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[2014] ZAWCHC 16
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Von Wielligh Bester N.O. and Others v Merchant Commercial Finance and Others (16211/13) [2014] ZAWCHC 16 (18 February 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE division, CAPE TOWN)
Case
No
16211
/13
In
the matter between:
LAMBERTUS
VON WIELLIGH BESTER N
O
...............................................
First
Applicant
KGASHONE
CHRISTOPHER MONYELA N
O
.........................................
Second
Applicant
BETHUEL
BILLYBOY MAHLATSI N
O
........................................................
Third
Applicant
(in their capacities as
joint liquidators of Sarepta
Trading (Pty) Limited (in
liquidation))
VINCEMUS
INVESTMENTS (PTY) LIMITED
t/a
Kempston
Finance
….....................................................................................
Fourth
Applicant
and
MERCHANT
COMMERCIAL FINANCE
(Pty) Limited t/a
Merchant
factors
.....................................................................
First
Respondent
&
3 other Respondents
Court:
GRIESEL J
Heard:
12 February 2014
Delivered:
18 February 2014
JUDGMENT
Griesel
J:
Introduction
[1]
The fourth applicant, Vincemus Investments
(Pty) Limited, trading as
Kempston
Finance
, launched an urgent
application,
inter alia
,
against the first respondent herein, Merchant Commercial Finance
(Pty) Limited, trading as
Merchant
Factors
. The other parties to this
litigation are the joint liquidators of Sarepta Trading (Pty) Limited
(in liquidation) (‘
Sarepta’
)
and Taxi Trucks Logistics (Pty) Limited (in liquidation)
(‘
Logistics’
),
none of whom played any active role in these proceedings. For
convenience I accordingly refer herein to the fourth applicant
and
first respondent simply as the ‘applicant’ and the
‘respondent’ respectively.
[2]
Both
the applicant and respondent are creditors of Sarepta. The crux of
the relief sought in the notice of motion is based on the
provisions
of
s 31(1)
of the
Insolvency Act, 24 of 1936
,
[1]
in support of an allegation that there has been collusive dealings
between the respondent and Sarepta. Voluminous papers have been
filed
by the respective parties herein. The respondent applied
in
limine
that certain portions of the founding affidavit (including two
annexures thereto) as well as portions of the replying affidavit
be
struck out as inadmissible evidence. Further grounds for
striking out that were advanced are that the replying affidavit
impermissibly includes new matter and that some of the
allegations are ‘speculative and argumentative’. This
judgment deals solely with the first ground for striking out.
Factual
background
[3]
Sarepta was placed in provisional
liquidation by order of the North Gauteng Division of the High Court
on 28 November 2012, which
order was made final on 24 January 2013.
Pursuant to the liquidation of Sarepta, on 25 March 2013, the
applicant applied for and
was granted an order in terms of ss 417
and 418 of the Companies Act that a commission of enquiry be
held into the trade,
dealings, affairs and property of Sarepta. Adv
MJ Fitzgerald SC was at the same time appointed as commissioner
in terms of
s 418(1)(a) of the Act.
[4]
One
of the aspects that fell under the spotlight at the enquiry concerned
a transaction whereby the business and unencumbered assets
of Sarepta
were transferred to Logistics during 2012, prior to the winding up of
both companies. It is this disposition that the
applicant seeks to
set aside in terms of
s 31(2)
of the
Insolvency Act as
having
been effected in collusion between Sarepta and the respondent.
[2]
[5]
One
of the main witnesses who testified in the course of the enquiry was
one Denis Henry Kaye who, together with his wife, were
directors and
in effective control of both Sarepta and Logistics at the relevant
time. In the course of his evidence Kaye made
certain damning
concessions relating to the dealings involving Sarepta and Logistics,
on the one hand, and the respondent, on the
other. The applicant
relies heavily on these extracts from Kaye’s evidence in
support of its allegations of collusion. It
is these extracts that
form the subject of the application to strike out on the basis that
‘it is impermissible for [the
applicant] to rely on extracts
from the evidence given at the commission for purposes of bolstering
its alleged entitlement
in this application to relief under
s 31(1)
of the
Insolvency Act, and
that such evidence is
inadmissible’.
[3]
Legal
principles
[6]
The
respondent’s argument was based primarily on the following
formulation of the relevant principles by
Henochsberg
:
[4]
‘
The
evidence of a witness at an examination or enquiry is admissible only
against himself, eg evidence given by a director of a
company is not
admissible against the company. . . . The evidence is
admissible in civil proceedings and in certain
criminal proceedings,
ie those relating to the offences mentioned in
s 417(2)(c)
.
Such evidence is admissible to prove what the witness stated during
the examination or enquiry and may be used to cross-examine
him ...;
it does not however, constitute proof of the facts revealed by the
evidence . . .’
[7]
Most
of these principles are derived from a series of decisions arising
from the judicial management of Consolidated Portland Cement
Co Ltd.
In
Simmons
NO v Gilbert Hamer & Co Ltd
,
[5]
one of the issues confronting Henochsberg J at first instance
was the admissibility of admissions made by one Lea, the
managing director of Consolidated Portland Cement Co Ltd, during an
enquiry under the predecessor of the present
s 417
in relation
to claims against Portland in subsequent proceedings by the
liquidators to vindicate certain fabricated steel
from the
respondent, Gilbert Hamer & Co. Henochsberg J struck out the
evidence of Lea as inadmissible against the liquidators.
On appeal to
the Full Court,
[6]
Harcourt J
addressed the question of admissibility at some length and, the other
members of the Court (Caney J and Henning J) concurring,
the
appeal against the striking out order was dismissed. In a further
appeal to the
Appellate
Division,
[7]
that
order was not attacked and, although the appeal succeeded on other
grounds, the
Appellate
Division
mentioned
obiter
‘that
in launching, and in persisting in, the motion proceedings the
judicial manager and his advisers laboured under a fundamental
error
in regarding the commission evidence as admissible against the
Engineering Company.’
[8]
[8]
In
O’Shea
NO v Van Zyl NO
[9]
Heher JA, writing for a unanimous court, quoted with approval and at
great length from the various judgments in the
Gilbert
Hamer
matters
(as well as certain other decisions) and concluded, for similar
reasons, that the evidence given by one of the trustees
of a trust
before the commissioner was inadmissible against the trust in
the subsequent civil proceedings in the absence of
its confirmation
under oath by him in those proceedings. It would be
supererogatory (not to mention a waste of time,
paper and ink) to
repeat for purposes hereof the exercise performed by Heher JA in
O’Shea
.
Instead, I gratefully adopt his summary of the relevant authorities
as set out in paras 19 24 of the judgment, to which the
reader
is referred. What it amounts to, in a nutshell, is confirmation of
the principles summarised by
Henochsberg,
in the passage quoted above.
Applicant’s
response
[9]
In
response, counsel for the applicant referred to the recent judgment
in this Division by Rogers AJ (as he then was) in
Engelbrecht
NO & others v Van Staden & others
.
[10]
In the course of his judgment, the learned judge performed a careful
analysis of the various judgments in
Gilbert
Hamer
and
O’Shea NO, supra,
and
their
respective
rationes
decidendi
before
concluding:
‘
The
admissibility or inadmissibility of such evidence [i.e. evidence
given at an insolvency enquiry] in civil proceedings thus appears
to
rest on general principles of the law of evidence rather on than the
terms of the Companies Act.’
[11]
[10]
This conclusion led the learned judge,
in
an
obiter dictum,
to express the following
tentative
view:
‘
I
am thus inclined to think that a court may in appropriate cases
permit a litigant to rely on evidence given by X at a s 417 enquiry
for purposes of making out a case against Y provided this would be in
the interests of justice, having regard to the requirements
laid down
in s 3 of Act 45 of 1988. However I do not need to express a
firm view on this issue.’
[12]
[11]
Counsel
for the applicant sought to persuade me that the present application
was indeed an ‘appropriate case’ to permit
the applicant
to rely on the evidence given by Kaye at the enquiry in order to
prove the impeachable transaction in issue against
the respondent
herein. However, accepting for purposes of the argument the
correctness of the
obiter
views
expressed by Rogers AJ, I am not satisfied that this is indeed such a
case. The fact of the matter is that in terms of s 3(1)(c)
of
the Law of Evidence Act, 45 of 1988, hearsay evidence is as a general
rule inadmissible
unless
the court is of the opinion, based on a wide variety of
considerations, that such evidence should be admitted ‘in the
interests
of justice’. It was thus incumbent upon the applicant
to seek admission of the hearsay evidence; not for the respondent to
seek its exclusion. The applicant has not sought to make out a case
or to lay any basis for the admission of the evidence on this
basis,
with the result that I am not persuaded that the evidence in question
ought to be admitted in the interests of justice.
[12]
I am accordingly driven to the conclusion
that the evidence given by Kaye at the enquiry is not admissible
against the respondent
in these proceedings. It follows that the
offending portions of the record fall to be struck out, with costs
following the result.
(As this leaves a significant portion of the
application to strike out undecided, some apportionment may have to
be made on taxation
to make provision for this fact.)
Order
[13]
For the reasons set out above, it is
ordered as follows:
(a)
Paragraphs 66 (and annexure FA21), 67, 68 (and annexure FA22), 81,
82, 89, 90 and 92 of the founding affidavit, as well as paragraphs
101, 103, 141.1 and 149 of the replying affidavit are struck out.
(b)
The fourth applicant is ordered to pay the costs of the application
to strike out insofar as it relates to the inadmissible
evidence, including the costs of two counsel.
(c)
The parties are granted leave, if so advised, to approach me in
chambers within one month from the date of this judgment
for
directions regarding the further conduct of the main application.
B
M Griesel
Judge
of the High Court
[1]
Sec
31(1) provides:
‘
After
the sequestration of a debtor’s estate the court may set aside
any transaction entered into by the debtor before the
sequestration,
whereby he, in collusion with another person, disposed of property
belonging to him in a manner which had the
effect of prejudicing his
creditors or of preferring one of his creditors above another.’
[2]
The
application is being brought by the applicant in the name of the
joint liquidators pursuant to the provisions of
s 32(1)(b)
of
the
Insolvency Act, the
necessary indemnity having been furnished to
the liquidators in respect of
the
costs thereof.
[3]
Answering
affidavit, Record, p 505 506 para 9.25.
[4]
Meskin
Henochsberg
on the Companies Act 61 of 1973
,
p 894(5) (SI 33) (other case citations omitted). See also, to the
same effect, Blackman Jooste Everingham
Commentary
on the Companies Act
Vol 3, 14 491 (original service); and 4(3)
lawsa
(1
st
reissue) para 198 at n 61
et
seq
.
[5]
1962
(2) SA 487 (D).
[6]
Simmons
NO v Gilbert Hamer & Co Ltd
1963
(1) SA 897 (N).
[7]
James
Brown & Hamer (Pty) Ltd v Simmons NO
1963 (4) SA 656 (A).
[8]
At
at 661H-662A.
[9]
[2011]
ZASCA 156
;
2012 (1) SA 90
(SCA);
[2012] 1 All SA 303
(SCA) (28
September 2011).
[10]
(8318/2011)
[2011] ZAWCHC 447
(6 December 2011).
[11]
Para
20.
[12]
Para
21.