Bergrivier Farms (Pty) Ltd v Midnight Storms Investments 232 (Pty) Ltd and Another (25338/2009) [2010] ZAWCHC 150 (26 May 2010)

IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

CASE NUMBER 25338/2009

DATE: 26 MAY 2010

In the matter between

BERGRlVIER FARMS (PTY) LTD Applicant

and

MIDNIGHT STORMS INVESTMENTS

232 (PTY) LIMITED 1sr Respondent

CAPENSIS INVESTMENTS 203 (PTY) LTD 2nd Respondent

JUDGMENT GAMBLE, J This is an application for a postponement in an application for provisional winding up order of the respondent company. I refer to the parties as they are in the main application. The matter commenced urgently in December 2009 and when it came before Court,

it was postponed until today for hearing, with an agreed timetable for the filing of answering and replying papers. Those papers were, to all intents and purposes, filed timeously. In the answering papers the respondent launched a blistering attack on the integrity of the directors of the applicant company and the intervening creditor. Allegations tantamount to fraud, theft and deceit were readily made. On 7 April 2010 the applicant and the intervening creditor filed a voluminous reply, collectively in excess of 1 000 pages, inclusive of annexures. Nothing was heard from the respondent company's attorneys until 28 April 2010 when an inquiry was made regarding the index which was required so that the pages could be paginated for consideration by counsel. This was about four weeks ago. The index was filed the following day. There was a further hiatus until 11 May 2010, when the applicant and the intervening parties filed their heads of argument. On that very day a lengthy letter was sent by the company's attorneys, indicating that there was extensive new matter in the reply and that the respondent needed time to deal with it. A postponement was sought. I accept counsel's say-so that the letter was not written in response to the persuasive arguments made in the heads of argument, but independently thereof. The applicant and the intervening creditor indicating in no uncertain terms that such an application would be opposed. The application only saw the light of day ten days later on 21 May 2010. Answering papers and a reply were filed and that interlocutory application was heard first today. When the matter was called this morning, I enquired from Mr Fitzgerald SC, who appears for the company with Ms Watson, why no heads of argument had been filed in terms of Practice Direction Number 50 of this court. I was told that if no postponement was granted, counsel for the respondent would seek leave to be excused and that the matter would have to proceed on an unopposed basis. Clearly explicit in this submission is an acceptance by counsel for the company that a prima facie case is made out on the papers, as they now stand, for a provisional winding up order. Mr Fitzgerald motivated the postponement primarily for the purposes of dealing with the new matter, which it is common cause includes documentation, including expert reports generated after the filing of respondent's answer. At the same time the deponent to the respondent's affidavit, Mr Dawood, says that he may have been misled by the erstwhile director of the respondent, Mr Salie, and that he wishes to clarify matters in that regard. If he has been misled, says Mr Dawood, then the respondent would probably concede that a provisional winding up order is unavoidable. The principles in respect of an application for a postponement are dealt with by Mohammed. AJA, as he then was, in the Mvburqh Transport case 1991(3) SA 310 (NSC) at 314F. The principles are as follows: 1. The trial judge has a discretion as to whether an application for a postponement should be granted or refused. 2. That discretion must be exercised judicially, it should not be exercised capriciously or upon any wrong principle, but for substantial reasons. 3. A Court should be slow to refuse a postponement where the true reason for a party's non-preparedness has been fully explained, where his unreadiness to proceed is not due to delaying tactics and where justice demands that he should have further time for the purposes of presenting his case. 4. An application for a postponement must be made timeously, as soon as the circumstances which might justify just an application become known to the applicant Where, however, fundamental fairness and justice justifies a postponement, a court may, in an appropriate

case, allow such an application for postponement, even if the applicant was not so timeously made That, of course, is applicable

in casu 5. An application for a postponement must always be bona fide and not used simply as a tactical manoeuvre for the purposes of obtaining an advantage to which the applicant is not legitimately

entitled. 6. Considerations of prejudice will ordinarily constitute the dominant component of the total structure in terms of which the discretion of a court will be exercised. What the Court has primarily to consider is whether any prejudice caused by the postponement to the adversary of the applicant for a postponement, can be fairly compensated by an appropriate order of costs, or any other ancillary mechanisms 7. The Court should weight the prejudice which will be caused to the respondent in such an application, if the postponement is granted against the prejudice, which will be cause to the applicant if it is not. 8. Finally, where the applicant for a postponement has not made his application timeously, or is otherwise to blame with respect to the procedure which he followed, but justice never justifies a postponement in the particular circumstances of a case, the Court can make an appropriate costs order against that party. In the present case, the application was not brought timeously, allegedly due to the peregrinations of both the respondent's senior

counsel and its lead attorney, himself a senior practitioner. This, of course, is no fault of the client but I should add, however, in their favour, that no one could have reasonably anticipated in December 2009, that an affidavit in excess of 1 000 pages would be filed in reply. The conduct of the respondent's director, has clearly not been the cause of the delay and an order, therefore,

should not be to the prejudice of the respondent. Nevertheless the delay in bringing the application to postpone is unacceptable and the conduct of the company's attorneys in this regard will be addressed more fully in the costs order that I intend making. From the bar, Mr Fitzgerald amplified the tender made by Mr Dawood in paragraph 37 of the affidavit in reply in this interlocutory application which appears

at page 1 782 of the record. The extent of that tender is incorporated in a draft order which Mr Fitzgerald handed to me shortly before lunch. Mr Pincus SC, who appeared together with Messrs Goldberg and Moller for the applicant and intervening creditor, were most critical of the respondent's legal representatives' cavalier conduct in this matter. I agree with that criticism to the extent that it relates to the behaviour of the attorneys. The involvement in respect of counsel was explained by Mr Fitzgerald from the bar. The attorneys' conduct is exaggerated, in my view, by the brazen manner in which it was put before the Court with little by way of an apology for the inconvenience to the other parties or to the Court. We have spent the last couple of days running around, reading applications for a postponement, when the time could have been used

otherwise more productively. The fact that remains, however, is that there is a plethora of new matter in the reply and it may be that the respondent needs to deal therewith. To determine the relevance thereof, is a difficult task at this stage, because it would involve a consideration of the merits, but I need to cite only one example. The company relied on a valuation of its farming land at a figure of around R45 million, (if I am not mistaken) and filed a summary by a Mr Blewett in this regard with its answering papers. The applicant and the intervening creditor say that the value is only about a third of that and they rely on two valuations obtained by them after the filing of the answering papers. It appears that Mr Blewett passed away very recently and the respondent is unable, and at short notice, to verify the correctness of the new valuations advanced by the applicant and the intervening creditor. This detail is, of course, relevant to the overall solvency of the respondent company. Having considered the matter fully, I am of the view that the respondent should be granted a short postponement to investigate and, if need be. deal with the replying papers. The draft order prepared by Mr Fitzgerald in this regard, in my view, adequately addresses the issue of prejudiced raised by Mr Pincus. The ongoing deterioration of the farm, its buildings and its equipment, can at least to an extent be staunched by the undertaking

by Mr Dawood to cover those costs, so too the plight of persons resident on the farm. The matter stood down after argument this morning to enable me to consider my judgment and during which time Mr Fitzgerald handed me an initial draft of his proposed order. When the matter recommenced at 14:30 this afternoon, I was informed by Mr Pincus from the bar that it was common cause that Mr Dawood had withdrawn an amount of R85 000 from the company's bank account yesterday, that is 25 May 2010, to repay himself for legal expenses allegedly disbursed on behalf of the company. This conduct was said to be surreptitious and the applicant and the intervening creditor only came upon it fortuitously. This transaction may in due course found to be a voidable preference in terms of section 29 of the Insolvency Act, but that conundrum can only be resolved when one knows whether the company's liabilities exceed it assets. At present that is still contested territory as I have demonstrated above. I note Mr Pincus' concern that this step may reflect adversely on Mr Dawood's undertaking, but at this stage I do not have enough about the

circumstances under which he acted. He may have been following advice received from others that he was entitled to do so. I have

accordingly made some adjustments to the draft order handed up by Mr Fitzgerald at lunch time, in an attempt to address the concerns of the applicant and the intervening creditor. I trust, however, that it

will not be necessary to follow the route proposed therein. The tender then otherwise, in my view, addresses the considerations of prejudice raised by the learned judge of appeal in the Mvburgh Transport case at paragraphs 6 and 7 referred to above. Finally I turn to the issue of costs. As an indication of my displeasure with the manner in which the respondent's attorneys have dealt with this matter in relation to the application for a postponement, I am of the view that they should be precluded from recovering any fees in relation to the application for a postponement. I do this because it is not fair that the client should be mulcted in costs due to the attorney's dilatoriness. The following order is then made: 1. The application for winding up of the applicant herein is postponed for a hearing before me, in the 4,h Division, on the semi-urgent roll on 12 August 2010. 2. The applicant is given leave to file a further set of affidavits in response to the new matter raised in the replying affidavits, filed of record on behalf of first and second respondents herein. 3. Any such further affidavits to be filed by applicant, must be filed before 30 June 2010, failing which first and second respondents are authorised to enrol the winding up application for hearing before me in the 3rd Division, on an unopposed basis, on Tuesday 6 July 2010. (I pause to mention that I shall be doing recess duty during that week). Mr. Rafiq Dawood is directed to make payment forthwith of all necessary and reasonable expenses relating to the maintenance, upkeep and farming activities on the immovable property owned by the applicant, pending the hearing hereof on 12 August 2010,

alternatively such earlier date as a provisional winding up order may be granted.

In the event of non-payment of, or a dispute in relation to any of the costs referred to in paragraph 4 above, the first and second respondents are authorised to approach this Court forthwith, on reasonable notice to the applicant, for appropriate relief.

The costs of this postponement, including the costs of two counsel, are to be paid by the applicant.

The applicant's attorneys of record are precluded from recovering any fees from their client in relation to the application to postpone. GAMBLE, J

JUDGMENT

GAMBLE, J

This is an application for a postponement in an application for provisional winding up order of the respondent company. I refer to the parties as they are in the main application. The matter commenced urgently in December 2009 and when it came before Court,

it was postponed until today for hearing, with an agreed timetable for the filing of answering and replying papers. Those papers were, to all intents and purposes, filed timeously.

In the answering papers the respondent launched a blistering attack on the integrity of the directors of the applicant company and the intervening creditor. Allegations tantamount to fraud, theft and deceit were readily made. On 7 April 2010 the applicant and the intervening creditor filed a voluminous reply, collectively in excess of 1 000 pages, inclusive of annexures. Nothing was heard from the respondent company's attorneys until 28 April 2010 when an inquiry was made regarding the index which was required so that the pages could be paginated for consideration by counsel. This was about four weeks ago. The index was filed the following day.

There was a further hiatus until 11 May 2010, when the applicant and the intervening parties filed their heads of argument. On that very day a lengthy letter was sent by the company's attorneys, indicating that there was extensive new matter in the reply and that the respondent needed time to deal with it. A postponement was sought. I accept counsel's say-so that the letter was not written in response to the persuasive arguments made in the heads of argument, but independently thereof. The applicant and the intervening creditor indicating in no uncertain terms that such an application would be opposed. The application only saw the light of day ten days later on 21 May 2010. Answering papers and a reply were filed and that interlocutory application was heard first today.

When the matter was called this morning, I enquired from Mr Fitzgerald SC, who appears for the company with Ms Watson, why no heads of argument had been filed in terms of Practice Direction Number 50 of this court. I was told that if no postponement was granted, counsel for the respondent would seek leave to be excused and that the matter would have to proceed on an unopposed basis. Clearly explicit in this submission is an acceptance by counsel for the company that a prima facie case is made out on the papers, as they now stand, for a provisional winding up order.

Mr Fitzgerald motivated the postponement primarily for the purposes of dealing with the new matter, which it is common cause includes documentation, including expert reports generated after the filing of respondent's answer. At the same time the deponent to the respondent's affidavit, Mr Dawood, says that he may have been misled by the erstwhile director of the respondent, Mr Salie, and that he wishes to clarify matters in that regard. If he has been misled, says Mr Dawood, then the respondent would probably concede that a provisional winding up order is unavoidable.

The principles in respect of an application for a postponement are dealt with by Mohammed. AJA, as he then was, in the Mvburqh Transport case 1991(3) SA 310 (NSC) at 314F. The principles are as follows:

1. The trial judge has a discretion as to whether an application for a postponement should be granted or refused.

2. That discretion must be exercised judicially, it should not be exercised capriciously or upon any wrong principle, but for substantial reasons.

3. A Court should be slow to refuse a postponement where the true reason for a party's non-preparedness has been fully explained, where his unreadiness to proceed is not due to delaying tactics and where justice demands that he should have further time for the purposes of presenting his case.

4. An application for a postponement must be made timeously, as soon as the circumstances which might justify just an application become known to the applicant Where, however, fundamental fairness and justice justifies a postponement, a court may, in an appropriate

case, allow such an application for postponement, even if the applicant was not so timeously made That, of course, is applicable

in casu

5. An application for a postponement must always be bona fide and not used simply as a tactical manoeuvre for the purposes of obtaining an advantage to which the applicant is not legitimately

entitled.

6. Considerations of prejudice will ordinarily constitute the dominant component of the total structure in terms of which the discretion of a court will be exercised. What the Court has primarily to consider is whether any prejudice caused by the postponement to the adversary of the applicant for a postponement, can be fairly compensated by an appropriate order of costs, or any other ancillary mechanisms

7. The Court should weight the prejudice which will be caused to the respondent in such an application, if the postponement is granted against the prejudice, which will be cause to the applicant if it is not.

8. Finally, where the applicant for a postponement has not made his application timeously, or is otherwise to blame with respect to the procedure which he followed, but justice never justifies a postponement in the particular circumstances of a case, the Court can make an appropriate costs order against that party.

In the present case, the application was not brought timeously, allegedly due to the peregrinations of both the respondent's senior

counsel and its lead attorney, himself a senior practitioner. This, of course, is no fault of the client but I should add, however, in their favour, that no one could have reasonably anticipated in December 2009, that an affidavit in excess of 1 000 pages would be filed in reply. The conduct of the respondent's director, has clearly not been the cause of the delay and an order, therefore,

should not be to the prejudice of the respondent. Nevertheless the delay in bringing the application to postpone is unacceptable and the conduct of the company's attorneys in this regard will be addressed more fully in the costs order that I intend making.

From the bar, Mr Fitzgerald amplified the tender made by Mr Dawood in paragraph 37 of the affidavit in reply in this interlocutory application which appears

at page 1 782 of the record. The extent of that tender is incorporated in a draft order which Mr Fitzgerald handed to me shortly before lunch.

Mr Pincus SC, who appeared together with Messrs Goldberg and Moller for the applicant and intervening creditor, were most critical of the respondent's legal representatives' cavalier conduct in this matter. I agree with that criticism to the extent that it relates to the behaviour of the attorneys. The involvement in respect of counsel was explained by Mr Fitzgerald from the bar. The attorneys' conduct is exaggerated, in my view, by the brazen manner in which it was put before the Court with little by way of an apology for the inconvenience to the other parties or to the Court.

We have spent the last couple of days running around, reading applications for a postponement, when the time could have been used

otherwise more productively. The fact that remains, however, is that there is a plethora of new matter in the reply and it may be that the respondent needs to deal therewith. To determine the relevance thereof, is a difficult task at this stage, because it would involve a consideration of the merits, but I need to cite only one example. The company relied on a valuation of its farming land at a figure of around R45 million, (if I am not mistaken) and filed a summary by a Mr Blewett in this regard with its answering papers.

The applicant and the intervening creditor say that the value is only about a third of that and they rely on two valuations obtained by them after the filing of the answering papers. It appears that Mr Blewett passed away very recently and the respondent is unable, and at short notice, to verify the correctness of the new valuations advanced by the applicant and the intervening creditor. This detail is, of course, relevant to the overall solvency of the respondent company.

Having considered the matter fully, I am of the view that the respondent should be granted a short postponement to investigate and, if need be. deal with the replying papers. The draft order prepared by Mr Fitzgerald in this regard, in my view, adequately addresses the issue of prejudiced raised by Mr Pincus. The ongoing deterioration of the farm, its buildings and its equipment, can at least to an extent be staunched by the undertaking

by Mr Dawood to cover those costs, so too the plight of persons resident on the farm.

The matter stood down after argument this morning to enable me to consider my judgment and during which time Mr Fitzgerald handed me an initial draft of his proposed order. When the matter recommenced at 14:30 this afternoon, I was informed by Mr Pincus from the bar that it was common cause that Mr Dawood had withdrawn an amount of R85 000 from the company's bank account yesterday, that is 25 May 2010, to repay himself for legal expenses allegedly disbursed on behalf of the company. This conduct was said to be surreptitious and the applicant and the intervening creditor only came upon it fortuitously. This transaction may in due course found to be a voidable preference in terms of section 29 of the Insolvency Act, but that conundrum can only be resolved when one knows whether the company's liabilities exceed it assets. At present that is still contested territory as I have demonstrated above.

I note Mr Pincus' concern that this step may reflect adversely on Mr Dawood's undertaking, but at this stage I do not have enough about the

circumstances under which he acted. He may have been following advice received from others that he was entitled to do so. I have

accordingly made some adjustments to the draft order handed up by Mr Fitzgerald at lunch time, in an attempt to address the concerns of the applicant and the intervening creditor. I trust, however, that it

will not be necessary to follow the route proposed therein. The tender then otherwise, in my view, addresses the considerations of prejudice raised by the learned judge of appeal in the Mvburgh Transport case at paragraphs 6 and 7 referred to above.

Finally I turn to the issue of costs. As an indication of my displeasure with the manner in which the respondent's attorneys have dealt with this matter in relation to the application for a postponement, I am of the view that they should be precluded from recovering any fees in relation to the application for a postponement. I do this because it is not fair that the client should be mulcted in costs due to the attorney's dilatoriness. The following order is then made:

1. The application for winding up of the applicant herein is postponed for a hearing before me, in the 4,h Division, on the semi-urgent roll on 12 August 2010.

2. The applicant is given leave to file a further set of affidavits in response to the new matter raised in the replying affidavits, filed of record on behalf of first and second respondents herein.

3. Any such further affidavits to be filed by applicant, must be filed before 30 June 2010, failing which first and second respondents are authorised to enrol the winding up application for hearing before me in the 3rd Division, on an unopposed basis, on Tuesday 6 July 2010. (I pause to mention that I shall be doing recess duty during that week).

Mr. Rafiq Dawood is directed to make payment forthwith of all necessary and reasonable expenses relating to the maintenance, upkeep and farming activities on the immovable property owned by the applicant, pending the hearing hereof on 12 August 2010,

alternatively such earlier date as a provisional winding up order may be granted.

In the event of non-payment of, or a dispute in relation to any of the costs referred to in paragraph 4 above, the first and second respondents are authorised to approach this Court forthwith, on reasonable notice to the applicant, for appropriate relief.

The costs of this postponement, including the costs of two counsel, are to be paid by the applicant.

The applicant's attorneys of record are precluded from recovering any fees from their client in relation to the application to postpone.