Cross-med Health Centre (Pty) Ltd and Others v Crossmed Mthatha Private Hospital (Pty) Ltd and Another (357/2018) [2018] ZAECGHC 24 (29 March 2018)

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION, GRAHAMSTOWN

CASE NO: 357/2018

DATE HEARD: 22/03/2018

DATE DELIVERED: 29/03/2018

In the matter between

CROSS-MED HEALTH CENTRE (PTY) LTD

1ST APPLICANT

(In business rescue)

CASSIM: ZAHEER N.O.

2ND APPLICANT

NDYAMARA: AVIWE N.O.

3RD APPLICANT

and

CROSSMED MTHATHA PRIVATE HOSPITAL (PTY) LTD

1ST RESPONDENT

YAKO: CHWAYITA ONGAMA YONGAMA

2ND RESPONDENT

JUDGMENT

ROBERSON J:-

[1] The first applicant is a company under business rescue. It trades as a private hospital under the trading name Mthatha Private Hospital. The second and third applicants are the appointed business rescue practitioners. The second respondent, a medical doctor, is a director of the first applicant and a director and sole shareholder of the first respondent. In this judgment I shall refer to the first applicant as Cross-Med Health, to the second and third applicants individually as Cassim and Ndyamara and jointly as the BRPs, to the first respondent as Cross-Med Mthatha, and to the second respondent as Yako.

[2] The applicants launched this application on an urgent basis, seeking the following order:

“1. Permitting this application to be heard as one of urgency in accordance with the provisions of Rule 6 (12) and condoning the Applicants’ failure to comply strictly with the provisions of Rule 6 (5), including the service of this application by the Sheriff of this Honourable Court;

2. Interdicting and restraining the First and Second Respondents from:

2.1 Conducting any form of medical practice, rendering medical services or any other form of business from the premises of the First Applicant situated at 59 Nelson Mandela Drive, Mthatha, Eastern Cape (“the premises”);

2.2 Submitting accounts to any medical aid societies for the provision of medical services to patients treated at the premises;

2.3 Operating any medical practice whatsoever from the premises;

2.4 Removing any documents, accounts, statements or any other type of business record from the premises.

3. Interdicting and restraining the Second Respondent from entering the premises of the First Applicant.

4. Removing the Second Respondent as a director of the First Applicant.

5. Ordering the Second Respondent to render a full and proper accounting supported by vouchers within thirty days of the granting of this order in respect of all income generated by the First Applicant and which may have been invoiced in the name of the First and/or Second Respondents and submitted to medical aid societies for payment for the period 12th September 2017 to the date of the granting of this order.

6. Ordering the First and Second Respondents, jointly and severally, the one paying, the other to be absolved, to pay the costs of this application on the attorney and client scale.”

Background

[3] A creditor and shareholder of Cross-Med Health, the Independent Development Corporation (the IDC) applied for its liquidation.

Yako, together with a company, Osteen Health Group Consortium (Pty) Ltd (Osteen), brought a cross-application for Cross-Med Health to be placed under business rescue. Yako applied in his capacity as an employee and a creditor of Cross-Med Health, and Osteen applied in its capacity as a shareholder and a creditor of Cross-Med Health.

[4] In his founding affidavit in the business rescue application, Yako stated, inter alia, that Cross-Med Health had cash flow problems and was financially distressed. It had been generating revenue but it was insufficient to service its obligations. It had however been able to pay its employees and creditors and that thus far (August

2017) Cross-Med Health had invoiced over R20 million. He mentioned that Cross-Med Health’s gross profit had increased

significantly from year to year and that such profits would increase. Yako stated that Cross-Med Health faced the challenge

of collecting from its debtors and because he was left to run the hospital and practise as a doctor in the hospital, he found it

difficult to devise a mechanism to ensure timeous payment from the medical aid companies. Such a mechanism was an invaluable asset which the business rescue practitioner would contribute. Further motivation for business rescue was that Cross-Med Health provided an essential service to the Mthatha community and its services were in demand owing to the shortage of private hospitals in the area. There was a strong business case, so Yako stated, for Cross-Med’s business operations to be resuscitated especially if a skilled and experienced business rescue practitioner was appointed.

[5] In a supplementary affidavit in the business rescue application, Yako annexed Cross-Med Health’s financial statements for the year ending 28 February 2017 which he said reflected assets of R24 242 380.00 as opposed to liabilities of R1 109 956.00.

He also referred to medical aid debtors in the sum of R9 814 015.00 which he said was difficult for him to collect, because he had to attend to the day to day running of Cross-Med Health and was the only medical doctor practising at Cross-Med Health.

[6] The business rescue application was granted by the Mthatha High Court on 12 September 2017 and Cassim and Ndyamara were appointed as the business rescue practitioners.

[7] On 22 January 2018 the BRPs applied in the Pretoria High Court for an order freezing the Nedbank bank account of Cross-Med Mthatha, pending the outcome of an action to be instituted. The order was granted. Yako had, without the knowledge of the BRPs, notified various medical aid societies that the bank account details of Cross-Med Health had changed to the account of Cross-Med Mthatha. Thereafter payments by medical aid societies due to Cross-Med Health were instead paid to the account of Cross-Med Mthatha. During the period July 2017 to 23 January 2018, medical aid societies paid the sum of R5 942 184.12 to Cross-Med Mthatha’s account. Of that sum, R3 767 643.00 was paid to Cross-Med Properties, a company controlled by Yako, R240 000.00 was paid to Yako, and R118 534.97 was paid to Yako’s attorneys. The balance as at 23 January 2018 in Cross-Med Mthatha’s bank account was R342 734.03.

[8] On 30 January 2018, on a Cross-Med Mthatha letterhead, Yako wrote to several medical aid societies accusing the BRPs of fraudulently

attempting to change the banking details of his practice, which he referred to as Cross-Med Mthatha Private Hospital (Pty) Ltd. He further accused the BRPs of attempting to use his practice for their “ill gains” despite Cross-Med Mthatha having terminated agreements with Cross-Med Health. Yako warned the medical aid societies that if they did not furnish confirmation that the bank details would not be changed, he would approach the High Court for urgent relief and seek punitive costs orders against them. This letter was emailed to the medical aid societies by Mr Gregory Thutha, the hospital’s operations manager, who is also head of revenue and billing.

[9] On 6 February 2018 the BRPs wrote to Yako pointing out to him the provisions of various sections of the Companies Act 71 of 2008 (the Act) and reminding him that as a director he was subject to the authority of the BRPs. They notified him that they had discovered that he had changed the bank details for payments from medical aid societies without their authority. They requested an undertaking that he would not attend the hospital premises or interfere with its operations or communicate with medical aid societies, failing which they would apply to court for urgent relief. They further informed him as follows:

“You, and Crossmed Mthatha Private Hospital (Pty) Ltd, are herewith formally informed of the business rescue practitioners’ decision to suspend, with the express exclusion of any agreement relating to the Company’s use of a practice number or hospital licence, any and all obligations of the company that arises under any agreement which the company has concluded with you, Crossmed Mthatha

Private Hospital (Pty) Ltd, or any entity which you represented in the conclusion of an agreement with the company. You are, in addition, herewith expressly informed that you are not to perform/exercise any management functions within the company without

the express authority of the business rescue practitioners.”

[10] Yako responded by letter the next day. He denied that he acted unlawfully in changing the bank details or that he required the BRPs’ permission. He said that the BRPs were ignorant of the fact that he ran his own hospital practice and private practice within the hospital premises in terms of an agreement with Cross-Med Health and that Cross-Med Health previously enjoyed the use of his licence and practice number. The business of the hospital practice, so he stated, belonged to him by virtue of his practice number and licence. He accused the BRPs of failing to pay or guarantee payment for the use of his licence. He further accused them of unlawfully and fraudulently changing the bank details he had provided to medical aid societies, and demanded an undertaking from them that they would reverse the changes, failing which he would urgently approach the High Court and seek a personal costs order against them.

[11] On 8 February 2018 the BRPs wrote to Yako informing him, inter alia, that he was in breach of his fiduciary duties, that his conduct in diverting funds to Cross-Med Mthatha was tantamount to theft, and that urgent proceedings would be launched.

[12] Also on 8 February 2018 Yako provided Cassim with a written agreement between Cross-Med Health and Yako in terms of which Cross-Med Health would pay Yako R1.44 million a year for the use of Yako’s practice number to operate the hospital.

The application

[13] The application was enrolled for hearing on 27 February 2018. On that day it was postponed to 22 March 2018, and pending the determination of the application, Cross-Med Mthatha and Yako were interdicted from entering the premises of the hospital, interfering

with its management, or contacting members of staff at the hospital.

[14] Cassim deposed to the founding affidavit. Besides setting out some of the background above, he said he was not aware that Yako operated his own private practice from the premises of Cross-Med Health and that Yako had not disclosed this in the business rescue application. When Cassim visited the hospital premises on 7 February 2018 he requested Yako to explain what had happened to Cross-Med Health’s income since October 2017. Yako said that it was “floating around” and gave no further

explanation. According to Cassim up until 7 February 2018 Yako created the impression that Cross-Med Health’s income had merely dwindled. When Cassim confronted Yako about the drop in turnover of Cross-Med Health, Yako said it was usual for the turnover to drop during November, December and January and that the medical aid societies’ payments slackened during this period.

[15] On the same day Cassim requested Cross-Med Health’s HR manager, Ms N Mpelane, to furnish him with copies of certain employment

agreements with Cross-Med Health. She agreed to obtain them but later informed Cassim’s candidate attorney that Yako had instructed her not to provide the employment agreements. She was suspended pending disciplinary proceedings. Her response to the charge sheet was that she was not employed by Cross-Med Health but by Cross-Med Mthatha, despite having furnished Cassim with a list of employees of Cross-Med Health on which her name appeared. Another employee, the general manager, has also been suspended pending the outcome of disciplinary proceedings, for failing to adhere to lawful instructions.

[16] On 8 February 2018 Cassim appointed a health care management company, Halcyon Management Services (HMS) to manage Cross-Med Health’s business. On 12 February 2018 Mr Keith Bonsall of HMS informed Cassim that staff members were reluctant to co-operate with him and that they had informed him that they were instructed by Yako not to co-operate with HMS.

[17] Cassim was of the view that Yako was able to operate his private practice from other premises and that there were such premises

available. Cassim maintained that the only effective manner in which the BRPs could resuscitate the business of Cross-Med Health was an order interdicting Yako from interfering with them. Cassim also expressed the view that Yako should be removed as a director of Cross-Med Health because he had committed theft (the diversion of income), had not co-operated with the BRPs and had breached his fiduciary duties towards Cross-Med Health.

[18] Cassim deposed to a supplementary affidavit after the respondents had filed their notice to oppose the application. It concerned events of 21 February 2018. Mr Manesh Nagessur, an employee of Delta 9, the company which provides the billing system for Cross-Med Health, was contacted by Thutha with regard to a new programme for the hospital. According to Nagessur, in an email to Mr Stephen Baker of HMS, Thutha told Nagessur that:

“He wanted a quote on setting up a new company on a fresh database. I was told that when the new company is opened, all admissions will stop. It will only be used for credit control purposes.”

[19] Nagessur referred this request to Baker who in turn reported it to Cassim. According to Baker, Thutha denied making the request when confronted, but later agreed that he had done so on Yako’s instructions. Baker requested Thutha to surrender his laptop at which Thutha left the premises. Baker stored the laptop in an office but the next day it was missing. In addition to the laptop, some of Cross-Med Health’s employment contracts went missing.

[20] In his answering affidavit, Yako described his dream to provide an affordable private hospital in Mthatha for the purpose of providing quality healthcare to residents of Mthatha who otherwise could not afford it and who would otherwise have to resort to public healthcare facilities. He registered Cross-Med Health and Cross-Med Mthatha. It was envisaged that Cross-Med Health would own the property on which the hospital was built, the building itself, and the equipment used in the hospital. This entity would then be leased to Cross-Med Mthatha, as well as to private doctors and other related services such as pathology and radiology facilities, who would rent space in the hospital. The intention that Cross-Med Mthatha would lease from Cross-Med Health was never implemented and Cross-Med Health paid all the running expenses of the hospital, paid employees (who were according to Yako employed by Cross-Med Mthatha despite what he said in his founding affidavit in the business rescue application) and invoiced the medical aid societies. According to Yako collection of this income was in lieu of rent.

[21] Funding of R37 million was obtained from the IDC and building of the hospital commenced. Yako applied for a licence on behalf of Cross-Med Mthatha, which was issued. Yako had his own private practice licence and from the time the hospital opened he operated his private practice from the premises in terms of an agreement with Cross-Med Health. This practice was separate from the business of the hospital. Yako also operates another private practice from the hospital premises, in partnership with a Dr Ndabeni. Yako said he had never made a secret of his private practice which occupies 125m² of the hospital space. He alluded to other groups operating private hospitals which make space available for doctors to use in return for referrals to the hospital. Yako further explained that his statement in his letter of 7 February 2018 to the BRPs that he ran a hospital practice was inaccurate. He intended to say that he ran his own private medical practice.

[22] The hospital opened in September 2014 and from that time he and Ndabeni referred all of their private patients who required to be hospitalised to the hospital. These referrals constitute approximately 90% of the patients at the hospital. Yako said that if his private practice did not operate from the hospital the referrals would cease. He did not dispute that he could operate his practice from alternative premises but if he did so the consequences for the hospital and Cross-Med Health would be disastrous.

[23] Yako said that as a result of the purchase of poor equipment the hospital had been unable to treat patients adequately and had not attracted sufficient patients. Support from other doctors had not been forthcoming. As a result Cross-Med Health was unable to meet the loan repayments to the IDC and because of this, as well as a rift between Yako and the IDC, the IDC had called up the loan. The liquidation and business rescue applications followed.

[24] Yako expressed the view that the BRPs were incapable of running the hospital and rendering it profitable. He had had to run the hospital single-handedly. He proposed that he should take over the running of the hospital utilising Cross-Med Mthatha and that Cross-Med Mthatha would pay a market related rental for the premises and equipment.

[25] He was critical of the BRPs in that they seldom came to Mthatha, and HMS’s representative, Baker, only comes to Mthatha a few days in a week. Yako specifically complained that he had informed the BRPs that the hospital’s uninterrupted power supply (UPS) had burned out and needed to be replaced, but the BRPs did not deal with the problem. Yako paid for a UPS system from Cross-Med Mthatha’s account. A further specific complaint was the BRPs’ refusal to pay the hospital’s electricity account. The electricity supply was terminated and Yako paid for a generator to run until the supply was restored. He paid the electricity account in full.

[26] Yako admitted that he had changed the account details for medical aid payments to the Nedbank account but said this was necessary in order to keep the hospital functioning. The funds which were diverted to the Nedbank account were used to defray expenses incurred in the running of the hospital, including salaries of employees, the purchase of medicines and payment of municipal accounts. With regard to the monies paid to Cross-Med Properties Yako said that he intended to invest them on behalf of Cross-Med Health but gave no further details. He tendered to transfer the funds back to Cross-Med Health or Cross-Med Mthatha at the election of the BRPs. He denied that he had acted unlawfully and said that his actions had benefited Cross-Med Health. He denied telling Cassim that income generated by Cross-Med Health was “floating around” and said that if Cassim was really intent on getting the information Cassim would have pressed the point or undertaken further investigation.

[27] Yako also tendered not to involve himself in the affairs of Cross-Med Health provided that the BRPs are actively involved in the running of the hospital. However he could not put patients at risk and was obliged to act in the patients’ interests. He tendered to co-operate fully with the BRPs and to assist them in rescuing Cross-Med Health. He denied having instructed employees not to co-operate with the BRPs and said that on the contrary the employees had complained at the treatment they received from security officials employed by the BRPs.

[28] In response to Cassim’s supplementary affidavit, Yako denied knowledge of what allegedly took place between Thutha, Nagessur and Baker concerning the billing system. An affidavit from Thutha was filed. His version of his conversation with Nagessur was to the effect that a new billing system would be purchased in order to allow for a greater number of users than the existing system allowed. Such new system would be purchased by Cross-Med Health and not by a new company. A quotation was requested on this understanding. Thutha denied any underhand or sinister conduct. He also denied any involvement in the disappearance of his laptop.

[29] In reply Cassim referred to and annexed a transcript of the telephone conversation which took place between Thutha and Nagessur on 21 February 2018. I reproduce certain portions:

“Thutha: The situation’s like this ……… I think the hospital have got, we’ve got two divisions now. And seemingly the new guys, they want to change everything and now Dr Yako is happy with Delta 9 so far and he’s got another company. Then he said okay, for these guys, if for now she (sic) can leave them with their old Delta 9, okay? So he wants to create a new data base on the Delta 9. Then the employees, the other employees maybe she (sic) will cancel them bit by bit, so that, you know, that I’ve got these employees of mine.

Nagessur: We can create a new data base but we’ll have to start the whole process again. So I’ll have to send you an application form.

Thutha: Can you do that for me? Because I think he is willing to go that extra mile.

Nagessur: So what’s going to happen to the current application? Will that be closed?

Thutha: Not now. It will run concurrently.

Nagessur: Concurrently? So how would you admit patients and all of that then on two different systems?

Thutha: But so, which means patients will be admitted on the new database.

Nagessur: And the old database would be no admissions at all?

Thutha: Yes. So which means we will be leaving as it is. Once the other one is active, we will continue with the other, with the new one, okay?

Nagessur: Just until the credit control is finished and completed on it?

Thutha: Yes.

Nagessur: What date must it happen from? The new database?

Thutha: Probably – but if I can get a quotation and discuss it with him, then they’ll give you a date. I think he might even say even next week it’s fine.

Nagessur: So whose company would this be opened under?

Thutha: It should, because now there’s this confusion between Cross-Med Health Centre and Crossmed Mthatha Private. Because the one he wants, the one that he’s got that documentation, it’s Cross-Med Mthatha Private Hospital.

Nagessur: Is the current one Cross-Med Health Centre?

Nagessur: And he’s the director of this new company?

Nagessur: I’ll send you the application form and I’ll get you a quote, because you’re going to be running two concurrent systems. And then you’re going to eventually phase one out. Well, basically the moment that one goes live, let’s assume it’s on the 1st, then the other one will basically stop doing admissions. You’ll just do credit controls. That means limited access.

Thutha: Yes."

[30] Cassim also responded to the complaints that the BRPs were not performing their duties. It transpired that Yako had obtained a quotation for a new UPS system in July 2017 but only informed the BRPs’ agent about the problem in September 2017. The quotation needed to be verified before payment could be made. With regard to the electricity account, Yako failed to mention in his answering affidavit that he had made arrangements with the Municipality to pay the arrears in instalments. The BRPs attempted to honour that arrangement but were not in a financial position to make payment. They could not pay creditors because, according to Cassim, Yako had stolen Cross-Med Health’s income. Cassim also annexed proof that the employees’

salaries for the period September 2017 to February 2018 had been paid by Cross-Med Health. This meant, according to Cassim, that Yako had lied under oath when he said he had paid the employees’ salaries.

[31] Cassim stated that since the interdict of 27 February 2018 was granted Yako has not attended the hospital premises and it has

operated smoothly. Other doctors have been employed. The BRPs have sought an extension of the period within which to submit a business rescue plan and the creditors have granted an extension. Cassim expects that the BRPs will shortly be in a position to draft a business rescue plan.

Discussion

[32] A consideration and assessment of Yako’s conduct is required. If one starts with his application for business rescue, which he brought partly in his capacity as an employee of Cross-Med Health, what emerges there is an expressed concern and hope that Cross-Med Health will survive its current difficulties. He referred to the demand for its services and the essential service it provided to the Mthatha community. One of the motivations for business rescue was that a business rescue practitioner could assist in recovering debts from the medical aid societies because he did not have time to do so. No mention was made of Cross-Med Mthatha or that he owned the hospital practice. The founding affidavit was deposed to in August 2017. Yet there is evidence that he diverted funds to Cross-Med Mthatha from as early as July 2017 and continued to do so until discovered in January 2018. The sentiments expressed in the business rescue application were therefore false and misleading. He not only failed to disclose to the BRPs what he had done, he also gave Cassim a false explanation for the decline in income from the medical aid societies. This false explanation was clearly to put Cassim off the scent.

[33] After the freezing of the Nedbank account, he wrote to medical aid societies (the letter of 30 January 2018) with the intention of achieving a result directly in contradiction to the purpose of the freezing order. In other words he was still trying to divert income due to Cross-Med Health to Cross-Med Mthatha, again without the knowledge of the BRPs. By this time he would have been aware of the freezing order and that the BRPs had brought that application. He accused the BRPs of fraudulent conduct when he knew that they had brought the application to freeze the Nedbank account. In his letter to the medical aid societies he did not disclose the freezing order. In my view his letter was a fraudulent attempt to continue to divert income. He even threatened the medical aid societies with court action and a punitive costs order, when he knew that he would have had no case against them.

[34] His letter of 7 February 2018 in response to the BRPs letter of 6 February 2018 reflected a defiantly unco-operative and threatening

stance. He claimed to own and run his own hospital practice from the hospital premises, but said in his answering affidavit that this was a mistake and it was only his private practice which operated from the premises. It is notable that in his letter of 30 January 2018 to the medical aid societies he claimed to own a hospital practice and in his letter of 7 February 2018 he referred on three occasions to owning or running a hospital practice. These claims were clearly an attempt to misrepresent the true situation and his later retraction was unpersuasive.

[35] Although Yako denied telling Cassim that the income from the medical aid societies was “floating around”, his further response to this allegation was telling. He tried to shift the blame to Cassim, whereas it was quite open to him to tell Cassim where the money was. He knew where the money was. He did not satisfactorily explain why Cross-Med Mthatha had paid over R3 million to Cross-Med properties. One may ask why would this money be paid to a property company, when according to Yako in the business rescue application he was very keen for the assistance of a business rescue practitioner to collect this income for the good of Cross-Med Health. To date the money has not been repaid.

[36] On 21 February 2018, through the agency of Thutha, Yako clearly made an attempt to usurp the business of Cross-Med Health for Cross-Med Mthatha. There is no other interpretation to be put on the telephone call between Thutha and Nagessur. The timing of this conversation is important with regard to Yako’s now professed bona fides and offer to co-operate. It was after the application had been served on him (the notice of opposition was filed on 15 February

2018) and two days before he deposed to his answering affidavit.

[37] Even in his answering affidavit Yako continued to perpetrate untruths. He said that the diverted income had been used, inter alia, to pay employees, whereas they had been paid by Cross-Med Health. He maintained that the employees were employed by Cross-Med Mthatha whereas in his business rescue application he referred to employees of Cross-Med Health. His criticism of the BRPs in relation to the UPS system and non-payment of the electricity account was misleading, viewed in the light of the BRP’s explanations of these occurrences. It is notable that in his letter of 7 February 2018 to the BRPs he made no mention of their poor performance and lack of presence at the hospital. By this time the problems with the UPS and payment of the electricity account had occurred. He has also not brought an application for the removal of the BRPs on the grounds that they have failed to perform their duties or to exercise the proper degree of care in the performance of their functions.

[38] My conclusion concerning Yako’s conduct is that he behaved dishonestly towards Cross-Med Health and the BRPs for his and Cross-Med Mthatha’s gain. He breached his fiduciary duties to Cross-Med Health and deliberately obstructed the BRPs in the performance of their functions. He operated persistently behind the scenes, influencing at least Thutha and Mpelane to aid and abet him. While the BRPs were trying to rescue Cross-Med Health, he was trying to achieve the opposite. It is fortunate that he was found out, otherwise in my view he would have continued with this conduct until Cross-Med Health was an empty shell.

[39] My further conclusion is that Yako’s sudden professed turn around, in the face of a pattern of dishonest and clandestine conduct extending over many months, is not tenable. It was submitted on his behalf that since taking legal advice he has seen the error of his ways, but I do not accept that he has and that he will not attempt further sabotage. As said earlier, he tried to take Cross-Med Health’s business for the benefit of Cross-Med Mthatha after this application had been served on him and he had notified his intention to oppose the application, via his attorneys. By this time he surely would have had legal advice.

Urgency

[40] Insofar as urgency remained in dispute, this matter was clearly urgent. Ongoing attempts were being made to disrupt the

operations of the BRPs to the detriment of Cross-Med Health. If relief was not granted on an urgent basis, the applicants would not have obtained substantial redress in due course.

Have the applicants met the requirements for an interdict?

[41] I am satisfied that they have demonstrated a clear right. The BRPs have substantial powers and duties in terms of the Act, including those set out in s 140, and the power to suspend the obligations of the company under business rescue arising from

agreements to which the company was a party at the commencement of the business rescue proceedings (s 136 (2) (a) (i) of the Act).

They have the right to demand compliance by a director with s 142 of the Act, which is the duty to co-operate with and assist the BRPs, and to deliver books and records and a statement of affairs of the company under business rescue. They have the right not to be obstructed in the exercise of their duties. Should they be obstructed in the proper performance of their functions, they have the right to relief to allow them to perform their functions and prevent obstruction. In this case Yako has persistently and dishonestly obstructed the BRPs in the performance of their functions, to the detriment of Cross-Med Health. His involvement and presence in the hospital is an integral part of this obstruction in that he has access to employees who will carry out his instructions in obstructing the BRPs and limiting the prospect of the rescue of Cross-Med Health.

[43] I am also satisfied that the applicants have demonstrated an apprehension of irreparable harm. As was submitted on behalf of the applicants, harm has already occurred. In the light of my view of Yako’s professed change of attitude, the applicants

have every reason to apprehend irreparable harm.

[44] Lastly I am satisfied that there is no other remedy available to the applicants other than interdictory relief to prevent the respondents from continuing along their obstructive and underhand path.

The relief claimed (see paragraph [2] above)

[45] Prayer 2.1

In my view this relief is warranted, in the light of Yako’s attempts to take away the business of Cross-Med Health for the

benefit of Cross-Med Mthatha. It is Cross-Med Health which conducts the business of the hospital and the BRPs have full management control of Cross-Med Health (s 140 (1) (a) of the Act).

[46] Prayer 2.2

This relief goes hand in hand with the relief claimed in prayer 2.1. It is further supported by Yako’s attempt to purchase a new billing system for Cross-Med Mthatha.

[47] Prayer 2.3

This is covered by prayer 2.1. Insofar as Yako’s private practice is concerned, submissions were made on behalf of the

applicants to the effect that he was somewhat vague about the precise arrangement with Cross-Med Health. However if there was an agreement between Yako and Cross-Med Health for him to occupy space at the hospital and conduct a private practice, Cross-Med Health’s obligations in that regard have been suspended by the BRPs. In addition, Yako agreed it was possible for him to practise elsewhere, but he was concerned about the effect on Cross-Med Health because he is responsible for 90% of referrals. That is certainly a factor requiring serious consideration, but in my view the gravity of Yako’s conduct overrides this factor. Furthermore Cassim stated in his replying affidavit that the hospital has been running smoothly in Yako’s absence.

[48] Prayer 2.4

It was submitted on behalf of the respondents that there was no evidence that documents had been removed from the premises. However in the light of the evidence of the missing laptop this prayer is justified. Thutha was untruthful about the reason for his approach to Nagessur and his denial of involvement in the removal of the laptop following confrontation by Baker can be rejected as untenable.

[49] Prayer 3

It was submitted on behalf of the applicants that the BRPs do not trust Yako and do not want him on the premises. I am fully aware that Yako is a practising medical doctor and this relief has the potential to interfere with the practice of his profession, for example should he wish to refer patients to the hospital. However, as already mentioned, his conduct towards Cross-Med Health and the BRPs has been so serious that in my view this relief is also justified.

[50] Prayer 4

Section 137 (5) of the Act provides:

“(5) At any time during the business rescue proceedings, the practitioner may apply to a court for an order removing a director from office on the grounds that the director has—

(a) failed to comply with a requirement of this Chapter; or

(b) by act or omission, has impeded, or is impeding—

(i) the practitioner in the performance of the powers and functions of practitioner;

(ii) the management of the company by the practitioner; or

(iii) the development or implementation of a business rescue plan in accordance with this Chapter.

[51] In my view at least the grounds contained in s 137 (5) (b) (i) and (ii) are present in this case. It was submitted on behalf of the respondents that s 71 of the Act provides for removal of a director and reference was made to the procedural requirements of that section. It was acknowledged that it was competent for the BRPs to apply for Yako’s removal as a director but that such removal should occur in circumstances where his bona fides have not been tested in oral evidence.

[52] I have already expressed my views about Yako’s bona fides. The evidence discloses that he has impeded the BRPs in the performance of their powers and functions and their management of Cross-Med health in a dishonest and clandestine manner and in my view there are very strong grounds for his removal as a director.

[53] Prayer 5

In his answering affidavit Yako tendered to comply with the relief sought.

[54] Prayer 6

The applicants seek a punitive costs order. I am of the view that such an order is warranted. At the risk of repetition, Yako has behaved in a dishonest and underhand manner to the prejudice of Cross-Med Health. He perpetuated this conduct to some extent in this application.

Order

[55] An order will issue in terms of prayers 2,3,4,5 and 6 of the notice of motion.

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J M ROBERSON

JUDGE OF THE HIGH COURT

Appearances:

For the Applicants: Adv N P G Redman SC, instructed by Netteltons Attorneys, Grahamstown

For the Respondents: Adv G I Hoffman SC with Adv M J Cooke, instructed by Wheeldon Rushmere & Cole, Grahamstown