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[2020] ZASCA 149
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Knoop and Another NNO v Gupta (Tayob Intervening) (115/2020) [2020] ZASCA 149; [2021] 1 All SA 17 (SCA); 2021 (3) SA 135 (SCA) (19 November 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 115/2020
In
the matter between:
KURT
ROBERT KNOOP
NO
FIRST APPELLANT
JOHAN
LOUIS KLOPPER NO
SECOND
APPELLANT
and
CHETALI
GUPTA RESPONDENT
MAHOMED
MAHIER
TAYOB INTERVENING
PARTY
Neutral
citation:
Knoop and Another NNO v
Gupta (No 1)
(115/2020)
[2020] ZASCA
149
(19 November 2020)
Coram:
WALLIS, MBHA and MOCUMIE JJA and EKSTEEN and
MABINDLA-BOQWANA AJJA
Heard
:
6 November 2020
Delivered
:
The order in this case was delivered orally to the parties on
6 November 2020 and furnished to them electronically that day.
This judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the
Supreme
Court of Appeal website and release to SAFLII. The date and time for
hand-down of the judgment is deemed to be 09h45 on
19 November 2020.
Summary:
Suspension of operation of order
pending an appeal – section 18(1) of
Superior Courts Act
10 of 2013
– leave to execute on order in terms of
s 18(3)
of Act – requirements – urgent appeal in terms of
s 18(4)
of Act – suspension of order granting leave to execute in terms
of
s 18(4)(iv)
of Act – whether court empowered to order
that suspension would not operate – such an order a nullity.
ORDER
On
appeal from:
Gauteng Division of High
Court, Pretoria (Ledwaba DJP, Janse van Nieuwenhuizen J and
Senyatsi AJ concurring, sitting as court
of first instance):
1 The appeal is upheld with costs,
such costs to include those consequent upon the employment of two
counsel.
2 The order of the full court is
set aside and replaced by the following order:
'The
application is dismissed with costs, such costs to include those
consequent upon the employment of two counsel.'
3 It is declared that pending the
finalisation of this appeal:
(a)
The operation and execution of the order of the full court granting
leave to execute in terms of
s 18(1)
, read with
s 18(3)
, of the
Superior Courts Act 10 of 2013
was suspended in terms of s 18(4)(iv)
of the Superior Courts Act 10 of 2013.
(b)
The appellants were not validly removed from office as business
rescue practitioners in respect of Islandsite Investments One
Hundred
and Eighty (Pty) Ltd (Islandsite) and Confident Concept (Pty) Ltd
(Confident Concept).
(c)
The directors of Islandsite and Confident Concept were not
entitled to act on the order for the removal of the appellants
as
business rescue practitioners in those two companies by nominating
new business rescue practitioners and the appointments of
Mr Tayob in
respect of Islandsite and Mr Naidoo in respect of Confident Concept
were invalid.
(d)
The notices of termination of business rescue given by Mr Tayob
in respect of Islandsite and Mr Naidoo in respect of Confident
Concept in terms of
s 132(2)
(b)
of the
Companies Act
71 of 2008
were invalid and of no force and effect.
(e)
Nothing in this order validates or invalidates any other action taken
by Islandsite and Confident Concept since 7 February 2020
with the
authority of Mr Tayob and Mr Naidoo as the case may be.
4 It is further declared that
pending the finalisation of the main appeal under Case No 116/2020
Islandsite and Confident Concept
remain in business rescue under the
supervision of the appellants in accordance with their original
appointments as business rescue
practitioners.
JUDGMENT
Wallis
JA (Mbha and Mocumie JJA and Eksteen and Mabindla Boqwana AJJA
concurring)
[1]
The immediate execution
of a court order, when an appeal is pending and the outcome of the
case may change as a result of the appeal,
has the potential to cause
enormous harm to the party that is ultimately successful. That was
well-illustrated by the facts in
Philani-Ma-Afrika
,
[1]
where the judge granted leave to appeal against an eviction order and
at the same time gave leave to execute. Only an urgent application
to
the Constitutional Court, made in the mistaken belief that the
execution order was not appealable to this court, forestalled
the
inevitable and irreparable harm that would have resulted from giving
effect to the execution order. In giving the judgment
of this court,
Farlam JA said:
[2]
'The facts of this case provide a striking illustration of the need
for orders of the nature of the execution order to be regarded
as
appealable in the interests of justice.' There can be little doubt
that what occurred in
Philani-Ma-Afrika
led to the statutory provisions that now govern the grant of leave to
execute ('execution orders').
[2]
At common law, unless
the court in the exercise of a discretion ordered otherwise, an
application for leave to appeal and an appeal
pursuant to leave being
granted suspended the operation of the order. It was not open to the
successful party to execute on, or
otherwise act pursuant to, that
order.
[3]
This common law rule and the power to grant an execution order is now
expressly embodied in
s 18(1)
, read with s 18(3), of the
Superior Courts Act 10 of 2013 (the SC Act). The grant of leave to
execute is constrained by the
requirement that it may only be granted
if there are exceptional circumstances; if the applicant will suffer
irreparable harm if
it is not granted; and if the grant will not
cause the respondent to suffer irreparable harm. A further safeguard
against the risk
of harm being caused by an execution order is the
automatic right to an urgent appeal given by s 18(4). Pending
such an appeal
the statute expressly provides in s 18(4)(iv)
that the operation of the suspension order is itself suspended. This
case illustrates
what can go awry when a court attempts to override
that statutory provision. But first, the background.
Background
[3]
The shareholders in equal shares of two
companies, Islandsite Investments One Hundred and Eighty (Pty)
Ltd (Islandsite) and
Confident Concept (Pty) Ltd (Confident Concept),
are the respondent, Mrs Gupta, her husband, Mr Atul Gupta, and Mr
Gupta's two
brothers, Arti and Rajesh Gupta (hereafter 'the Guptas').
Their business affairs have come to public attention through media
reports,
the 'State of Capture' report by the Public Protector,
Ms Thuli Madonsela, and the activities and daily public hearings
of
the Commission of Inquiry into Allegations of State Capture, known
eponymously as the Zondo Commission after the commissioner,
Deputy Chief Justice Raymond Zondo. The Commission was
appointed in fulfilment of the remedial action determined
by the
Public Protector in her report.
[4]
In consequence of
allegations made about the Guptas a number of companies in the group
through which the Guptas conducted their
business activities became
'unbanked', because the major banks in South Africa were not prepared
to afford them banking facilities.
This precluded them from
continuing with their business operations and very probably rendered
them commercially insolvent.
[4]
In the result Islandsite and Confident Concept were placed under
supervision and went into voluntary business rescue on 16 February
2018. Six other companies in the group were placed under business
rescue at the same time. These did not include Oakbay Investments
(Pty) Ltd (Oakbay), the company that controlled the operations of all
the other companies in business rescue. It is convenient
to refer to
these companies generally as the Oakbay Group. Forty percent of the
shares in Oakbay are owned by Islandsite and the
balance by Mr and
Mrs Gupta. Its acting Chief Executive Officer (CEO) is Ms Ronica
Ragavan.
[5]
The present appellants,
Mr Knoop and Mr Klopper, were appointed as the business rescue
practitioners (BRPs) in respect of Islandsite
and Confident
Concept
[5]
and also held appointments as BRPs in respect of some of the other
companies in the Oakbay Group. Although appointed at the instance
of
the directors (Ms Ragavan and Mr Ashu Chawla in the case of
Islandsite, and Mr Chawla in the case of Confident Concept) on the
recommendation of the attorneys advising the Guptas, within a short
period disputes arose between the BRPs, Ms Ragavan and other
employees in the Oakbay Group. These need not be described here, but
they led to Mrs Gupta making an application on 28 November
2018,
on the basis of an affidavit by Ms Ragavan, for the removal of the
BRPs of these two companies in terms of s 139(2)
of the
Companies Act 71 of 2008 (the Act). That application came before a
specially constituted full court of the Gauteng Division
of the High
Court, Pretoria (Ledwaba DJP, Janse van Niweuwenhuizen J
and Senyatsi AJ) and succeeded. An order for the
removal of the BRPs
(the removal order) was granted.
[6]
Messrs Knoop and
Klopper lodged an application for leave to appeal against the removal
order and were met with an application for
leave to execute, brought
on behalf of Mrs Gupta on the strength of an affidavit deposed to by
Ms Ragavan. On 7 February 2020 the
application for leave to appeal to
this court against the removal order succeeded. An execution order
was also granted in terms
of ss 18(1) and (3) of the SC Act. On
12 February 2020, as was their right and as was expected,
[6]
Messrs Knoop and Klopper lodged notice of an extremely urgent appeal
to this court. This is the appeal dealt with in this judgment.
The
following day they lodged their notice of appeal against the removal
order.
Subsequent
events
[7]
After the execution order was granted
arrangements were made – presumably by the boards of directors
of the two companies
– to have Mr M M Tayob
appointed as the business rescue practitioner in respect of
Islandsite and Mr S M Naidoo
appointed as the business
rescue practitioner in respect of Confident Concept. According to an
affidavit filed by Mr Tayob his
appointment was made on 10 February
2020 and I will assume that Mr Naidoo was appointed on about the
same date. We do
not know whether notice of that appointment was
filed with the Companies and Intellectual Property Commission (the
CIPC) as required
by s 129(4)
(a)
of
the Act, or whether and when notice was given to affected parties in
terms of s 129(4)
(b)
,
but I will assume that there was proper and timeous compliance with
these statutory requirements. What is relevant for present
purposes
is the steps taken, on the basis of these appointments, to bring
these proceedings and the business rescue of the two
companies, to an
end.
[8]
On 13 March 2020, Mr Tayob delivered a
notice purporting to withdraw the main appeal insofar as it related
to Islandsite. On
17 March 2020, Mr Naidoo purported to do
the same insofar as Confident Concept was concerned. This
precipitated
a paper war between the attorneys acting for Messrs
Knoop and Klopper and those representing Mrs Gupta. On 9 April
2020,
Mr Krause of BDK Attorneys wrote to the registrar asserting
that Messrs Klopper and Knoop had been 'stripped of their capacity'
as BRPs; had no
locus standi
and
no right of appeal; and asking that the urgent appeal should not be
enrolled, but should be disposed of by the President under
Rule
11(1)
(b)
of
the Supreme Court of Appeal Rules. It is difficult to conceive of a
more misconceived request by a legal practitioner. The rule
empowers
the President to give such directions as she may consider just and
expedient 'in matters of practice, procedure and the
disposal of any
appeal'. No sensible reading of the rule could lead anyone to think
that it entitled the President of this court
to dispose of an appeal
without placing it before a bench properly constituted to consider
the issues raised by the appeal, including
the question of the
entitlement of the appellants to pursue an appeal.
[9]
It is noteworthy that Mrs Gupta's attorneys
did not ask for the appeal to be enrolled as a matter of extreme
urgency as provided
in s 18(4)(iii) of the SC Act. Indeed, they
asked that it not be enrolled at all. This is both odd and
unexplained. If their
client thought that she would suffer
irreparable harm by Messrs Knoop and Klopper remaining in office, one
would have expected
them to ask the court to expedite the urgent
appeal to remove any obstacle to their removal. Had that been done
immediately the
notice of appeal was lodged on 12 February 2020,
the appeal could have been set down for an urgent hearing in the
February
term that was about to commence and disposed of by the end,
or shortly after the end, of that term.
[10]
The contention that Messrs Knoop and
Klopper, who were cited in their capacity as business rescue
practitioners
nomine officio
,
no longer had any
locus standi
to
pursue the main appeal, because they had not sought or obtained leave
to appeal in their personal capacities was refuted by their
attorneys. They asked for the urgent appeal to be enrolled. The
outcome of this pointless spat was that the Deputy President quite
properly refused to determine these legal issues on the
correspondence and directed that the urgent appeal and the main
appeal
be set down for hearing together. They were both enrolled for
hearing before us on 6 November 2020. On 5 October 2020 the
attorneys delivered a notice that the parties wanted a web-based
hearing.
[11]
Heads of argument were delivered in
accordance with the rules. Counsel for Messrs Knoop and Klopper
submitted that the urgent appeal
had been rendered moot by the Deputy
President's order, as the outcome of the main appeal would render it
unnecessary to determine
the urgent appeal. However, in making that
submission they had counted on there being no further actions by
Mr Tayob in relation
to Islandsite and Mr Naidoo in respect of
Confident Concept. In this they fell into error as the following
paragraphs demonstrate.
[12]
On 12 October 2020, Mr Tayob lodged an
application for leave to intervene in the main appeal for the sole
purpose of placing further
evidence before the court. While his
notice of motion and affidavit did not express any view about the
proper disposition of the
main appeal – it will be recalled
that he had purported to withdraw it – the terms of the
affidavit were plainly directed
at securing the dismissal of that
appeal insofar as it related to Islandsite. On 22 October 2020, the
court received a letter from
the attorneys on behalf of the
appellants saying that they would need time to respond to his
affidavit and the four lever arch
files of evidence to which it
referred and that Mr Tayob might wish to reply to their answering
affidavit. In the circumstances
they said the appeals would need to
be adjourned.
[13]
All this came only two weeks before the
appeals were due to be heard, when the preparation by the members of
the court was well
advanced. Bearing in mind that the appeal against
the execution order was required by the provisions of s 18(4)(iii)
to be
heard as a matter of extreme urgency and had already been
delayed by nine months, we were not minded, without first hearing the
parties, to agree either to Mr Tayob being allowed to intervene, or
to the postponement of the appeals.
[14]
We had started preparing a directive to the
parties governing the further conduct of the proceedings, when our
attention was drawn
to a news report that Mr Tayob had purported to
terminate the business rescue and restore Islandsite to its
directors. On Monday,
26 October 2020, the respondent's attorneys
confirmed this by delivering a letter to the registrar attaching a
copy of a document
from the CIPC reflecting that the business rescue
of Islandsite had been terminated by Mr Tayob and recorded by CIPC on
16 October
2020. The letter indicated that in the circumstances
Mr Tayob would not be pursuing his application to intervene in the
main appeal
and it would not be necessary for the appeals to be
adjourned as suggested by the appellants' attorneys.
[15]
The impression given by
these actions on the part of Mr Tayob was that they might have
been directed at stultifying the appellants'
appeals both against the
execution order and against the removal order. That was of concern,
because our law is clear that if that
is done with
dolus
it may amount to
contempt of court. As long ago as 1906, Mason J in
Li
Kui Yu
[7]
said:
'
…
where a person
knows or has reason to believe or ought to know that an application
is being made to the Court for a certain purpose
--- where he has
that knowledge, or that suspicion, then, if he takes any action
before the Court can be approached, the Court
will regard that as an
interference with the administration of justice, and will exercise
its powers to prevent itself being defeated
by anything of that
kind.’
Subsequent
cases have stressed the need for there to be an intention to defeat
the ends of justice amounting to
dolus
.
[8]
In
Yamamoto
De Villiers JP
gave, as examples of such conduct, procuring the disappearance of a
witness knowing that they had been
subpoenaed to appear or removing
goods with the object of defeating a possible order of court. The
question is whether it is 'manifest
that there was an ulterior object
– namely to obstruct the due course of justice.
[9]
However, in oral argument counsel for the appellants said that a
finding on this was not necessary for the determination of the
appeal
and we have not pursued the matter further. To do so would require
further evidence.
[16]
The following directive was issued to the
parties and Mr Tayob concerning the conduct of the appeals:
'
The
judges have considered the application for an adjournment of the main
appeal under Case No 116/2020 and Mr Tayob’s application
for
leave to intervene in that appeal and to tender further evidence.
Neither application is granted at this stage. They will be
considered
and disposed of together with the appeal in Case No 115/2020
in the scheduled appeal hearing on 6 November
2020. In addition,
since receiving those applications the attention of the judges
was drawn to a media report that Mr Tayob
had purported to terminate
the business rescue and restore the company to its directors. The
respondent’s attorneys
sent a letter to the Registrar of this
court on 26 October 2020 recording the termination of business rescue
in relation to that
company. As these intervening events may affect
the conduct of the proceedings, the court gives the following
directive
for the hearing on 6 November:
1 Mr Tayob is to deliver an
affidavit by no later than 30 October 2020 in which he is to inform
the court:
(a) when he terminated the
business rescue and provide particulars, including copies of all
documents showing the steps taken in
terms of s 141(2)
(a)
or
(b)
as the case may be of the
Companies Act, 71 of 2008
in
seeking the termination of the business rescue;
(b) when he formed the intention
to terminate the business rescue;
(c) the basis upon which he gave
notice to the Commission in terms of
s 132
(2)
(b),
read
with
s 141
(2) of the
Companies Act 71 of 2008
.
2 Mr Tayob is to file heads of
argument not exceeding 15 pages in length by no later than 30 October
2020 dealing with the following
matters:
(a) As the operation of the
execution order in terms of
ss 18(1)
and (3) of the
Superior Courts
Act 10 of 2013
(the Act) was automatically suspended in terms of
s 18(4)(iv) of the Act, on what basis does he contend that he
has a legal
interest in the outcome of the appeal in Case No
116/2020 and, if he did so, on what basis was he entitled to
terminate the
business rescue?
(b) Given the likelihood that the
evidence he now seeks to tender will be disputed, on what basis is it
admissible at the stage
of an appeal?
(c) The delay in bringing the
application for leave to intervene.
3 The parties and Mr Tayob are to
be represented at the hearing on 6 November 2020. The
hearing will commence at
9.45am by dealing with the urgent appeal
under Case No 115/2020. The appellants will be allocated 35 minutes
and the respondent
35 minutes, with 5 minutes for a reply.
Counsel for Mr Tayob will be entitled to address the court on issue
1(a) above for
no more than 15 minutes, subject to the
directions of the court.
4 Judgment in the urgent appeal
under Case No 115/2020 will then be reserved and the court will
adjourn to consider the further
disposition of the appeal in
Case 116/2020. When it resumes it will either grant an
adjournment and hear argument on the wasted
costs occasioned by the
adjournment, or it will proceed to hear the appeal in accordance with
directions to be given at that stage
of the hearing.
5 Pending the hearing on 6
November 2020 Mr Tayob is to take no further steps to give effect to
any purported termination of the
business rescue proceedings or in
any way to transfer control, or facilitate the transfer of control,
of the company under business
rescue, Islandsite Investments 180
(Pty) Ltd, to its directors.
6 The local attorneys for Mr
Tayob, who are also the local attorneys for Mrs Gupta in these
appeals, are directed forthwith
to draw their client’s
attention and that of the principal deponent to the affidavits on her
behalf, Ms Ragavan, to the terms
of these directives and in
particular paragraph 5 thereof.
7
Any party affected by this directive is given leave to apply to the
presiding judge on notice to the Registrar and the parties
to the
appeals for a variation of the terms of the directive.’
[17]
Mr Tayob filed an affidavit and heads of
argument, and was represented before us by counsel. In consequence of
the directive, supplementary
heads of argument were delivered on
behalf of the appellants dealing with the suspension of the execution
order and the urgent
appeal. Mrs Gupta's attorneys wrote to the
Registrar objecting to the supplementary heads of argument and sought
a direction in
that regard. We indicated that whether the
supplementary heads would be accepted would be dealt with at the
hearing. The attorneys
were advised that if their counsel thought it
appropriate to deliver supplementary heads of argument their
reception would likewise
be dealt with at the hearing. On the morning
of the appeal they delivered two sets of supplementary heads of
argument, one dealing
with mootness and the other with the merits of
the urgent appeal. Neither party suggested that we should disregard
these supplementary
heads and we are grateful to counsel on both
sides for the assistance they have provided.
[18]
The final development came on 2 November
2020 when the Registrar received a letter from Mrs Gupta's attorneys
informing the court
that on 23 October 2020 Mr Naidoo had, like Mr
Tayob, purported to terminate the business rescue in respect of
Confident Concept.
That completed the background against which we
dealt with this urgent appeal. Had it been heard and disposed of as a
matter of
extreme urgency as provided in the SC Act the court would
simply have had to determine whether the execution order should have
been granted. Instead it was faced with a number of other issues
arising from the basic question of whether the execution order
was
enforceable and could validly be acted upon pending the hearing of
the urgent appeal. How that came about is set out in the
next section
of this judgment.
Was
the execution order enforceable?
[19]
Section 18(4) of the SC Act reads as
follows:
' If a court orders otherwise, as contemplated in
subsection (1) ─
(i) the court must immediately record its reasons for
doing so;
(ii) the aggrieved party has an automatic right of
appeal to the next highest court;
(iii) the court hearing such an appeal must deal with it
as a matter of extreme urgency; and
(iv)
such order will be automatically
suspended, pending the outcome of such appeal.
’
(My emphasis)
[20]
The section provides a safeguard against
irreparable prejudice being occasioned as a result of a court
granting an execution order
when it should not have done so. The
court must record its reasons immediately and the aggrieved party has
an automatic right of
appeal, unlike the ordinary situation where it
is necessary to obtain leave to appeal. An appeal against an
execution order is
one of right and the party that obtained the
execution order cannot object to it. If they wish to sustain the
execution order,
they must oppose the appeal. If they wish to avoid
being prejudiced by the execution order being suspended, their remedy
is to
approach the head of the court to which the appeal lies and
take all steps within their power to secure a hearing of the
extremely
urgent appeal for which the section provides. As noted
above, Mrs Gupta's attorneys did nothing of the sort, and at
every
stage have sought to rely on technicalities to avoid both
appeals being heard on its merits.
[21]
As an example of what
is envisaged by the section, when Fisher J granted an execution
order on 18 April 2018 against Ms
Ragavan and others at the
instance of Messrs Knoop and Klopper, giving the BRPs access to the
premises from which the companies
under business rescue operated, Ms
Ragavan's appeal was heard on 23 April and dismissed on 3 May
2018. Appeals under s 18(4)
can be disposed of equally
expeditiously by this court. In
Ntlemeza
[10]
the execution order was granted on 12 April 2017; the high court
furnished its reasons on 10 May 2017; the appeal was heard on
2 June
2017; and judgment was delivered on 9 June 2017.
[11]
Had the President been approached shortly after 12 February 2020
for a date for an urgent appeal it could easily have been
accommodated in the first term of this year.
[22]
The provisions of
s 18(4)(iv) are clear and emphatic. An execution order is
suspended pending an urgent appeal by the aggrieved
party.
[12]
The suspension of the original order in terms of s 18(1) of the
SC Act continues until the disposal of the urgent appeal.
In those
circumstances it may well be asked on what basis Messrs Tayob and
Naidoo were appointed and on what basis they have acted
as BRPs since
their appointment; purported in that capacity to withdraw Messrs
Knoop and Klopper's appeals; and now, as the appeal
hearing was
looming, purported to terminate the business rescue in relation to
both companies?
[23]
The answer to those questions lies in the
following paragraphs of the judgment granting leave to execute.
'[23] In terms of section 18(4)(ii) the respondents have
an automatic right of appeal to the next highest court, being the
Supreme
Court of Appeal.
[24] Section 18(4)(iv) provides that the order will
automatically be suspended pending the outcome of the appeal.
[25] The suspension would in the normal course require a
further application for leave to execute.
[26] The Supreme Court of Appel in
Ntlemeza v Helen
Suzman Foundation
2017 (5) SA 402
(SCA) was alive to the
multiplicity of applications that would follow in view of the
provisions of section 18(4)(iv) and held that
a court seized with an
application in terms of sections 18(1) and (3) may order that the
order will operate and be executable despite
the noting of any
further appeals by any party.
[27] The principle underlying the decision of the
Supreme Court of Appeal in
Ntlemeza supra
is the inherent
right of courts to control its own judgments to prevent a toing and
froing of litigants [See
Ntlemeza supra
at paragraph [32]].
[28] In executing our inherent right
in this regard an order that any present or future appeals,
applications and petitions by any
party relating to this judgment
shall not suspend the operation of the order granted on the 13
December 2019 shall follow.'
[24]
In the result, apart from granting leave to
execute the full court granted the following order:
'Any present or future appeals, applications and
petitions by any party relating to this judgment shall not suspend
the operation
of the order granted on the 13 December 2019.'
I
will refer to this as the suspension order.
[25]
The suspension order was explicitly
directed at overriding the provisions of s 18(4)(iv) and
Islandsite and Confident Concept
took advantage of it in the respects
set out above. That might not have mattered practically so far as
this appeal and the main
appeal are concerned, had Messrs Tayob and
Naidoo done nothing more than purport ineffectually to withdraw
Messrs Knoop and Klopper's
appeals. However, Mr Tayob's application
to intervene in the main appeal necessitated, in the first instance,
a consideration of
his
locus standi
to
do so. The subsequent conduct of both Mr Tayob and then Mr Naidoo
aimed at terminating the business rescue of both companies,
on which
Mrs Gupta's attorneys relied in contending that the appeals were
now moot, compelled us to consider whether the full
court's order was
properly granted. If it was not, the further question would arise of
the validity of the steps taken in reliance
upon it.
[26]
These issues arose because Mrs Gupta and
her attorneys, who informed us in a letter on 2 November 2020 that
they acted also for
Islandsite, presumably on the instructions of the
Guptas as a whole, sought to rely on the validity of the full court's
order seeking
to override s 18(4)(iv). They relied on the
validity of the actions of the substitute BRPs in order to advance
three contentions.
Firstly, they contended that Messrs Knoop and
Klopper had no
locus standi
to appeal because their removal and replacement meant that they
lacked any official capacity and standing to pursue the appeal
as
BRPs. Secondly, they contended that the substitute BRPs had withdrawn
the appeal insofar as they were appeals by the BRPs of
Islandsite and
Confident Concept. Thirdly, and most recently, they claimed that in
consequence of the termination of business rescue
in relation to both
companies the main appeal had become moot. I turn then to address
these questions commencing with the validity
of the full court's
order.
Was
the full court's order valid?
[27]
The short answer to that question is 'No'.
There are four reasons why this is so. They are:
(a) No such order was asked for in the application for
leave to execute. We were informed that none of the parties were
called upon
to address the court on this specific issue and that the
court made the order
mero motu
. In the result it was granted
without affording Messrs Knoop and Klopper a hearing on the issue.
(b) The order flew directly in the face of the statute,
that explicitly says that pending an urgent appeal under s 18(4)
the
operation of an execution order is suspended.
(c)
Ntlemeza
not only did not provide any
authority in favour of the grant of such an order, but was authority
against it.
(d) The inherent power of a court to
regulate its own procedure cannot be used to override the provisions
of a statute directly
governing the issue.
[28]
The first reason
requires little explanation. Section 34 of the Constitution
guarantees a 'fair public hearing' before a court.
In
De Beer
,
[13]
Yacoob J said: 'A fair hearing before a court as a prerequisite to an
order being made against anyone is fundamental to a just
and credible
legal order.' Where an issue is not raised in the pleadings or
affidavits in a case, and the order granted is one
on which neither
party has been heard, there is a breach of a fundamental
constitutional right. Had the court raised the issue
with counsel,
the fact that it had no power to grant such an order would have been
dealt with. Any misconception in regard to
Ntlemeza
and the scope of
its inherent power to regulate its own procedure, could have been
dispelled. On that ground alone the suspension
order should not have
been granted.
[29]
The language of s
18 (4)(iv) is explicit and allows for no misunderstanding. The
operation of an execution order is suspended
pending the outcome of
an urgent appeal against that order. That is the statutory position
and a court can no more grant an order
contrary to a statute, than it
can order a party to perform an illegal act.
[14]
Mr Tsatsawane SC, who appeared for Mrs Gupta here, but not in
the full court, quite properly accepted that the correct
position is that the high court could not rely on its inherent
jurisdiction to grant an order that was in direct conflict with
the
statute. Unless the statutory provision in question is subject to a
constitutional challenge – and none was raised in
this case –
it must be applied. Mr Cassim SC, who appeared for Mr Tayob
following the court's directive, conceded from
the outset that the
purported override of the statutory suspension of the execution order
was a nullity.
[30]
Mr Snijders, junior counsel for Mrs Gupta,
advanced an argument that the wording of s 18(4)(iv) reflected
the wording of s 18(1)
and therefore it was open to the court to
revert to the latter section in order to suspend the suspension of
the execution order.
There is no merit in the argument. The
fundamental difference between the two sections is that the
suspension provision in s 18(1)
is qualified by the words
'unless the court under exceptional circumstances orders otherwise'
whereas there is no such qualification
in s 18(4)(iv). To stress
the point the suspension of the execution order under that section is
said to be 'automatic'.
[31]
The reliance on
Ntlemeza
was misplaced. That was an urgent appeal where a preliminary argument
was advanced that a pending application for leave to appeal
or a
pending appeal was a jurisdictional requirement for the grant of an
execution order. Leave to appeal had been refused and
it was
submitted that the court was precluded from granting an execution
order because there was then no application for leave
pending,
although an application to this court for such leave was highly
likely and duly materialised. The argument was rejected
as
inconsistent with the language of s 18(1), which does not make
an application for an execution order dependent on a pending
application for leave to appeal or an appeal at the time the
application is made. The court pointed out that once an application
for leave to appeal was lodged with this court, execution of the high
court order would be stayed and it would be open to the respondents
to make an application for an execution order. The court remarked
that courts are guardians of their own process and should avoid
'a
to-ing and fro-ing of litigants', but that related solely to the
interpretation of s 18(1). It did not mean that a court
could
allow execution to take place in terms of an execution order when the
statute said that order was automatically suspended
pending the
exercise of the right to an extremely urgent appeal. Other than the
fact that the judgment set out s 18 as a whole,
including
s 18(4)(iv), it did not refer to the latter section and did not
question that the effect of the section was to suspend
the execution
order pending an appeal against it.
[32]
Paragraphs 27 and 28 of
the full court's judgment, quoted above in para 23, suggest that
it thought that it could create a
right to reverse the automatic
suspension of its execution order on the basis of its inherent power
to protect and regulate its
own process. But that power is one to
protect and regulate process in cases properly before it, not to
assume powers that would
override the explicit provisions of the
statute. That there was no application before the full court for an
order granting leave
to execute on the execution order pending the
appellants urgent appeal has already been dealt with. However, if
there had been
such an application, s 18(4)(iv) provided a
complete answer to it. The Constitutional Court pointed out in
Molaudzi
[15]
that the inherent power of courts to regulate their process does not
apply to substantive rights, but rather to procedural or adjectival
rights. The position is clear that Messrs Knoop and Klopper had a
right to an urgent appeal and a right not to have the execution
order
implemented against them – something that would have
substantive law consequences – until that appeal had been
disposed of. Protecting and regulating the court's process could not
be invoked to deprive them of those rights.
[16]
[33]
It follows that the
full court's suspension order, purporting to override the suspension
of its execution order, was invalid. It
had no power and no authority
to make that order. It is inexplicable that it made the order without
being asked to do so and without
having heard argument. The order was
void. In very similar circumstances that was the conclusion of this
court in
Motala
.
[17]
There a company was placed under judicial management in terms of the
Companies Act 61 of 1973 (the 1973 Act) and the court
made an
order appointing two named individuals as joint judicial managers. It
had no power to do that because s 429 of the
1973 Act
vested the power of appointment exclusively in the Master.
[18]
The Master was caught between Scylla and Charybdis, or in the modern
iteration of that classical allusion, between a rock and a
hard
place. The unpalatable choices facing him were to act in terms of the
court order by issuing certificates of appointment in
disregard of
the statute, or to act in terms of the statute and make appointments
as he deemed appropriate, but disregard the court
order. He chose the
latter and declined to appoint the one person named in the court
order on the grounds that he was unqualified
for appointment and to
do so was in conflict with the 1973 Act. The high court held him
to be in contempt of court. That order
was set aside on appeal to
this court on the grounds that the court order was void from
inception because it directly contradicted
the statute.
[34]
I am aware that some of
the reasoning in
Motala
has been subjected
to criticism by the Constitutional Court.
[19]
However, it remains authority for the proposition that if a court 'is
able to conclude that what the court [that made the original
decision] has ordered cannot be done under the enabling legislation,
the order is a nullity and can be disregarded'.
[20]
This principle can be invoked where the invalidity appears on the
face of the order as in
Motala
and in this
case.
[21]
The suspension order granted by the full court was therefore a
nullity.
The
consequences of nullity
[35]
The nullity of the suspension order meant
that the execution order was suspended pending this appeal. No lawful
steps could be taken
to remove Messrs Knoop and Klopper as BRPs until
the urgent appeal had been heard and dismissed. Substitute BRPs could
not be appointed
to take their place, because the order for their
removal was not yet effective and they were still in place. The order
directing
the appointment of new BRPs was suspended and could not be
acted on.
[36]
The consequences of that are perfectly
clear. Messrs Tayob and Naidoo did not become BRPs of Islandsite and
Confident Concept. Messrs Knoop
and Klopper remained in office
as BRPs of those two companies. The purported withdrawals of their
appeals, by two individuals who
were complete strangers to the
dispute between the BRPs and Mrs Gupta, were invalid and of no
effect. To be clear, that would have
been so whether or not Messrs
Tayob and Naidoo's appointments had been valid. The court had ordered
that Messrs Knoop and
Klopper be removed as BRPs. They were
entitled to appeal against that decision. It was not for two people,
who had no involvement
in that dispute and no authority to represent
Messrs Knoop and Klopper, to withdraw their appeals or in any other
way to interfere
with their constitutionally protected right to have
their dispute with Mrs Gupta resolved by a court of law in
accordance
with the judicial hierarchy established by the
Constitution.
[37]
For the same reason, the objection to the
continued
locus standi
of Mr Knoop and Mr Klopper was without merit. The convoluted argument
advanced on behalf of Mrs Gupta was that they were removed
in their
capacity as BRPs and given leave to appeal in that capacity, but not
in their personal capacity. Therefore, when they
were replaced as
BRPs by Messrs Tayob and Naidoo, they no longer had
locus
standi
because they did not have the
right in their personal capacity to seek their reinstatement. This
argument went beyond fantasy into
the realms of the surreal. They had
been joined in the removal application in their capacity as BRPs. It
was in that capacity that
they were removed and it was that decision
that they challenged in the main appeal. Their only involvement in
their personal capacity
was the failed attempt to obtain an order for
costs against them as individuals. There was nothing for them to
appeal against in
their personal capacity. The effect of the argument
was that they had no right of appeal notwithstanding that the full
court granted
leave to appeal to this court. The argument smacks of a
desperate endeavour to avoid the appeal being heard and the high
court
judgment ordering their removal being reconsidered.
[38]
It was also contended on behalf of Mrs
Gupta that Messrs Knoop and Klopper had accepted the execution order
and perempted their
appeal by abiding by it and submitting in their
heads of argument that it had become moot as a result of being set
down for hearing
simultaneously with the main appeal. That was
clearly incorrect. The heads of argument merely reflected the
sensible view that,
once the merits of the main appeal had been
disposed of, the question of leave to execute upon it would be moot,
save in respect
of costs, which s 16(2)
(a)
(ii)
of the SC Act renders an irrelevant consideration. The
correspondence made it clear that, apart from the coincidence
of the
two appeals being heard on the same day, Messrs Knoop and Klopper
were persisting with the urgent appeal. The point was
rightly not
pressed in argument.
[39]
Potentially the most
difficult issue relates to the purported termination of the business
rescue of the two companies. Reliance
was placed upon the principles
in cases such as
Tasima
[22]
to contend that there needed to be an application to set aside the
termination. But that was based upon the misconception that
the
termination was an official act by the CIPC. This is not correct.
When one is dealing with a company that is placed in business
rescue
voluntarily by way of a resolution of the board of directors, the
process of business rescue is conducted on the basis of
the actions
of the company; affected persons, that is, shareholders, any trade
union representing employees and employees;
[23]
the BRP; and the creditors. It is the company, acting through its
directors that commences the process and appoints the BRP.
[24]
The company then gives notice of the resolution to commence business
rescue.
[25]
During the course of the business rescue the directors of the company
remain in office and must continue to perform their functions
as
directors
[26]
and perform their management functions in accordance with the express
instructions of the BRP to the extent that it is reasonable
to do
so.
[27]
The BRP must investigate the affairs of the company and develop a
business rescue plan to be considered by affected persons.
[28]
If the plan is adopted the company is obliged to implement it under
the direction of the BRP.
[29]
[40]
If it transpires at any
stage of the process that the company cannot be rescued, the BRP is
obliged to give notice of this and approach
the court for a
liquidation order.
[30]
If the business rescue plan is substantially implemented, the BRP
files a notice with the CIPC
[31]
and the business rescue terminates when that notice is
filed.
[32]
If the business rescue plan is proposed and rejected and no affected
person has acted to extend it in terms of s 153 (1) of
the Act,
the business rescue terminates. The BRP is obliged in that event to
file a notice of termination of the business rescue.
[33]
If at the end of the BRPs investigation, they conclude that there are
no longer grounds for thinking that the company is financially
distressed, they must inform the court, the company and all affected
persons of that fact and file a notice of termination of the
business
rescue.
[34]
On filing that notice the business rescue proceedings end.
[35]
[41]
That summary of the process that ensues
after a company enters voluntarily into business rescue demonstrates
that the CIPC has no
role to play in the process beyond receiving and
maintaining in its records the information about the commencement and
termination
of business rescue. There is accordingly no public act by
the CIPC that has legal efficacy and requires to be set aside in
accordance
with the principles in
Tasima
.
Instead there is an entirely private process involving the company,
the BRP and all affected persons. The role of the CIPC is
simply to
hold the public record of the company's status.
[42]
The correct position is therefore that the
'termination' of the business rescue of these two companies was
effected by two people
who were not the BRPs duly appointed and in
office at the time. They had no right or power to terminate the
business rescue, however
much they may have believed that they did.
The termination was accordingly invalid and void. As a result, both
companies remain
in business rescue. That conclusion means that we
are back where we started, with an appeal against the execution order
in this
appeal and an appeal against the removal order in the main
appeal.
[43]
Before turning to deal with the urgent
appeal it is necessary to make it clear that, save to the extent set
out above, these conclusions
do not either validate or invalidate
actions by Mr Tayob and Mr Naidoo while they were acting as the BRPs
of these companies. Those
actions may have affected third parties or,
for example in the case of their remuneration, Messrs Tayob and
Naidoo themselves.
The precise consequence of those actions in the
light of the fact that they were not validly appointed as BRPs will,
if need be,
have to be explored in other litigation where the issues
will be properly defined and those third parties are before the
court.
The order makes this clear. I can then move on to the urgent
appeal.
The
merits of the urgent appeal
[44]
This is an appeal against the execution
order. Section 18(1) of the SC Act provides that:
‘
Subject to subsections (2) and
(3), and unless the court under exceptional circumstances orders
otherwise, the operation and execution
of a decision which is the
subject of an application for leave to appeal or of an appeal, is
suspended pending the decision of
the application or appeal.’
Messrs
Knoop and Klopper's removal as BRPs was therefore suspended by their
application for leave to appeal and would have continued
to be
suspended after being granted leave to appeal, subject only to the
provisions of s 18(3). That section provides that:
‘
A court may only order
otherwise as contemplated in subsection (1) . . . if the party who
applied to the court to order otherwise,
in addition proves on a
balance of probabilities that he or she will suffer irreparable harm
if the court does not so order and
that the other party will not
suffer irreparable harm if the court so orders.’
[45]
These provisions have
now been considered by this court in three judgments.
[36]
The effect of these is that an
applicant for an execution order must prove three things, namely,
exceptional circumstances; that
they will suffer irreparable harm if
the order is not made; and that the party against whom the order is
sought will not suffer
irreparable harm if the order is made.
[46]
Courts have always
eschewed any attempt to lay down a general rule as to what
constitutes exceptional circumstances.
[37]
The reason is that the enquiry is a factual one.
[38]
There is a helpful summary in the
MV Ais Mamas
[39]
that has been endorsed both by this court and by the Constitutional
Court.
[40]
In the context of s 18(3) the exceptional circumstances must be
something that is sufficiently out of the ordinary and of an unusual
nature to warrant a departure from the ordinary rule that the effect
of an application for leave to appeal or an appeal is to suspend
the
operation of the judgment appealed from. It is a deviation from the
norm.
[41]
The exceptional circumstances must arise from the facts and
circumstances of the particular case. When dealing with someone’s
removal from office, be it a BRP or a liquidator in relation to a
company, or a trustee or an executor, or some other office bearer,
the mere fact that the court has held that they should no longer fill
that office does not, in and of itself, constitute exceptional
circumstances. There must be something more in the circumstances of
the particular case that makes the immediate implementation
of the
removal order necessary.
[47]
The need to establish exceptional
circumstances is likely to be closely linked to the applicant
establishing that they will suffer
irreparable harm if the removal
order is not implemented immediately. One can readily imagine that an
order for the removal of
a dishonest BRP will provide grounds for the
court to order that the removal order should have immediate operative
effect. But
unless there is a real and substantial risk of immediate
and irreparable harm being suffered while waiting for the enrolment,
hearing
and outcome of the appeal, the foundation for an execution
order will be absent.
[48]
Section 18(3) requires
the applicant for an execution order to establish that the respondent
will not suffer irreparable harm if
the order is granted. The
judgment in
UFS v
Afriforum
[42]
indicates that the requirements of irreparable harm to the applicant
and no irreparable harm to the respondent, unlike the common
law
position, do not involve a balancing exercise between the two, but
must both be established on a balance of probabilities.
If the
applicant cannot show that the respondent will not suffer irreparable
harm by the grant of the execution order that is fatal.
It is
unnecessary to decide whether in those circumstances the court would
be empowered to grant other relief pending the hearing
of the appeal
in order to protect the applicant's position.
[49]
In
Justice
Alliance
,
[43]
it was held that the court has a wide discretion to grant or refuse
an execution order once the statutory requirements are satisfied,
and
that prospects of success in the appeal have a role to play in
considering the exercise of that discretion. There is a dictum
in
UFS
v Afriforum
[44]
that supports this approach, but in both that case and
Ntlemeza
the record in the
main appeal was not before this court and the appeals had perforce to
be decided without the full record or any
consideration of the merits
of the main appeals.
[50]
We had the full record
in the main appeal before us and had read it in anticipation of
dealing with the main appeal, but the argument
on the urgent appeal
did not include any debate over prospects of success in the main
appeal. Our finding that the three requirements
for making an
execution order were not established means that we did not have to
consider whether there is a discretion once they
are present and, if
so, whether the prospects of success should affect its exercise.
There may be difficulties if the high court
takes the prospects of
success into account in granting an execution order, because it is
not clear that the court hearing an urgent
appeal under s 18(4)
will always be in a position to assess the weight of this factor. As
I have noted, in both
UFS
v Afriforum
and
Ntlemeza
the
court disposed of the appeal by disregarding the prospects of success
on appeal. The urgency of the appeal almost inevitably
dictates that
in this court and possibly in a full court, the appeal court will not
have the record before it and will be confined
to assessing the
prospects of success in the main appeal from the judgment alone. The
usual principle that an appeal court decides
the appeal on the record
before the high court cannot apply in those circumstances. If the
language of s 18(4) confers a discretion,
is that a full
discretion or a power, combined with a duty to exercise that power on
proof of the requirements for its exercise?
[45]
These issues may warrant a reconsideration of the approach in
Justice
Alliance
on an
appropriate occasion.
Exceptional
circumstances
[51]
Ms Ragavan, who deposed to the founding
affidavit in the application for leave to execute, said that Mrs
Gupta's case was exceptional
for the following reasons:
(a) there had been inordinate delay in completing the
business rescue, during which damage had been caused to certain
properties
of Islandsite and Confident Concept, the creditors' debts
had not been settled and the BRPs had continued to generate fees for
themselves;
(b) the business rescue plans could have been
implemented by the sale of a single asset, an aircraft owned by
Islandsite that had
been allowed to fall into a state of disrepair;
(c) this was manifestly prejudicial to the companies and
the creditors;
(d) the BRPs could not be trusted to take decisions for
the companies while the matter was delayed by an appeal 'which is in
any
event doomed to predictable failure';
(e) the BRPs had not adequately
responded to certain demands made on Mrs Gupta's behalf by her
attorneys in a letter written the
day after the application for leave
to appeal the removal order was served. In particular Ms Ragavan
complained that a full accounting
had not been furnished.
[52]
In his answering affidavit Mr Knoop dealt
with each of these as follows:
(a) the delays in completing the business rescue had
been occasioned by the deliberate actions of Ms Ragavan and others in
the employ
of, or associated with, companies in the Oakbay Group to
frustrate the BRPs in performing their duties. The BRPs had been
denied
access to premises, records and information. Properties that
should have been sold could not be sold because they were occupied
by
employees of the Oakbay Group and Ms Ragavan refused to instruct
these employees to vacate and said she would oppose any
attempt to
evict them;
(b) every endeavour to obtain information about the
aircraft, which was owned by Islandsite and not available to be sold
to satisfy
Confident Concept's debts, had been blocked. It had
been removed from South Africa and there were attempts to
re-register
it in the Isle of Man. The BRPs had reason to believe
that it was being used by the Gupta family for private purposes. When
its
whereabouts in Dubai were discovered, the entity having
responsibility for it, DC-Aviation, refused to provide the BRPs with
any
information concerning it. The potential 'sale' was in terms of
an agreement where the identity of the purchaser was not disclosed
and on terms in regard to the condition of the plane that were
extremely onerous;
(c) the general allegations of prejudice were
unparticularised;
(d) details of the fees that the BRPs had earned were
given and it was pointed out that it had never been suggested in the
removal
application that they were excessive or a ground for their
removal;
(e) the attorneys' letter had been
responded to, certain undertakings had been given and details of
information about the progress
of the business rescues had been
furnished. Detailed reconciliations of sales were annexed to the
affidavit.
[53]
The replying affidavit delivered by Ms
Ragavan does little credit to her or to the legal practitioner or
practitioners responsible
for drafting it. Its contents consisted of
a number of intemperate, but unsubstantiated attacks on Mr Knoop;
repeated and unnecessary
assertions of the lack of prospects of
success in obtaining leave to appeal or in any appeal; and a joining
of issue on many factual
assertions thereby compounding the already
apparent dispute of fact on the papers. All in all, there was nothing
exceptional in
the circumstances set out in Ms Ragavan's affidavit.
Overwhelmingly they reiterated complaints advanced in the removal
application,
some being complaints that had not been dealt with by
the full court in its judgment. All of them had been dealt with
extensively
in the answering affidavit and the supplementary
affidavit delivered by Mr Knoop in the removal proceedings.
There were disputes
of fact on fundamental issues.
[54]
The full court needed to engage with the
evidence and set out in clear terms the facts on which it based a
finding that exceptional
circumstances were present, as well as an
explanation of why, in its view, those circumstances were exceptional
within the context
of s 18(1). This was required in terms of
s 18(4)(i), a provision designed to ensure that, when a party
against whom
an execution order has been granted exercises their
right to an extremely urgent appeal, the appeal court will know
precisely why
the order was granted.
[55]
Regrettably the full court merely stated in
para 10 that the applicant submitted that the BRP's 'failure to meet
the required standard
expected of business rescue practitioners as
dealt with in the judgment of this court constitutes exceptional
circumstances'. Assuming
this was intended as a summary of Ms
Ragavan's complaints set out above in para 51 of this judgment, the
complaints demonstrated
that the circumstances were not exceptional.
Were these to constitute exceptional circumstances, an execution
order would have
to issue in every case of the removal of a BRP under
s 139(2) of the Act, and indeed in every removal of a
liquidator, trustee,
executor or similar office holder. However
routine or mundane the grounds for removal they would always be
treated as exceptional.
[56]
The full court said that business rescue
was intended to be a speedy process requiring the BRPs to act in the
best interests of
all affected parties, conducting themselves as
officers of the court with the duties of a director. No attempt was
made to deal
with the evidence of Mr Knoop in the answering
affidavit, and in his affidavits in the main application, that the
problems
were caused entirely by the campaign waged by Ms Ragavan and
others to hinder and prevent the BRPs from performing their duties.
That evidence had to be accepted in accordance with the
Plascon-Evans
rule.
[57]
The findings in the main judgment were
summarised in saying that the BRPs failed to discharge their duties
in good faith, objectively
and impartially; failed to report criminal
unlawfulness of the prior board and shareholders to the authorities;
had a conflict
of interest by acting as BRPs in respect of different
entities in the Oakbay Group; and failed properly and timeously to
perform
their duties. The judgment then returned to the theme that
business rescue must be a speedy process and that the BRPs needed to
adhere to the high standards set out in the Act, and concluded:
'In our view, the purpose of business
rescue proceedings combined with the interests of all affected and
the fact that the respondents
failed dismally in their duties
constituted exceptional circumstances.'
[58]
There were several errors in these reasons.
The alleged failure to report criminal conduct to the relevant
authorities had been
introduced by the full court itself in its
removal judgment, without having been raised as a ground of complaint
or dealt with
in the papers. The likelihood of it having been a
ground of complaint by Mrs Gupta, speaking through Ms Ragavan,
was nil,
inasmuch as any such criminal conduct would have been by the
Guptas and directors and employees of companies in the Oakbay Group,
such as Ms Ragavan and Mr Chawla. Given that it was raised in the
removal judgment, Mr Knoop set the record straight in his answering
affidavit, explaining that the BRPs had reported their suspicions of
potentially criminal conduct to the SAPS, the National Prosecuting
Authority, the Special Investigations Unit, the Asset Forfeiture
Unit, SARS and the Zondo Commission. The full court was wrong
to use
the error as a ground for a finding of exceptional circumstances.
[59]
The reliance on the
finding of a conflict of interest was also unfounded and unjustified.
In its judgment granting leave to appeal,
delivered on the same day,
it had accepted that there was a difference between its approach and
that taken by a single judge in
the same court in a similar
application involving the same BRPs and Tegeta, another company in
the Oakbay Group.
[46]
The need to resolve this difference of view was one of the grounds
upon which it granted leave to appeal. A ground on which there
was
room for a difference of view could not render the circumstances
exceptional.
[60]
The full court's reasons consisted entirely
of generalisations and there was no specific statement of the facts
that made this case
different from other similar cases and provided
exceptional grounds for departing from the normal rule that the
removal order would
be suspended pending the outcome of the appeal.
Making as much allowance as is possible for the fact that the
judgment was delivered
a week after argument was heard, it falls
short of providing an explanation for finding that Mrs Gupta
discharged the onus of establishing
on a balance of probabilities
that exceptional circumstances existed. Nor does a reading of the
affidavits disclose such a basis.
The heads of argument delivered in
regard to the urgent appeal are long on rhetoric and assertions, but
bereft of any analysis
of the evidence, or the concept of exceptional
circumstances, that would support the conclusion that such
circumstances were present
in this case. The existence of exceptional
circumstances was not established.
Irreparable
harm
[61]
The application for leave to execute fell
at the first hurdle and the appeal accordingly had to be upheld.
However, it is desirable
to point out that neither of the other two
requirements were satisfied. As to Mrs Gupta's allegations of
suffering irreparable
harm, Ms Ragavan's affidavit went off on a
tangent to the business rescue in respect of these two companies and
alleged that the
BRPs in their dealings with Optimum Coal Mine
(OCM) and Koornfontein had turned OCM from being a profitable
enterprise employing
2000 people to a ruin. She alleged that assets
were being sold at a fraction of their value as part of a sale of the
mine, which
was the subject of litigation. She noted that an
application had been brought for the liquidation of OCM.
[62]
The relevance of these allegations to Mrs
Gupta suffering irreparable prejudice justifying the immediate
implementation of the removal
order in respect of Islandsite and
Confident Concept was not apparent on the papers. In any event they
were firmly refuted by Mr Knoop
in his answering affidavit. He
said that these companies and their assets had been virtually
destroyed before the commencement
of business rescue and alleged that
Ms Ragavan had been a party to this. Ms Ragavan in reply denied the
relevance of these allegations
claiming that they had only been
raised to show the poor management of the businesses by the BRPs.
[63]
Without referring to these allegations or
the evidence the full court said:
'The conduct of the respondents thus
far, however, establishes a pattern of their failure to properly
conduct the business rescue
proceedings. In our view the respondents
lack of insight in their failure to adhere to the high standards
expected of business
rescue practitioners establishes at least on a
balance or probabilities, that their continued involvement in the
proceedings would
cause irreparable harm, not only to the applicant
but to all affected parties.'
[64]
It is not apparent to which conduct of the
BRPs reference was being made. There was no mention of the grounds of
prejudice relied
on by Mrs Gupta as set out in Ms Ragavan's
affidavit. The conclusion had no basis in the evidence. As to the
position of 'all affected
parties' the majority of the affected
parties in the two companies, were the three Gupta brothers, who
together own 75% of the
shares in the two companies, and their
silence was deafening. They did not, publicly at least, make common
cause with Mrs Gupta
in her endeavours to have the BRPs removed. Did
they support her efforts? Were they cheering her on from the
sidelines? Ms Ragavan
only holds office as the acting CEO of Oakbay
by virtue of their support. Was she in receipt of instructions from
them? Nothing
at all was said in this regard and nothing can or
should be inferred. But in the absence of evidence from them, the
full court
could not reach generalised conclusions in regard to their
interests.
[65]
No irreparable prejudice to Mrs Gupta was
established. Nor was the onus discharged of showing that the BRPs
would not suffer irreparable
harm as a result of an execution order
being granted. Ms Ragavan said that the only possible harm was a loss
of fees. This theme
had its origins in the judgment granting the
removal order, which was taken up by Ms Ragavan in the execution
application
and appeared again in the execution judgment. The full
court added, even though Ms Ragavan had not said this, that they
could make
up the shortfall by doing other work as BRPs. These
allegations were denied. The issue of reputational risk as a result
of being
removed as BRPs in these high-profile cases of
business rescue was not canvassed. Mr Knoop pointed to the
prejudice creditors
would suffer if they were removed and new BRPs
appointed with the very real risk of the approved business rescue
plans not being
implemented. I am not sure that this was relevant to
the question whether he and Mr Klopper would suffer irreparable harm
as a
result of the grant of such an order as that was potential harm
to third parties not the BRPs. Be that as it may, on the tenuous
evidence advanced I do not think that the onus under this head was
discharged.
Result
[66]
For those reasons the urgent appeal had to
succeed and at the conclusion of the argument on this appeal we
granted the order set
out at the head of this judgment and below. The
order was granted before we heard argument in the main appeal and was
not affected
by any consideration of the merits of the main appeal.
[67]
It remains to say something about the
order. In view of the various issues that we have had to canvass and
determine before reaching
the main appeal, it was desirable that the
order should reflect our conclusions on those issues. It therefore
contains declaratory
orders in relation to those issues. That is a
proper approach given our power under s 19
(d)
of the SC Act to 'render any decision
which the circumstances may require'. Insofar as any costs were
occasioned to the appellants
by Mr Tayob's abortive attempt to
intervene, while his counsel addressed us during the argument on this
appeal, the application
to intervene was in the main appeal and the
costs must be dealt with there.
[68]
In the result, after hearing argument in
this urgent appeal and taking the opportunity to consult among
ourselves during an adjournment
of the proceedings, the following
order was made:
1 The appeal is upheld with costs,
such costs to include those consequent upon the employment of two
counsel.
2 The order of the full court is
set aside and replaced by the following order:
'The
application is dismissed with costs, such costs to include those
consequent upon the employment of two counsel.'
3 It is declared that pending the
finalisation of this appeal:
(a)
The operation and execution of the order of the full court granting
leave to execute in terms of s 18(1), read with
s 18(3)
, of the
Superior Courts Act 10 of 2013
was suspended in terms of s 18(4)(iv)
of the Superior Courts Act 10 of 2013.
(b)
The appellants were not validly removed from office as business
rescue practitioners in respect of Islandsite Investments One
Hundred
and Eighty (Pty) Ltd (Islandsite) and Confident Concept (Pty) Ltd
(Confident Concept).
(c)
The directors of Islandsite and Confident Concept were not
entitled to act on the order for the removal of the appellants
as
business rescue practitioners in those two companies by nominating
new business rescue practitioners and the appointments of
Mr Tayob in
respect of Islandsite and Mr Naidoo in respect of Confident Concept
were invalid.
(d)
The notices of termination of business rescue given by Mr Tayob
in respect of Islandsite and Mr Naidoo in respect of Confident
Concept in terms of
s 132(2)
(b)
of the
Companies Act
71 of 2008
were invalid and of no force and effect.
(e)
Nothing in this order validates or invalidates any other action taken
by Islandsite and Confident Concept since 7 February 2020
with the
authority of Mr Tayob and Mr Naidoo as the case may be.
4 It is further declared that
pending the finalisation of the main appeal under Case No 116/2020
Islandsite and Confident Concept
remain in business rescue under the
supervision of the appellants in accordance with their original
appointments as business rescue
practitioners.
_________________
M J D WALLIS
JUDGE OF APPEAL
Appearances
For
appellant:
P Stais SC (with him GD
Wilkins SC)
Instructed
by:
Smit Sewgoolam Inc, Johannesburg;
McIntyre
Van der Post, Bloemfontein
For
respondent:
NK Tsatsawane SC (with him J-P Snijders)
Instructed
by:
BDK Attorneys, Johannesburg;
Honey
Attorneys Inc, Bloemfontein.
For
Mr M M Tayob: NA Cassim SC (Heads
of Argument by MA Chohan and L Kutumela)
[1]
Philani-Ma-Afrika and
Others v Mailula and Others
[2009]
ZASCA 115; 2010 (2) SA 573 (SCA); [2010] 1 All SA 459 (SCA).
[2]
Ibid para 20.
[3]
South
Cape Corporation (Pty) Ltd v Engineering Management Services
(Pty)
1977
(3) SA 534
(A)
(
South
Cape Corporation
)
at 544H-545G.
[4]
Murray NO and Others v
African Global Holdings (Pty) Ltd and Others
[2019]
ZASCA 152; 2020 (2) SA 93 (SCA); [2020] 1 All SA 64 (SCA).
[5]
They were jointly appointed
in relation to Islandsite and Mr Knoop was the sole appointee in
relation to Confident Concept.
[6]
According to counsel for Mrs
Gupta.
[7]
Li Kui Yu v Superintendent
of Labour
1906 TS
181
at 190.
[8]
Fein
and Cohen v Colonial Government
(1906)
23 SC 750
;
Yamamoto
v Athersuch and Another
1919
WLD 105
at 106.
[9]
Fein
and Cohen v Colonial Government
at
758.
[10]
Ntlemeza v Helen Suzman
Foundation and Another
[2017]
ZASCA 93
;
2017 (5) SA 402
(SCA);
[2017] 3 All SA 589
(SCA)
(
Ntlemeza
).
[11]
In
University
of the Free State v Afriforum and Another
[2016]
ZASCA 165
;
2018 (3) SA 428
(SCA);
[2017] 1 All SA 79
(SCA) (
UFS
v Afriforum
) the
execution order was granted on 21 July 2016 and affected the
university's lecture arrangements for the ensuing academic
year. The
appeal was heard at the beginning of the November term on 3 November
and judgment was delivered on 17 November. In
Premier
for the Province of Gauteng and Others v Democratic Alliance and
Others
[2020]
ZASCA 136
the execution order was granted on 20 June 2020 and the
appeal was heard on 17 August 2020.
[12]
Minister of Social
Development and Others v Justice Alliance of South Africa and
Another
[2016]
ZAWCHC 34
(
Justice
Alliance
) para 2.
[13]
De Beer NO v North Central
Local Council and South Central Local Council and Others
(Umhlatuzana Civic
Association Intervening)
[2001]
ZACC 9
;
2002 (1) SA 429
(CC) para 11.
[14]
Hosain v Town Clerk
Wynberg
1916 AD
236
at 240;
Pottie
v Kotze
1954 (3)
SA 719
(A) at 726H-727A.
[15]
Molaudzi v The State
[2015] ZACC 20
;
2015 (2) SACR 341
(CC) para 33.
[16]
One cannot alter a
statutorily prescribed procedural situation by resort to the court's
inherent powers to regulate process, any
more than the inherent
power to develop the common law can be invoked to change the meaning
of a statute. See
The
Minister of Safety and Security v Sekhoto and Another
[2010]
ZASCA 141
;
2011 (5) SA 367
(SCA)
[2011] 2 All SA 157
(SCA) para 22.
[17]
Master of the High Court
Northern Gauteng High Court, Pretoria v Motala NO and Others
[2011]
ZASCA 238; 2012 (3) SA 325 (SCA).
[18]
Ex parte The Master of the
High Court South Africa (North Gauteng)
2011
(5) SA 311 (GNP).
[19]
Department of Transport
and Others v Tasima (Pty) Ltd
[2016]
ZACC 39
;
2017 (2) SA 622
(SCA)(
Tasima
)
paras 188-196.
[20]
Ibid para 197 relying on
Provincial
Government North West and Another v Tsoga Developers CC and Others
[2016] ZACC 9
;
2016 (5) BCLR 687
(CC) (
Tsoga
)
para 50.
[21]
See to similar effect
City
of Johannesburg v Changing Tides 74 (Pty) Ltd and Others
[2012] ZASCA 116
;
2012 (6) SA
294
(SCA);
[2013] 1 All SA 8
(SCA) para 8, referred to in support of
this proposition in
Tsoga
para 48.
[22]
Op cit fn 18.
[23]
Definition of 'affected
person' in s 128(1)
(a)
of the Act.
[24]
Sections 129(1) and
(3)
(b)
of the Act.
[25]
Section 129 (4) of the Act.
[26]
Section 137(2)
(a)
of the Act.
[27]
Section 137(2)
(b)
of the Act.
[28]
Sections 141(1) and 140(1) of
the Act.
[29]
Section 152(5) of the Act.
[30]
Section 141(2)
(a)
of the Act.
[31]
Section 152(8) of the Act.
[32]
Section 132(2)
(c)
of the Act.
[33]
Section 153(5) of the Act.
[34]
Section 141(2)
(b)
of the Act.
[35]
Section 132(2)
(b)
of the Act.
[36]
UFS v Afriforum
op
cit fn 10 paras 5-6;
Ntlemeza
op
c
it fn 9
paras 19-22;
The Premier for the Province of Gauteng and
Others v Democratic Alliance and Others
[2020] ZASCA 136.
[37]
Norwich Union Life Insurance Society v Dobbs
1912 AD 395
at 399.
[38]
S v Dlamini
;
S
v Dladla and Others
;
S
v Joubert
;
S v
Schietekat
[1999] ZACC 8
;
1999 (4) SA 623
(CC) para 75-77.
[39]
MV Ais Mamas: Seatrans Maritime v Owners MV
Ais Mamas and another
2002 (6) SA 150
(C) at
156E-157.
[40]
Liesching and Others v The State
[2018] ZACC 25; 2019 (4) SA 219 (CC).
[41]
UFS v Afriforum
op
cit, fn 10 para 13.
[42]
Op cit, fn 10, para 10.
Incubeta Holdings
and Another v Ellis and Another
2014
(3) SA 189
(GSJ)(
Incubeta
)
para 24.
[43]
Op cit, fn 11, paras 26-29.
[44]
Op cit, fn 10, para 15. It is
contrary to the approach in
Incubeta
that the section
codifies the law completely.
[45]
Schwartz v Schwartz
1984
(4) SA 467 (A).
[46]
Oakbay Investments (Pty)
Ltd v Tegeta Exploration and Resources (Pty) Ltd (in business
rescue)
[2019]
ZAGPHC 411.