Ex parte: Kajee N.O. and Others; In Re: Parkin and Others v Kajee N.O. and Others (9768/2013) [2014] ZAKZDHC 31 (28 August 2014)

IN THE HIGH COURT OF SOUTH AFRICA,

KWAZULU NATAL LOCAL DIVISION, DURBAN

CASE NO: 9768/2013

In the ex-parte application:-

ZEENATH KAJEE N.O.................................................................................................................................................................................................................................First Applicant

KURT ROBERT KNOOP N.O.................................................................................................................................................................................................................Second Applicant

MACDONALD ALBERT LENKA CHITJA N.O. …................................................................................................................................................................................ Third Applicant

(in their capacities as the Joint Provisional Liquidators

of Brikor Limited) (in provisional liquidation))

IN RE:

GARNETT VAN NIEKERK PARKIN.......................................................................................................................................................................................................First Applicant

BALDWIN SIPHO NGUBANE.............................................................................................................................................................................................................Second Applicant

ILANGABI INVESTMENTS 12 (PTY) LTD

(Registration Number: M2004/019972/07).....................................................................................................................................................................................................Third Applicant

HUNTREX 305 (PTY) LTD

(Registration Number: M2010/004684/07).................................................................................................................................................................................................. Fourth Applicant

HANLIEU BOTHA ......................................................................................................................................................................................................................................Fifth Applicant

JOHN WYLES.............................................................................................................................................................................................................................................Sixth Applicant

and

ZEENATH KAJEE N.O......................................................................................................................................................................................................................... First Respondent

KURT ROBERT KNOOP N.O.........................................................................................................................................................................................................Second Respondent

MACDONALD ALBERT LENKA CHITJA N.O..............................................................................................................................................................................Third Respondent

J U D G E M E N T

Delivered: 28 August 2014

Order

1. The application by the first to sixth applicants’ is dismissed with costs.

2. Such costs are to include the costs consequent upon the employment of two counsel.

Introduction

1. This is an urgent application in which the first to sixth applicants seek to rescind orders granted by Chetty J on 5 August 2014 and seek leave to deliver an application to intervene in such proceedings.

2. For the sake of convenience the parties will be referred to as follows. The first to third respondents will be referred to as the “provisional liquidators” and the first to sixth applicants will be referred to as the “intervening parties”.

3. The relief foreshadowed in the notice of motion is the following, namely:

“1. THAT a Rule Nisi is hereby issued calling on the Respondents to show cause, if any, at 09H30 on ___________ 2014 why Orders in the following terms should not be granted:-

1.1 The Orders granted by the Honourable Mr. Justice Chetty on 05 AUGUST 2014 in case no: 2013/9768 are hereby rescinded;

1.2 The Applicants are granted leave to deliver their Application to Intervene in this Application within 10 days from the date of grant of the Order referred to at 1.2 above; and,

1.3 The costs of this Application shall be borne by the First, Second and Third Respondents on an Attorney-Client Scale.

2.

The relief prayed for in paragraph 1.1 above shall operate immediately as interim relief suspending the said Orders pending the return date of the Rule Nisi or any extended return date.”

4. A brief chronology of the facts is necessary to consider the relief sought.

Facts relevant to determination of the issues

5. On 30 July 2013, Brikor Limited (Brikor) was placed under provisional liquidation, by a major creditor First Rand Bank Limited. Paragraph 6 of the court order[1] records this was after an application for a postponement was refused with costs.

6. Pursuant to the order of provisional liquidation and their appointment as provisional liquidators by the Master [2] on 6 September 2013, they applied in terms of Section 386(5) and 387(3) of the Companies Act[3] for powers necessary to the winding up of Brikor.

7. The first intervening party, Garnett van Niekerk Parkin (Parkin) sought leave to intervene in such application in his capacity as director of Brikor and was granted leave to do so. Paragraph 3 of the order made provision for the provisional liquidators to approach the court urgently on papers duly supplemented for any further orders extending their powers should the need arise.

8. This order was agreed to by consent, subject to certain minor amendments proposed by Parkin. Since the granting of the provisional

winding up order, it is common cause that Brikor has been trading. The return date for the final winding up order is 21 November 2014 and such order is opposed.

9. It appears to be common cause among the parties that the issue for determination in such application relates to whether or not Brikor is insolvent and unable to pay its debts and related to this issue is the disparity between the valuations of Brikor’s immovable property.

10. The intervening parties valuer being the sixth intervening party, John Wyles has valued the immovable properties in excess of

approximately R100m whereas Advanced Valuers employed by the provisional liquidators has valued the immovable properties at a significantly lower amount.

11. The disparity between the valuations obviously affects whether or not Brikor is able to pay its debts. The parties agree that First Rand Bank Limited is a creditor of Brikor, although the exact amount of its indebtedness is disputed by Brikor.

12. It is common cause that prior to the provisional winding up order and on 11 June 2013, First Rand Bank Limited obtained an order for the perfection of its general notarial bond and was granted an order, inter alia, in respect of the cession of debts of Brikor in favour of First Rand Bank Limited. Such order is still in place[4].

13. On Friday, 1 August 2014, the provisional liquidators issued an urgent exparte application for the extension of their powers in terms of sections 386 (5) read with section 387(3) of the Companies Act.

14. The orders in the notice of motion to such application, authorises the provisional liquidators to institute and defend legal proceedings on behalf of certain intervening parties and Brikor, being Huntrex 305, Ilangabi Investments , and in respect of an immovable property described as Portion 112 of the Farm Olifantsfontein, and to convene an enquiry into the trade dealings and affairs of Brikor in terms of sections 417 and 418 of the Companies Act.

15. A copy of the application papers was served on Ilangabi Investments 12 (Pty) Limited (the third intervening party) and Huntrex 305 (Pty) Limited (the fourth intervening party) at the offices of their attorneys, Maharaj Incorporated, who learnt of the application on Saturday 2 August 2014 and were only able to obtain proper instructions from the intervening parties on Monday, 4 August 2014.

16. On 4 August 2014, Chetty J met with the parties in his chambers. He was advised of the intervening parties’ intention to seek leave to intervene and that they were in the process of preparing an application to intervene.

17. The application to intervene together with the application for the provisional liquidators extension of powers where to be heard on 5 August 2014. The application for the extension of powers was heard in motion court on 5 August 2014 by Chetty J at 12h30 with the intervening parties attorney present.

18. The intervening parties legal representative attempted to hand up the application to intervene, despite non-compliance with the provisions of rule 6(4) (b). Chetty J did not entertain the intervention application as he did not consider that such application was properly before him.

19. The intervening parties legal representative was allowed to address the court presumably in respect of the application to extend the powers of the provisional liquidators.

20. The orders granted by Chetty J on 5 August 2014 were those sought in the notice of motion to the application for the extension of powers.

21. On 11 August 2014, the intervening parties attorneys addressed correspondence to the provisional liquidators legal representatives

in which a request was made that the orders of Chetty J be suspended pending the application to rescind the order.[5] A response to such letter was communicated by the provisional liquidators legal representatives on 12 August 2014 [6] in which the legal representatives pointed out that the first day for the enquiry was 1 September 2014 and required the application for rescission to be instituted and served by 13 August 2014.

The Rescission Application

22. The intervening parties seek the rescission of the orders of Chetty J in terms of Rule 42(1) of the Uniform Rules of Court, alternatively, in terms of Rule 6(12), alternatively the common law.

23. The orders are challenged on the following basis, namely the application for the extension of powers was instituted ex parte, the failure by Chetty J to consider the application to intervene despite he being aware thereof, the orders were irregular and erroneously granted as the intervening parties were absent despite the physical presence of their attorney and were erroneously sought by the provisional liquidators as no proper service and notice of the application was given to the intervening parties.

The grounds for rescission

24. In terms of the common law an applicant must demonstrate fraud or iustus error on the part of the presiding officer.

25. Rule 6(12) (c), reads as follows …“A person against whom an order was granted in his absence in an urgent application may by notice set down the matter for reconsideration of the order.”

26. Rule 42 which deals with the variation and rescission of orders provides that a court may rescind or vary an order upon application

by any party affected by such order on the following grounds, namely:

26.1 Where an order or judgement is erroneously sought or erroneously granted in the absence of any party affected thereby[7];

26.2 Where there is an ambiguity, or a patent error or omission, only to the extent of such ambiguity, error or omission[8];

26.3 Where such order was granted as a result of a mistake common to the parties[9].

27. In deciding this issue, regard must be had to the orders issued by Chetty J, the circumstances under which such orders were granted and the factual allegations in the papers filed in support of the application for the extension of the provisional liquidators powers, specifically in regard to the need for an enquiry in terms of section 417 and 418 of the Companies Act.

The application for the extension of powers of the provisional liquidators

28. As I already mentioned the order of Thatcher AJ made provision for the provisional liquidators to inter alia:

“1.4. to carry on the business of Brikor in so far as may be necessary for the beneficial winding- up thereof;

1.5 to employ suitable individuals and / or entities whose professional or other services may reasonably be required to assist with the carrying on of the business of Brikor;

1.6 to retain the services of any of the employees of Brikor on such terms and conditions as determined by the applicants.”

29. The application to extend the powers of the provisional liquidators before Chetty J was to authorise the provisional liquidators to institute and defend legal proceedings on behalf of Brikor, Huntrex and Ilangabi and to institute and defend legal proceedings and obtain interdicts in respect of the immovable property Olifantsfontein and to authorise the convening of an enquiry into the trade, dealings and affairs of Brikor.

30. In support of the application for the extension of powers and the enquiry in terms of section 417 and 418 the provisional liquidators relied in summary on the following facts, namely:

30.1 that at the time of the granting of the provisional winding up order, Brikor was unable to pay its debts specifically its debt in excess of R130 million owing to its major creditor, First Rand Bank ;

30.2. First Rand had obtained an interdict against Brikor in respect of its debtors;

30.3. the provisional liquidators have valued the movable assets of Brikor as well as the immovable properties as has Brikor. There is not a serious disparity between the value of the movable assets placed thereon by the respective parties valuers, however, there is a significant disparity as to the value of the immovable properties;[10]

30.4. despite the fact that Brikor is currently trading it is still insolvent in that it is unable to pay its major creditor being First Rand Bank and its creditors pre the winding-up order;

30.5. the immovable properties cannot be sold presently or for a period in time;

30.6 Huntrex 305 (Pty) Ltd (Huntrex) purchased the Mandini Quarry from Brikor in June 2011 for the sum of R 50million. It is common cause that Parkin is a director of Huntrex and Ngubane who is one of two directors of Huntrex is also a non-executive director of Brikor. The balance of the purchase price in the sum of R 20 million excluding interest has not been paid by Huntrex to Brikor and there was non-disclosure of a holiday payment by both Ngubane and Parkin.

30.7. In addition Parkin did not refer to Brikor’s indebtedness to the South African Revenue Services in respect of the sale of its Mandini business to Huntrex. As a consequence of First Rand Bank acquiring a cession of Brikor’s debts it made demand of Huntrex for payment of the balance of the purchase price owed to Brikor in May 2013. No monies were paid by Huntrex to either First Rand Bank or Brikor.

30.8. Both Huntrex as well as Brikor are represented by the same firm of attorneys being the first to sixth intervening parties current attorneys of record. In addition Brikor has not made a demand to Huntrex for payment of the balance of the purchase price.

30.9. Huntrex is indebted to Brikor and such indebtedness is recorded in affidavits by Parkin and confirmed by Ngubane and also reflected in the financials of Brikor. Parkin effectively controls Huntrex and Brikor.

30.10 The provisional liquidators thus seek an enquiry so that the indebtedness of Huntrex to Brikor can be fully and properly investigated and the outstanding debt be pursued. In addition there appears to be a relationship between Parkin and Ngubane both in their capacities as directors of Brikor and Huntrex which needs to be properly investigated

30.11. Insofar as Ilangabi Investments 12 (Pty) Ltd (Ilangabi) is concerned, it is a wholly owned subsidiary of Brikor. Parkin is a director of Ilangabi and Brikor holds a 31% shareholding in Ilangabi and has the voting rights in respect of the 69% of the remaining shares. Parkin effectively owns the 69% shareholding.

30.12. Subsequent to the order of provisional winding up, the provisional liquidators have attempted to investigate the nature of the relationship between Brikor and Ilangabi. Having regard to Annexure “FA 43”, the supporting documentation prepared by Brikor concerning the summary of debtors, creditors and the loan account it would appear that in so far as the indebtednesses of Ilangabi are concerned these records may have been altered post liquidation.

30.13. It would appear that Parkin who is in control of Ilangabi has set off amounts owing between the respective companies being Brikor and Ilangabi post liquidation and it is possible that the amounts owing by Ilangabi to Brikor which ought not to have been set off, fall to be paid back to the estate for the benefit of the general body of creditors of Brikor.

30.14. The value of the assets of Brikor cannot be properly valued as the relationship between Brikor and Ilangabi needs to be considered. As Ilangabi holds various mining rights which are extremely valuable, and is a wholly owned subsidiary of Brikor, it may be a significant asset which can be realised for the benefit of the creditors.

31. To succeed to have a judgement or order set aside on grounds of fraud, an applicant must allege and prove that the successful litigant was a party to the fraud, that the evidence was in fact incorrect, it was made fraudulently and with intent to mislead and that if the true facts had been placed before the presiding officer such presiding officer would not have given the judgement or orders other than that which it was induced to give by the incorrect evidence. In other words it must be alleged and proved that but for the fraud the court would not have granted the judgement.

32. There is nothing on the papers before me indicative that the orders were granted as a consequence of any fraud or incorrect evidence placed before Chetty J. Neither is there any indication that the orders were granted as a consequence of iustus error.

33. In terms of Rule 42(1) (a) a judgement or orders are considered to have been erroneously granted if at the time they were issued the judge was unaware of a fact which would have precluded the granting of the judgement and which would have induced the judge had he or she been aware of it not to grant the judgement. Our courts have also held that an order or judgement is erroneously granted if there was an irregularity in the proceedings or if it was not legally competent for the court to have made the order or the judgements.

34. The rule does not cover a situation where orders are wrongly granted.[11] A judgement to which a party was procedurally entitled to obtain in the absence of a party cannot be said to have been granted erroneously[12].

35. The order was not granted against the applicants and rule 6(12) (c) also cannot find application. In addition, the affidavits indicate that the intervening parties legal representative was present and allowed to make submissions despite the application to intervene not being entertained. Among the factors which the courts consider in such applications are the reasons for such party’s absence.[13]

36. In my view, given the facts, there is no basis for the intervening parties to argue that a rescission of the orders is justified either in terms of rule 6(12), rule 42 or in terms of the common law.

37. Insofar as the ex parte nature of the application is concerned the practice in this division is that such applications are specifically

sanctioned. The intervening parties attorneys, save the fifth and sixth intervening party’s attorneys were given notice of the application and attended the meeting in Chetty J’s chambers on 4 August 2014, and were thus aware the matter would be heard on 5 August 2014.

38. Section 386 (5) sanctions an application to court to grant leave to provisional liquidators “to do any other thing a court may consider necessary for winding-up the affairs of the company and distributing it assets.” By its very nature these proceedings are ex parte as the provisional liquidators seek authority from the court to extend their powers to take certain steps which are in their opinion is necessary for the winding-up of the company’s assets.

39. The provisional liquidators also challenge the locus standi of the intervening parties to bring the rescission application and to intervene in the proceedings. They dispute the intervening parties have an interest in the subject matter of the judgements or orders which are sufficiently direct and substantial to allow them to have intervened in the original application for the extension of the powers of the provisional liquidators. The provisional liquidators submit that the intervening parties do not have a legal interest in the orders which can be prejudicially affected by the judgement to such an extent entitling them the rescission.

40. The first intervening party, Parkin submits that he is the majority shareholder in Brikor and has interest in residual value of Brikor’s estate. It is the major creditor of Brikor, being First Rand who ought to have applied for an enquiry in terms of Sections 417 and 418. Parkin will be a witness in the enquiry and will suffer inconvenience, hardship, financial prejudice and his being required to attend the enquiry will make inroads into his civil liberties.

41. The second intervening party, Ngubane, submits that he will be inconvenienced as his character given his former office of Premier is being called in to question and this forms the only basis for the enquiry sought by the provisional liquidators.

42. In my view Botha and Wyles do not have a substantial and direct interest in the orders granted to seek to intervene and seek a rescission.

43. It is trite that a party cannot refuse to testify at an enquiry convened in terms of s 417 and 418 of the Companies Act. The purpose of the enquiry is an “investigative measure designed to facilitate the winding up of the company.”[14]

44. The Constitutional court has highlighted that the provisions of section 417 and 418 are necessary and vital to the winding up of a company, impose a statutory duty on the liquidators and does not infringe on any rights.[15] It may also be necessary to in conducting the enquiries to obtain information from “complete outsiders”.[16]

45. In addition the intervening parties are not without remedy and can should they be subpoenaed to attend the enquiry can before the enquiry commences and raise whatever objections they wish before the commissioner.[17]

46. When Mr Kemp, who appeared for the intervening parties presented argument, he submitted that the intervening parties, ought to be given an opportunity to be heard in the application for the extension of the powers of the provisional liquidators specifically in relation to the order authorising the enquiry in terms of sections 417 and 418. An interim order was therefore necessary suspending the operation of the orders of Chetty J, pending a court hearing the rescission application.

47. In essence the relief sought is that of an interim interdict. Mr Joubert submitted that the intervening parties were not entitled to such order as the requirements for such interdict had not been met. I agree with the submissions of the provisional liquidators in this regard the requirements for an interim interdict are trite and need not be restated.

48. It would appear that Brikor, Parkin, Ngubane, Huntrex and Ilangabi, knew of the application for the extension of powers at the very least by 2 August 2014, as the application was served on their attorneys of record. When Chetty J, met the parties legal representatives on 4 August 2014, the intervening parties legal representatives had already intimated that an application to intervene was in the process of being drafted.

49. The parties knew that the application for the extension of powers would be heard on 5 August 2014 and the approximate time of such application. No explanation has been provided as to why there has been non-compliance with rule 6(4) (b) and why the application to intervene was not timeously placed before Chetty J. This specifically in light of the previous application to intervene brought by Parkin on behalf of Brikor.

50. It is also apparent that the intervening parties legal representatives were at court and were allowed to make submissions by

Chetty J, despite his refusal to entertain the application to intervene.

51. In my view, in essence, what the intervening parties seek to do in this application is to require of me to sit as a court on “review”, alternatively as a court of appeal, and revisit the exercise of a discretion by Chetty J. This I cannot do.

52. They are not without remedy in this regard. It is trite that a party can appeal or review a decision in which they are of the view that a court did not properly exercise its discretion. In the Friedland[18]case, the court recognised the right of parties to be heard, although same is not an absolute right, before an order in terms of section 417 and 418 was made, albeit on limited grounds.

53. For the reasons mentioned, and the conclusion which I come to, it is not necessary to deal with the issue relating to the suspension of the orders of Chetty J. Given the nature of the matter, I reserve my right to file further reasons.

54. In the premises the orders I make are the following:-

(i) The application by the first to sixth applicants’ is dismissed with costs.

(ii) Such costs are to include the costs consequent upon the employment of two counsel.

________________

J.I.HENRIQUES

DATE OF ARGUMENT: 22 August 2014

DATE JUDGMENT DELIVERED: 28 August 2014

INTERVENING PARTIES COUNSEL: ADV.KEMP J KEMP SC

INTERVENING PARTIES ATTORNEYS: Maharaj Attorneys

Rydall Vale Office Park

3 Rydall Vale Crescent

La Lucia Ridge

Ref: T JANSEN VAN VUUREN/B510

Telephone: 031 566 2100

Fax: 031 566 2400

RESPONDENTS COUNSEL: ADV. A. JOUBERT SC

ADV. J E SMIT

RESPONDENTSATTORNEYS: Werkmans Attorneys

155 Fifth Street

Sandown

Sandton

Ref:MRS SILBERMAN/RAND5064.122

℅ Garlicke & Bousfield Incorporated

La Lucia Ridge Office Estate

6 Torsvale Crescent

Durban

Reference: VJM

Telephone: 031 570 5423

Fax: 031 570 5309

[1] Annexure “FA 3”, page 68 Indexed 1 of the Court bundle

[2] Annexure “FA 4”, page 70, Index 1

[3] Reference is to the 1973 Companies Act read with Item 9 of Schedule 5 of the 2008 Companies Act

[4] A petition against the order of Gorven J in respect of part of the perfection order and interdict regarding the cession of book debt was unsuccessful.

[5] Annexure FA “3”, page 675 Index 7 of the papers

[6] Annexure FA “4”, page 678 Index 7 of the papers

[7] Rule 42(1) (a)

[8] Rule 42(1) (b)

[9] Rule 42(1) (c)

[10] Here reliance is also placed on a estimate given by Parkin in which the assets of Brikor are valued at R 110 000 million.

[11] Seale vs Van Rooyen NO; Provincial Government, North West Province vs Van Rooyen NO 2008 (4) SA 43 SCA

[12] Lodhi 2 Properties Investments CC vs Bondev Developments (Pty) Ltd 2007 (6) SA 87(SCA)

[13] ISDN Solutions (PTY) Ltd v CSDN Solutions CC and Others 1996(4) SA 484 (W)

[14] Nedbank Ltd v Master of the High Court, Witwatersrand Local Division and Others 2009 (3) SA 403 W

[15] Bernstein and Others v Bester and Others NNO 1996(2) SA 751 CC at paragraphs 15, 16 52, 55,

[16] Bernstein at paragraph 50

[17] Mondi Ltd and Another v The Master and Others 1997(2) SA 450 N

[18] Friedland and Others v The Master and Others 1992(2) SA 370 (W)