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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, JOHANNESBURG

 

CASE NO.: 2021/18884

 

REPORTABLE: No

OF INTEREST TO OTHER JUDGES: No

REVISED

13/10/2021

 

In the matter between:

 

VENTER, KENNETH COLIN                                             Applicant

 

and

 

BARAK FUND SPC LIMITED                                            First Respondent

 

THE HOLLARD INSURANCE COMPANY LIMITED          Second Respondent

 

In re:

 

EBM PROJECT (PROPRIETARY) LIMITED

(IN BUSINESS RESCUE)                                                  First Applicant

 

VENTER, KENNETH COLIN N.O                                     Second Applicant

 

and

 

BARAK FUND SPC LIMITED                                            First Intervening party/ Respondent

 

In re:

 

THE HOLLARD INSURANCE COMPANY LIMITED          Applicant/2^nd Intervening Party

 

and

 

THE MASTER OF THE HIGH COURT                              First Respondent

 

THE COMPANIES AND INTELECTUAL PROPERTY

COMMISSION                                                                   Second Respondent

 

ALL AFFECTED PARTIES LISTED IN

ANNEXURE ‘X’                                                                 Further Respondents

 

EBM PROJECT (PTY) LIMITED

(IN BUSINESS RESCUE)                                                  Respondent

 

This judgment was handed down electronically by circulation to the parties’ legal representatives by email. The date and time for hand-down is deemed to be 10h00 on 13 October 2021

 

JUDGMENT

 

INGRID OPPERMAN J

 

Introduction

[1]          This is an application for leave to appeal to the Full Court of the Gauteng Division against a costs order granted against Mr Kenneth Colin Venter (‘Mr Venter’) directing that he pay on the scale as between attorney and client, including the costs of two counsel, de bonis propriis the costs of the application he brought, ex parte, to place EBM Project (Pty) Ltd (in business rescue) (‘EBM’) into provisional liquidation,. The order was handed down by this court on 14 June 2021.

[2]          This judgment should be read with the 14 June 2021 judgment (‘the main judgment’). The parties are referred to as in the main judgment and all abbreviated descriptions used herein are defined in the main judgment.

Application to have further evidence considered by the court hearing the application for leave to appeal

[3]          Mr Venter, the business rescue practitioner of EBM, filed an affidavit together with his application for leave to appeal (‘the further evidence affidavit’) to place further evidence before the court on appeal and before this court in his application for leave to appeal.

[4]          Mr Fine SC, representing Barak in these proceedings, did not object to the Court receiving the further evidence affidavit subject to it being considered and measured against the findings of this court in the main judgment and in the context of the affidavits already filed.

[5]          There are essentially two points made in the further evidence affidavit. I deal with them in turn.

Abandonment of interim relief

[6]          Mr Venter says that on 8 June 2021 when the matter was called:

‘…..I had abandoned the interim relief prayed for in the conversion application with the knowledge that final relief would be granted under the relief prayed for by Hollard’ (emphasis provided)

[7]          This position was not communicated to Barak or to the court at the time of the hearing on 8 June 2021. The position adopted by Mr van der Merwe, the counsel for Mr Venter at the hearing of the matter on 8 June 2021 is at odds with the proposition now presented by Mr Venter ‘that final relief would be granted under the relief prayed for by Hollard.’ In fact, the argument advanced by his counsel, Mr van der Merwe, and as is recorded in paragraph [25] of the main judgment was the following:

‘Barak contended that the Venter Application was first to be disposed of and, should it fail, that Hollard would be entitled to a final liquidation order. Mr van der Merwe argued that Hollard did not have locus standi to approach the Court for a liquidation order on the basis of section 141 of the New Companies Act, it was only the business rescue practitioner who had approached the court for an order for liquidation and if such application [Hollard’s application] were dismissed, that would be the end of the matter as there would be no application left in which to intervene.’ (emphasis added)

[8]          Be that as it may, what was primarily being interrogated at the hearing on 8 June 2021 is the way in which (by ex parte application in circumstances more fully traversed in the main judgment) Mr Venter had sought to achieve the liquidation of EBM, provisional or final. The withdrawal or abandonment of either the relief or the proceedings would carry with it costs implications which could not be avoided in the manner suggested by Mr Venter.

[9]          At the heart of the costs order lies the court’s disapproval of Mr Venter‘s conduct in seeking an order to place EBM under a provisional winding up order, having himself appointed as a consultant to the provisional liquidator without Barak or any other affected person (as contemplated in chapter 6 of the Companies Act, 2008) having advance knowledge of this scheme. In seeking this relief Mr Venter withheld material facts from the court so as to prevent the court hearing his ex parte application from being alerted to the full picture of all the true facts,[1] to say nothing of not having opposition to enable the court hearing that application to perform its function as an adversarial system is designed to provide. This combination of procedural and substantive trickery is conduct unbecoming of an officer of the court,[2] particularly given the self-interest implicit in the position of ‘consultant’.

[10]       In Osteen Health[3] the court was confronted with an application where a firm of attorneys had caused a matter to be enrolled in the unopposed court, without notice to the attorneys acting for the opposing parties, with the express purpose of seeking relief by default – and excluding the inconvenience of an opponent. Much like the instant case where the conduct of an officer of the court was discovered by fluke[4] Smith J held:

‘[15] In Thunder Cats Investments 49 (Pty) Ltd & Others v Fenton & Others 2009 (4) SA 138 (C), at para. 30, Le Grange J said that:

'An order to hold a litigant’s legal practitioner liable to pay the costs of legal proceedings is unusual and far-reaching. Costs orders of this nature are not easily entertained and will only be considered in exceptional circumstances.'

[16] A court will show its displeasure by ordering a legal practitioner to pay costs from his or her own pocket where the conduct materially deviates from the standard expected from legal practitioners to such an extent that it would be unfair or unconscionable to expect his or her clients to bear the costs.

[17] The following are examples of conduct deserving of censure: “dishonesty, obstruction of the interest of justice, irresponsible and grossly negligent conduct; litigating in a reckless manner, misleading the court, and gross incompetence and a lack of care”. (Multi-Links Telecommunications v Africa Prepaid Services Nigeria Ltd; Telkom SA Soc Limited & another v Blue Label Telecoms Limited & others [2013] 4 All SA 346 (GNP)).

[18] In this case it is manifest that the applicants’ attorneys had set the matter down on the unopposed roll well knowing that the matter was opposed. They had by that time been served with a proper notice to oppose, as well as an answering affidavit. Their declared intention was to obtain relief by default. And if it were not for the fact that Mr Nettleton had fortuitously become aware that the matter had been enrolled for the following day, they would have proceeded to apply for default judgment.

[19] To say that their conduct was reprehensible would be an understatement. The inference is ineluctable that they have dishonestly contrived not only to “blindside” the respondents’ legal representatives, but they also no doubt intended to mislead the court. Their conduct amounted to more than mere negligence or even recklessness, since they appeared to have deliberately schemed to achieve their stated objective, namely to obtain default judgment by stealth. In my view, their conduct deviated substantially from the standard of collegial courtesy and ethical behaviour required of officers of the court, and is accordingly deserving of a punitive costs order. I am thus of the view that it is appropriate that they should be ordered to pay the costs …, de bonis propriis and on the attorney and client scale."

The notice requirements

[11]       The second point in the affidavit of Mr Venter deals with the notice requirements this court found in the main judgment had not been complied with. Mr Venter contends in the further evidence affidavit that he had complied with the notice requirement by distributing his circular that was sent out to all affected parties in April 2021 and in May 2021.

[12]       However, before this Court, Mr Venter failed to reply to the allegations that had been made against him as follows:

‘14    Venter failed to comply with the peremptory requirements of this section. He failed to inform the Court, EBM and all affected persons in the prescribed manner of the fact that there was no reasonable prospect of EBM being rescued. He was obliged to do so, so as to give parties, the opportunity to consider their position and, if necessary, give further comment and decide what course to follow. A list of creditors and affected persons is annexed marked “A” to Barak’s notice of motion in the Barak Application (CaseLines 0001-5). As appears therefrom least 29 entities (excluding SARS, the Master and EBM’s employees) have a direct and substantial interest in this application and were entitled to notice.

15       Venter has conceded the obligation to give creditors and affected persons notice of this application and the Interlocutory Application.

16       Annexed to his replying affidavit in the Interlocutory Application is an email addressed by Venter to the affected persons, being substantially those identified in Annexure "A" to Barak's aforesaid notice of motion wherein he gives “notice” of the Interlocutory Application (CaseLines 010 48).

16.1   First, this “notice” was given ex post facto and to address Barak's contentions in relation to section 141(2) of the Companies Act. The belated notice does not, however, cure the non compliance with the section or the manner in which creditors and affected person's rights have been defeated.

16.2   Second, this "notice", which neither annexes the papers nor the opposition to the Interlocutory Application, can be seen as anything but cynical in the circumstances. There is no basis upon which a creditor or an affected party reading this “notice” would have any idea of what Venter is trying to achieve, against whom he is trying to achieve it and they are, therefore, in no position to exercise their rights.

16.3   Third, this "notice" is required to be given before proceedings are commenced with, as the whole purpose of the notice is to afforded creditors and affected persons the opportunity to consider their position and, if necessary, give further comment and decide what course to follow. The "notice" cannot be given ex post facto.”

[13]       The main judgment should not be read as support for the proposition that all creditors should be joined in all legal proceedings by or against a company in business rescue. This is not what Timasani[5] requires. Having regard to the history of the litigation between the parties in this matter, it can hardly be said that Mr Venter did not know that Barak had a direct and substantial interest in the liquidation proceedings.

[14]       In fact, it was because Mr Venter anticipated opposition from Barak and wished to avoid such opposition (an entirely unacceptable reason for proceeding ex parte), that he had decided to proceed on an ex parte basis. The notice requirement is different and as correctly stated in the affidavit filed on behalf of Barak and quoted hereinbefore, the notice cannot be given ex post facto.

[15]       Although receiving the further evidence affidavit, I find that it does not change the facts underpinning the costs order granted.

[16]       Mr Venter in his application for leave to appeal does not take issue with the order dismissing his application nor the scale on which costs are payable. Nothing proffered in the further evidence affidavit suggests that the order should have been granted against EBM as opposed to Mr Venter.

Failure to join Mr Venter personally

[17]       At 22h27 on 1 September 2021, literally on the eve of the application for leave to appeal which was set down for hearing on 2 September 2021, Mr Venter, through Mr van der Merwe his counsel, mailed short heads of argument in which he, for the first time, contended that Mr Venter ought to have been joined in his personal capacity and that he had not been afforded an opportunity to be heard in this capacity.

[18]       This criticism was not raised as a ground in the application for leave to appeal. It was also not raised in the further evidence affidavit.

[19]       There are a number of things that are startling about this proposition. One is the fact that Mr Venter never applied for leave to intervene in these proceedings which one would have expected if he considered the joinder of himself in his personal capacity a pre-requisite for the order to have been granted. His legal representatives simply changed the pleading heading and Mr Venter, with a stroke of a pen, became the applicant in the application for leave to appeal.

[20]       On the 3rd of September 2021, I, through my registrar, directed a query to Mr van der Merwe asking him to disclose who he had represented in the application for leave to appeal heard on 2 September 2021, by whom he had been instructed and if he had represented Mr Venter in his personal capacity, when Cawood attorneys had come on record to represent Mr Venter.

[21]       Mr van der Merwe responded that he had represented Mr Venter on the instructions of Cawood attorneys, that Mr Venter was part of the proceedings for the first time when he approached the court for leave to appeal and that the application for leave to appeal confirms Cawood attorneys coming on record for Mr Venter.

[22]       Mr van der Merwe undertook to confirm the dates on which Cawood attorneys had received instructions from Mr Venter but such dates have, to date hereof, not been provided.

[23]       The argument that Mr Venter was not afforded an opportunity to be heard or that he did not know that costs were being sought against him in his personal capacity is simply false. I summarise below the facts from which I draw this conclusion.

[24]       In the answering affidavit deposed to on 17 May 2021, the following appears:

‘Wherefore I pray for an order:

1……

2. Dismissing the application with costs, on the scale as between attorney and client, including the costs consequent upon the employment of two counsel, de bonis propriis, including those costs previously reserved.’

 

[25]       The request for such a costs order is repeated a number of times[6] in the answering affidavit filed on 17 May 2021.

[26]       In the replying affidavit Mr Venter deposed to on 24 May 2021 he says:

28.      It is important to consider that direct relief is prayed for against me even though a counter application to that effect had not been filed.

29.      Barak is seeking an order from this Honourable Court about my independence and competency as a business rescue practitioner. Findings on the issues mentioned above, per se, represent findings of negligence. I state this, seeing that the granting of a cost order against me personally will be interpreted as a finding against me on the issues mentioned above.’ (emphasis provided)

[27]       There can be no doubt that Mr Venter knew that an order was being sought against him personally. He said so under oath. Mr van der Merwe argued Mr Venter’s case on 8 June 2021 when the matter was heard. When probed during argument on 2 September 2021, Mr van der Merwe could not argue persuasivley for whom he had argued against the de bonis propriis order on 8 June 2021 if not for Mr Venter in his personal capacity. He stated that he had appeared on behalf of Mr Venter, the business rescue practitioner. But his is non-sensical because Mr Venter the business rescue practitioner represented EBM and a costs order against EBM is precisely what Barak sought to avoid.

[28]       On 4 June 2021 Mr Wright from Webber Wentzel, Barak’s attorneys of record wrote a letter to Cawood Attorneys stating that they were amenable to consenting to a draft order proposed but subject to the Venter application being withdrawn and a tender of costs on an attorney client scale being made. This was rejected and it was recorded by Cawood attorneys that if agreement could not be reached, all would have to be argued which they hoped to avoid. No tender in respect of costs was forthcoming and thus no settlement was reached.

[29]       The authorities to which I have been referred in the short heads of argument filed by Mr van der Merwe in support of the proposition that Mr Venter ought to have been joined, deal with public bodies where costs orders were granted against individuals. Clearly under such circumstances the individual should be joined and should be afforded an opportunity to respond and be represented. The present situation is distinguishable as Mr Venter was no mere employee of a larger organisation, he was the appointed business rescue practitioner driving the litigation and to have joined him would have been an exercise in empty formalism. That he was in substance before the court and represented by counsel to fight the costs order sought against him admits of no doubt.

[30]       Mr Venter had knowledge of what was being sought against him, he had a fair opportunity to respond to the charges against him and was represented in the hearing by Mr van der Merwe.

Interests of justice

[31]       Mr van der Merwe argued that it would be in the interests of justice to grant leave to appeal.

[32]       The Court's power to grant to leave to appeal to a higher court is found in section 17(1) of the Superior Courts Act, 2013.[7]

[33]       Leave to appeal should be granted only when there is a sound and rational basis for doing so[8]. The threshold for granting leave to appeal has also been raised[9].

[34]       The principles that emerge from Four Wheel Drive and Independent Examinations Board requires that one test the grounds on which leave to appeal is sought against the facts of the case and the applicable legal principles to ascertain whether an appeal court "would" interfere in the decision against which leave to appeal is sought.

[35]       Mr Venter approached this Court for relief which he knew (or ought to have known) he was not entitled to seek as it is contrary to the fundamental construct of an adversary system, courts are to exercise powers to grant ex parte orders only in very narrow circumstances and none of those found application here; he knew (or ought to have known) that if his ex parte application had been granted that would bring about an end of business rescue proceedings, would entirely defeat the rights of all affected parties to the earlier litigation and that all those parties would resist the relief claimed.[10]

[36]       Moreover, this court exercised a discretion when making the costs order and Mr Venter has not persuaded me that it was erroneously exercised. This proposition of law is not challenged by Mr Venter.

[37]       In Blom,[11] the Appellate Division said:

“Appellant appeals also against the order as to costs, contending that, even if the declaratory order was correctly made, the appellant, a public official, should not be mulcted in costs since his attitude, though mistaken, was bona fide. Appellant's counsel relied for this contention on the case of Coetzeestroom Estate and GM Co v Registrar of Deeds  1902 TS 216 at 223.

On this aspect the judgment of the Court a quo reads as follows:

'In regard to the question of costs, despite respondent having acted in good faith and in his official capacity, the Court nevertheless has a discretion to award costs against him. Applicants have succeeded in establishing an important principle relating to their possible release from custody. Respondent was further presumably aware of the aforementioned decisions when he decided to oppose this application. The applicants have succeeded in establishing an important principle relating to their liberty. We are therefore disposed, in the exercise of our discretion, to award the applicants their costs.'

In awarding costs the Court of first instance exercises a judicial discretion and a Court of appeal will not readily interfere with the exercise of that discretion. The power of interference on appeal is limited to cases of vitiation by misdirection or irregularity, or the absence of grounds on which a court, acting reasonably, could have made the order in question. The Court of appeal cannot interfere merely on the ground that it would itself have made a different order. (See Protea Assurance Co Ltd v Matinise  1978 (1) SA 963 (A) at 976H; Minister of Prisons and Another v Jongilanga  1985 (3) SA 117 (A) at 124B and the authorities cited in these two cases.)

I am not convinced that the rule laid down in the Coetzeestroom case supra in relation to applications against the Registrar of Deeds arising on matters of practice is applicable to a case such as the present one; and in any event the rule should not be elevated into a rigid one of universal application which fetters the judicial discretion (see Potter and Another v Rand Townships Registrar  1945 AD 277 at 292 - 3; Commissioner for Inland Revenue v Ropes and Mattings (SA) Ltd 1945 AD 724 at 731 - 2; Die Meester v Joubert en Andere  1981 (4) SA 211 (A) at 218B - H).” (emphasis added)

[38]       The principle in Blom is cogent authority for the proposition that a court enjoys a discretionary power to make costs orders against public officials. In Osteen Health, the court granted a de bonis propriis order against an attorney whose conduct was at odds with that expected by an officer of the court.

[39]       There is, therefore, no genuine debate that this Court enjoyed the power to make the costs order against Mr Venter; that the exercise of that power is discretionary; and that it is not appealable in the absence of a “…misdirection or irregularity, or the absence of grounds on which a court, acting reasonably have made the order in question…”

[40]       Mr Venter has not made out such a case to merit an appeal court’s attention in his application for leave to appeal.

Costs

[41]        It was argued, that at best, this case falls within the category of cases considered in Alluvial Creek[12] where it was said:

“An order is asked for that he pay the costs as between attorney and client. Now sometimes such an order is given because of something in the conduct of a party which the Court considers should be punished, malice, misleading the Court and things like that, but I think the order may also be granted without any reflection upon the party where the proceedings are vexatious, and by vexatious I mean where they have the effect of being vexatious, although the intent may not have been that they should be vexations. There are people who enter into litigation with the most upright purpose and a most firm belief in the justice of their cause, and yet whose proceedings may he regarded as vexatious when they put the other side to unnecessary trouble and expense which the other side ought not to bear. That I think is the position in the present case.” (emphasis added)

Conclusion

[42]       In the decision of Dexgroup (Pty) Ltd v Trustco Group International (Pty) Ltd and Others[13], Wallis JA observed that a court should not grant leave to appeal, and indeed is under a duty not to do so, where the threshold which warrants such leave, has not been cleared by an applicant in an application for leave to appeal. In paragraph [24] he held as follows:

“[24] For those reasons the court below was correct to dismiss the challenge to the arbitrator's award and the appeal must fail. I should however mention that the learned acting judge did not give any reasons for granting leave to appeal. This is unfortunate as it left us in the dark as to her reasons for thinking that enjoyed reasonable prospects of success. Clearly it did not. Although points of some interest in arbitration law have been canvassed in this judgment, they would have arisen on some other occasion and, as has been demonstrated, the appeal was bound to fail on the facts. The need to obtain leave to appeal is a valuable tool in ensuring that scarce judicial resources are not spent on appeals that lack merit. It should in this case have been deployed by refusing leave to appeal.” (emphasis added)

[43]       I have considered the extensive application for leave to appeal and hold the view that most of the grounds have been answered in the main judgment.

[44]       Nothing argued has persuaded me that another court might (old test) or would (new test), find differently this is particularly so as neither the fact that the Venter application was dismissed nor that attorney/client costs was appropriate, is being appealed.

[45]       The belated denial of an opportunity to be heard by Mr Venter contradicted by his evidence under oath in his replying affidavit, is worthy of censure. Barak relying primarily on the Alluvial Creek principle which I too, consider to be applicable, sought a punitive costs order. For all these reasons I consider such a costs order appropriate.

Order

[46]       I therefore grant the following order:

46.1. The further evidence affidavit is received.

46.2.  The application for leave to appeal is dismissed with costs to be payable on the scale as between attorney and client, to include the costs consequent upon the employment of two counsel, where so employed.

 

 

I OPPERMAN

Judge of the High Court

Gauteng Local Division, Johannesburg

 

 

Counsel for Mr Venter in the application for leave to appeal: Adv LK van der Merwe

Instructed by: Cawood Attorneys Inc

Counsel for the respondent in the application for leave to appeal: Adv DM Fine SC and Adv AW Pullinger

Instructed by: Webber Wentzel

Date of hearing: 2 September 2021

Date of Judgment: 13 October 2021

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