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Janse Van Rensburg NO and Others v Kruger (19123/2005)  ZAGPHC 249 (12 August 2008)
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IN THE HIGH COURT OF SOUTH AFRICA
(TRANSVAAL PROVINCIAL DIVISION)
Case number: 19123/2005
In the matter between:
JACOBUS HENDRIKUS JANSE
VAN RENSBURG N.O. First Plaintiff
PHILlP FOURIE N.O. Second Plaintiff
JACOB LUCIEN LUBISI N.O. Third Plaintiff
LILY MAMPINA MALATSI-TEFFO N.O. Fourth Plaintiff
ENVER MOHAMMED MOTALA N.O. Fifth Plaintiff
RABOJANE MOSES KGOSANA N.O.
(In their capacity as joint liquidators of
MP Finance Group CC [In liquidation]) Sixth Plaintiff
KRUGER, GEORGE JAMES Defendant
At the hearing this matter the parties applied an order separation issues in terms Rule 33(4) which application was granted. The plaintiffs in addition to the pleadings tendered oral evidence at the hearing while the defendant only relied on the pleadings and plaintiffs evidence for argument. The plaintiffs are appointed liquidators the estate of various entitles namely MP Finance Consultants CC in liquidation which were condidated into single Scheme known as MP Finance Consultants CC. The defendant was an investor in the above- mention consolidated schemes. The defendant was cited in the Fourie N.G. and others v Edeling N.G. case which will be dealt with to an extent necessary hereunder. The Plaintiffs claim against the Defendant under both Section 26 and 29 of the Insolvency Act in the particulars claim. To this claim, the defendant has raised special defences res judicata election/ issue estoppel and lis pendens. The plaintiffs pleaded estoppel in replication to the defendant's special pleas.
The very crisp point arising for decision in the present application is whether the facts now pleaded by the plaintiffs in there replication can refute the defendants reliance on an extended application of the defence of res judicata.
The Court was requested to read and scrutinise the papers under case numbers 1288/03, 18109/2005,14428/2005 and 37035/02, as all the cases have a bearing on the success or otherwise of the special pleas and/or replication.
CASE NUMBER 1288/03
On or about 16 January 2003 the liquidators of: MP Finance Consultants CC (in liquidation); Krion Financial Services CC (in liquidation); Martburt Financial Services CC (in liquidation); Madikor 20 (Pty) Ltd (in liquidation); M & B Corporative Partnership Limited; Brought an application under case number 1288/03 to the Transvaal Provincial Division (TPD) in which relief was claimed against Christiaan Serfontein Edeling ("Edeling") (a so-called investor's representative) and almost 10000 other respondents.
The current Defendant was joined in the proceedings as Respondent 4439.
The following relief was sought and is cited verbatim:
"1. the applicants, in terms of 386 (5) of Companies Act, to launch these proceedings.
2. that a nisi to issue returnable on 18thof 2003 calling upon the respondents and any interested persons to show cause an in the following terms should not be granted:
2.1 that the investment scheme conducted by Marietjie Prinsloo (Previously Pelser) during the period 1998 June 2002 under various names including MP Consultants CC, 20 (Pty) Ltd, Martburt Financial Services Limited, M & B rasie Beperk, and Krion Financial Services Limited (hereinafter "investment schemes”) was, at all times from after 1stMarch 1999, in the sense that its liabilities exceeded its assets.
2.2 aside as dispositions all payments from and 1stMarch 1999 the investment schemes investors, including the and respondents, as being by the scheme investors at times when liabilities exceeded its assets, with the of preferring one more of its creditors above , as in Section 30 of the Act, alternatively as without value as in Section 26 the lvency Act, alternatively in terms of common law.
2.3 in terms of Section 32 (3) the Act, that the are to recover the of every such as the on which the in question was made, interest a tempore morae.
2.4 that the which are set aside and recoverable as include amounts made by the scheme the which were, the of the not paid out cash value but were, on the ctions of the , applied by the scheme way of credit on a new in the scheme (referred to as a "reinvestment" or "herbelegging") by the .
2.5 an enquiry the of the impeachable disposition and payment of such to the . Applicants may the down for judgement as any at any , on the same but duly pplemented by as the of the claimed.
2.6 that any the and respondents or other persons who this application be to pay the 's costs including the of two counsel.
2.7 further and/or alternative relief
3 the of an curiae to argue the set out herein if minded, and the thereof be out of the of Financial Services Limited (in liquidation) or ordering that this order be forthwith in the , Sunday Times and Newspapers as well as on the Estate's web .
5 further or alternative relief. "
The founding affidavit in the aforesaid matter contained the following relevant allegations:
That one Marietjie Johanna Pelser (later Prinsloo) ran a pyramid scheme under the names the entities referred to above.
That despite various name changes from time to time, it was at all relevant times the same scheme that was run.
The aforesaid information was confirmed by Van Rensburg in his testimony, which testimony therefore does not constitute any new information, as it previously served before court.
A scheme of arrangement was sanctioned by the honourable Court (Case number 27035/2002) and a consolidation agreement was entered into on 19 November 2002, as a result of which the entities were from this point on only referred to as the "investors' scheme".
In order to facilitate the introduction of the information contained in the investment scheme, a report by Edeling was attached to the founding papers.
The liquidators aimed for the high water mark of rescission of investments, and the rescission of undue and/or voidable preference was primarily based on section 30 of the Insolvency Act (hereinafter referred to as "the act"). The liquidators also included reliance on section 26, and as a last resort to the common law. In this regard the following is alleged:
The plaintiffs endeavoured to have all payments rescinded made by the investment scheme from 1 March 1999, regardless of whether the payments were made in regards to interest, dividends, capital repayments or otherwise. The plaintiffs claimed that all such payments were dispositions at a stage when liabilities of the investment scheme exceeded its assets, and further that all such payments were made with the intention to prefer the beneficiary above other creditors of the scheme. In order to support this proposition, the Plaintiffs referred Edeling's report to the Master of High Court and the allegations made therein. The Plaintiffs also made certain averments in regards to re investments by the investors in the investment scheme. These were cases where the paid out monies were re-invested in the scheme. The relief sought was to the effect that the monies paid out and which monies were re-invested should be considered dispositions.
The Plaintiffs alleged that the records were fairly accurate, but not sufficiently accurate pertaining to amounts that were paid out. As a result that Court was requested to sanction the procedure to more fully investigate the transactions and to approach the Court on the same papers as duly supplemented in order for the quantification of the claims to take place.
Edeling, acting as first respondent in the application, and also acting on behalf of all investors, regardless of whether they were debtors or creditors, filed an "opposing" affidavit in which he - as representative of all - supported and consented to all the relief sought.
Shortly before the matter was heard a few investors came to the fore.
On 28 February 2003 Hartzenberg J made the following order:
"1. is declared that the investment scheme by Marietjie Prinsloo (formerly Pelser) during the period 1998 June 2002 under various names including MP Consultants CC. Madikor 20 (Pty) Ltd, Martburt Financial Services Limited, M & B Beperk and Financial Services Limited ("the scheme'] was all material times from and 1st 1999, in that its liabilities exceeded its assets.
2. contracts concluded between the scheme and the in the scheme were and and void.
3. actual payments from and March 1999 the investment scheme investors, including the and respondents are set aside as by the scheme times when liabilities exceeded its assets with the of preferring the investor above investors in terms of Section 30 of the Act, provided that a is not to be regarded as a and the of investors to rely on the of Section 33 the ncy Act is no way by this .
4. An enquiry ordered into the of the of the payments and the and provisions of paragraph 38 the scheme arrangement, sanctioned on 22 2002 under case number /2002, shall apply is mutandis for the of this enquiry.
5. The applicant may the down judgement against any investor, at any time, on the same papers, duly by evidence as the quantum claim.
6. The of all who appeared in this matter, and the amicus curiae, are as of the and of the scheme. Where such are include the of two counsel."
The court order, read with the judgement, contained certain ambiguities, and both the plaintiffs and the investors approached the Court for clarification on 10 November 2003. On 10 November 2003 Hartzenberg J issued an order in terms which the words "all actual payments are aside" were qualified by inserting "insofar as they exceed the of each investor". Both parties also applied for leave to appeal on account paragraph 3 which included that "all actual payments are aside" Both parties were granted leave to appeal.
After having heard the matter, the Supreme Court Appeal issued an order on 1 April 2004, in terms which paragraph 3 the order by Hartzenberg J was amended to read as follows:
"All payments, whether as or interest, from and after 1 March 1999 by the investment scheme the , third, fourth, fifth and respondents, insofar as they exceed the of each investor is aside, under 26 the Act as dispositions value by the scheme investors to rely on the of Section 33 the Act is in no way by this ."
A full judgement by Conradie AJ was handed down in terms which:
Edeling is found - due to the conflict interests - incapable to make concessions on behalf investors regarding the intention Marietjie Prinsloo pertaining to dispositions.
The factual averments underlying the cause action in terms Section 30 were not sufficient. There was no evidence that the gains paid over to investors were made with the intension preferring one creditor above the other and there was also no evidence to support this proposition in regards to repayments. An order could be granted in terms the alternative relief sought under section 26, ie. that paid out profits did in fact constitute a disposition not value.
It would be possible a non-participating investor to aver that he does not consider himself bound to the order of Hartzenberg J. "Fresh" recovery proceedings may then be instituted against such an investor, but the Court ruled that it was unlikely that such proceedings would be necessary because an investor would have to allege that the disposition in terms section 26 was value.
CASE NUMBERS 18109/05 AND 14428/2005 (the Murphv J case and the test case)
The plaintiffs were not satisfied with the Hartzenberg J outcome to some extent with the result that they issued fresh summons against the investors in the above cases and ignored the order of Hartzenberg J in case no 1288/03. The defendants raised special defences of res judicata/lis pendens/ issue estoppel and the defendants alleged that the plaintiffs were not entitled to pursue a claim based on section 29. Both before the full bench and a single Judge, the defendants were successful with their plea of res judicata. The defendants were able to show the Courts that there had already been an earlier judgment under case number 1288/03 with respect of the same subject matter, based on the same ground and between the same parties in line with the elements stipulated in Mitford's Executor, Ebden's Executors 1917 (AD) 682 and 686. At the time when the two cases were heard, the applicant had already instituted the present case in respect of the same ground and between the respective defendants that had been cited in the 1288/03 case and the plaintiffs.
After the court gave a ruling upholding the defendant's special plea in those cases, the plaintiffs filed an estoppel replication to the special pleas and presented facts whose purpose was to show that it would be equitable to allow the case to be adjudicated upon and finalised on the pleadings issued and delivered in respect of the present case. In addition to the replication to special pleas, the plaintiffs presented oral evidence at the hearing of this application which amplified the replication. The evidence was to the effect that the plaintiffs were discouraged from sending letters of inquiry relating to the 1288/03 case due to the fact that a small number of letters of demand was sent but this did not yield results. Considering the number of investors involved, the non-response of some of the investors and costs of postage, the plaintiffs decided not to follow the normal process of lodging claims with the debtors but rather, decided to issue summons. The Plaintiffs did not know whether the Defendant considered himself bound by the court order of Hatzenberg J under case number 1288/03 or not, they only became aware of the fact that the defendant considered himself bound by the court proceedings on the 17th August 2007 when the defendant made such an indication.
The plaintiffs argue that in the cases which served before Murphy J and the bench absolutely nothing was placed before the court to put distance between those defendants and the proceedings in case number 1288/03 which would make it impossible for them to embrace those proceedings. This now brings me to turn and closely analyse the new factors brought to my attention, which factors, my brothers presiding over the Murphy J and test cases respectively never had the benefit of considering.
What distinguishes the present case from the two above cases is that the plaintiff gave detail especially relating to the calculation of amounts claimed against the defendant. Further, the plaintiffs delivered replication to the defendant's special plea. The plaintiffs argue that this court has the benefit of more facts placed before it and the replication filed, which was not the case in the previous three cases referred to supra, in the circumstances the plaintiffs submit that their estoppel replication should succeed alternatively that the court should find that it would be equitable to find that it would be equitable to allow the plaintiffs to pursue the claims and set aside dispositions both in terms of Section 26 and Section 29 of the Insolvency Act.
The plaintiffs' replication to the Defendants' special pleas of res judicata/issue estoppel/election reads as follows:
"In view of the facts of the present matter as outlined above it is not just and equitable or appropriate to allow the Defendant to rely on an extended application of the defence of res judicata in the present proceedings.
Any election which the Plaintiffs had made to pursue their remedies against investors under section 26 or 30 of the Insolvency Act (which election is denied) can only be binding on Plaintiffs vis-a-vis the participating Respondents in case number 1288/03 and of whom the Defendant was not one.
The issue of Defendant's statutory liability to the Plaintiffs as liquidators pursuant to his investment in the illegal Krion Scheme was not finally decided in case number 1288/03 and in quantifying their claim against Defendant, Plaintiffs were entitled to include both as section 26 and a section 29 claim against the Defendant in the present setting aside combined with quantification proceedings, neither the TPD nor the SCA having made any judicial pronouncement on section 29"
Plaintiff's replication to the special plea of lis pendensreads at follows:
"On the facts as pleaded above there are no proceedings pending between Plaintiffs and the Defendant under TPD case number 1288/03.
Alternatively even if it should be found that those proceedings are still pending, then, on the facts as outlined above, the present proceedings are not vexatious as the balance of convenience and equity are in favour of allowing the present proceedings to proceed."
In addition to replication to special pleas, the plaintiffs presented oral evidence at the hearing of this matter which amplified the replication. The evidence was to the effect that the plaintiffs were discouraged from sending letters were discouraged from sending letters of inquiry relating to the 1288/03 case due to the fact that a small number of letters of demand was sent but this did not yield results. Considering the number of investors involved, the non-response of some of the investors and costs of postage, the plaintiffs decided not to follow the normal process of lodging claims with the debtors but rather decided to issue summons. The plaintiffs did not know whether to Defendant considered himself bound by the case number 1288/03 or not, they only became aware of the fact that the defendant considered himself bound by the court proceedings on the 17th August 2007 when the defendant made such an indication.
Defendant argues that to ascertain whether a matter has become res judicata (and/or whether "issue estoppel" is applicable), one has to take the pleadings into account and not the evidence. It is however so that on application one has to take the affidavit in to account which cristalise the point of dispute. Regard being had to the latter I consider this matter on the pleadings as well as the evidence presented by the plaintiffs.
I now turn to analyse the replication of the plaintiffs read with the evidence presented to this court.
The plaintiffs further argue that in the cases which served before Murphy J and the full bench respectively absolutely nothing was placed before the courts to put distance between those defendants and the proceedings in case no 1288/03 which would make it impossible for them to embrace those proceedings or be deemed to have embraced those proceedings. This now brings me to turn and closely analyse the new factors brought to my attention, which factors my brothers presiding over the Murphy J and test cases respectively never had benefit of when dealing with those cases were heard.
"The SCA found that the order issued by J could not bind all investors whose names appeared as Respondents in the list appended to the notice of motion as it purported to do. The court pronounced that any investor against whom such recovery proceedings are brought would be free to maintain that he or she is, for lack of notification or by reason of having been misled by the terms of the publication, not bound by the order of Hatzenberg J. It may be that fresh setting aside proceedings against such an investor would then have to be combined with the recovery proceedings." (my emphasis)
Plaintiffs argue that they did not know what the attitude of the non participating investors in those proceedings was regarding whether they considered themselves bound by the court order or not. The Plaintiffs' were therefore not in a position to know whether defendants will plead that the was not bound by the previous order. The plaintiffs were therefore not in a position to know whether the defendant will plead that he had no knowledge of the case and/or the court order and was thus not bound by the order. It is common cause that the plaintiffs neither gave the defendant direct notice nor enquired about the attitude of the defendant. The allegation that some of the other respondents who did not participate in this case took a position that they were not bound by the order does not justify the plaintiff's assumption and belief that the defendant would also not consider himself bound. The plaintiff pleads that the Defendant by his silence on whether he considered himself bound or not led the plaintiffs to believe that the Defendant was not considering himself bound by the order of Hatzenberg J. Taking all the facts into consideration, the plaintiffs argue that they were entitled to believe that the Defendant was not considering himself bound by the order of Hatzenberg J and the apparent reasonable route to follow was to institute fresh setting aside combined with quantification proceedings in a fresh action. To this the defendant argues that this argument is fatally flawed in that there was no presentation made by the defendant to the plaintiffs regarding whether he considered himself bound or not bound by the court order of Hatzenberg J. I agree with the defendant that the plaintiffs have not placed facts before this court that show that the defendant did in act conduct himself in a manner that suggests that he does not consider himself bound by the Court order of my brother Hartzenberg J. In the circumstances the plaintiff's argument in this regard is rejected on the basis that it lacks merit.
The plaintiffs further argue that it would be equitable if they were allowed proceed under the present case. this the defendant argues that the conduct of the plaintiffs has been less than reasonable in that they wasted time during which prescription runs, they engaged in needless litigation under case numbers 37035/2002 and 21098/2002 and six thousand unnecessary summonses, and finally, they are reluctant pursue the procedure which they themselves created under case number 1288/03, at best on the latter leg, they are only prepared accept the outcome of case number 1288/03 selectively and the extent that they are pleased with the outcome.
The recovery procedure as mandated by Hartzenberg J which was affected by the order of the SCA and remains in reads:
"the applicants may set the matter down judgment against an investor, at any time, on the same papers, duly supplemented by the evidence, as the quantum of claim." The plaintiffs were the architects of this procedure and cannot today heard be renouncing what they received from the court at their special instance and request.
The plaintiffs further argue that the magnitude of the matter, time constraints relevant prescription and the liquidators' lack of knowledge of a particular defendant's attitude regarding the proceedings in the previous matter it would be unreasonable of the liquidators first send out letters of demand enquire from the numerous investors what their attitude was. After the plaintiffs had done the quantification of claims and found that there were both a section 26 and 29 claim, is in the present matter, it would have been an additional complication to first try and pursue the proceedings under case number 1288/03. On the same grounds as stated above this argument cannot be sustained.
A further argument that reliance upon res judicata would exclude Plaintiff's claim based on section 29 of the Insolvency Act can also not be sustained because it clear that when the plaintiffs approached the court for relieve under case no 1288/03, they intended to have the estate claims finalised. Now that the order given thus not suite the plaintiffs to sum extend they want to have a second bite at the cherry. It is significant to point out that the order of Hartzenberg J as amended by the supreme court of appeal is to the effect that the order is binding to all the investors cited in that case at the election of the investor. In no way does the order suggest that the plaintiffs share this right of election.
It is tried that the facts of a particular case may justified a court not to allow and extended application of the doctrine of res judicata. On the facts before me I am not satisfied that the plaintiffs have made a case for the defendant to be estopped from denying that he considers him self not bound by the Hatzenberg J order and in the same vain, I am also no satisfied the replication and the facts placed before me suffice to persuade me to find that it would be a equitable to allow the plaintiffs to have their claims adjudicated upon on the documents issued and delivered. In the result the replication of the plaintiffs is dismissed and the defendant plea res juricata is upheld. the circumstances the following is made the order this court that:
1. The defendant's special plea res juricata is upheld
2. The plaintiffs replication is dismissed with costs
3. The plaintiffs are to pay the costs
M. J. RAMAGAGA
JUDGE OF THE HIGH COURT