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IN THE HIGH COURT OF SOUTH AFRICA

(Northern Cape High Court, Kimberley)

Case no: 138/2010

Date heard: 2010-02-11

Date delivered: 2010-03-19

In the application of:

JOHAN FRANCOIS ENGELBRECHT N.O. 1^ST APPLICANT

BRIAN ST. CLAIR COOPER N.O. 2^ND APPLICANT

MATHEBE VIOLET PHATSOANE N.O. 3^RD APPLICANT

GARY BOTHA N.O. 4^TH APPLICANT

versus

BRC DIAMONDCORE LIMITED 1^ST RESPONDENT

ANSAFON (PTY) LTD 2^ND RESPONDENT

JUDGMENT

MJALI AJ:

1. During the course of the applicant’s argument the parties reached a settlement. A draft order was prepared and made an order of court which read as follows:

“The applicants are authorized to raise finance with any registered financial institution or bank for an amount not exceeding R2 million, such finance to be costs in the administration of the estate of Diamond Core Resources (PTY) LTD and that the applicant is authorized, in raising the finance, to encumber the assets, limited to shares held by DCR and/or loan accounts in favour of DCR, for that purpose.

The judgment on costs is reserved”.

2. The background is crucial to the proper determination of costs issue in this matter. Diamond Core Resources (PTY) LTD (DCR) was finally liquidated by order of this court on 3 July 2009. After an unsuccessful application for leave to appeal the liquidation order, the respondents petitioned the Supreme Court of Appeal. That application was still pending. It has been confirmed that subsequent to the hearing the Supreme Court of Appeal has turned down the application for leave to appeal. The applicants, who were duly appointed in terms of the Master of the High Court’s reference number K18/09 as joint liquidators of DCR (in liquidation), acting in their representative capacity brought this application on an urgent basis for relief in the following terms:

1. that the application be heard as one of urgency and that the non compliance with the rules relating to form and service in terms of rule 6(12)(b) of the Uniform Rules of this court, be condoned,

2. that the applicants be authorised to lodge this application in terms of the provisions of Section 386(5) read with section 387(3) of the Companies Act No. 61 of 1973 (as amended),

3. that the applicants be authorised to raise finance with any registered financial institution or bank for an amount not exceeding R2 000 000.00 (Two Million Rand), against the assets of Diamond Core Resources (PTY) LTD, pending the outcome of the petition to the Supreme Court of Appeal against the final liquidation order granted by this court on 03 July 2009,

4. that costs in this application be costs in the administration of the estate of Diamond Core Resources(PTY) LTD, alternatively that the respondents be ordered to pay the costs in the event of them opposing the application.

3. In substantiation of their application the applicants stated that they are under a statutory duty to preserve and maintain the assets of the liquidated company and that a need has arisen to urgently raise funds to be able to carry out such duties. In raising such funds the applicants sought to encumber the assets of the liquidated company. For that they required authority of the Court.

4. The respondents opposed the application. In their answering affidavit, attested to by Mr Andreas Elia, the Director of the second respondent, (on behalf of the first and the second respondents and on the strength of a resolution of its directors, dated 01 February 2010), the respondents challenged the application inter alia on the grounds that:

1. the application is ill conceived in that the applicants do not need authority of the court to raise loan finance, and

2. the authority would only be required where they intended securing a loan with the assets of DCR and its subsidiaries. No such authority was sought by the applicants.

5. The first respondent did not file an answering affidavit of his own but merely confirmed the correctness of the averments contained in the second respondent’s (Ansafon (Pty) Ltd’s) answering affidavit. The applicants filed a replying affidavit wherein they challenged the locus standi of Ansafon to oppose this application on the grounds that it was not a share holder of DCR. This fact was conceded in the heads of argument filed on the day prior to the hearing by Mr Coetzee, who appeared for the respondents. Together with the heads of argument, Mr Coetzee filed what purported to be the first respondent’s answering affidavit. This was done without any prior application for the condonation of the late filing thereof or for the filing of a fourth set.

6. Mr Vorster, who appeared for the applicants, took a point in limine that such affidavit be treated as pro non scripto in that it was a further affidavit filed without the leave of the Court in terms of Rule 6(5) of the Uniform Rules of Court. In reply Mr Cotzee argued that this was not a fourth set in that the first respondent had not filed any answering affidavit as he was entitled to do. According to Mr Coetzee the only problem was that the affidavit was filed out of time and that there was no substantive application for condonation for its late filing. When his attention was drawn to the fact that Ansafon deposed to an answering affidavit on behalf of both respondents and that the first respondent confirmed its correctness, Mr Cotzee was constrained to concede that an irregular procedure was followed and as such it should be treated as pro non scripto.

7. It is trite that three sets of affidavits are allowed in respect of opposed applications, ie the founding affidavits, the answering affidavits and the replying affidavits. The court may, in its discretion, permit the filing of further affidavits upon a proper application by the party seeking such indulgence, setting out reasons why it requires the indulgence. The applicant must also show that he has not been mala fide or culpably remiss. James Brown & Hamer (Pty) Ltd (Previously named Gilbert Hamer & Co Ltd) v Simmons NO 1963 4 SA 656 (A) at 660 D-H. The respondents have not made any application but simply slipped the affidavit into the court file. For that reason I ordered that it be disregarded.

8. That order coupled with the concession that Ansafon had no locus standi spelt the demise of the respondents’ case. There was technically therefore no opposition to the application. The respondents decided to throw in the towel. The parties engaged in talks which culminated in the order quoted above. Of note is that the parties agreed to the prayers sought in the Notice of Motion and the “proposed amendment” contained in the Notice of Application to Amend the Notice of Motion filed by the applicants prior to the hearing. The effect of the proposed amendment was to include a prayer that the applicants be granted leave to encumber the assets of DRC to raise the finance required.

9. Mr Vorster prayed for costs against the respondents on an attorney and client scale. He argued that the respondents were warned that if they opposed the application costs on an attorney and client scale would be sought against them. Further the conduct of the respondents in their opposition of this application called for an award of costs on an attorney and client scale, he submitted. Mr Coetzee resisted the award of the costs against the respondents on the grounds that his clients were entitled to oppose the application and that the settlement differs from the prayers sought in the initial Notice of Motion and that the proposed amendment to the initial Notice of Motion had not yet been granted.

10. Mr Cotzee’s argument is fallacious for the following reasons:

    1. this application was brought in terms of Section 386(5) read with section 387(3) of the Companies Act No. 61 of 1973 (as amended). Section 386(5) provides: “In a winding-up by the Court, the Court may, if it deems fit, grant leave to a liquidator to raise money on the security of the assets of the company concerned or to do any other thing which the Court may consider necessary for winding up the affairs of the company and distributing its assets”, (my emphasis).

10.2 in paragraph 13.3 of their founding affidavit the applicants state “and that the applicants be authorised, in raising finance, to encumber assets of DCR for that purpose”.

10.3 in effect the proposed amendment would not introduce new relief that was not canvassed in the Notice of Motion and the founding affidavit,

10.4 it can be deduced from the fact that the respondents consented not only to the relief sought in the initial Notice of Motion but also to the relief contained in the proposed amended Notice of Motion that they had no objection to such amendment being effected. And,

10.5 the mere fact that the assets to be encumbered have in terms of the settlement been limited to shares held by DCR and/or loan accounts in favour of DCR, is of no consequence as the phrase “assets of DCR” is inclusive of the assets to be encumbered (in terms of the settlement).

11. It is trite that the award of costs is within the discretion of the Court which must be exercised judicially with due regard to all relevant considerations. These would include the nature of the litigation being conducted and the conduct of the parties (or their representatives). Intercontinental Exports (Pty) Ltd v Fowles 1999 (2) SA 1045 (SCA) 1055F-G. Mala fides, unreasonableness and frivolousness have been found to be factors justifying the imposition of an adverse costs order. Performing Arts Council of the Transvaal v Paper Printing Wood and Allied Workers Union and others [1993] ZASCA 201; 1994 (2) SA 204 (A) at 221A–C.

12. The general rule is that costs follow the event, in other words the successful party should not be left out of pocket. This rule should be departed from only where good grounds for doing so exist. Pretoria Garrison Institutes v Danish Variety Products (Pty) Ltd 1948 (1) SA 839 (A); Union Government v Gass 1959 (4) SA 401 (A) at 413.

13. In this matter the respondents persisted with their ill conceived defence and only consented to the order sought at the eleventh hour. They were warned timeously that a cost order on an attorney and client scale would be sought against them should they continue defending what should have been clear to them was indefensible. Instead when it became clear to them that the answering affidavit filed in opposing this application was deposed to by a director of Ansafon who had no locus standi to oppose, the respondents sought to supplement their case by filing a further affidavit without following the proper procedure.

14. It is clear that pending the appeal against the applicants required authority of the Court to encumber the assets of DCR and as such they were justified in making an application to this court for the relief sought. In Skotnes v South African Library [1997] ZASCA 28; 1997 2 All SA 379 (SCA) at p386 VIVIER JA stated:

“Unsuccessful litigants cannot escape liability for costs when it is clear that a resort to litigation was the only way in which the successful party could obtain delivery of that which the unsuccessful party unlawfully refused to deliver.”

15. The conduct of the respondents was most unreasonable and as such, justify an order on an attorney and client scale. In result I make the following order:

The respondents are to pay the costs of this application including costs of the application to strike out the further affidavit on an attorney and client scale.

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GNZ MJALI

ACTING JUDGE

NORTHERN CAPE HIGH COURT, KIMBERLEY

On behalf of the Applicants	Adv J Vorster
Instructed by	Van de Wall & Partners
On behalf of the Respondents	Adv WJ Coetzee
Instructed by	Engelsman Magabane Inc.

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