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Last Updated: 3 December 2005
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
REPORTABLE
CASE NO:
293/2004
In the matter between
NAVY TWO CC
APPELLANT
and
INDUSTRIAL ZONE LIMITED
RESPONDENT
CORAM: SCOTT, MTHIYANE, JAFTA, PONNAN JJA and MAYA AJA
HEARD: 6 SEPTEMBER 2005
DELIVERED: 28 SEPTEMBER
2005
Summary: Sole member of a close corporation seeking to
represent it - whether refusal to grant him audience misdirection –
whether
case fell within exception to rule barring a person who is not a
practitioner from representing a corporate entity – whether
refusal to
grant postponement was justified – default not adequately explained - bona
fide defence not disclosed - circumstances
in which a court will grant
indulgence discussed.
JUDGMENT
MTHIYANE JA:
MTHIYANE JA:
[1] This is an appeal against the judgment
of Brassey AJ sitting in the Johannesburg High Court, in which he refused to
grant the
appellant, a close corporation, a postponement to file an answering
affidavit and to allow its sole member, Mr Ashum Kumar Nannen,
to represent it
during the hearing of the application for a postponement. The appeal is with the
leave of the learned judge.
[2] The background facts are briefly the
following. On 14 December 2001 the appellant and the respondent concluded an
agreement of
sale in terms of which the appellant was required to make certain
payments. The appellant fell in arrears with those payments and
various
accommodations were granted in order to assist it, which were ultimately
fruitless. Notice of cancellation was given in terms
of the agreement of sale.
The cancellation clauses in the agreement provided for 14 days’ notice to
be given to the defaulting
party to rectify the defect, failing which
cancellation would be permissible. The notice upon which the appellant relies
was issued
on 4 March 2003 and expired accordingly on 18 March 2003. The notice
appears to have been served on the appellant at its place of
business and signed
for by one Kamal Singh. The respondent by implication denies that it received
the notice.
[3] On 12 November 2003 the respondent launched an application in
the Johannesburg High Court for an order declaring that the written
agreement
concluded between the parties on 14 December 2001 had been validly cancelled and
that it was of no force and effect.
[4] A Notice of Intention to Oppose
was filed and served on the respondent on 14 November 2003 and thereafter no
further steps appear
to have been taken by the appellant. On 3 February 2004 the
respondent set the application down for hearing on the opposed roll.
The matter
came before Blieden J and the appellant was represented by Mr Ashum Kumar
Nannen, who is not a legal practitioner. The
application was stood down until
the following day (4 February 2004) to enable Mr Nannen to apply for a
postponement.
[5] At the hearing before Blieden J Mr Nannen was
apparently told that he would not be allowed to represent the appellant as he
was
not a legal practitioner. However on the following day (4 February 2004) he
again appeared on behalf of the appellant and sought
a postponement. Blieden J
directed that Mr Nannen prepare and file an affidavit in support of his request
for a postponement and
indicated that he could himself bring the affidavit to
court, a suggestion which counsel for the appellant submitted led Mr Nannen
to
think he could appear on behalf of the appellant.
[6] At the next hearing
the matter came before Brassey AJ. The learned judge was prepared to receive the
affidavit but refused to
allow Mr Nannen to represent the appellant as, reasoned
the judge, a corporate entity could only be represented by a legal
representative.
[7] The judge then as a compromise, perhaps, devised and
embarked on some procedure whereby Mr Nannen was permitted to relay his
submissions
to the court through Mr Konstantinides, counsel for the respondent.
The proceedings continued in that vein up until their conclusion
when Brassey AJ
made an order refusing the postponement and granted the respondent the relief it
sought.
[8] The issue on appeal is whether the present matter is not one
of those cases that fall within the exception to the rule barring
a person who
is not a legal practitioner from representing a corporate entity, where the
court a quo should have exercised its discretion in favour of allowing Mr
Nannen to represent the appellant. That the refusal to grant Mr Nannen
audience
arose from an erroneous belief on the part of the judge a quo that he had
no discretion in the matter leaves of no doubt. That much is clear from what he
said during the application for leave
to appeal:
‘It is correct that I
refused to give Mr Nannen an audience. I did so in the belief that a corporate
entity could only be represented
before me through a legal
representative’.
[9] The question of representation of a corporate
body by a natural person who is not a legal practitioner has been the subject of
discussion in numerous cases. One such case is Yates Investment (Pty) Ltd v
Commissioner for Inland
Revenue[1] where a
beneficial shareholder sought to appear for a company to argue an appeal on its
behalf. He was refused permission to do so.
Without any detailed discussion of
the rule and its source, presumably because on the facts of that case such
discussion was not
warranted, Centlivres CJ held that an artificial person could
not appear in person and had to be represented by a duly admitted
advocate.
[10] Following and applying the rule in Yates Investment
(Pty) Ltd v Commissioner for Inland Revenue, Hurt J held in Hallowes v
The Yacht Sweet Waters[2]
that a juristic person can only litigate and appear before a court through a
representative duly qualified and admitted to practise
as such and that for
practical purposes the doors of the court were closed to the close
corporation.
[11] The decision in Hallowes v The Yacht Sweet Waters
has been severely criticised in Lees Import & Export (Pty) Ltd v
Zimbabwe Banking Corporation
Ltd[3] as having overlooked
the caveat placed upon the rule, recognising the court’s residual
power to regulate its own proceedings unless fettered by legislation.
The
caveat embodies a power which a court has, in the exercise of its
discretion and in the interests of justice, to permit a person other than
a
legal practitioner to appear before it on behalf of a corporate entity, but only
if exceptional circumstances so warrant it.
[12] There is a lot to be
said for the above criticism. It is clear that the rule limiting representation
of a corporate entity to
legal practitioners is not inflexible. In Arbuthnot
Leasing International Ltd v Havelet Leasing Ltd &
others[4], while accepting that
the normal rule was that a body corporate must appear by counsel or solicitor,
the court recognised that in
certain exceptional circumstances, a director who
is a party to litigation to which a company is also a party may be allowed to
appear
in person for purposes which are also those of the
company.
[13] In California Spice Marinade (Pty) Ltd and others in re:
Bankorp v California Spice and Marinade (Pty) Ltd v others; Fair O’Rama
Property Investments CC v others; Tsaperas; and
Tsaperas[5] after tracing the
history of the rule in the English common law Wunsch J came to the conclusion
that a court should be entitled,
in an appropriate case and to avoid injustice,
to allow at least a one-person company to be represented at a court hearing by
its
alter ego. The learned judge said that the inconvenience caused to
the court as a result of an unqualified person appearing before it had to
be
weighed up against the injustice of a juristic person being denied access to the
courts. In this regard I agree with the reasoning
of Wunsch
J.
[14] Turning to the facts of this case it seems to me that very little
of the court’s time would have been taken up if Brassey
AJ had allowed Mr
Nannen to address him on the merits of the application for a postponement. The
effect of his refusal was that the
appellant was denied an opportunity to be
heard. The defect was not remedied by the learned judge receiving the
appellant’s
submissions through the respondent’s counsel, Mr
Konstantinides. In my view the refusal by Brassey AJ to exercise a discretion
of
granting Mr Nannen audience was a misdirection which entitles this court to
interfere with his refusal to grant Mr Nannen audience
and to consider the
application for a postponement afresh. We have not been asked to remit the
matter to Brassey AJ but to deal with
it in this court. In this regard the
appellant was required to satisfy two requirements: first, it had to show that
the delay or
failure to file an answering affidavit was not wilful and secondly,
that it has a bona fide defence to the main application. I discuss
the two
requirements in turn.
[15] With regard to the question of delay Mr Nannen
says upon receiving the papers in the main application he handed them to the
appellant’s
erstwhile attorneys, Chibabhai Jivan Inc. of Mayfair,
Johannesburg. The Notice of Intention to Oppose was filed on 21 November 2003
and no further steps were taken. Mr Nannen says he paid the attorneys R10 000 by
way of fees and thereafter continued to pay a retainer
of R1 500 per week. He
says further that he entertained ‘a serious belief’ that the matter
would be attended to by the
attorneys. He also says that before the papers in
the present application were served he consulted with an advocate, presumably
arranged
by his erstwhile attorneys. He does not understand why the attorneys
did not prepare, file and serve the opposing affidavits. No
affidavit has been
put up by any member of the attorneys’ firm with whom he has had dealings,
to corroborate his story. Of
course this is not meant as a criticism – it
is just an observation. There seems to have been a total lack of urgency on his
part in attending to the matter. This is evidenced by the fact that Mr Nannen
did not at any stage complain to the attorneys that
the matter was not being
attended to notwithstanding that he was presumably in constant contact with them
on a weekly basis, seeing
that he made weekly payments to them of the retainer
of R1 500 at a time. It has been held that litigants ‘cannot divest
themselves
of their responsibilities in relation to the action and then complain
vis-à-vis the other party to the action that their agents, in whom
they have apparently vested sole responsibility have failed them.’
(See
De Wet and others v Western
Bank[6]).
[16] During
December 2003 he consulted another firm of attorneys, SA Ebrahim, of Pretoria.
He duly paid fees for consultation but
nothing could be done as the attorneys
were closing for the end of the year vacation. During the last week of December
2003 he was
advised that a notice of set down of the present application had
been served on his erstwhile attorneys on 17 December 2003. But
for a reason not
disclosed in the papers he waited until 31 January 2004 when he consulted a new
firm of attorneys, AS Cassim and
Co of Pretoria, the appellant’s present
attorneys of record. Mr Cassim of this firm told him that he could only
represent the
appellant if a postponement were granted. In his presence the
attorney telephoned the respondent’s attorneys requesting a postponement
but this was refused.
[17] Mr Nannen says he is not to blame for the
delay, the fault of which he places firmly at the door of the appellant’s
erstwhile
attorneys. He says he does not understand the rules of court and the
procedures. He urges that the appellant should not be prejudiced
thereby.
[18] If Mr Nannen received notice of service of the papers in
the present application, as he says he did, during the last week of
December
2003, it is not clear why he only consulted his present attorneys of record on
31 January 2004. In paragraphs (a) and (b)
of the Notice of Motion it is clearly
stated that notice of opposition has to be given within five days of
service of the application and the answering affidavit, within fifteen
days thereafter. The notification is plain and does not require any legal
knowledge to understand and to act upon it. Mr Nannen’s
reliance on lack
of knowledge of the rules and procedures does not assist. There is no
explanation of what Mr Nannen did for the
entire month of January 2004 after
becoming aware of the service of the application on the appellant. The appellant
sought the court’s
indulgence and yet did not see it fit to place facts
from which the court could determine whether or not it was in wilful default
in
respect of the filing of an answering affidavit.
[19] As to the
appellant’s defence to the main application, there is yet again a glaring
paucity of information. Mr Nannen says
before the present application was
served, he consulted with an advocate arranged by his erstwhile attorneys, who
advised him that
in order to cancel the contract of sale between the respondent
and the appellant, the respondent had to serve notice of any breach.
As far as
the appellant was concerned the contract would therefore not be cancelled. This
is a conclusion of some sort and the basis
for it has not been disclosed.
Finally Mr Nannen alleged that the respondent, too, was not prepared to perform
certain contractual
obligations, despite requests to do so. We are not told what
those obligations are that were not complied with. That is the sum total
of the
appellant’s defence. To my mind it is far from convincing. It is true that
at this stage the appellant was not expected
to set out his defence in full. But
what was required of the appellant was to place facts from which the court could
say that there
was a bona fide defence to the main
application.
[20] Notwithstanding the misdirection on the part of Brassey
AJ occasioned by his refusal to permit Mr Nannen to address him on the
merits,
the refusal to grant a postponement was correct.
In the result the
appeal is dismissed with costs, such costs to include the costs occasioned by
the application for condonation.
__________________
KK MTHIYANE
JUDGE OF APPEAL
CONCUR:
JAFTA
JA
MAYA
AJA
PONNAN
JA:
[21] I have had the benefit of reading the judgment of my brother
Mthiyane. Although I agree with the conclusion to which he comes
I do not
endorse his approach.
[22] In my view the real issue is whether the
appellant suffered any prejudice as a result of Brassey AJ's failure to afford
Mr Nannen
the opportunity to address the court on the issue of a postponement.
In other words, it is unnecessary to consider the circumstances
in which the
so-called rule barring a non-legal person from representing a corporate entity
may be relaxed. Even if it is accepted
in the appellant’s favour that
Brassey AJ misdirected himself in this regard it does not follow that the
appellant would have
been entitled to the postponement it now seeks on appeal.
The effect of such a misdirection on the part of the court a quo would be
that this Court would be free to consider whether in all the circumstances a
postponement should have been granted.
[23] The respondent's claim
against the appellant is set out in detail in its founding affidavit in the
court a quo. It is alleged that the appellant failed over a
protracted period to meet its contractual obligations. The affidavit catalogues
repeated
instances of the appellant's failure to effect payment in terms of the
agreement timeously or at all. Dishonoured cheques were the
order of the day. By
30 March 2003 the appellant should in terms of the agreement have paid R797
065,79 (excluding interest). The
appellant had in fact only paid R450
000,00.
[24] In the face of these persistent breaches, the respondent,
through its attorney, delivered to the appellant on 4 March 2003, a
notice
calling upon it within 14 days of receipt to rectify its breach. In response the
appellant furnished to the respondent certain
letters of undertaking. According
to investigations conducted by the respondent: the first, emanating from FNB,
contained unauthorised
alterations; and, the second, emanating from Engen was a
forgery. On 8 July 2003 the respondent accordingly cancelled the
agreement.
[25] These in a nutshell were the factual allegations that
confronted the appellant. The response of Nannen on behalf of the appellant
was:
‘ ... I was advised that the deed of sale between the applicant and
the respondent, the applicant had to serve notice of any
breach of the contract
in order to cancel the contract. The contract could therefore not be
cancelled.’
The language employed by Nannen is curious. It is not in
dispute that the respondent had to serve a notice of breach. Nor could it
be.
That flows from the agreement. Nannen does not assert positively that no such
notice had been served. He likewise does not attempt
to explain the signed
acknowledgment of receipt endorsed on the notice. It is expected of the reader,
it would seem, simply to infer,
despite the respondent's detailed allegations to
the contrary, that no such notice had in fact been delivered and consequently
therefore
there can be no cancellation. Nannen, moreover, makes not attempt to
deal with the repeated breaches by the appellant detailed in
the respondent's
founding affidavit. Nor for that matter does he deal with the very serious
allegations of fraud and forgery.
[26] He does confirm having received
the application papers in the matter. According to him those papers he forwarded
to the appellant's
then attorney. Nothing appears to have been done. During
December 2003, precisely when he does not say, he consulted S A Ebrahim,
an
attorney in Pretoria. On 31 January 2004 he consulted with A S Cassim also an
attorney in Pretoria.
[27] He must undoubtedly have known that the
necessary papers in opposition to the relief sought had not been served and
filed. Why
else would he have changed attorneys not once but twice? And yet
aside from consulting with those attorneys he did nothing further.
Nannen has
chosen to be deliberately vague. His coyness must redound to his discredit. At
the very latest by December 2003 when he
consulted with attorney Ebrahim he must
have known that no opposing affidavit had been filed. He seeks to explain that
failure in
the following terms: ‘I cannot understand why my previous
attorneys did not prepare opposing affidavits in this matter and
did not inform
me as to their reasons for not preparing and filing same with the applicant's
attorneys and at the above honourable
court’. That explanation is not only
far from illuminating but is unsatisfactory. He says: ‘[I]f anyone is to
be blamed,
it is certainly not me on behalf of the respondent and we should
therefore not be prejudiced thereby. The above honourable court
should look
towards my previous attorney's of records conduct in this matter’. This
assertion rings hollow.
[28] In short, the appellant has failed miserably
to explain its tardiness. A postponement was not there for the asking. The
appellant
had to make out a proper case in support of its application for a
postponement. That it failed to do. Not only did it fail to explain
with
sufficient candour why no further steps had been taken by it in the matter but
the affidavit ultimately filed on its behalf
falls far short of establishing
that it has a bona fide defence to the respondent's
claim.
[29] Senior counsel who appeared on behalf of the appellant in
this court sought to persuade us that on the basis of the affidavit
filed by
Nannen a postponement was justified. Everything that could be said in support of
a postponement was said and debated in
this Court. The appellant was undoubtedly
placed in a better position than it would have been had it been left to a lay
person to
argue the matter. Nothing that was said in this court has caused me to
believe that the circumstances were such that the decision
to refuse a
postponement was not the correct one. It follows that I agree that the appeal
must fail.
V M PONNAN
JUDGE OF APPEAL
CONCUR:
SCOTT JA
[1] 1956 (1) SA 364
AD.
[2] 1995 (2) SA 270 D at 273
C-D.
[3]1999 (4) SA 1119 ZSC at
1126 A-D.
[4] [1991] 1 ALL ER (CH
D), at 597 to 598 a-h 599 a e
g.
[5] [1997] ALL SA 317
(W).
[6] 1979 (2) SA 1031 (AD) at
1044 C.
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