Makhavhu v Pollock N.O and Others (1812/2022) [2023] ZALMPTHC 10 (19 September 2023)

HIGH COURT OF SOUTH AFRICA

LIMPOPO LOCAL DIVISION, THOHOYANDOU

CASE NO: 1812/2022

REPORTABLE: NO/YES

OF INTEREST TO OTHER JUDGES: NO/YES

REVISED

19/09/2023

In the matter between PAUL MAKHAVHU APPLICANT And RICHARD KEAY POLLOCK N.O FIRST RESPONDENT NURJEHAN ABDOOL GAFAAR OMAR N.O SECOND RESPONDENT OSCAR JABULANI SITHOLE N.O THIRD RESPONDENT IGNATIUS CLEMENT MIKATEKO SHIRILELE N.O FOURTH RESPONDENT MICHELLE SCHUTTE N.O FIFTH RESPONDENT VELE INVESTMENTS (PTY) LIMITED (in liquidation) SIXTH RESPONDENT In re RICHARD KEAY POLLOCK N.O FIRST APPLICANT NURJEHAN ABDOOL GAFAAR OMAR N.O SECOND APPLICANT OSCAR JABULANI SITHOLE N.O THIRD APPLICANT IGNATIUS CLEMENT MIKATEKO SHIRILELE N.O FOURTH APPLICANT MICHELLE SCHUTTE N.O FIFTH APPLICANT VELE INVESTMENTS (PTY) LIMITED (in liquidation) SIXTH APPLICAT PAUL MAKHAVHU RESPONDENT

JUDGMENT

IM KHOSA AJ

Introduction

[1] This is an interlocutory application in terms of Rule 35(12) of the Uniform Rules of this Court. I refer to parties as in the main application. The Respondent seeks to compel the Applicants to comply with his notice in terms of Rule 35(12) prior to the hearing of the main application. In the main application, the Applicants seek to declare payments made by the Sixth Applicant, “Vele Investments”, to the Respondent, as dispositions without value in terms of Section 26(1) of the Insolvency Act, and, repayment of the money by the Respondent, to Vele Investments.

Factual background

[2] On the 14 October 2022, the Respondent served a notice in terms of Rule 35(12) on the Applicants. The Applicants replied to the said notice on the 21 October 2022. The Respondent did not file his answering affidavit and that prompted the Applicants to set the main application down for hearing on the unopposed motion roll scheduled for 26 January 2023.

[3] Two days prior to the hearing of the main application, which was placed on the unopposed motion roll, the Respondent filed his answering affidavit. On 26 January 2023, this court ordered the Respondent to deliver and file his heads of argument, practice note and chronology on or before the 21 April 2023.

[4] On 07 June 2023, the Applicants served the Respondent with a notice of set-down for hearing of the main application on the opposed motion roll scheduled for 31 October 2023. The Respondent launched this interlocutory application on the 08 August 2023. The Applicants opposes the application.

Issues

[5] The issue is whether the Respondent is entitled to the production of documents he requested in terms of Rule 35(12).

The law

[6] Rule 35(12) provides:

'(a) Any party to any proceeding may at any time before the hearing thereof deliver a notice [as near as may be] in accordance with Form 15 in the First Schedule to any other party in whose pleadings or affidavits reference is made to any document or tape recording to –

(i) produce such document or tape recording for inspection and to permit the party requesting production to make a copy or transcription thereof . . . .

(b) Any party failing to comply with the notice referred to in paragraph (a) shall not, save with the leave of the court, use such document or tape recording in such proceeding provided that any other party may use such document or tape recording.'

[7] The provisions of Rule 35(12) apply mutatis mutandis to applications[1].

[8] The court in Gorfinkel v Gross, Hendler & Frank[2] held as follows:

'Prima facie there is an obligation on a party who refers to a document in a pleading or affidavit to produce it for inspection if called upon to do so in terms of Rule 35(12). That obligation is, however, subject to certain limitations, for example, if the document is not in his possession and he cannot produce it, the Court will not compel him to do so . . . . Similarly, a privileged document will not be subject to production. A document, which is irrelevant, will also not be subject to production. As it would not necessarily be within the knowledge of the person serving the notice whether the document falls within the limitations I have mentioned, the onus would be on the recipient of the notice to set up facts relieving him of the obligation to produce the document’.

Evaluation

[9] Rule 35(12) of the Uniform Rules entitles a party to proceedings to demand discovery of documents referred to in the pleadings or affidavit of any party to litigation. This demand may be made at any time before a hearing. The only caveat to this rule is that it only entitles a party to discovery of documents specified in the affidavit or pleadings.[3]

[10] Further, Rule 35(12) has a self-contained sanction of a negative nature. It provides that a party failing to comply with the notice shall not, save with the leave of the court, use the document in question, provided that any other party may use such document. This sanction comes into effect automatically upon non-compliance with the provisions of the rule.

[11] Numerous cases show that a party who gives notice under Rule 35(12), is often not content with the negative sanction encompassed in the rule, and, will seek an order to compel production. This matter presents this classical scenario.

[12] The Respondent contends that the Applicants’ reply to his Notice in terms of Rule 35(12) is a refusal to produce documents based on various grounds[4]. It is the Respondent’s case that, in paragraph 38 of the Applicants’ founding affidavit filed in support of the main

application, reference is made to the documents he requests[5].

[13] To do justice to this contention, it is necessary that I quote paragraph 38 of the Applicants’ founding affidavit in the main application. It states;-

“From my examination of the books, records, and documents of Vele Investments, the company did not, at any relevant stage, generate

sufficient legitimate income in order to honour its obligations to its creditors, which, at all times, rendered it insolvent.”

[14] Further, the Respondent contends that the deponent of the Applicant’s founding affidavit “would be in possession of documents such as Financial Statements, tax returns, etc. to properly assess the solvent state of the

company.”[6]

[15] I pause to mention that the Applicants did, in reply to the notice in terms of Rule 35(12), furnish the Respondent with a copy of Vele Investment’s liquidation and distribution account and Advocate Terry Motau’s report - “The Great Bank Heist”[7].

[16] Prior to dealing with documents sought in terms of Rule 35(12), the Applicants proffer two reasons, which they submit, are a basis for the dismissal of this application. Firstly, the Applicants’ contention is that the application is moot, and, secondly, that it is impermissible. I deal with these two issues in sequence immediately below.

Mootness

[17] The Applicants opine that this application is moot in that it was launched after the filing of the Respondent’s answering affidavit, and, there is no possible legitimate purpose this application would serve because the Respondent’s defence has already been set out in the answering affidavit filed on 24 January 2023.

[18] Further, the Applicants contend, if the documents requested in the notice in terms of Rule 35(12) were required to make the Respondent’s defence, the Respondent would have ensured that this application is heard before filing his answering affidavit and thus this application is a delay tactic. I disagree.

[19] This contention entirely ignore the wording of Rule 35(12), which accords any party to any proceedings 'at any time before the hearing thereof', a right to call upon any other party in whose pleadings or affidavits reference is made to any document, to produce such document[8]. The language of Rule 35(12) is crystal clear.

[20] In my view, if this rule was intended to ban a party from seeking production after the filing of his/her affidavit, the text of the rule would have expressly indicated as such.

[21] In Unilever,[9] the court stated that a party is entitled to have the documents produced "for the specific purpose of considering his position".

[22] It is trite law that three set of affidavits are allowed in application proceedings. There are exceptions to this rule. It is also trite that the filing of Rule 35(12) notice does not suspend the dies for the filing of the subsequent pleading or affidavit[10]. It follows that, with or without compliance to a notice in terms of Rule 35(12), the party seeking production, is in law, expected to deliver the subsequent pleading or affidavit or invoke the provisions of Uniform Rule 27.

[23] Upon production of the documents in terms of Rule 35(12), the Respondent may still consider his position, even after he has filed his answering affidavit. He may seek court’s leave to file a supplementary affidavit to expand or narrow down his defence or even settle the main application. Possibilities are endless. Until the main application is heard, the Respondent may still consider his position.

[24] Disallowing the Respondent from seeking compliance with the Rule 35(12) notice after delivery of his answering affidavit, will indefensibly limit the ambit of Rule 35(12) and inevitably defeat its purpose. In my view, the purpose of Rule 35(12) can still be served by compelling compliance with a notice in terms of Rule 35(12) after the delivery of the answering affidavit.

[25] This application is not moot and still serves a legitimate purpose. No authority was advanced by the Applicants to support their contention. This contention cannot be sustained.

Impermissibility

[26] The second reason proffered by the Applicants as the basis for dismissal of this application is that this application is impermissible because of the Respondent’s non-compliance with the order granted by this court on the 26 January 2023 and the directive issued on 01 June 2023.

[27] The Respondent was ordered and directed to file his heads of argument (in respect of the main application) on the 21 April 2023 and 31 August 2023 respectively.

[28] The Applicants opine that until the Respondent has purged his contempt by filing his heads of argument, he cannot seek any redress from this court. I agree.

[29] This issue strikes at the heart of the court’s judicial authority to carry out its constitutional functions enshrined in section 165 of the Constitution,[11] being, the need to safeguard the rule of law and Constitutional supremacy.

[30] The primary function of the Judiciary is to uphold, protect and apply the Constitution and the law impartially, without fear, favour or prejudice. Everyone has a duty to respect and abide by the law and court orders issued and or handed down in terms of the law.

[31] As at the date of the hearing of this application, the Respondent had not filed his heads of argument. The Respondent has failed to either contest his contempt or seek an opportunity to purge the contempt. This blatant disrespect for judicial authority, by an officer of court, is lamentable.

[32] Although these are not contempt proceedings, it is for this court to enforce its orders, maintain the rule of law, and defend its judicial authority. The efficacy of court orders or decisions is deeply rooted on the assurance that they will be enforced. When this court use its power to defend its order and directive, it act as a guardian of the Constitution, asserting its authority in the public interest.

[33] A principle has already been developed. In Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State v Zuma and Others[12], the Court stated that “the fact remains, however, that contempt is between the court and the contemnor, and it is for the court to decide, taking all circumstances into account, how to deal with an alleged contempt.”

[34] This court frowns at the Respondent’s blatant disrespect for its order and directive. The Respondent cannot flout the authority of this court by non-compliance with its order and directive, and then seek its protection, as and when it suits him.

[35] Granting the Respondent the relief he seeks in this application, absent his compliance with this court’s order and directive, will render nugatory the order of this court and its directive, effectively making a mockery of the judiciary.

[36] This court must vindicate its authority by coercing the Respondent to comply with the court order of the 26 January 2023, and, the directive issued on the 01 June 2023[13]. In the circumstances, the Respondent’s non-compliance with this court’s order and directive is not without consequence.

Documents of the subsidiaries of Vele Investments.

[37] The Respondent seeks production of documents of Vele Investments and all its subsidiaries[14].

[38] Having dealt with the two obstacles placed on the Respondent’s path to procure production of the documents sought, at the outset, I proceed to deal generally with documents of the subsidiaries of Vele Investments.

[39] It is my view that the documents of the subsidiaries of Vele Investments are beyond the ambit of Rule 35(12) and this application. Compelling production of the documents of the subsidiaries of Vele Investments in terms of rule 35(12) is misplaced. The founding affidavit refers to documents of Vele Investments only.

[40] To compound this challenge, the Respondent, in his notice in terms of Rule 35(12), fails to identity the subsidiaries. This resulted in the subsidiaries being faceless and, remaining faceless in this application. To compel the Applicants to produce documents of faceless entities in these circumstances would, in my view, be tantamount to discovery abuse.

[41] The case of Democratic Alliance and Others v Mkwebane and Another[15] is authoritative in this regard. The court said the following:

'. . . What will not pass muster is where there is no direct, indirect or descriptive reference but where it is sought through a process of extended reasoning or inference to deduce that the document may or does exist. Supposition is not enough.'

[42] The Respondent opines that Vele Investments cannot be “divorced” from Vele Petroport. This is incorrect. The Respondent’s contention seems to view the two entities as one and thus undermines their autonomy. The two entities are separate legal personas. They are independent of each other.

[43] Reference to documents sought in the pleading or affidavit of the adversary is a jurisdictional requirement for production of documents in terms of rule 35(12). The absence of reference to documents of the subsidiaries of Vele Investments is fatal to the Respondent’s request for production of the said documents in terms of the provisions of Rule 35(12).

Documents not in the Applicants’ possession

[44] The documents that are not in the Applicants’ possession, more specifically relating to the audited financial statements, tax returns and the asset register cannot be produced because they are not, as the Applicants’ assert, in their possession. They have not seen them. They have searched and asked for them but to no avail.

[45] The Applicants further assert that they did not commission or produce the liquidators’ forensic report. Such a report is not in their possession. It does not exist.

[46] It is trite law that a litigant stands and fall on its papers before court. The evidence before this court is that the Applicants are not in possession of those documents. In Gorfinkel[16], the court stated that ‘a court cannot compel a party to produce a document which is not in its possession’. It is trite that a court must give an order that is executable. This court cannot compel the Applicants to produce documents which are not in their possession and which, possibly do not exist.

The Chairman’s recommendations and transcribed records of witnesses’ evidence

[47] These documents are in the Applicants’ possession[17]. The Applicants refuse to produce these documents on the basis that they are confidential and that production is prohibited, as envisaged in terms of section 417 and 418 of the 1973 Companies Act.

[48] Section 417(7) provides as follows:-

“Any examination or enquiry under this section or section 418 and any application therefore shall be private and confidential, unless the Master or the Court, either generally or in respect of any particular person, directs otherwise.”

[49] Section 417(7) does not provide an absolute prohibition. In a letter addressed to the Applicants’ attorneys by the Office of the Master on 23 June 2020, the following is stated:-

“Consent is hereby given in terms of section 417(7) of the Companies Act, no 61 of 1973, as amended, to utilise the transcripts from the enquiry for the purposes of prosecuting the claims in the application.”

[50] The said letter is an annexure to the Applicants’ founding affidavit in the main application[18]. The Applicants opine that they are not permitted to share the documents with the Respondent despite having permission (written

consent) to use the documents to prosecute claims.

[51] To my mind, the production of documents through discovery is an integral part of the process of prosecuting claims. The Applicants have permission to use the said documents for this specific purpose and have in fact, done so. The Applicants have attached a portion of transcripts of evidence tendered in Section 417 and 418 enquiry as an annexure to the Applicants’ Founding affidavit in the main application.

[52] In my view, the permission to use documents to prosecute claims encompasses the production of the said documents, through discovery, particularly to the Respondent, as the said documents are a basis of the legal proceedings instituted against him in the main application.

[53] Upholding the confidentiality defence, in the circumstances of this case, will afford the Applicants an undue advantage and offend Respondent’s right to fair trial. The jurisprudence show that confidentiality does not trump the request for production of documents in terms of Rule 35(12)[19].

[54] Where appropriate and to strike a balance between the competing interests of the parties, our courts ordered production of confidential documents under the auspices of Rule 35(12), coupled with an appropriate confidentiality regime.

[55] Not only does this approach protect both parties’ right to equal protection and benefit of the law as enshrined in section 9 of the Constitution[20], it embraces the important function served by discovery in the resolution of legal disputes.

[56] In this matter, a confidentiality regime prohibiting the Respondent from disclosing the confidential documents produced in terms of Rule 35(12), save for purposes of consulting with his legal representative or any independent experts, will, in my view, be appropriate.

Punitive costs

[57] The Applicants seeks punitive costs order against the Respondent on the basis that this application is designed to delay finalization of the main application. The Applicants argue that the launching of this application 10 months after the notice in terms of rule 35(12) and 7 months after filing the answering affidavit by the Respondent, who is an Attorney and an officer of this court, is abuse of court machinery and warrants a punitive costs order.

[58] The Respondent did not file a replying affidavit to deal with the delay tactics ascribed by the Applicants to the manner in which he has conducted litigation.

[59] A general rule dictates- costs are in the discretion of court. Courts are, expected to exercise their discretion, judiciously. Punitive costs should, ordinarily be, ordered only when it is necessary to inflict some financial pain to deter wholly unacceptable behaviour and instil respect for the court and its processes.[21]

[60] The operative principle in determining whether to award punitive costs is, whether a litigant’s conduct is frivolous, vexatious or manifestly inappropriate.[22] The Respondent’s delay in launching this application, solely, in my view, is not frivolous, vexatious or manifestly inappropriate.

It does not warrant punitive costs, especially when the enabling provision provides that this application can be brought at any time before hearing.

[61] Even if I may be wrong, this court frowns at the Respondent’s blatant disregard of its authority by non-compliance with the order made on 26 January 2023 and directive issued on 01 June 2023. The Respondent’s contemptuous conduct obligates this court to coerce him to comply with its order and directive. As an expression of displeasure, this court shall not award the Respondent costs of this application.

[62] I therefore make the following order:-

[62.1] The Respondent is ordered to comply with the order of this court, granted by Justice MF Kganyago on the 26 January 2023 and the directive issued on the 01 June 2023 by delivering and filing his heads of argument, practice note and chronology within 05 days of this order.

[62.2] The Applicants are ordered to produce for inspection and copying, by the Respondent, items no 6 and 8 on the Respondent’s notice in terms of Rule 35(12) dated 14 October 2022, within 05 days after the Respondent has complied with the order in paragraph 62.1 above.

[62.3] The Respondent shall not disclose, directly or indirectly, the documents referred to in paragraph 62.2 above to anyone, save for purposes of securing legal advice or expert opinion.

[62.4] The legal practitioner and expert furnished with documents referred to in para 62.2 above, shall sign a confidentiality undertaking confirming that they will not disclose, directly or indirectly, the above mentioned documents to any other party.

[62.5] No order as to costs.

IM KHOSA

ACTING JUSTICE OF THE HIGH COURT OF SOUTH AFRICA

APPEARANCES FOR THE APPLICANTS Adv. M J COOKE INSTRUCTED BY WERKMANS Attorneys FOR THE RESPONDENT MR T MALULEKE INSTRUCTED BY RAMBEVHA MOROBANE ATTORNEYS VIRTUALLY HEARD 30 August 2023 JUDGMENT 19 September 2023

JUDGEMENT DATE: Judgment handed down in court and electronically by circulation to the parties’ legal representatives by email and publication through SAFLII. The date deemed handed down is 19 September 2023.

[1] See Uniform Rule 35(13)

[2] Gorfinkel v Gross, Hendler & Frank 1987 (3) SA 766 (C) (Gorfinkel).

[3] Competition Commission Of South Africa v Standard Bank Of South Africa Limited [2020] ZACC 2 para 146

[4] See para 5 of the supporting affidavit

[5] See para 7 of the supporting affidavit

[6] ibid

[7] See annexure BM2 of the supporting affidavit

[8] Caxton and CTP Publishers and Printers Limited v Novus Holdings Limited (219/2021) [2022] ZASCA 24 (9 March 2022 para 76

[9] Unilever plc and Another v Polagric (Pty) Ltd 2001 (2) SA 329 (C) at 336G–J.

[10] Distel Limited v Naidoo and Others (2557/2016) [2019] ZAKZPHC 80 (4 December 2019) paras [68]-[69], Democratic Alliance and Others v Mkhwebane and Another (1370/2019) [2021] ZASCA 18 (11 March 2021); 2021 (3) SA 403 (SCA) at para 47 - 48, Caxton and CTP Publishers and Printers Limited v Novus Holdings Limited (219/2021) [2022] ZASCA 24 (9 March 2022); [2022] 2 All SA 299 (SCA) at para 85

[11] Section 165 (1) of the Constitution provides the judicial authority of the Republic is vested in the courts.

[12] Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State v Zuma and Others [2021] ZACC 18 at para 114

[13] See Meadow Glen Home Owners Association v City of Tshwane Metropolitan Municipality [2014] ZASCA 209; 2015 (2) SA 413 (SCA) at para 16 where the Supreme Court of Appeal held that “[a]lthough some punitive element is involved, the main objectives of contempt proceedings are to vindicate the authority of court and coerce litigants into complying with court orders”.

[14] Annexure BM1 of the supporting affidavit

[15] Democratic Alliance and Others v Mkhwebane and Another [2021] ZASCA 18; [2021] 2 All SA 337 (SCA); 2021 (3) SA 403 (SCA) para 28.

[16] Note 2 above

[17] See answering affidavit para 32

[18] Annexure FA9

[19] See Caxton note 8 above at para 81, See also Tetra Mobile Radio (Pty) Ltd v Member of the Executive Council of the Department of Works and Others [2007] ZASCA 128; [2007] SCA 128 (RSA); 2008 (1) SA 438 (SCA) para 14 (Tetra Mobile). See also Comair Ltd v Minister for Public Enterprises and Others 2014 (5) SA 608 (GP); Helen Suzman Foundation v Judicial Service Commission [2018] ZACC 8; 2018 (4) SA 1 (CC); 2018 (7) BCLR 763 (CC) paras 73-75. [19] Bridon International Gmbh v International Trade Administration Commission and Others [2012] ZASCA 82; [2012] 4 All SA 121 (SCA); 2013 (3) SA 197 (SCA) para 35.

[19] See Caxton note 8 above at para 81,

See also Tetra Mobile Radio (Pty) Ltd v Member of the Executive Council of the Department of Works and Others [2007] ZASCA 128; [2007] SCA 128 (RSA); 2008 (1) SA 438 (SCA) para 14 (Tetra Mobile). See also Comair Ltd v Minister for Public Enterprises and Others 2014 (5) SA 608 (GP); Helen Suzman Foundation v Judicial Service Commission [2018] ZACC 8; 2018 (4) SA 1 (CC); 2018 (7) BCLR 763 (CC) paras 73-75.

[19] Bridon International Gmbh v International Trade Administration Commission and Others [2012] ZASCA 82; [2012] 4 All SA 121 (SCA); 2013 (3) SA 197 (SCA) para 35.

[20] Act 108 of 1996

[21] See Madyibi v Minister of Safety and Security 2008 JDR 0505 (Tk) (Madyibi) at para 31, in which Petse ADJP states that— “[t]he principle that I have been able to extract from other decisions of our courts that I have had recourse to . . . is that our courts have awarded costs on the punitive scale in order to penalise dishonest, improper, fraudulent, reprehensible, or blameworthy conduct or where the party sought to be mulcted with punitive costs was actuated by malice or is otherwise guilty of grave misconduct so as to raise the ire of the court in which event a punitive costs order would be imperatively called for.”

[21] See Madyibi v Minister of Safety and Security 2008 JDR 0505 (Tk) (Madyibi) at para 31, in which Petse ADJP states that—

“[t]he principle that I have been able to extract from other decisions of our courts that I have had recourse to . . . is that our courts have awarded costs on the punitive scale in order to penalise dishonest, improper, fraudulent, reprehensible, or blameworthy conduct or where the party sought to be mulcted with punitive costs was actuated by malice or is otherwise guilty of grave misconduct so as to raise the ire of the court in which event a punitive costs order would be imperatively called for.”

[22] Helen Suzman Foundation, note 20 above at para 36