terms of
paragraph 9.2.7, below and sanctioned by the Court in the context
of
the consideration provided in terms of paragraph 10, below.
In funding the expenses and
costs of the curatorship referred to in paragraphs
subject to paragraph In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph below permitted to engage such assistance of a legal, accounting, administrative, or other professional or technical
nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and to defray reasonable
charges and expenses thus incurred from the assets held by or under control of the companies; above and the applicant’s costs of
this application referred to in paragraph subject to paragraph below authorised to pay the applicant’s costs as provided for in
paragraph below without requiring the applicant first to excuss any other party against whom an order for costs may have been granted
by the court. above, the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources
are insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors
administered by or under the control of the companies pro rata the value of such assets or investments of each investor in relation
to the total value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007;
alternatively as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of
the consideration provided in terms of paragraph, below. below authorised to incur such reasonable expenses and costs as may be necessary
or expedient for the curatorship and control of the business and operations of the companies, and to pay same from the assets held,
administered or under the control of the companies;
and
subject to paragraph In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph below permitted to engage such assistance of a legal, accounting, administrative, or other professional or technical
nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and to defray reasonable
charges and expenses thus incurred from the assets held by or under control of the companies; above and the applicant’s costs of
this application referred to in paragraph subject to paragraph below authorised to pay the applicant’s costs as provided for in
paragraph below without requiring the applicant first to excuss any other party against whom an order for costs may have been granted
by the court. above, the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources
are insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors
administered by or under the control of the companies pro rata the value of such assets or investments of each investor in relation
to the total value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007;
alternatively as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of
the consideration provided in terms of paragraph, below. below permitted to engage such assistance of a legal, accounting, administrative,
or other professional or technical nature, as they may reasonably deem necessary for the performance of their duties in terms of
this order and to defray reasonable charges and expenses thus incurred from the assets held by or under control of the companies;
above and the applicant’s costs of this application referred to in
paragraph
subject to paragraph In funding the expenses and costs of the curatorship referred to in paragraphs subject to paragraph below authorised
to incur such reasonable expenses and costs as may be necessary or expedient for the curatorship and control of the business and
operations of the companies, and to pay same from the assets held, administered or under the control of the companies; and subject
to paragraph below permitted to engage such assistance of a legal, accounting, administrative, or other professional or technical
nature, as they may reasonably deem necessary for the performance of their duties in terms of this order and to defray reasonable
charges and expenses thus incurred from the assets held by or under control of the companies; above and the applicant’s costs of
this application referred to in paragraph subject to paragraph below authorised to pay the applicant’s costs as provided for in
paragraph below without requiring the applicant first to excuss any other party against whom an order for costs may have been granted
by the court. above, the curators shall first utilise the resources of the companies, jointly and severally, and only if those resources
are insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors
administered by or under the control of the companies pro rata the value of such assets or investments of each investor in relation
to the total value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007;
alternatively as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of
the consideration provided in terms of paragraph, below. below authorised to pay the applicant’s costs as provided for in paragraph
Save as provided in paragraph 11, below, the costs of these proceedings, as between attorney and own client, and the costs and remuneration
of the curators shall be payable by the companies, jointly and severally, and to the extent that the assets of the companies are
insufficient for that purpose, and only to the extent of any such insufficiency, out of the assets or investments of investors administered
by or under the control of the companies pro rata the value of such assets or investments of each investor in relation to the total
value of investors’ assets or investments administered by or under the control of the companies on 2 March 2007; alternatively
as may be proposed by the curators in terms of paragraph 9.2.7, below and sanctioned by the Court in the context of the consideration
provided in terms of paragraph 10, below. below without requiring the applicant first to excuss any other party against whom an
order for costs may have been granted by the court.
above, the curators shall first utilise the resources of the
companies, jointly and severally, and only if those resources are
insufficient for that purpose, and only to the extent of any such
insufficiency, out of the assets or investments of investors
administered by or under the control of the companies pro rata the
value of such assets or investments of each investor in relation
to
the total value of investors’ assets or investments administered
by or under the control of the companies on 2 March
2007;
alternatively as may be proposed by the curators in terms of
paragraph 9.2.7, below and sanctioned by the Court in the context
of
the consideration provided in terms of paragraph
,
below.
The curators shall be
remunerated in accordance with the norms of the attorneys and
auditors profession respectively, as agreed
with the Registrar.
The curators are directed
-
to furnish the Registrar
with progress reports relating to the curatorship on a monthly
basis; and
to deliver a further
report to the Court by no later than 15 October 2007 in which the
following aspects are addressed:
the status of the
curatorship as at 30 September 2007;
a reconciliation
statement of investor funds and assets held by the companies and
the liabilities of the companies to their
current investors;
any shortfall detected in
the holding of investment assets;
any irregularities
committed by the companies, their directors, key individuals,
shareholders or management, and the contravention
of any codes,
law or mandates in the conduct of the business;
details of civil actions
which may have been instituted by or against the curators, and the
status of any relevant prosecution
which may be pending;
the progress made with
respect to the transfer of the administration of investments off
the Ovation platform;
how the funding of the
costs of the curatorship, including the remuneration of the
curators, has been provided for or is intended
to be provided for;
recommendations with
regard to the further conduct of the curatorship and any matter
arising from the curatorship.
On receipt of the curators’
report referred to in paragraph
above, the applicant shall set the application down for
consideration within ten days by the Court.
The Applicant’s costs of
suit occasioned by the opposition by Ovation Preservation Fund,
Ovation Preservation Provident Fund and
Ovation Retirement Annuity
Fund, including the costs of two counsel, be paid by the Ovation
Retirement Funds and Metropolitan jointly
and severally, on the
scale as between party and party.
Copies of this order shall, as
soon as possible, be served on the companies at their principal
place of business in Cape Town and
be published in one issue of the
Government Gazette. An abbreviated version of this order, shall be
published in one issue of
the Cape Argus and Business Day
newspapers.
__________________
DLODLO, J