Trustees for the Time Being of the Bermack Trust ( NO IT 1730/1996) and Another v Patel N.O and Another (9282/2014) [2014] ZAWCHC 105 (8 July 2014)

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[2014] ZAWCHC 105
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Trustees for the Time Being of the Bermack Trust ( NO IT 1730/1996) and Another v Patel N.O and Another (9282/2014) [2014] ZAWCHC 105 (8 July 2014)

IN THE
HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
Before:
The Hon. Mr Justice Binns-Ward
Case no.
9282/2014
DATE: 08
JULY 2014
In the
matter between:
THE
TRUSTEES FOR THE TIME BEING OF THE
BERMACK
TRUST (NO. IT
1730/1996)
.........................................................................
First
Applicant
CHRISTOPHER
PETER VAN ZYL N.O.
(in his
capacity as the joint liquidator of
Kingfield
Aviation Leasing One (Pty) Ltd (in
liq.)
......................................................
Second
Applicant
And
MOHAMED
ISMAIL PATEL N.O.
(in his
capacity as the joint liquidator of
Kingfield
Aviation Leasing One (Pty) Ltd (in
liq.)
......................................................
First
Respondent
THE MASTER
OF THE HIGH COURT
CAPE
TOWN
.........................................................................................................
Second
Respondent
JUDGMENT
DATED 8 JULY 2014
BINNS-WARD J:
Introduction
[1]
An outline of the background to this matter
was given in the directions judgment delivered on 2 June 2014 after
the preliminary
hearing on 29 May.  To facilitate the narrative
in this judgment, which is given after hearing full argument on 20
June 2014,
I shall, by way of introduction, repeat here some of the
background described in the earlier judgment.  I should also
acknowledge
at the outset that this judgment might seem unduly
detailed in certain respects having regard to the fact that it
effectively decides
only the alternative application for essentially
procedural relief and postpones the application for the substantive
relief for
determination by another court.  I have entered into
the detail for two reasons: in the hope that my labours might to some

extent relieve the burden on my colleague who will have to decide
this case together with two other related matters that have already

been consolidated for hearing; and also to try to do justice to the
argument I heard from counsel on 20 June.  I thought it

sufficiently important in the context of that argument to make it
clear to the parties that full attention was given to the ably

advanced submissions, and that the decision to postpone the
determination of the substantive question was arrived at only after

very earnest consideration.  Obviously, nothing that I say
should be misunderstood in any way to pre-empt the exercise of

independent judicial discretion that will be involved in the
determination of the application for substantive relief.
[2]
The case concerns an application for an
order, sought at the instance of the first applicant, which is a
proved creditor of Kingfield
Aviation Leasing One (Pty) Ltd (in
liquidation) (‘KAL’), for the removal of the first
respondent (Mr Patel) from office
as the joint liquidator of the
company.  Contingent upon that relief not being granted, the
second applicant (Mr van Zyl),
who is the other joint liquidator, has
applied for an order directing the joint liquidators to proceed with
the litigation in which
they are currently engaged and which is set
down for hearing on 6 October 2014, together with directions
authorising him to act
alone in doing everything that might be
necessary to implement the order.
[3]
The application arises out of the first
respondent’s conduct in respect of a claim against KAL by
Boland Trust, represented
by one Pieter de Villiers Ebersohn, which,
although accepted at proof, is contentious.  The claim was
investigated by a commission
established in terms of ss 417 and
418 of the Companies Act, 1973.  The commissioner was the Hon.
M.M. Joffe, a retired
High Court judge.  The commission was
established by this court upon the application of the joint
liquidators of KAL in terms
of an order made by Fourie J on 30
April 2012.  The order directed that the costs of the
application for the establishment
of the commission and those
involved in the conduct of the commission’s enquiry should be
treated as costs of administration
in the winding-up of KAL.  As
directed by the court, Judge Joffe in due course compiled a report on
the commission’s
investigations.
[4]
The
commissioner indicated at para 32.13 of his report that ‘it
does not appear that the Boland Trust has a claim against
[KAL]…and
that the claim should be expunged’.  The commissioner’s
report founded this indication on the
evidence adduced at the
enquiry, which was amply summarised in the document.  An
expungement of the nature contemplated in
the commissioner’s
report falls to be effected in terms of
s 45(3)
of the
Insolvency Act 24 of 1936
, which is applicable in the winding-up of
KAL by virtue of s 339 of the Companies Act, 1973 (read with
item 9 of Schedule
5 to the
Companies Act 71 of 2008
).  An
expungement does not debar the creditor from thereafter establishing
his claim by an action at law, subject only to
the provisions of
s 75
of the
Insolvency Act.
[5
]
The joint liquidators thereafter duly
applied to the Master to expunge the claim.  The application was
contained in a letter
to the Master by attorneys Edward Nathan
Sonnenbergs Inc. (‘ENS’), dated 4 April 2013, which
enclosed a copy of the
commissioner’s report. The letter was
copied to Assheton-Smith Inc. (‘ASI’), the attorneys who
represent the
Boland Trust.
[6]
ASI in turn made representations to the
Master on behalf of the Boland Trust in a letter dated 17 May 2013.
They took issue
with the content of the commissioner’s report
in a number of respects.  They contended, amongst other matters,
that
the commissioner had misapprehended the character of the Trust’s
claim against KAL.  He had treated it as a purported

shareholder’s claim, whereas, according to ASI, it was
predicated on the purchase of the aircraft that was KAL’s only

asset using funds invested by Boland Trust for that purpose.
[1]
ASI pointed out that the commissioner had not dealt in his report
with how the acquisition of the aircraft by KAL had been
funded.
They challenged the commissioner’s omission to deal with
the funding of the difference (approximately R3,35
million, according
to ASI) between the ascertained purchase price of the aircraft and
the contribution by the Bermack Trust.
They emphasised that the
investments made by both the Bermack Trust and the Boland Trust for
the purpose of obtaining a proprietary
interest in the aircraft to be
acquired by KAL had both been paid into the same third party banking
account, namely that of Phindana
Properties 103 (Pty) Ltd.
[7]
The Boland Trust also impeached the
independence and impartiality of the joint liquidators and the
propriety of their employment
of ENS as attorneys.  This was
because ENS also acted for the trustees of the Bermack Trust (the
first applicant in the current
proceedings and the petitioners in the
winding-up application), who were alleged by ASI to have used the
commission as a device
to promote the exclusion of Boland Trust’s
claim, and also to gather evidence for claims that the Bermack Trust
– as
distinct from KAL - might establish against third parties
whose representations may have played a role in the Bermack Trust’s

decision to invest in the company in liquidation.
[2]
[8]
ASI accordingly applied to the Master of
behalf of their client, in terms of s 379(1) of the Companies
Act, 1973, for the removal
of Messrs Patel and van Zyl as liquidators
of KAL.  They requested that in the event that the Master was
not inclined to accede
to their application, she should defer
determining the liquidators’ application for the expungement of
the Boland Trust’s
claim until the determination of an
application by the Trust to court in terms of s 379(2) for the
removal of the liquidators.
They also indicated that if the
Master did not accede to that request, the Trust would be constrained
to apply for interdictal
relief to protect its position.
[9]
It should perhaps be mentioned that ASI
also contended in their letter that the Bermack Trust’s claim
lay against the en commandite
partnership, of which Bermack was a
member, and which, according to ENS’s letter to the Master, had
formed ‘part and
parcel of the business structure’ in
respect of the Trust’s investment in KAL1.  The contention
appears to have
been that the Bermack Trust’s claim, properly
characterised, was for the recoupment of its capital contribution to
the en
commandite partnership, and not one that properly lay against
the company in liquidation.  It has not been for me to get to

the bottom of these allegations.  When the current matter was
argued, counsel for the first respondent appeared to accept,
for the
purposes of this matter at any rate, that the Bermack Trust’s
claim against KAL was good.
[10]
The Master responded as follows on 7 June
2013 to the correspondence concerning the expungement sought by ENS
and the removal
of liquidators sought by ASI:
Kindly be
advised that I have read all the correspondence from all the parties.
It is clear
that there is a dispute of facts which can only be decided upon after
hearing evidence by a court of law and therefore
I refrain myself
from giving a ruling on this matter.  The parties are advised to
refer this matter to the High Court.
[11]
The
trustees of the Boland Trust thereafter instituted an application in
this court for the removal of the second applicant and
the first
respondent as joint liquidators of KAL (WCC case no. 10223/13).
That was followed shortly by an application
by the joint liquidators
for orders (i) reviewing the Master’s refusal to expunge the
claim of the Boland Trust and (ii)
disallowing the claim (WCC case
no. 11666/13).  The Deputy Judge President directed, in
February 2014, that the applications
should be heard together.  The
latter order was made in an opposed consolidation application brought
by the joint liquidators.
[12]
The consolidated applications were set down
for hearing before Yekiso J on 14 May 2014.  I have not
seen the papers in
those applications,
[3]
but it would seem reasonable to infer, in the
absence of any indication to the contrary, that the liquidators’
expungement
application is predicated on the content of the
commissioner’s report, and the Boland Trust’s removal
application on
the allegations set out in ASI’s letter of 17
May 2013.
Indeed, Mr Katz of ENS
confirmed in the applicants’ replying affidavit, jurat 17 June
2014, that the ASI letter had formed
the basis of the removal
application and that the allegations contained therein had been the
subject matter of a two hour consultation
held by him with Messrs
Patel and van Zyl on 18 July 2013 for the purpose of drawing the
answering affidavits.
[13]
On
30 April 2014, ASI addressed a letter to ENS, as attorneys for the
joint liquidators, in which they proposed that the consolidated

applications:
‘…
be
addressed on a practical basis in the following manner:
1. our client
withdraws the removal application without admission as to the
allegations made by your clients in their opposing papers;
2. our client
will withdraw its opposition to the review application without
admission as to the allegations made by your clients
in their
founding and replying papers;
3. the costs
of the removal application and the costs of opposition of the review
application be held over for determination by
the trial court in an
action to be instituted by our client within 20 days of the review
application being granted’.
Had it been accepted, the proposal would, save for the formality of
obtaining the court’s order in the review application,
have
disposed of the substantive issues in the litigation set down for
hearing on 14 May 2014.  The costs would have stood
over for
later determination.  The proposal did in essence amount to a
capitulation by the Boland Trust on the merits, but
its provision in
respect of costs impliedly reserved to the Trust the position to
argue later (presumably after it had succeeded
in establishing its
claim by action) that the institution of the applications had
nevertheless been reasonable and it should not
be penalised in
costs.  An acceptance by the liquidators of the proposal would
have expedited the liquidation process and
probably saved to some
extent on the costs of the hearing scheduled for 14 May.  It
would not have entailed a waiver of their
right to claim their costs
in the consolidated applications against the Boland Trust.
[14]
On Sunday, 4 May 2014, ENS responded to the
Boland Trust’s proposal in an email to Mr Assheton-Smith of
ASI, which stated
simply, ‘Your proposal is rejected’.
The email was sent by the attorney at ENS in charge of the litigation
on
behalf of the joint liquidators, Mr Leonard Katz.  The email
was copied to the joint liquidators, amongst others, but it is

conceded that Mr Patel had not previously been informed of the
proposal, or consulted concerning the decision to reject it.

Accordingly, Mr Patel could have had no idea, when he received the
email, of its significance.
[15]
On
9 May 2014, ASI delivered certain documentation to ENS relating to
the proceedings due to commence on 14 May. It included an
affidavit
deposed to by the Mr Patel earlier that day.  The affidavit
disclosed that Patel had been approached by Mr Ebersohn,
representing
the Boland Trust, some months earlier (the date of their first
meeting was given in the affidavit as 6 March, but
the first
respondent subsequently conceded that it had in fact been 14
February).  It is contextually evident, however, that
the crux
of the affidavit concerned an exchange between Ebersohn and Patel
that must have occurred subsequent to the aforementioned
rejection of
the proposal made in ASI’s letter of 30 April 2014.
[4]
It is convenient to set out the most relevant of
the first respondent’s averments in full:
2.
…[Ebersohn] advised me that the Boland Trust was embroiled in
protracted and costly litigation pertaining to the manner
in which it
and its claim had been dealt with.  He also wanted me to ask me
(sic) what my views were and whether I was aware
of the fact that a
proposal had been made to curtail the extent and legal costs of the
proceedings up to now which I understand
have been extensive.  I
have also been advised that the proposal made by Boland Trust with
regard to a possible settlement
has been summarily rejected by the
attorney of record.
3. I was not
aware of such settlement proposal or consulted on the reasons for the
rejection thereof.  I find this state of
affairs, and actions
taken without my consent and approval by the attorney of record to be
most unsatisfactory.  Mr van Zyl
[the second applicant] has been
in charge of the administration of the company in liquidation from
the beginning and I have not
been made aware of the comprehensive and
exact details of what had transpired with regard to certain aspects
of the administration
more particularly with regard to the current
litigation.  I was merely requested to sign documents from time
to time and not
been fully apprised of the circumstances that led to
the current litigation.  As joint liquidator I am however
required to
be consulted on these matters, especially where expensive
litigation is being pursued on behalf of the insolvent estate as I am

jointly and severally liable for the administration thereof.
4. I
understand from Mr Ebersohn that this matter and a further
application for review under case number 11666/2013 is (sic) set
down
for argument on 14 May 2014.
5. I require
time to consider the papers as I have not been fully consulted
thereon, and thereafter to discuss the position with
my joint
liquidator Mr Van Zyl.  Until such time as I have had the
opportunity to do so I deem it necessary for me to have
an
opportunity to make an informed decision together with Mr Van Zyl as
to whether or not to support proceed (sic), and believe
that the
proceedings ought to be postponed until I have been able to consider
my position and that of the company in liquidation
fully.
[16]
Two days later, on Sunday, 11 May
2014, the Boland Trust gave notice of its intention to amend its
notice of motion in the
removal application so as to apply only for
the removal of Mr van Zyl as joint liquidator.  Its
objection to Mr Patel
would appear thus effectively to have been
withdrawn.
[17]
Mr Katz then urgently made arrangements for
a meeting with both liquidators at the chambers of the senior counsel
engaged to represent
them in the proceedings due to commence on 14
May.  The meeting was scheduled to take place on the afternoon
of 12 May.
The first respondent, who had confirmed that he
would attend, failed to arrive.  He also failed to give his
excuses or, after
it was learned that he had left for Johannesburg,
to respond to telephone and email messages asking him to contact Mr
Katz or senior
counsel.  In an email sent to Katz on 13 May, Mr
Patel stated that he did not come to the meeting because he had been
required
to travel to Johannesburg urgently to attend to a family
emergency.  He confirmed that information in the affidavit that
he
made in answer to the current application.  He ventured that
little point would have been served by his attendance at the meeting

in any event because the battle lines had already been drawn between
him and Katz.  (In this regard it may be noted that the
first
respondent was clearly affronted by Katz’s failure to have
referred the ASI proposal to him for consideration, while
Katz, in
quite trenchant language, had questioned the propriety of the first
respondent’s undisclosed meetings with Ebersohn
and also,
briefly, with the Boland Trust’s attorney, Mr Assheton-Smith.)
[18]
The hearing of the consolidated
applications before Yekiso J set down for 14 May could not
proceed because the first respondent
indicated on that day that he
had withdrawn ENS’s mandate to represent the liquidators and
required time to consider his
position concerning the litigation.
Mr Katz has averred that the postponement of the proceedings has
occasioned wasted costs
in the sum of approximately R200 000 and
delayed the finalisation of the winding-up.  Mr Patel challenges
Mr Katz’s
estimate of the amount of the wasted costs.
[19]
The current application was brought as a
matter of alleged urgency on Thursday, 29 May 2014.  The
founding papers, which
were fairly voluminous (328 pages), were
served on the respondents during the course of Monday, 26 May 2014.
The applicants
failed to comply with the practice prescribed in this
Division, in terms of which, consistently with the guideline laid
down in
Gallagher v Norman’s Transport Lines (Pty) Ltd
1992 (3)
SA 500
(W), the notice of motion should provide a timetable,
reasonably formulated in accordance with the exigencies of the given
matter,
for the exchange of answering and replying papers.  In
the result, the first respondent delivered what was labelled a
‘provisional
answering affidavit’ on the morning of the
day on which the matter had been set down for hearing on the ‘fast
track’
motion roll.
[20]
In heads of argument filed by senior
counsel on the afternoon of 28 May, the applicants adopted a position
at variance with that
reflected in the notice of motion.  The
heads indicated that ‘[i]n the event the application is
opposed, the applicants
propose moving for the alternative relief
empowering [the second applicant] to continue with the litigation
involving [KAL].
This relief will be sought pending the
[later] adjudication of the application for [the first
respondent’s] removal’.
Having regard to the nature
of the relief sought by the first applicant against the first
respondent, which included a prayer
that an order be made that the
first respondent forfeit his fee and pay the costs of the application
de bonis propriis, it could
hardly have been cause for surprise that
the application was indeed opposed.
[21]
When the matter was called before me in the
‘fast track’ court in the Third Division on 29 May 2014
it soon became apparent
during argument that it was not ripe for
hearing.  The first respondent’s request that, if the
matter were to be entertained
as one of urgency, he should be
afforded time to supplement his answer was eminently reasonable.
The less than three days’
notice of the application that he had
been given was manifestly unreasonable in the circumstances.
Moreover, it was also
desirable, in my opinion, that the Master
should apprise herself of the problems that had arisen in the conduct
of the winding-up
and that the court’s further consideration of
the application should occur with the assistance of a detailed report
from
the Master’s Office.  The hearing was therefore
postponed until 20 June 2014 in terms of the directions given in the

earlier judgment referred to at the start of this judgment.  The
directions given required service of the papers by no later
than noon
on 3 June directly on the official who is responsible for the
matter at the Master’s Office.  The Master
was directed to
file a report by 18 June.  In that regard I said the
following in paragraph 1 of the judgment:
This judgment
is directed at describing the context of the postponement and giving
the motivation for the postponement and the attendant
directions for
the conduct of the matter in the lead up to the resumption of the
hearing.  Nothing in its content should be
understood to
pre-empt any of the substantive issues in the litigation.  The
judgment is primarily intended to assist the
parties, in particular
the Master, in engaging in the further conduct of the matter within
the stringent time frame provided in
the order made at its
conclusion.  That requires a summary of the application as it
appears currently to stand.
Service on
the relevant official at the Master’s Office was duly effected
by the applicants’ attorneys in compliance
with the order.
I shall comment on the report subsequently furnished by the Master’s
Office later in this judgment.
[22]
The
directions given on 2 June called upon the first respondent ‘to
set forth in his supplemented answering papers (i) his
position
in respect in regard to the continued prosecution of the review
application (under WCC case no. 11666/13) and the
opposition by
the joint liquidators to the removal application (under WCC case
no. 10223/13); (ii) without derogating
from the generality
of (i), … the circumstances in which his contention that the
current application should be postponed
for determination together
with the aforementioned applications, as proposed in his provisional
answering affidavit, could feasibly
occur in the context of his
unilateral withdrawal of the mandate of the joint liquidators’
attorneys of record; (iii) the
nature and bases of the deadlock he
contends exists between the joint liquidators and (iv) his
contentions as to how such deadlock
should be resolved’.
[23]
I should also record that it had been made
known by that stage that the proposal concerning the disposal of the
pending removal
and review applications communicated in ASI’s
aforementioned letter of 30 April was no longer held open for
acceptance.
[24]
In the course of the exchange of further
affidavits between the parties subsequent to the adjournment on 2
June, described below,
it was indicated that the first applicant
would move, on 20 June, for the principal relief in terms of the
notice of motion, viz.
the removal of the first respondent as joint
liquidator.
The grounds for removal advanced in the founding papers
[25]
The principal founding affidavit on behalf
of both applicants was deposed to by attorney Katz.  The
essential basis made out
for the application by the first applicant
was the making of the affidavit to which Mr Patel deposed on 9 May
2014 and his behaviour
in respect of the subsequent events that
culminated in the forced postponement of the hearing of the removal
and review applications
that had been set down on 14 May.  After
relating the events summarised above, Mr Katz concluded (at para 192
of his
founding affidavit) that ‘There can be no doubt that
Patel has played a major part in the delay of the winding-up and his

conduct has cost KAL1 a significant amount of money.  The first
applicant respectfully submits that Patel is unfit to remain
a
liquidator of KAL1.  Furthermore, Patel has made common cause
with the Boland Trust whose claim has been described as fraudulent
by
Van Zyl and Patel.  The fact that Patel has joined forces with
Ebersohn and Assheton-Smith renders him unfit to carry out
his
obligations in a proper manner’.
The first respondent’s answer
[26]
Mr
Patel’s position prior to the postponement of the proceedings
scheduled for 14 May was set out in his affidavit of 9 May
(which has
been quoted above
[5]
)
and in a lengthy email he sent to Mr Katz on 13 May.  The email
was handed up to Yekiso J when the consolidated applications

were called before the learned judge on 14 May.  It reads as
follows:
Dear Mr Katz
I was unable to meet with
you yesterday.  The reason being that I had to attend to an
urgent matter that required my attention
and I had to travel to
Johannesburg yesterday afternoon.  I am sure that you sometimes
find yourself having to deal with similar
situations as they crop up.
I apologize for any
inconvenience caused, as this was out of my control.
With regard to the
Application on Wednesday I confirm having informed you that I was
approached by Mr Ebersohn (who represents the
Boland trust as a
creditor in the KAL1 insolvent estate upon which these very papers
are premised) and who had me informed (sic)
of the circumstances that
led to the rejection by Chris Van Zyl of the Trust’s claim.
He furthermore made me aware
of many other alleged irregularities in
the administration of the estate, including but not limited to a
conflict of interests
of your firm acting in the matter.
Despite your protestations
to the contrary there is no provision in law or otherwise to prevent
a creditor from approaching a liquidator
with information that may be
relevant and of value to the administration of an estate.  In
fact the Act places an onus on
interested parties to make all
relevant information available to liquidators.
It was with this in mind
that I deposed to an affidavit and requested that I be given a
reasonable opportunity as joint liquidator
(and which I am duty bound
to do) to assess the position and to verify the information brought
to my attention before embarking
on or incurring any further
substantial legal costs.  I am also satisfied that the deposing
to of the affidavit by me which
so enraged you was so done so as to
serve the best interest of the general body of creditors.
Your comments that I signed
confirmatory Affidavit/s authorizing the review and removal
applications are of course correct.
As such the affidavit/s
were signed at your request and also after having been apprised with
the limited information which you
and Chris Van Zyl elected to share
with me.  The other information which was recently brought to my
attention quite clearly
contradicts your version and hence as joint
liquidator I was obliged to take the necessary steps to test the
veracity of the information
to the application which both Chris Van
Zyl and you requested me to support.
In this regard I draw your
attention to the fact that the entire administration was conducted by
Chris Van Zyl and that I was excluded
from the process.  I only
had limited access to the information which Chris Van Zyl made
available to me from time to time.
One of my concerns is also
the massive amount of legal fees with which this estate has been
burdened.
I re-iterate that I have
only very recently been made aware of the alleged irregularities
associated with inter alia a conflict
of interests that may or may
not exist insofar as the relationship between your firm and the
Bermack Trust who you also represent
as a claimant in this estate.
You will appreciate that insofar as there are serious allegations
against my co-liquidator
and your firm that there is an onus on me to
fully investigate such allegations and to independently apply my mind
in deciding
whether to support the applications and whether the
current litigation is in the interests of the estate.
I have furthermore been
made aware of the Commissioner’s report regarding the 417
enquiry and certain statements that were
made on affidavit in that
forum which may amount to perjury.  I place on record that I was
not even aware that such en enquiry
was conducted nor was I made
aware that there was a prima facie dispute regarding the evidence led
at the enquiry or of the resultant
commissioner’s report.
To date I have also not been informed of the costs associated with
the 417 enquiry and how this
impacts on the administration of the
estate.
This information was only
brought to my notice very recently and with the time available before
the hearing of the matter on Wednesday
I was not able to give my full
attention to it.
I have received the
affidavits and other documents that you emailed to me over the
week-end and confirm that same are already in
my possession.
I am surprised that as an
experienced attorney you have adopted your current stance and I also
do not appreciate the fact that in
my absence you have been
intimidating my staff with threats of them having to depose to
affidavits regarding my whereabouts.
I find your actions in
this regard totally unprofessional and unacceptable.
As far as the costs are
concerned both counsel would have been entitled to such costs anyway,
and I have in any event been made
to understand that the Boland Trust
may have tendered the wasted costs of the postponement.
In the circumstances and in
view of your repugnant attitude and threats I formally advise you
that I am withdrawing your mandate
to act or represent me in this
matter and will also make this letter available to the Judge to be
read with your affidavit.
I am also surprised that at
attorney of your calibre will go to the lengths of deposing to an
ineffectual affidavit with such frivolous
complaint and to be present
same (sic) to the Judge.
You are also welcome to
masquerade (sic) on a frolic of your (sic) by approaching the Law
Society and the Master of the High Court
or any other forum that you
may elect to do with frivolous complaints and I reserve my rights to
deal with it at the appropriate
time.
I have in the meantime
instructed my own counsel to appear on my behalf on Wednesday to hand
this email up to the Judge, as I regard
your mandate representing me
as terminated.
Yours faithfully
MOHAMMED PATEL
[27]
The first respondent returned to the
subject of the rejection by Mr Katz of the Boland Trust settlement
proposal in his ‘provisional’
answering affidavit
delivered on 29 May.  He stated that ‘Katz did not even
seek instructions from me, his client, before
rejecting the
proposal.  What is worse, Katz goes on [to] disclose what
appears to be a bona fide settlement offer to this
court on the basis
that it is “bogus”.  I do not share Katz’s
view of the settlement offer.’
He contended that the
subsequent events, outlined above, had resulted in ‘a
cross-liquidator removal dispute’, with
the Bermack Trust and
Katz seeking his removal as liquidator and the Boland Trust seeking
the removal of Mr Van Zyl.  He pointed
to the untenability of
Katz representing the Bermack Trust against him in the removal
application and acting for Van Zyl in the
latter’s application
for authority to proceed, effectively alone, with the litigation
before Yekiso J that has been
postponed to October.
[28]
Mr Patel also averred that he had only
recently (in March 2014) become aware of alleged impropriety in the
liquidation.  The
context suggests that this awareness had
resulted from the approach to him by Mr Ebersohn.  He
sought to explain that
‘until recently, [I] took a back seat in
the liquidation.  I signed documents and accepted the limited
information provided
by Katz and Van Zyl’.  He denied the
allegations in Mr Katz’s affidavit that he (Patel) had been
involved in arranging
the sale of the aeroplane that comprised KAL’s
only asset.  In that regard he averred that he ‘was not
involved
in the sale process at all.  Being copied in on an
email chain does not amount to involvement.  I receive a great
many
emails and I do not read them all’.  In regard to the
litigation fixed for hearing on 14 May, he stated that he had not
had
time to study the documentation in detail.  According to Patel,
Van Zyl had taken the lead in dealing with the removal
and review
applications, which he ‘essentially rubber-stamped’.
Elsewhere in the affidavit, the first respondent
described his
involvement in the court applications as having been ‘limited
to scanning affidavits and signing confirmatory
affidavits’.
He confirmed that he had agreed to the launching of the enquiry in
terms of ss 417 and 418 of the
Companies Act, but stated that he
had not been ‘aware that the enquiry was being conducted at the
time nor was [he] aware
of the outcome’.  He said that he
had approved the despatch of ENS’s abovementioned letter of 4
April 2013 to
the Master,
[6]
but that he had not been aware ‘that a section 417 enquiry had
been undertaken or concluded’.  He continued ‘I
was
under the impression that this was another formality in the process
of setting aside an obviously bad claim, as this is how
the state of
affairs was conveyed to me by Katz and Van Zyl’.  He
stated that he had agreed that the Boland Trust’s
claim should
be expunged ‘because this is what Katz and Van Zyl told me.
[He] did not, at that stage, suspect that
anything was amiss’.
[29]
The first respondent explained that he had
made his 9 May affidavit after having been approached by Mr Ebersohn,
who had told him
that ‘Katz was exploiting his position as
liquidators’ attorney and a creditor’s [the Bermack
Trust] attorney
to the advantage of ENS and “his”
creditor to the prejudice of the competing creditor [the Boland
Trust]’.
He asserted that his reservations about
proceeding with the litigation without further investigation were
vindicated when he was
provided by Katz with a copy of the proposal
contained in ASI’s letter to ENS of 30 April 2014 only on
10 May.
He stated that he would have accepted the
proposal, as it constituted what he considered to have been a
sensible way forward that
would have saved on litigation costs.
He claimed that if Van Zyl had differed from him in this regard,
their deadlock would
have been referred to the Master for a ruling,
and a postponement of the hearing would then have occurred in any
event.
[30]
Apart from its highlighting of the failure
to have referred ASI’s settlement proposal to him, the content
of the first respondent’s
provisional answering affidavit was
notably lacking in information as to the nature of the improprieties
that had allegedly coloured
the conduct of Messrs Van Zyl and Katz in
the liquidation.  Mr Patel went no further than to point to
the allegations
and accusations set out in ASI’s abovementioned
letter to the Master, dated 17 May 2013.  It was, in part, for
that
reason that the court afforded him the opportunity to deal in a
supplementary answering affidavit with the issues specifically
identified in the order made on 2 June, and thereby provide some
substantiating detail for what appeared to be his change of stance
on
the merits of the review application.
[7]
[31]
As mentioned in the earlier judgment, the
first respondent adopted various, not entirely consistent, positions
to the current litigation
in his ‘provisional’ answering
affidavit: that the application should be struck from the roll with
costs, alternatively,
that it should be dismissed with costs against
the Bermack Trust, or, that it should be heard together with the
consolidated applications
now due to heard by Yekiso J on
6 October.
Supplementary affidavits filed by the applicants’ attorneys
on 5 June 2014
[32]
The first respondent had been directed to
deliver his supplementary answering papers by 9 June 2014.  On 5
June, the applicants’
attorneys filed a further affidavit by Mr
Katz and an affidavit by Mr Roy Gillespie of ENS Forensics (Pty) Ltd,
which, judged by
its name and business address, would appear to be a
business associated with ENS attorneys.  Leave was not sought
for the
admission of these affidavits, but there was no application
by the first respondent for them to be struck out.
[33]
The only matter contained in the affidavits
that I consider to be relevant to the current application concerned
the ascertaining
by Mr Katz from correspondence received from Mr
Assheton-Smith at the end of May that Mr Patel’s first meeting
with Mr Ebersohn
of the Boland Trust had been on 14 February 2014,
and not 6 March, as had been alleged by Mr Patel.  There is
no reason
to suspect that there was anything sinister about Mr
Patel’s confusion of the dates, but the point that Mr Katz
sought to
make was that the meeting had predated the hearing of the
application for the consolidation of the removal and review
applications
before Traverso DJP on 20 February.  Mr Katz
pointed out that Mr van Zyl had reported the outcome of the
application
to the first respondent in an email dated 24 February.
The email (which was in fact addressed to someone called ‘Ronel’

at the first respondent’s insolvency practice) included the
following statements concerning the two applications:
The legal
advice that we are given is that they believe that we cannot lose the
application for the expungement of Boland trust’s
claim and if
this is so then their application for the removal of the liquidators
from office will fall away as they would have
no locus to proceed
with that application on the basis that they are not proved
creditors.
We in any
event stand by our submissions that there is no merit their
application for our removal in the first instance.
We have
carried out our duties in accordance with the legal advice that we
have been given as well as that provided to us by Retired
Judge Joffe
who acted as the Commissioner in terms of the 417 enquiry.
In the context of the first respondent’s probable receipt of
the email, Mr Katz emphasised the significance of Mr Patel’s

failure to have communicated with his joint liquidator about his
meeting with Mr Ebersohn, or to have conveyed any concerns he
might
have had arising out of what Ebersohn might have told him, and his
subsequent first disclosure of his meetings with the Boland
Trust
parties only in his affidavit of 9 May.  He contended that
this showed that the first respondent’s professed
concerns were
not bona fide.
[34]
The remainder of Mr Katz’s further
affidavit was given over to describing adverse comments about Mr
Patel in a judgment given
by Traverso DJP on 16  November 2012
in an unrelated matter and in raising questions about the probity of
Mr Patel’s
conduct in the administration of an insolvent estate
of which he had been a co-trustee together with Mr van Zyl’s
son, Thomas
van Zyl.  There was no explanation why, if these
matters were truly germane, they had not been put up in the founding
papers.
Mr Patel provided an explanation of his conduct in
the first matter, and it would appear that Thomas van Zyl must have
accepted
the explanation provided by him during 2013 in the second
matter.  As neither matter appears to have been pursued further
at the time, it seems that reference to them in the current matter
has been introduced only for the purpose of atmosphere.
That is
to be deprecated.  It served only to give rise to numerous
counter-allegations by the first respondent concerning
the second
applicant’s, and indeed, also Mr Katz’s, conduct in other
matters, which appear to be equally irrelevant,
save, no doubt, for
the costs involved in the generation of reams of paper in explanation
and rebuttal.
[35]
The affidavit by Mr Gillespie stated that
he had been instructed by Mr Katz on 1 June 2014 to conduct an
investigation into the
background of the first respondent.  The
investigation included the first respondent’s application for
admission as
an attorney.  It drew attention to the fact that
there is confusion as to the first respondent’s identity in
that he
appears to have two identity numbers (one of which is
indicated on the Home Affairs website as pertaining to a deceased
person)
reflecting two completely different dates of birth.
There is also confusion as to his registered name.  These issues

were developed further in the applicants’ replying papers,
which included allegations questioning whether Mr Patel held the

university law degree referred to in his attorney’s admission
application.  The replying papers were delivered on 17
June
2014.  Explanations were furnished by the first respondent in
his supplementary answering papers concerning the allegations
in the
affidavit by Mr Gillespie filed on 5 June, but he did not have the
opportunity to respond to the new allegations made in
Mr Katz’s
affidavit in reply.  This court is thus in no position to go
into these allegations on the papers.  It
would be inappropriate
to do so in any event because they predicate a case that the founding
papers did not ask the first respondent
to meet.  The
allegations contained in Mr Katz’s replying affidavit
concerning the propriety of Mr Patel’s status
as an attorney
are nevertheless of the gravest nature and he is under an ethical
obligation, in my view, to report them to his
professional body.
[36]
It is not clear on the papers at whose
instance the investigations by Mr Katz into the first respondent’s
personal background
and alleged misconduct in other insolvency
matters were undertaken.  One might assume that it was at the
instance of the first
applicant, upon the advice of ENS, because the
exercise was plainly directed in support of the relief sought by the
Bermack Trust.
However, the probability, in the absence of any
explanation to the contrary, is that the information concerning the
incident in
the estate co-administered by Mr Thomas van Zyl and the
first respondent would have emanated from the second applicant.
The
application papers were noticeably structured to cast the second
applicant in an apparently neutral role concerning the removal
of his
joint liquidator.  The likelihood that he provided information
to support the relief sought ostensibly only by the
Bermack Trust
calls this appearance of neutrality into question.  (This
impression is reinforced by certain other parts of
the papers.
For example, it appears in the replying affidavit
[8]
that the second applicant is opposed to the consolidation of the
application for the first respondent’s removal from office
with
the applications due to be heard in October.  It is difficult to
understand why the second applicant would adopt this
position if he
were truly neutral in respect of the application for Mr Patel’s
removal.  It is a position that is explicable
only if he wants
the first respondent removed now, and not later; in other words, a
position fully aligned with that of the first
applicant.)
The first respondent’s supplementary answering affidavit
[37]
In the supplementary answering affidavit
that the first respondent was granted leave to deliver by 9 June
2014, he protested that
the supplementary papers filed by the
applicants without leave on 5 June had ‘shifted the goal
posts’, as it had been
indicated at the hearing on 29 May that
only the relief sought by the second applicant was being pursued at
this stage, and that
counsel had engaged in preparing his
supplementary answer accordingly.  It was only after the
delivery of the applicants’
supplementary papers that it was
first made apparent that a removal order was being sought against him
at this stage.  This
required substantial amendments to the
draft under preparation, which in turn had made it impossible for him
to deliver the affidavit
within the court-directed timeframe.
He sought condonation.  This was not opposed.  To the
extent necessary, it
may be taken to have been granted.
[38]
It will be recalled that the order made on
2 June 2014 had called upon the first respondent to indicate his
position with regard
to the applications postponed for hearing before
Yekiso J in October.  His indication was that ‘ideally’
he would
prefer for those applications to be further postponed ‘while
some form of investigation into the conduct of this liquidation
takes
place’.  He said he was mindful, however, of the urgency
inherent in winding-up proceedings and therefore, subject
to the
views of the Master, proposed that –
1.
the second applicant be authorised to
prosecute the review application and oppose the application for his
removal on his own (‘but
not that he be authorised to proceed
with the conduct of the liquidation on his own’);
2.
the review and removal applications proceed
on 6 October 2014;
3.
the current application for his removal be
consolidated with the matters to be heard on 6 October 2014; and
4.
he be authorised to oppose the application
for his removal without the participation of the second applicant.
The first respondent made some additional proposals concerning the
conduct of the hearing of all three applications together in
October,
but it is unnecessary for present purposes to set them out.
They relate to aspects that would fall in any event
to be decided by
the judge who will hear the matters.  (He does not need
authority from the court, or the second applicant’s
consent to
oppose any application for his removal as joint liquidator.)  In
the alternative, he proposed that both he and
Mr van Zyl be removed
as liquidators.  He provided certain grounds in motivation of
the alternative proposal.  The option
of removing both
liquidators is, however, not available in the current proceedings as
the application before this court is one
only for the removal from
office of the first respondent.  The position might be different
were this application determined
together with the pending
application for Mr van Zyl’s removal.
[39]
The first respondent stated that the nature
of the deadlock that he had indicated in his provisional answering
affidavit existed
between the joint liquidators, and which he said
should be referred to the Master for determination in terms of
s 382(2) of
the Companies Act, was, in a single word, ‘Katz’.
He asserted that while he had no difficulty with Mr van Zyl

personally, ‘the difficulty [was] that van Zyl is squarely
within Katz’s camp….and happy to give Katz (and Katz’s

other client, the Bermack Trust) free reign over the litigation’.
He suggested that what he termed the ‘incestuous’

relationship between Mr van Zyl and Mr Katz prevented the former from
exercising ‘an independent will’ and looking
to the
interests of the creditors as a whole.  The first respondent
also expressed his reservations about the fees that had
been charged
by Katz, but he did not provide any particularity by which the
cogency of his concerns could be assessed.
[40]
Notwithstanding his profession of the
ability to maintain a viable working relationship with Mr van Zyl if
the services of Mr Katz
were disposed of, the first respondent
proceeded call his fitness to remain in office in doubt by raising
allegations in respect
of Van Zyl’s conduct in other matters,
which are alleged to be under investigation.  He furthermore
stated that Mr van
Zyl should have referred the deadlock between the
liquidators concerning the further conduct of the consolidated
applications and
Katz’s role as the joint liquidators’
attorney of record to the Master, rather than proceeding for the
alternative
relief sought in the current application.
[41]
The first respondent sought to explain his
belated intervention shortly before the consolidated applications
were due to be heard
on 14 May 2014 by saying that his first meeting
with Mr Ebersohn had been only ‘exploratory and brief’.
Indeed,
Mr Patel stated that his first meeting with Ebersohn (at
which Mr Assheton-Smith was also present for a short time at the
commencement)
‘did not concern the consolidated applications’.
He said that it was ‘only closer to the date of 14 May
2014
that [he] perused some of the papers, and considered the matter, and
was able to form the view that [he] could not support
Katz’s
stance in then impending applications’.  He did not
identify which papers he studied, or to which considerations
he had
regard.  In his ‘provisional’ answering affidavit he
had given the impression that he still needed time
to form a view.
The allegations are self-evidently vague and contradictory.
[42]
Mr Patel described several instances of his
alleged exclusion from the administration of the winding-up.
These included the
sale of the company’s sole asset, the
aircraft.  In this regard he averred:
66. Van Zyl, prior to the first meeting of creditors at the behest of
the Bermack Trust and ENS, entered into an agreement of sale
of the
aircraft with Cronos Airlines.
67. Similarly, I was excluded from this decision, and I only learned
of this when I had sight of the first distribution account
on or
about 15 December 2011.  The sale of the aircraft raises serious
questions and stands to be investigated.  Ebersohn
alleges that
van Zyl failed to consider alternative offers for the aircraft and
effectively rubber stamped the agreement of sale
drafted by ENS.
[43]
The first respondent also alleged that he
had not been informed that the enquiry in terms of ss 417 and
418 had been convened.
He stated that he would have had
‘difficulty with ENS representing a creditor and the
liquidators in such an enquiry, given
its potentially adversarial
nature’.
The applicants’ replying papers
[44]
Mr Katz deposed to the principal replying
affidavit on behalf of both applicants.  He dealt in detail with
rebutting the suggestions
by Mr Patel that he had not been involved
in the sale of the company’s aircraft and that he had not been
involved in or aware
of the proceedings in the ss 417-418
enquiry.
[45]
It is unnecessary for present purposes to
go into the detail.  Suffice it to record that it is abundantly
apparent from the
copies of the extensive email correspondence
attached to Mr Katz’s replying affidavit (annexures ‘RA
1’ to ‘RA
15’) that the first respondent was not
only involved in, but also regularly updated during the period
February to June 2011
on developments concerning the sale of the
aircraft.  His claim not to have been aware of the sale of the
aircraft before
December 2011 is wholly irreconcilable with the
content of the correspondence.  In an email dated 22 February
2011, Mr Richard
de la Harpe, a director of ENS, advised a number of
persons apparently engaged in the sale of the aircraft that Messrs
Patel and
Van Zyl had signed the sale agreement, which had been
delivered to DHL the previous day to be couriered to ‘Equatorial
Guinea
for execution on behalf of Cronos’.  The email
recorded, amongst other things, that ‘Patel required the
inclusion
of a provision that should Cronos fail to procure the
required insurance [KAL] would be entitled to procure such insurance
and
claim the costs, which we did’.  De la Harpe forwarded
a copy of the email to the first respondent later the same day
with
the message ‘Hi Mohamed.  Please see email below for your
information.  I had to first hunt down your email
address.
Kind regards.’
[46]
It seems that problems arose subsequently
with the sale of the aircraft and it proved necessary to execute an
addendum agreement.
One of the emails annexed to Mr Katz’s
affidavit concerned the signing of an additional agreement concerning
the sale of
the aircraft (frequently referred to in the papers as the
‘SOP agreement’).  It was an email sent internally
between
members of the ENS support staff.  It was dated 23 June
2011 and apparently transmitted at 11.30.  Under the subject
line ‘Mohamed Patel – Signing of SOP Agreement’, it
read ‘Mohamed Patel indicated that he is in office all
day and
will be available to sign.  His address is 22
nd
(sic) Golden Acre Office Tower ….  Farouk, would you be
able to collect the agreement from Tracy [van Wyk, an associate
at
ENS] and take it to Mohamed Patel for signature?’.  A
further email sent later that day (at 15.44) from Tracy van
Wyk to a
number of addressees, including Mr Katz, Mr Paul Berman of the
Bermack Trust and the first respondent, read ‘Dear
All.
Kindly find attached a copy of the SOP sale agreement signed by all
the parties.’
[47]
Mr Katz also averred that the allegations
made on behalf of the Boland Trust, to which Mr Patel professed in
these proceedings to
have afforded sufficient credence to warrant
investigation, to the effect that Mr Van Zyl had failed to consider
alternative offers
for the company’s aircraft and had
effectively rubber-stamped the agreement drafted by ENS, had been
comprehensively rebutted
in the papers in the consolidated
applications and in the application for the consolidation of those
matters.  In substantiation
of his averments Katz quoted at some
length from the content of those papers in the replying affidavit.
Mr Patel, of course,
had signed confirmatory affidavits in those
proceedings.  He could not properly have done so if he had not
satisfied himself
of the content of the evidence that he was
confirming.  As mentioned earlier, Mr Katz averred - and his
evidence in this regard
is corroborated by the content of some of the
email correspondence attached to his affidavit - that he attended on
a two hour long
consultation with Messrs van Zyl and Patel on 18 July
2013 to take instructions on the founding papers in the review
application
and the answering papers in the removal application.
In the circumstances it is difficult to credit the first respondent’s

recently adopted attitude of ambivalence towards the position of the
joint liquidators in the consolidated proceedings in the absence
of
any cogent explanation by him in these proceedings of the cause of
his change of heart.
[48]
As to the first respondent’s repeated
claims not to have been aware of the ss 417 – 418 enquiry,
the email exchanges
between Mr Katz and Mr Patel on 14 and 15 June
2012 (annexures ‘RA 16’ – ‘RA 19’)
reflect that the
latter was well aware that the enquiry had been
scheduled to be conducted before Judge Joffe at the ENS offices on 25
and 26 June
2012.  Mr Patel was invited to attend at a meeting
in counsel’s chambers on 18 June for the purpose of preparing
for
the enquiry.
[49]
It is evident from the emails that the
first respondent had expressed reservations about the costs of the
enquiry.  In this
regard Mr Katz stated as follows in his email
to the first respondent of 14 June 2012:
I understand
from Chris [van Zyl] that you have an issue with our fees and
disbursements.  Can you please advise me urgently
what the
problem is so that I can try and deal with the difficulties which you
have.
This has to
be resolved by close of business on Monday as I am not in a position
to continue with the enquiry unless I have an undertaking
that our
fees and disbursements will be discharged in full in terms of our
mandate letter which was accepted on behalf of the joint
liquidators.
If this is
not the case, regrettably, I will have to cancel the enquiry as ENS
is not prepared to go on risk in respect of our fees
and
disbursements.  I will then have to release counsel and Judge
Joffe from their briefs.
[50]
Mr Patel’s reply indicated his
unavailability to attend the meeting with counsel on 18 June due to
another commitment.
As to the issue of the costs of the enquiry
and the objects to be achieved by it, the first respondent stated the
following in
an email to Mr Katz on 15 June 2012:
As you can
probably understand as a joint liquidator in this matter I was never
a party to any fee arrangement regarding the matter,
and secondly the
Master of the High Court would require the account to be taxed as is
the case in all matters where legal Bills
of Costs are submitted with
Liquidation accounts for confirmation.
I have also
not been properly briefed on what the enquiry is all about and would
appreciate it if you could let me have details
of what it is that we
hope to achieve out of the enquiry.
At the risk
of being held jointly liable for a Bill of Costs that is paid before
taxation I cannot, as much as I would like to,
agree to payment or
guarantee that this matter will be resolved by the close of business
on Monday (which comment sounds like a
threat rather than a request)
and I suggest therefore that you look to Chris van Zyl who instructed
you in the first place, for
such authorization.
[51]
Mr Katz replied to the first respondent as
follows later the same day:
The court
applications for the extension of powers and the convening of the
enquiry were forwarded to you and you signed confirmatory

affidavits.  I therefore do not understand why you say you were
not party to any fee arrangement.  The order which was
obtained
at your instance and that of Chris van Zyl provided that our fees and
disbursements do not need to be taxed.  The
Master does not
require the bill to be taxed where attorneys represent the
liquidators on an attorney and client basis as is the
case in this
matter.
I shall
ask Lisa [Melis, Katz’s assistant]
to
email you both applications (without annexures).
(I have quoted only the relevant portion of the email.)
[52]
The first respondent had also signed a
confirmatory affidavit in support of the application for an extension
of the joint liquidators’
powers and the establishment of the
enquiry before the commissioner.  It is evident from the
passages of the founding affidavit
in that application, quoted at
length by Mr Katz in the replying affidavit in the current matter,
that part of the business of
the contemplated enquiry would be to
investigate the probity of the Boland Trust’s claim against
KAL.  The basis upon
which an investigation was considered
appropriate was spelled out in the founding papers.  Without in
any way suggesting that
the Boland Trust may not have a good claim
against KAL – an issue to be determined by action if the
pending review of the
Master’s refusal to uphold the
liquidator’ expungement application succeeds – the
information concerning the
backdated issue of shares in KAL to the
Boland Trust and the basis of its deposit of funds into a third party
account against which
it had originally received shares in another
company controlled by Louw were certainly matters that prima facie
warranted investigation
by the liquidators.  Mr Patel has
not provided any information in these proceedings that would suggest
that a proper
basis for undertaking the enquiry had not existed.
Moreover, his stated position that he would have accepted the
proposal
contained in ASI’s letter to ENS of 30 April 2014 is
consistent only with a continued adherence to the view that the
Boland
Trust claim should be expunged and subjected to proof by
action.  The only logical basis for his not wanting the
proceedings
on 14 May to proceed would be an opinion that some of the
costs attendant thereon should have been averted by acceptance of the

ASI proposal.  It is peculiar that he has not said as much, and
instead has sought to explain his position by feigning ignorance

about the circumstances in which the review application had been
instituted.
Affidavit of Paul Raymond Berman jurat 19 June 2014
[53]
On the morning of the hearing on 20 June,
an affidavit deposed to Paul Berman, one of the trustees of the
Bermack Trust, was filed
of record.  At the commencement of the
hearing senior counsel for the first respondent informed me that he
had not yet had
the opportunity of reading the affidavit.
Nothing more was made of the issue, however, and I assume therefore
that counsel’s
disability must have been addressed before he
was called on sometime after the mid-morning tea adjournment.
[54]
The only significance of Mr Berman’s
affidavit was that it confirmed that the first respondent did not
enjoy the majority
support of the company’s proven creditors by
value.  That, of course, had been implicit from the very
beginning in the
very fact of the Trust’s application for the
removal of Mr Patel from office.  The concerns expressed by Mr
Berman are,
however, a matter that should enjoy the consideration of
the Master, and be squarely addressed in the further report that the
Master
undertook to provide if the application for Mr Patel’s
removal were postponed for hearing with the consolidated applications

in October.  It is appropriate for the Master to engage with the
issues raised by Mr Berman on behalf of the major creditor
because Mr
Patel is the Master’s special appointee, not having been
elected by the creditors.
The Master’s Report
[55]
As mentioned in the introduction, one of
the reasons for the postponement of the matter to 20 June was so that
a report could be
obtained from the Master.  I thought that this
was important because the Master is charged under the 1973 Companies
Act with
a number of relevant responsibilities.  So, for
example, in terms of s 381(1) of the Act, ‘The Master
shall take
cognizance of the conduct of liquidators and shall, if
[s]he has reason to believe that a liquidator is not faithfully
performing
his duties and duly observing all the requirements imposed
on him by any law or otherwise with respect to the performance of his

duties, or if any complaint is made to him by any creditor, member or
contributory in regard thereto, enquire into the matter and
take such
action thereanent as [s]he may think expedient’.  The
Master has the power, given in terms of s 382(2),
to determine
issues on which joint liquidators are unable to agree, or to give
directions as to the procedure by which such disagreements
should be
resolved.  She also has the power in terms of s 391 to
obtain information from the liquidators.  She could
thus request
the first respondent to provide her with the details of any fresh
information he has obtained from Mr Ebersohn.
[56]
The official in the Master’s Office
responsible for oversight of the KAL winding up filed a report as
directed in terms of
the order made on 2 June 2014.  He reported
as follows:
1.
Copies of the Notice of Motion, applicant’s
affidavit and supporting annexures have been lodged with me.
2.
I have perused my record of the
correspondence on file and wish to state that no complaint has been
received by me as required by
Section 382(2).  I am therefore
not aware of the details of complaint and or the reasons of any such
complaint which the liquidators
may have.  As a result I’m
not in a position to offer any opinion or recommendation in this
regard.
3.
This matter is one of the subsidiary
companies, which may have either been liquidated or which may have a
bearing in this matter.
In one of these matters, KAL5
Kingsfield Leasing Five I have started an enquiry in terms of Section
381 against Mr Van Zyl which
is pending.  In his response to me
in respect of the enquiry, he made reference to KAL1 (reference
number C 1424/2010) which
is the subject matter of this application.
His response necessitated further investigation into KAL1.
4.
Furthermore, I need to highlight that the
outcome of this forensic investigation may have an impact on the
First Respondent.
I would therefore recommend that, this matter
should also be heard on 6
th
October 2014 with the First Application.
5.
It is my request that copies of all the
applications relevant to this matter be provided to me to enable me
to submit a comprehensive
report to the Court.
6.
The determination whether the costs should
be costs in the winding up of the estate, alternatively by the
liquidators in their personal
capacity cannot be decided at this
point as am not in possession of a formal complaint hence I am not
fully apprised of the subject
matter of this application before the
Court.
7.
I have nothing further to add to this
application and abide by the decision of the Honourable Court.
[57]
The report is unhelpful. The Master is the
second respondent in these proceedings and thus should have been in
possession of the
papers. The official concerned must have been aware
of the identity of the applicants’ attorneys because of the
email correspondence
directed to him by ENS concerning service of the
order on him as directed in the order made on 2 June. Thus, even if
he had not
been placed in possession of a complete set of the papers,
there was no reason why he could not have obtained anything that he
was lacking. A certain lack of conscientiousness may be discerned in
his failure to do so, especially in the context of the insight
he had
been given into the 2 June judgment, which expressed the court’s
evident concern to be provided with assistance by
way of an informed
report from the Master. Even in the limited respects with which it
engages the matter at all, the report is
singularly uninformative. It
does not disclose anything about the nature of the investigation into
Mr van Zyl in respect of the
winding-up of another company in the
Kingsfield group, or explain how that investigation is thought to be
relevant to the current
matter. There is also no indication of why,
or how, the outcome ‘may have an impact on the First
Respondent’.
Applicable considerations and principles
[58]
The application for the first respondent’s
removal as joint liquidator falls to be considered in terms of s379
of the Companies
Act, 1973, which provides:
Removal of
liquidator by Master and by the Court
(1) The
Master may remove a liquidator from his office on the ground-
(a) that he
was not qualified for nomination or appointment as liquidator or that
his nomination or appointment was for any other
reason illegal or
that he has become disqualified from being nominated or appointed as
a liquidator or has been authorised, specially
or under a general
power of attorney, to vote for or on behalf of a creditor, member or
contributory at a meeting of creditors,
members or contributories of
the company of which he is the liquidator and has acted or purported
to act under such special authority
or general power of attorney; or
(b) that he
has failed to perform satisfactorily any duty imposed upon him by
this Act or to comply with a lawful demand of the
Master or a
commissioner appointed by the Court under this Act; or
(c) that his
estate has become insolvent or that he has become mentally or
physically incapable of performing satisfactorily his
duties as
liquidator; or
(d) that the
majority (reckoned in number and in value) of creditors entitled to
vote at a meeting of creditors or, in the case
of a members'
voluntary winding-up, a majority of the members of the company, or,
in the case of a winding-up of a company limited
by guarantee, the
majority of the contributories, has requested him in writing to do
so; or
(e) that in
his opinion the liquidator is no longer suitable to be the liquidator
of the company concerned.
(2) The Court
may, on application by the Master or any interested person, remove a
liquidator from office if the Master fails to
do so in any of the
circumstances mentioned in subsection (1) or for any other good
cause.
It seems that the current matter resorts under the ‘any other
good cause’ provision in subsection (2), although the
first
applicant appears also to invoke paragraphs (b) and (e) of subsection
(1).  The Master had not been requested to remove
the first
respondent from office on any of the grounds described in paragraphs
(a) to (e) of subsection (1).
[59]
It is obviously important in any
application for the removal of a liquidator to be mindful of what is
expected of a liquidator.
That no doubt explains why in the
very first paragraph of its judgment in Standard Bank of South Africa
v The Master of the High
Court and Others
2010 (4) SA 405
(SCA)
concerning an appeal against a judgment at first instance in which
the application for the removal of joint liquidators had
been
refused, the appeal court (per Navsa JA) observed: ‘In the
winding-up of companies liquidators occupy a position of
trust, not
only towards creditors, but also the companies in liquidation whose
assets vest in them. Liquidators are required to
act in the best
interests of creditors. A liquidator should be wholly independent,
should regard equally the interests of all creditors,
and should
carry out his or her duties without fear, favour or prejudice’.
The court also emphasised, at para 96-97
of its judgment, the duties
of liquidators to make themselves thoroughly acquainted with the
affairs of the company under administration,
and to suppress nothing
and conceal nothing that has come to their knowledge in the course of
the investigation, which is material
to ascertain the exact truth,
and also to exercise particular professional skill, care and
diligence in the performance of their
duties.
[9]
[60]
The principles that govern the approach
adopted by the courts in applications for the removal of liquidators
have been considered
in a number of judgments of the South African
courts.  A useful survey of the jurisprudence (unaffected by the
reversal of
the judgment on appeal) was provided by Liebenberg and
Plaskett JJ in Standard Bank of SA Ltd v The Master of the High
Court
2009 (5) SA 13
(E) at para 7-10; see also Ma-Afrika
Groepbelange (Pty) Ltd and Another v Millman and Powell NNO and
Another
1997 (1) SA 547
(C), at 561.  Our law in this regard, in
common with that of England and Australia,
[10]
applies the approach articulated in the dictum of Bowen LJ in Re Adam
Eyton Ltd ex parte Charlesworth
(1887) 36 Ch D 229
, at 306, when
treating of the then pertaining English equivalent of s 379(2)
of our 1973 Companies Act: ‘In order to
define “due cause
shewn” you must look wider afield, and see what is the purpose
for which the liquidator is appointed.
To my mind....the due cause is
to be measured by reference to the real, substantial, honest
interests of the liquidation, and to
the purpose for which the
liquidator is appointed. Of course, fair play to the liquidator
himself is not to be left out of sight,
but the measure of due cause
is the substantial and real interest of the liquidation’.
[61]
The
salient considerations commonly entailed in the application of that
approach were quite recently reviewed by Neuberger J
in AMP
Music Box Enterprises Ltd v Hoffman
[2003] 1 BCLC 319
, at para 23-27,
in a passage that has been cited with approval in a number of
subsequent judgments in England and Australia:
[23] In an
application such as this, the court may have to carry out a difficult
balancing exercise. On the one hand the court expects
any liquidator,
whether in a compulsory winding up or a voluntary winding up, to be
efficient and vigorous and unbiased in his
conduct of the
liquidation, and it should have no hesitation in removing a
liquidator if satisfied that he has failed to live up
to those
standards at least unless it can be reasonably confident that he will
live up to those requirements in the future.
[24] Support
for this approach is not only to be found in Keypack [Keypack
Homecare Ltd [1987] BCL 409], but also in some cases
where the court
has compulsorily wound up the company and appointed a new liquidator
in circumstances where there is already a
voluntary liquidator in
place – see for instance, Re Zirceram Ltd [2000] 1 BCLC 751,
especially at para 25(5). Also where
the liquidator could not be seen
as independent – see, for instance, Re Lowestoft Traffic
Services Ltd
[1986] BCLC 81
(where the liquidator concerned seems to
have been the same liquidator as in Keypack).
[25] It may
also be right to remove a liquidator where the circumstances are such
that, through no fault of his own, he is perceived
to be – even
though he may not be – biased in favour of, say, one or more of
the creditors – see per Robert Walker
J in Re Gordon &
Breach Science Publishers Ltd
[1995] 2 BCLC 189
, another case
concerned with a compulsory winding-up order in circumstances where
there was already a voluntary liquidator in place.
[26] While
the removal of the liquidator is not necessarily based on any fault
on his part, most such cases will involve a degree
of criticism.
Although in Keypack Millett J emphasised there was no criticism of
the general ability, experience and professionalism
of the
liquidator, and that, even in relation to the particular case, there
was no evidence of his being biased or dishonest, it
is nonetheless
clear that he was removed because the judge took a dim view of the
way in which he had conducted the particular
liquidation. As the
judge said, the fact that this may to some extent resound to the
discredit of the liquidator, does not mean
that the court should shy
away from making the order. On the contrary, in an appropriate case
it is the duty of the court to make
such an order, not merely on the
merits of the particular case, but also because it sends out a clear
message to liquidators that
they have an important function which
they should conduct in a vigorous, effective and independent manner.
[27] On
the other hand, if a liquidator has been generally effective and
honest, the court must think carefully before deciding
to remove him
and replace him. It should not be seen to be easy to remove a
liquidator merely because it can be shown that in one,
or possibly
more than one, respect his conduct has fallen short of ideal.
Otherwise, it would encourage applications under s 108(2)
[of the
English Insolvency Act, 1986 (c 45)] by creditors who have not had
their preferred liquidator appointed, or who are for
some other
reason disgruntled.
[11]
Once a liquidation has been conducted for a time, no doubt there can
almost always be criticism of the conduct, in the sense that
one can
identify things that could have been done better, or things that
could have been done earlier. It is all too easy for an
insolvency
practitioner, who has not been involved in a particular liquidation,
to say, with the benefit of the wisdom of hindsight,
how he could
have done better. It would plainly be undesirable to encourage an
application to remove a liquidator on such grounds.
It would mean
that any liquidator who was appointed, in circumstances where there
was support for another possible liquidator,
would spend much of his
time looking over his shoulder, and there would be a risk of the
court being flooded with applications
of this sort. Further, the
court has to bear in mind that in almost any case where it orders a
liquidator to stand down, and replaces
him with another liquidator,
there will be undesirable consequences in terms of costs and in terms
of delay.
[62]
It is clear that the court must have regard
to the full conspectus of relevant considerations in the case and
make a balanced decision
with the interests of the efficient
liquidation foremost in mind; cf. Joubert et al (ed.), Law of South
Africa First Reissue vol.
4(3) at para 281, s.v. ‘Removal
of liquidator by the court’.
Evaluation
[63]
In my view the blame for the postponement
of the hearing of the consolidated applications on 14 May 2014, which
was the genesis
of this application, was far from one-sided.
The failure to have referred ASI’s proposal of 30 April to Mr
Patel played
a material part.  Mr Katz has described the
omission as a mistake.  It is difficult to understand, however,
how such
a mistake could have been made if the first respondent’s
position as joint liquidator were being taken seriously.  Mr

Katz was, formally at least, as much the first respondent’s
attorney, as he was the second applicant’s.  The mistake

was of a nature that would have justified the first respondent in
terminating Katz’s employment.  Mr van Zyl would have
been
hard-pressed to resist accepting as much, had the first respondent
taken the matter up with him.
[64]
The failure to refer the proposal to the
first respondent also reflects poorly on Mr Van Zyl.  He had a
duty, quite independently
of that of Katz, to react to the proposal
jointly with his co-liquidator.  He has not explained his
failure to do so.
That has lent some credence, even if the
truth might be otherwise, to the accusation by Patel that the second
applicant dances
to Katz’s tune.  Van Zyl should have been
especially alert to the importance, in the circumstances in which the
Bermack
and Boland Trusts were in a sense mutually contesting
claimants to a limited fund under administration, of avoiding cause
for any
perception that the attorney, who also acted for the Bermack
Trust, rather than himself acting jointly with his co-liquidator, had

been the responsible decision-maker in rejecting the proposal.
[65]
The second applicant’s decision to
employ Mr Katz for the purpose of the current application was also
ill-considered, in my
view, for the same reason.  I remarked
earlier on some of the indications in the papers that notwithstanding
the neutral role
in which it was sought to portray Mr van Zyl, he
appears in fact to be supportive of, and to have co-operated in, the
application
by the Bermack Trust to have the first respondent removed
from office.  His decision to use the services of Bermack
Trust’s
attorney in the peculiar circumstances that had arisen
after Mr Patel had made his affidavit of 9 May could reasonably give
rise
to perceptions of bias.  The danger had been heightened by
Mr Katz’s unfounded accusation that the first respondent had

acted improperly in agreeing to meet with representatives of the
Boland Trust, a matter to which Mr Patel had referred in his email
of
13 May, quoted above.
[12]
That Van Zyl should have been astute to the dangers of allowing even
a perception of bias to be created, whether well-founded
or not, is
illustrated by the observations of Neuberger J at para 25
of the judgment in AMP Music Box Enterprises, quoted
above.
[13]
[66]
The first respondent’s inclination to
accept the proposal was, for the reasons I have mentioned earlier,
objectively not lacking
in cogency.  Acceptance could have saved
costs and lent some expedition to the process of resolving the Boland
Trust’s
contentious claim.  The out of hand rejection by
Mr Katz of the proposal as ‘bogus’, on the other hand,
has not
been motivated, save for the statement that it was supported
by senior counsel.  The basis for counsel’s opinion has

not been disclosed.  The only advantage to rejecting the
proposal that I have been able to identify is that (assuming
judgments
in their favour) the liquidators’ costs in the
consolidated applications might be recovered sooner than would be the
case
if the proposal were accepted.  It is an advantage that
fell to be weighed in the bigger picture against the countervailing

considerations of limiting the costs of the pending proceedings and
expediting the resolution of the issue that is holding up the

finalisation of the winding-up, namely the determination of the
Boland Trust’s claim.
[67]
The first respondent’s manner of
dealing with his discovery of the proposal made by ASI and its
rejection and his evidence
in opposition to the current application
has, however, highlighted serious shortcomings in his own discharge
of the functions of
a joint liquidator.
[68]
There is no excuse for him not to have been
fully informed as to the content of the commissioner’s report
and the basis for
the subsequent application, to which he was party,
for the expungement of the Boland Trust’s claim.  He
subsequently
deposed to a confirmatory affidavit in support of the
application to review the Master’s refusal to expunge the
Boland Trust’s
claim and for a substitutive decision by the
court expunging the claim.  His assertion that he did not know
that the commission
had conducted its enquiry and produced a report
just does not bear scrutiny.  In the context of the first
respondent’s
correspondence with Mr Katz described earlier
concerning the conduct of the enquiry, it is inconceivable that the
first respondent
was ignorant about it.  His request to Katz at
that time to be informed what the objects of the enquiry were was
extraordinary.
He had deposed to a confirmatory affidavit in
support of the application to establish the enquiry.  I have not
seen that application,
but it is standard practice that such
applications set out the applicant’s reasons for considering
the establishment of an
enquiry to be expedient.  It is
improbable that any judge, let alone one with the commercial law
background and considerable
experience of the learned judge who made
the order in the current case, would have appointed the commissioner
if he were not sufficiently
informed about the objects of the
contemplated enquiry.
[69]
If the ignorance as to the state of affairs
concerning the treatment of the Boland Trust’s claim professed
in the first respondent’s
affidavits in the current matter
(including that deposed to on 9 May 2014) is to be accepted, the only
inference to be made is
that the first respondent cannot have read
the founding papers in the application to which he was party for the
establishment of
the commission, that he did not read the emails sent
to him by Katz concerning the conduct of the enquiry, that he did not
read
the report to the Master on the enquiry submitted in his name,
and that he did not read the supporting papers in the review
application
and the opposing papers in the application by Boland Bank
for the removal of himself and Mr van Zyl as joint liquidators of KAL

that he endorsed under oath.  Such conduct would fall signally
short of compliance with the duty of liquidators to thoroughly

acquaint themselves with the affairs of the companies in liquidation
they are appointed to administer.
[70]
The first respondent was not entitled to
take refuge in a claim that he had been excluded from a meaningful
role in the winding-up
by Katz and Van Zyl.  I have described
some of the material put in evidence that tends to rebut the first
respondent’s
claims to have been excluded.  But even if he
had been excluded to any material extent, it behoved him not to
suffer such
exclusion in silence.  At the very least he should
have formally taken the issue up first with his co-liquidator, and if
that
did not resolve the problem, with the Master.  There is no
indication that he did so.
[71]
So too should the concerns that the first
respondent had about the fees and attendances of ENS as the attorneys
acting for the joint
liquidators have been confronted squarely if
they had a cogent basis.  It is apparent from the correspondence
to which reference
has been made above that Mr Katz had invited Mr
Patel to identify and discuss the issues about which he had been
reported to be
concerned.  The indications are that the first
respondent was content not to pursue the matter.  His failure to
have
done so detracts materially from the force of the expression of
concern about ‘the massive amount of legal fees with which
this
estate (sic) has been burdened’ in his 13 May 2014 email
that was handed in at the hearing before Yekiso J on 14
May.
[72]
It is convenient, while on the matter of
the first respondent’s misgivings about the employment of ENS
as the joint liquidators’
attorneys, to address his allegations
about the firm having a conflict of interest.  This was also a
point pressed on his
behalf in argument before me.  The first
respondent has not particularised the basis for the allegation of a
conflict.
It may be inferred, however, that at least one of his
reasons is the fact that ENS are also the attorneys for the Bermack
Trust,
which, as mentioned, was the applicant in the winding-up
application.
[73]
I
had occasion earlier this year in another matter to consider a
concern expressed by the Master about the propriety of the engagement

by liquidators of the services of the attorneys who had acted for the
petitioning creditor in a compulsory winding application;
see Ex
parte Steenkamp N.O and others: In re Monoceros Trading 111 CC (in
provisional liquidation)
[2014] ZAWCHC 82.
In that judgment I
held that there was nothing inherently untoward about such an
engagement.  I noted that whether a
conflict of interest
presents in any matter is dependent on the facts.  If, on an
analysis of the facts, the interests of
the petitioning creditor and
those of the liquidator correspond with each other, there will
ordinarily be no conflict of interest.
On the contrary, there
will often be much to be said in favour of the employment of the
petitioning creditor’s attorneys
because they may be steeped in
the complexities of the issues with which the liquidator will have to
engage, and it would be unduly
costly and time consuming in such
circumstances to appoint other attorneys with no prior involvement to
qualify themselves afresh.
The fact that the liquidator may, as in
the current matter, adopt a position adverse to the position of one
or more of the other
creditors does not, without more, derogate from
the conclusion just stated. It is in the nature of a liquidator’s
responsibilities
to interrogate creditors’ claims and in that
context he may have to adopt an adversarial position; cf. Receiver
of Revenue,
Port Elizabeth v Jeeva And Others; Klerck And Others NNO
v Jeeva and Others
[1996] ZASCA 5
;
1996 (2) SA 573
(A). The position would obviously
be different if the attorney had also previously acted for the
creditor against whom an adverse
position was adopted and, in that
connection, had been made privy to any relevant confidential
information of that creditor. There
is also a duty on legal
practitioners to be ever astute to the possibility of a conflict of
interest not identified at the outset
of their engagement
subsequently presenting itself, in which case, of course, they are
bound to withdraw. In a context like the
present, liquidators too are
bound to exercise their independence in giving and overseeing the
carrying out of instructions to
attorneys who act also for one or
more of the creditors in the winding-up. It may be necessary or
prudent in a given case that
separate attorneys be employed to deal
with certain questions that may arise in the liquidation. In that
manner conflict situations
may be managed and grounds for perceptions
of partiality avoided.
[74]
My apprehension of the position appears to
be consistent with the approach adopted by the English courts in
matters in which closely
analogous complaints to those expressed by
ASI in their abovementioned letter to the Master of 17 May 2013, and
now apparently
supported by the first respondent, were raised.
Reference to the English jurisprudence is helpful because, as noted
in E.A.L. Lewis,
Legal Ethics: A Guide to Professional Conduct for
South African Attorneys (1982),
[14]
the principles of legal ethics in South Africa are largely derived
from English law.
[75]
One of the questions addressed by Robert
Walker J in Re Schuppan (a bankrupt) (No 1)
[1997] 1 BCLC 211
was ‘Is
it generally acceptable (and fair as between the petitioning creditor
and other unsecured creditors) for the trustee
in bankruptcy to
retain the petitioning creditor's solicitors to act for him?’.
The learned judge had heard submissions from
an official receiver (a
state appointed official provided for in terms of the English
Insolvency Act, 1986, who fulfils the functions
that would be carried
out by provisional liquidators or trustees under our system of
insolvency practice) that ‘his own practice,
over many years of
experience, [had been] not to retain the solicitors acting for the
petitioning creditor, even when the petitioning
creditor presses for
this. This practice was, [the official] said, founded in his
perception of the importance of the official
receiver being
demonstrably impartial in his treatment of debtors and creditors’.
The judge noted that the official concerned
had conceded that ‘this
was not an official practice in the sense of being prescribed for
official receivers generally, and
that it is a more stringent
practice than what is required by the official guidance to insolvency
practitioners’. In this
connection the judge referred to the
‘Guidance Notes on Professional Conduct and Ethics for Persons
Authorised by the Secretary
of State to Act as Insolvency
Practitioners’ and observed the notes are intended to regulate
conduct of the insolvency practitioner
himself, not his advisers, but
considered that they nevertheless ‘provide guidance by
analogy’.
[76]
In answering the question posed, the
learned judge characterised the approach advocated by the official
receiver as ‘a counsel
of perfection’ which, he said,
‘need not necessarily be followed by all insolvency
practitioners in all circumstances.’
He proceeded ‘In a
case where the real difficulties that are foreseen are in connection
with the identification, tracing
and recovery of assets for the
bankrupt's estate, the retainer of solicitors who already have a good
grasp of these difficulties
can be of great advantage to all the
creditors, not just the petitioning creditor. [The trustee] deposes
that that would be the
case here. If in such a case the petitioning
creditor is very much the largest creditor, and no difficulties are
expected in quantifying
the provable debts of either the petitioning
creditor or the other creditors, the risk of a conflict of interest
would appear to
be, in the words of Hoffmann J in Re Maxwell
Communication Corp plc
[1992] BCLC 465
at 468, “a mere distant
possibility”.’
[77]
The judgment in Schuppan also confirms that
in instances in which the petitioning creditors attorney is indeed
conflicted in certain
respects in respect of matters to be attended
to by the liquidators, it is competent for such situations to be
managed by the appointment
by the liquidators of separate attorneys
to assist them in those matters. The judge did caution that the
engagement by a trustee
or liquidator of a petitioning creditor’s
solicitor in cases in which the likelihood (as distinct from the mere
possibility)
of any conflict of interest arising was identifiable was
‘in general undesirable’ because the need to appoint
separate
legal representatives to address the problem was liable to
cause unnecessary expense, duplication of work, and confusion, and
therefore
should occur only exceptionally. He, however, cited Re
Maxwell Communication Corp supra, at 569, and Re Polly Peck
International
plc (No 1)
[1991] BCC 503
as showing ‘that in
exceptional circumstances a division of responsibility may be the
best solution’.
[78]
Another English judgment in point is that
of Pumfrey J in Re Baron Investments (Holdings) Ltd (in liquidation),
Halstuk and another
v Venvil
[2000] 1 BCLC 272.
In that matter it was
argued that Schuppan had been wrongly decided. It was submitted by
counsel that in any matter in which the
solicitor appointed had acted
only for the petitioning creditor or for only some, and not all, of
the creditors, sufficient potential
of conflict existed to exclude
the propriety of the engagement of the solicitor by the liquidator.
The learned judge summarised
the import of the argument advanced
before him on this point to be to the effect that ‘there is an
inherent conflict between
the interests of an individual creditor and
the interests of the creditors en masse whose interest it is the
function of the liquidator
to protect’. The court rejected the
criticism of the judgment in Schuppan and reiterated the point that
the existence or
not of a conflict of interest is a facts dependent
question that is not amenable to determination on the generalised
basis contended
for by counsel. The essential questions are whether
the attorney is possessed, by virtue of a prior or co-existing
attorney-client
relationship of the confidential information of a
party against whom he is engaged to act, or whether the interests
which the liquidator
needs to advance are opposed to those of the
creditor for whom the attorney also acts. If so, the attorney is
conflicted. (The
latter situation is covered squarely by the Cape Law
Society rules. Rule 14.3.4 provides that a member must ‘refrain
from
doing anything which places or could place them in a position in
which a client’s interests conflict with their own or those
of
other clients’.) The judgment further confirmed the principle
that identified areas of conflict can be managed by the
appointment
of more than one firm of attorneys on the basis of a division of
responsibility. The proper approach of a liquidator
in deciding on
the appointment of legal advisers in such situations is one of
proportionality; balancing all the relevant considerations
including
costs, practical issues and reasonably based third party perceptions.
[79]
The first respondent has failed to disclose
any facts that would indicate that ENS are conflicted in acting for
the liquidators
in the applications that have preceded the current
litigation and indeed, his counsel were at a loss to identify a
rational basis
for his allegations when I pressed them in argument.
[80]
However, before moving on, I think it would
be proper to comment on ENS’s engagement by the applicants in
the current matter.
The application is against the first respondent,
who is ENS’s former client. It concerns issues in respect of
which the content
of attorney-client communications between Mr Patel
and Mr Katz and his colleagues at ENS in respect of the conduct of
the liquidation
might reasonably have been expected to, and indeed
have, become relevant. The privilege that attaches to such
communications is
highly valued as a matter of constitutional
principle (cf. Thint (Pty) Ltd v National Director of Public
Prosecutions and Others,
Zuma and Another v National Director of
Public Prosecutions and Others
2009 (1) SA 1
(CC),
2008 (12) BCLR
1197
at para 183) and its ambit falls to be determined generously
(cf. Balabel and another v Air India
[1988] 2 All ER 246
(CA),
especially at 254-256
[15]
).
The privilege is that of the client, not of the attorney. The
principle that I have in mind was expressed thus (per Wessels JA)
in
Robinson v Van Hulsteyn, Feltham and Ford
1925 AD 12
at 21-22 :
In order to
advise a client as to his legal position the solicitor must know all
the circumstances of his client's case, and therefore
a client is
often compelled to reveal to his solicitor the most intimate
circumstances of his life. The solicitor may thus become
the
repository of the most vital secrets of his client. These confidences
reposed in him he may not divulge, and if he does the
Court will
punish him for his breach of duty towards his client. If a solicitor
who in the course of advising a client has become
possessed of his
client's secrets is engaged by another person to act against his
former client, his knowledge of the latter's
secrets may be of great
advantage to his client's opponent. Although the solicitor may
conscientiously endeavour to do his duty
to his new client without
revealing the secrets of his old client, yet he may find himself in
an invidious position and his knowledge
of the secrets of his former
client may unconsciously affect him in doing his duty towards the
other. In order to avoid such a
dilemma the Court will restrain a
solicitor in whom confidences have been reposed by a client from
acting against such client where
it is made clear to the Court in the
words of COZENS-HARDY, M.R., ‘that real mischief and real
prejudice will in all human
probability result if the solicitor is
allowed to act’.
[81]
Notwithstanding that Mr Patel has not asked
for any relief of the nature sought by the applicants in the two
English cases just
discussed barring ENS from acting against him in
the application (cf. Wishart and Others v Blieden NO and Others
2013
(6) SA 59
(KZP)), I nevertheless have significant reservations about
ENS’s acceptance of appointment as attorney in the current
case.
The general principle seems to be that it is for the former
client who feels prejudiced by the attorney’s conduct to raise

the matter, but in Kirkwood Garage (Pty) Ltd v Lategan and Another
[1961] 2 All SA 413
(E), the court mero motu declined to entertain an
application in which it appeared that the applicant’s attorney
may have
previously acted in a connected matter for the respondents
and no explanation for his conduct had been given on the papers. In
Zulu and others v Majola
2002 (5) SA 466
(SCA), at para 18, the court
identified an evident conflict of interest involving the appellants’
attorney of record and
noted mero motu (per Mthiyane JA) ‘It is
further undesirable that the estate's appointed representative should
act as the
attorney for certain interested parties against another
interested party arising out of the administration of the estate. The
first
appellant [being the also the attorney for the appellants]
should therefore cease to act on behalf of the second and third
appellants,
in his own interests and theirs, and should be precluded
from recovering any costs from them in relation to the present
litigation,
not recoverable from the respondent, which he might
otherwise have been entitled to in his capacity as their attorney’.
Compare
also Retha Meiring Attorney v Walley
2008 (2) SA 513
(D), in
which, at para 42, the text of a relevant rule (presumably of the
KwaZulu-Natal Law Society) is quoted as providing ‘A
member
should not act against a former client, without the former client's
consent, if the possibility exists that the member may
use
information obtained from him to his prejudice’. In view of the
orders that will be made referring the substantive relief
sought in
this matter for the determination together with the consolidated
applications, and also because I did not hear argument
on this
question, I shall leave any decision on the point, if one is
required, for the court that deals with the consolidated matters.
[82]
Reverting to the central issue in the
application for the first respondent’s removal from office:
Whereas the first respondent
was entitled to take exception to being
excluded from the consideration of the proposal advanced by ASI on
behalf of the Boland
Trust in regard to the conduct of the
consolidated applications, his response to the situation, especially
in the context of the
imminent hearing date for the consolidated
applications, was required to be determined by a bona fide
consideration of the best
interests of the liquidation and all
parties involved in or affected by it. His reaction that he needed
time to apprise himself
of matters with which he should already have
been well acquainted reflects adversely on his suitability to be a
joint liquidator
of the company and on his diligence in the discharge
of his duties. As apparent from the discussion above, Mr Patel’s
professed
ignorance concerning matters germane to the consideration
of ASI’s proposal and the merits of the consolidated
applications
is inexcusable. His affidavits and the email he sent to
Mr Katz on 13 May 2014 are replete with allegations that information
had
come to his notice about irregularities and improprieties in the
conduct of the liquidation under the aegis of Katz and the second

applicant. It is significant, however, that nothing has been offered
by way of substantiation of the allegations. He has provided
no
evidence to suggest that the information apparently imparted to him
by Mr Ebersohn went beyond that already furnished in ASI’s

letter to the Master of 17 May 2013.
[83]
In the circumstances I do not consider that
the personal difficulties he was experiencing with Mr Katz and his
co-liquidator’s
failure to have consulted him on the ASI
proposal constituted a good enough reason for him to have forced the
abortion of the hearing
of the consolidated applications on 14 May
2014. He should have appreciated that his conduct would result in
wasted costs and in
a delay of many months in the finalisation of the
company’s winding-up. It was his professional duty to place
these considerations
before his personal sensibilities.
[84]
The prejudicial effect of the first
respondent’s conduct in relation to the litigation due to have
been heard on 14 May, judged
in the context of his explanation,
which, as I have observed, not only lacked substantiating reasons,
but also exposed serious
shortcomings in his compliance with his
duties as liquidator in regard to the administration of the
winding-up thus far, affords
sufficient justification to order his
removal from office. However, the requirement that such a decision
should be based on the
full conspectus of relevant considerations in
the case in order to inform a balanced decision with the interests of
the efficient
liquidation foremost in mind enjoins taking a broader
view. In that regard it is necessary to consider the argument
advanced by
the first respondent’s counsel that the justice of
the matter would be best served by postponing the determination of
the
first respondent’s removal for determination with the
consolidated applications.
[85]
The first respondent’s counsel
emphasised that the papers in the removal application pending before
Yekiso J are not before
me. They submitted that to remove the first
respondent from office at this stage when there are no pressing
considerations in the
winding-up exercise that necessitate such a
course as a matter of urgency - certainly not if Mr van Zyl is
permitted to manage
the consolidated applications in the interim, as
tendered by the first respondent – could pre-empt the effect of
the findings
Yekiso J might make in the application by the Boland
Trust for the removal of Van Zyl from office. The argument was that
the findings
that YekisoJ could make might vindicate the position
adopted by the first respondent concerning the review application.
[86]
The difficulty with that argument is that
the first respondent has failed to explain what his position in fact
is in regard to the
review application, or to give any reasoned
explanation as to why it might have changed from that manifested in
his subscription
as a party to the review application in his
confirmatory supporting affidavit. Moreover, a finding that Van Zyl
should be removed
as liquidator for any reason would not compensate
for, or offset the evident failure by Mr Patel to comply with his
obligations
as liquidator.
[87]
A better argument, in my view, would have
been that the conduct of Messrs Van Zyl and Katz in respect of the
proposal put by ASI
at the end of April and their failure to refer
the offer to the first respondent might bolster the position of the
Boland Trust
in the consolidated applications. The holistic
consideration enjoined in the best interests of the liquidation
process in any removal
application might be better served if this
application were to be heard and decided together with the
consolidated applications.
If both liquidators have to go, it would
probably be better that they go together. That might serve, if
nothing else, to avoid
the insidious effect, having regard to the
questions that have given rise to the currently pending litigation,
that one of them
staying in office a little longer than the other
could have on the continuance of the winding-up in new hands.
[88]
There is also the consideration whether,
having regard to the controversy and its basis in a dispute between
creditors, it is in
any event appropriate, if a joint liquidator is
to be removed at the instance of one of the creditors, that only one
of them be
removed. In Ma-Afrika supra, Van Zyl J, having noted the
observation by Innes CJ in Goldseller v Hill
1908 TS 822
at 827 that
‘They [the co-trustees] are in law only one persona. They
jointly represent the estate, and together they are
the channel
through which the estate can sue or be sued and the proper persons to
investigate all its affairs. They stand upon
exactly the same
footing.’, proceeded to query whether, when joint liquidators
were involved, it was competent to order the
removal of only one of
them. In that regard the learned judge stated at p. 567C-D:
The question
which must inevitably be asked is whether it is competent to seek the
removal of only one of two co-liquidators, particularly
where, as in
the present case, the second co-liquidator has played a relatively
minor role and must needs himself bear at least
part of the blame for
the alleged ineffective or objectionable conduct of the first
co-liquidator. If a proper case is made out,
should they not both be
removed? For present purposes, on the view I take of the facts before
me, it is not necessary to answer
this question. I venture to
predict, however, that it will have to be resolved judicially at some
or other time in the future.
The editors of Henochsberg on the Companies Act 61 of 1973 have
expressed the opinion that it is indeed competent for the court
to
remove only one or some of any number of joint liquidators. I agree.
[89]
The judgment in Goldseller cited by Van Zyl
J was concerned with a quite different point, namely the competence
of a decision by
a meeting of creditors which had purported to confer
priority in favour of one co-trustee over another. As held by the
Transvaal
Supreme Court in that case, such as decision was plainly
incompetent. The single persona metaphor applied by Innes CJ went to
the
obligation of co-trustees to act jointly in all matters under
their administration, which carries with it the necessary implication

that they must be equally empowered in all their actions as such.
[16]
It does not follow though that where some, but not all, of a number
of joint liquidators are found to be no longer suitable to
hold the
appointment that all of them, even those whose suitability is beyond
impeachment, should have to go. If the single persona
metaphor were
indiscriminately applicable in the removal context, it would also
apply in situations such as the resignation or
death of a
co-liquidator. The position of the other liquidator would also be
terminated thereby. The notion has only to be stated
to be rejected.
The statute does not require there to be more than a single
liquidator in place.
[90]
I do think, however, that when there are
two joint liquidators and separate proceedings with overlapping
considerations are pending
contemporaneously for their respective
removal from office, there is much to be said in favour of the
coterminous determination
of both applications when regard is had to
the broader considerations bearing on the efficiency of the
winding-up that need to
be weighed. The danger of two judges, within
a short period, taking different and potentially conflicting views on
how the best
interests of the liquidation would be best served in the
context of demonstrated shortcomings on the part of the liquidators
should,
as far as possible, be avoided. There is also the
consideration that the decisions made by this court may be subject to
appeal.
If that were to happen, it would be desirable in the
interests of the winding-up that the appeal process be an integrated
one.
[91]
As mentioned, one of the reasons for the
postponement of the application from 29 May to 20 June was to obtain
a report from the
Master. As noted, the report that was filed was
unhelpful. It is clear that the relevant official in the Master’s
Office
had not had regard to a full set of the papers in the
application. The report that he put in did, however, suggest, even if
opaquely,
that an investigation currently being undertaken by the
Master’s Office in another matter, may yield information that
could
have a bearing on the current matter and the consolidated
applications. The Master has recommended that the current application

be postponed for determination together with the consolidated
applications and has promised a further report. I remain of the view

that the provision to the court of a properly informed opinion from
the Master is desirable in cases of this nature. It would be
a matter
for concern, having regard to the responsibilities given to the
Master in terms of the Companies Act, if the capacity
restraints of
the Master’s Office are such that it were unable to render
meaningful assistance to the courts in matters like
this. It is thus
to be hoped that the promised further report will represent a
considerable improvement on the one provided on
18June.
[92]
All of these considerations, taken
together, have persuaded me that the determination of this
application should indeed stand over
for determination by the judge
who is to hear the consolidated applications.
[93]
Counsel for the applicants argued against
the taking of that course. He submitted that a formal application for
the consolidation
of this matter with the consolidated application
was required. Moreover, joinder of the Boland Trust as an interested
party was
required.
[94]
The papers before me do include an
application by the first respondent for the consolidation of this
application with the other
applications. The application for
consolidation might not be in the usual form under an appropriate
notice of application, but
that does not derogate from its evident
substantive existence on the papers as a matter of fact. Furthermore,
assuming that notice
of the application for consolidation needed to
be given to the Boland Trust, I am satisfied that the Trust was
sufficiently apprised
of its existence and in a position to raise any
objection to a further consolidation of matters if so advised.
Counsel for the
Boland Trust announced his presence at the hearing on
20 June and indicated that he was there on a watching brief. I also
noticed
that the Boland Trust’s attorney, Mr Assheton-Smith,
was present in the gallery for most, if not all, of the hearing on
that
day. The first respondent’s counsel indicated that if I
should consider myself unable for any reason to deal with the
question
of a consolidation of the current matter with the
consolidated applications, they would desire a postponement so as to
bring a
separate consolidation application. It follows from what I
have already said that I do not think that is necessary. Such a
course
would in my view escalate costs unnecessarily, and could even
prejudice the chances of the hearing fixed for 6 October proceeding

on that date. If the Boland Trust should consider itself prejudiced
in any manner by the course that I have chosen in this respect
–
which I doubt - there would be nothing to prevent it raising any
objections it may have at the hearing on 6 October, or
earlier. The
character of the order for a further consolidation that I propose to
make is that of a ruling. It is therefore susceptible
to being
recalled if there is good reason to do so. (Compare also rule 11(b)
read with rule 10(5) of the Uniform Rules of Court.)
[95]
The main consideration urged in support of
the urgency of the application was the need for the liquidators to
deal with certain
interlocutory matters in the consolidated
applications. It was at those exigencies that the relief sought by
the second applicant
was directed. The papers provided no
particularity about the interlocutory matters, but it is not in
contention between the first
respondent and the second applicant that
Mr van Zyl should be permitted on behalf of the joint liquidators to
attend to the requirements
of those matters on behalf of the joint
liquidators. This seems to me to be a sensible and pragmatic
arrangement in the circumstances.
An order will thus be made
confirming that Mr van Zyl is permitted to act accordingly. The order
will provide that Mr van Zyl is
to inform the first respondent in
writing of every action taken by him in this regard either before,
or, if that is not feasible
for any reason, as soon reasonably
possible after, he takes the action concerned.
[96]
I remarked earlier on how the papers have
developed in this matter thus far, with sets of affidavits being
delivered beyond what
is provided in terms of the rules of court
regulating the conduct of motion proceedings. I am concerned that
there may be a perpetuation
of this conduct in the period between now
and October. The conduct has already caused the introduction of a
significant amount
of evidence which has had to be read, but to which
I have, for the reasons mentioned, not thought it proper to have
regard. In
the circumstances, in order to restrain any further
undisciplined burgeoning of the papers, I propose to include in the
order to
be made a direction that further affidavits may be delivered
only with prior leave of the court on good cause shown; cf.James
Brown
& Hamer (Pty) Ltd (Previously named Gilbert Hamer & Co
Ltd) v Simmons N.O.
1963 (4) SA 656
(A) at 660F-G.
[97]
I am going to direct that the question of
costs in respect of the hearings on 29 May and 20 June 2014 shall
stand over for determination
by the court which hears the
consolidated applications. Without in any way purporting to pre-empt
the decision of that court, and
only by way of assistance, I think it
appropriate to indicate that it is my opinion that the bringing of
the application on barely
three days’ notice on 29 May was
unduly precipitate and that the applicants should bear the costs
incurred in respect of
the appearances on that date.
Order
[98]
The following order is made:
1.
The second applicant is hereby authorised
and directed, on behalf of the joint liquidators of Kingsfield
Aviation Leasing One (Pty)
Ltd (in liquidation), to do all things
necessary to proceed with the opposition by the joint liquidators to
the application for
their removal in case no. 10233/13, and with the
prosecution of the application for the review of the Master’s
refusal to
expunge the claim of the Boland Trust in case no.11666/13,
including instituting or opposing any interlocutory applications and

instructing attorneys and counsel so as to ensure that the matters
are ready for hearing on 6 October 2014.
2.
The second applicant is further directed to
keep the first respondent advised of any steps taken by him in terms
of the authorisation
afforded in terms of paragraph 1 by written
notice to be given before any such step is taken, or, if prior notice
is not feasible
by reason of the exigencies of the given situation,
as soon as reasonably possible after the step in question has been
taken.
3.
The application by the first applicant for
the removal of the first respondent from his office as joint
liquidator of Kingsfield
Aviation Leasing One (Pty) Ltd (in
liquidation) under case no.  9282/2014 is consolidated for
hearing with the aforementioned
applications under case no.s 10233/13
and 11666/13, and for that purpose is postponed to 6 October 2014.
4.
No party to the application under case no.
9282/2014 shall be permitted to deliver any further affidavit in the
matter save with
the prior leave of the court on good cause shown to
be sought by application on notice to the other parties.
5.
Costs, including the costs incurred in
respect of the hearings on 29 May 2014 and 20 June 2014,
respectively, shall stand over for
determination by the court to be
seized of the consolidated matters to be heard on 6 October 2014.
6.
The Master is directed to report further to
this court on the application under case no. 9282/2014 by no later
than Thursday, 18
September 2014.
7.
The applicants’ attorney of record is
directed to serve a copy of this order, together with a copy of the
judgment delivered
on 8 July 2014 on the Master by no later than 11
July 2014, and to file an affidavit confirming compliance with this
direction
by no later than 19 July 2014.
8.
The applicants’ attorney of record is
further directed to ensure by no later than 11 July 2014 that the
Master is possessed
of a full copy of the record in
case no. 9282/2014, and to file an affidavit confirming
compliance with this direction
by no later than 19 July 2014.
9.
The applicants’ attorney of record is
also directed to serve a copy of this order on the attorney of record
of the Boland
Trust in case no.s 10233/13 and 11666/13 by no later
than 11 July 2014, and to file an affidavit confirming compliance
with this
direction by no later than 19 July 2014.
A.G.
BINNS-WARD
Judge
of the High Court
Dates of
hearing: 29 May and 20 June 2014
Date of
judgment: 8 July 2014
Before:
Binns-Ward J
Applicants’
counsel: G.W. Woodland S.C.
Applicants’
attorneys: Edward Nathan Sonnenbergs Inc.
Cape
Town
First
Respondent’s counsel: Z.F. Joubert S.C.
Zach
Joubert
First
respondent’s attorneys: Patel and Totos
Cape
Town
[1]
It is not clear precisely how the Boland Trust will
formulate its claim against KAL in any action that might follow upon
the expungement
of its claim.  The claim submitted to proof by
the Boland Trust purported to be based on a fraudulent
representation by
KAL.  The description of the claim is
cross-referenced in the proof of claim affidavit to paragraphs 41-44
of the founding
affidavit in the winding-up application.  The
papers in that application were not before me.
[2]
The commissioner’s report did
state (in para 6) that ‘[s]
ubsidiary
issues were also canvassed.  These related in the main to
potential claims against Fifth Generation, de Klerk
[Bermack
Trust’s investment advisors]
and
Snyman personally, BGR Aucamp Scholtz Inc
[KAL’s
auditors]
and
Aucamp personally.  These claims do not appear to vest in KAL
1.  They appear to vest in the Bermack Trust
’.
[3]
They are described briefly in a few
paragraphs in the founding affidavit in the current application,
and, as related below, excerpts
from the papers in those
applications were also quoted in the replying papers.  I was
informed from the bar during argument
that the papers in the two
matters run in total to well over 2000 pages.
[4]
See para [13]
above.
[5]
At para [15].
[6]
See para [4]
above.
[7]
See paragraph [22]
above.
[8]
At para 55.
[9]
In this regard the court quoted approvingly from
Blackman
et al
,
Commentary on the Companies Act
vol 3, at 14-376 and 14-378 and cited
Ex
parte Clifford Homes Construction (Pty) Ltd
1989 (4) SA 610
(W) at 614.
[10]
Compare the English and Australian jurisprudence cited
in
Ma-Afrika
Groepbelange
.
[11]
Section 108(2) of the Insolvency Act, 1986 c 45
provides: ‘
The court may, on cause
shown, remove a liquidator and appoint another
’.
[12]
At para [26].
[13]
At para [61].
[14]
At page 59.
[15]
The pertinent passages from
Balabel
are quoted in
A Company and Others v
Commissioner for the South African Revenue Services
[2014] ZAWCHC 33
at para 24.
[16]
Both of the other judgments cited by Van Zyl J in this
connection, viz.
Murphy, NO and Benjamin, NO
v Semphill and Others
1954 (3) SA 450
(W)
and
Millman NO v Goosen
1975 (3) SA 141
(O), were also concerned with quite different
points, being the necessity for all co-trustees to be joined in
proceedings by
or against a trust, and the obligation of joint
appointees, whether they by trustees, liquidators or judicial
managers, to act
jointly.