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SOUTH GAUTENG HIGH COURT

JOHANNESBURG

CASE NO: 09/35416

DATE:23/07/2013

In the matter between:

UKWANDA LEISURE HOLDINGS (PTY) LTD...............................APPLICANT

and

ABSA BANK LIMITED....................................................................RESPONDENT

In re:

ABSA BANK LIMITED...........................................................................PLAINTIFF

and

UKWANDLA LEISURE HOLDINGS PROPIETARY LIMITED ….DEFENDANT

J U D G M E N T

DOSIO, AJ:

INTRODUCTION

[1] This application is in terms of rule 33(4) of the uniform rules. The defendant requests that all issues other than the computation of its loss, as set out in paragraphs 56,58,59,60,61 and 63 of the counterclaim, be heard and determined before the issue of the quantum of the defendant’s loss is adjudicated.

[2] The defendant submits that the later issue of quantum will become academic and superfluous should it fail to establish its case on the merits.

[3] The plaintiff opposes this application.

THE PURPOSE OF THE APPLICATION

[4] The counsel for the defendant has stated that it will be convenient to order separation. The reasons put forward are;

1. It will benefit the court hearing this trial, as it will curtail the evidence led. Should the separation be granted, the trial will last approximately 10 (ten) days instead of approximately 15 (fifteen). The court’s time will also be saved.

2. It will be fair, as it will save costs for both parties, in that once the separation is granted and should the defendant fail in its counterclaim, the costs of preparation in regard to the requested separated issues and the hearing thereof will not be incurred by either party.

3. The defendant has a limited budget of R1,000,000-00 (one million rand) to run this litigation as opposed to the plaintiff who has an unlimited amount of resources to litigate.

[5] The counsel for the plaintiff contends that the proposed separation will necessitate witnesses being led twice on the same facts should it be successful against the defendant on the merits. This will lengthen the trial causing wasted costs, and affect the credibility of witnesses. The likelihood of an appeal after the completion of the first phase of the trial, will exacerbate delays in finalizing this matter.

[6] Plaintiff’s counsel contends that the defendant has failed to illustrate how the separation will shorten the proceedings.

[7] Plaintiff’s counsel submits that the defendant has delayed the finalization of this matter on previous occasions, in that a few days before the commencement of the trial, which was scheduled for the 15^th of March 2012, the defendant unilaterally passed a resolution resolving that the defendant would voluntarily begin with business rescue proceedings. A day preceding the hearing, the plaintiff was informed that the business rescue proceedings had been terminated, due to the defendant successfully being recapitalized by its shareholders. Four years have passed since the launch of the proceedings against the defendant and 18 (eighteen) months have passed since the previous trial date and the new trial date being the 23^rd August 2013.

[8] Counsel for the plaintiff also states that the defendant put three different formulations of the issues it sought to separate. Firstly, in its notice of motion the defendant sought a separation of all the issues in paragraphs 56 to 63, secondly, in its founding affidavit the defendant omitted paragraphs 56 to 58 of its counterclaim and instead sought a separation of the issues in paragraphs 59 to 63 of its counterclaim. Thirdly, in its replying affidavit the defendant omitted paragraphs 57 and 62 of its counterclaim, and instead sought a separation of the issues contained in paragraphs 56, 58 to 61 and 63. The plaintiff’s counsel contends this shows the defendant has difficulty to define with clarity the issues it seeks to separate.

FACTS OF THE MAIN ACTION

[9] The litigation in the main action centers around trading on the regulated South African derivatives market. The plaintiff alleges that on or about the 10^th of October 2007, Cortex Asset Management (Pty) Limited and the defendant entered into a written agreement of mandate. The defendant authorized Cortex Asset Management to manage local and foreign investments on its behalf and also to open the following accounts: SAFEX Financial, and Equities. The defendant disputes such an agreement existed.

[10] In terms of annexure “C” to the mandate, the plaintiff alleges that the defendant agreed to the appointment of Cortex Derivative Brokers (“Cortex”), being the trading member of the JSE, with which the defendant would trade in respect of single stock futures and that the defendant would be registered as a client of Cortex in terms of rule 7.60.2 of the JSE.

[11] The plaintiff is claiming an amount of R732 000 000-00 (seven hundred and thirty two million rand), together with interest and costs arising from the so-called close out of the defendant in compliance with the derivative rules of the JSE. This resulted in an alleged default of the defendant to meet a margin call in respect of the Pinnacle Point Single Stock Futures (“PNG SSF’s”) on the back of a dramatically low closing price of the underlying stock (“PNG shares”) on the 3^rd of December 2008.

[12] The defendant denies liability and counterclaims for an amount of R1,064,315,905 (one billion, sixty four million, three hundred and fifteen thousand and nine hundred and five rands) which is based on the plaintiff’s alleged unlawful interference in the contractual relationship between Nedbank, the issuer of the PNG SSF’s, and the defendant.

THE LEGAL PRINCIPLES PERTAINING TO SEPARATION OF ISSUES

[13] Rule 33 (4) reads as follows:

“33(4) If, in any pending action, it appears to the court mero motu that there is a question of law or fact which may conveniently be decided either before any evidence is led or separately from any other question, the court may make an order directing the disposal of such question in such manner as it may deem fit and may order that all further proceedings be stayed until such question has been disposed of, and the court shall on the application of any party make such order unless it appears that the questions cannot conveniently be decided separately”

[14] In the case of S v Malinde and Others 1990 (1) SA 57 (A) at page 68 C-D, Nicholas AJA stated;

“If overall, and with due regard to the divergent interests and considerations of convenience affecting the parties, it appears that the advantages would outweigh the disadvantages, the Court would normally grant the application”.

[15] As stated by Horn AJ in the case of Internatio (Pty) Ltd v Lovemore Brothers Transport CC 2000 (2) SA 408 (SEC) at page 411;

“… the Court must be given sufficient information to enable it to decide this procedural step meaningfully. The relief is not a mere formality. The convenience must be demonstrated…

…A Court will not grant a separation where it is apparent that the evidence required to prove any of the issues on the merits will also be required to be led when it comes to proving quantum. Such a situation will result in witnesses having to be recalled to cover issues which they had already testified about…”

[16] The decision of Consolidated News Agencies (Pty) Limited (in liquidation) v Mobile telephone Networks (Pty) Limited and Another 2010 (3) SA 382 (SCA) at paragraph 90 the court warned that;

“…in many cases, once properly considered, issues initially thought to be discrete are found to be inextricably linked. And even where the issues are discrete, the expeditious disposal of litigation is often best served by ventilating all the issues at one hearing.”

[17] The decision of SA Transport and Allied Workers Union v Garvis and Others 2011 (6) SA 382 (SCA) at paragraph 45 the court warned that;

“…piecemeal litigation is not to be encouraged.”

[18] In the case of Molotlegi and Another v Mokwalase [2010] 4 All SA 258 (SCA) at paragraph 20 it was stated;

“…Where there is the likelihood that such a separation might cause the other party some prejudice, the court may, in the exercise of its discretion, refuse to order separation.”

EVALUATION

[19] As stated in the case of Sharp v Victoria West Municipality 1979 (4) ALL SA 385 (NC), at page 386;

Where parties “are not ad idem that piecemeal hearing is convenient, the Court will order the separate trial of the merits as a separate issue only where substantial grounds justify such a course.”

[20] This court is aware that it would not be convenient to separate issues if it would not materially shorten the proceedings¹. In addition, it would be undesirable to grant a separation if the separated issues and the non-separated issues are linked.²

[21] The defendant’s counsel has argued that should a separation be denied, they will have to procure the presence of expert witnesses to explain the underlying asset value of the PNG share during the trial. This evidence will be greatly contested. It will create additional expenses to both parties, as it will lengthen the trial considerably. It is clear that if the defendant is unsuccessful on the merits, this highly specialized evidence will not be necessary.

[22] This court must ensure, in a judicious manner, that intricate issues affecting the merits of this case are expeditiously dealt with and not protracted by evidence which may become unnecessary should the plaintiff be successful on the merits.

[23] This court will evaluate each issue to be separated individually.

[24] Paragraph 56 of the counterclaim, states;

“56. The Defendant suffered loss and damage directly as a result of the aforesaid intentional and unlawful conduct of the plaintiff”.

[25] This court finds that these issues may be conveniently separated. Should the trial court find at the merit stage that the plaintiff acted intentionally, negligently and unlawfully, only then it will have to hear evidence on quantum .

[26] Paragraph 58 states;

“58. Had it not been for the Plaintiff’s aforesaid unlawful conduct the closing price of the PNG shares would have remained stable until 18 December 2008 and therefore the total amount of margin and cash would have remained intact until that date”;

[27] The plaintiff’s counsel contends that whether the plaintiff’s alleged conduct was unlawful and whether it had any impact on the share price of the PNG shares until 18 December 2008 are all intertwined with the non-separated issues in the defendant’s counterclaim at paragraphs 45 to 49, 53.3 and 54 to 54.2.

[28] This court has considered whether evidence pertaining to the trade in PNG shares by Fradeys, and the selling of stock short until 4 December 2008, as well as the trading in a tranche of 35 600 PNG shares on 3 December 2008 at 17h00 at a closing price of 60 cents per PNG share would be intertwined with paragraph 58.

[29] This court does not believe the aspects in paragraph 58 are intertwined with the non-separated issues. If the plaintiff is successful on the merits of the defendant’s counterclaim then the issue of the stability of the shares will be of no relevance.

[30] The defendant disagrees that there was an agreement. Therefore, whether or not the plaintiff prohibited Cortex from trading in PNG stock and SSF’s, and whether the defendant was unable to protect its position on 27 November 2008 due to the deliberate withholding of its funds by the plaintiff will all be issues to be dealt with in the assessment of the defendant’s counterclaim.

[31] The only question the court has to answer in the first phase, pertaining to the merits is whether or not the plaintiff was obliged to make the R5, 000,000-00 (five million rand) available to the defendant. If it was not obliged to do so, then the defendant’s counterclaim may not succeed. If it was obliged to do so, then proof of the loss to the defendant will be required. Expert evidence may then have to be led to quantify the loss to the defendant and the manner in which the defendant would have maintained the share price at an acceptable level had the R5,000,000-00 (five million rand) been received.

[32] Paragraph 59 states;

“59. According to the Nedbank unwind proposal, thirty per cent of the positions were to be unwound by no later than 18 December 2008. It meant that the Defendant would have been obliged to:

59.1 purchase 260,150,160 PNG shares at a ruling price of R1.01, i.e. at a total price of R262,751,661;

59.2 maintain the initial margin on the remaining 70% of the positions lawfully held by it, in an amount of R155,396,222”;

[33] The plaintiff’s counsel contends this issue can never be regarded as discrete and separable from the remaining issues on the pleadings as this issue is directly related to and intertwined with the non-separated issues arising from the defendant’s counterclaim at paragraphs 27, 28, 30 to 30.3, 32, 40 to 43 and 53.4.

[34] The plaintiff’s counsel submits that the Nedbank unwind proposal meant that the defendant would have been obliged to purchase an alleged number of PNG shares at an alleged price on an indeterminate and unspecified date and that the defendant would have been obliged to maintain the initial margin on the remaining 70% of the positions lawfully held by it. This, according to the plaintiff, becomes important in respect to the merits.

[35] The plaintiff’s counsel submits that whether the defendant would have been able to successfully complete the Nedbank unwind proposal by financing the purchase of PNG shares through a loan from Innovatis Fund Investment is also inextricably linked with the merits.

[36] The defendant’s counsel submits that the fact that the plaintiff sabotaged the Nedbank unwind plan, is all part and parcel of the plaintiff’s wrongdoing.

[37] This court finds that should the plaintiff be successful on the merits of the defendant’s counterclaim, then the issue of the unwinding plan by Nedbank becomes superfluous. It is only if the defendant is successful on its counterclaim pertaining to the unwinding plan and the consequences for the defendant as a result of the plaintiff not accepting the unwinding plan, that the loss incurred by the defendant will require to be considered.

[38] This issue is inextricably linked to the non-separated issues and the defendant’s request for separation of this issue is refused. This court does not consider that it would be consistent in the administration of justice for the merits of a matter to be further sub-divided into various little compartments.

[39] Paragraph 60 states;

“60. The Defendant would have been able to finance the purchase by virtue of a loan to be granted by Innovatis Fund Investment in an amount of US $25,000,000(equal to R249,750,000 calculated at the average US $/ZAR exchange rate as on 18 December 2008) together with its own available cash funds of R13,001,661”,

[40] The plaintiff’s counsel contends that the defendant’s ability to borrow an amount of $25,000,000-00 (twenty five million US dollars) from Innovatis Fund is directly related to and intertwined with the non-separated issues arising from the defendant’s counterclaim at paragraphs 27, 28, 30 to 30.3, 32, 40 to 43 and 53.4..

[41] This court agrees with the plaintiff’s counsel on this point for the same reasons mentioned at paragraph [38] supra and the defendant’s request for separation of this issue is refused.

[42] In respect to paragraph 61 which states;

“61. If the Defendant had been able to conclude the purchase transaction, it would have been in the following position:

61.1 It would have been the holder of R607,017,040 March 09 PNG SSF’s at a nominal value of R60,701,704;

61.2. It would have been the outright owner of 260,150,160 PNG shares with a value , based on the value of the underlying assets of PNG, of R1.20 per share equaling R312,180,192;

61.3 It would have had cash assets in the form of initial margin and cash on call account with the Plaintiff in an amount of R208,992,941;

61.4 It would accordingly have possessed of net assets in an amount of R581,874,837 minus the loan amount of R249,750,000, equaling R332,124,837”,

[43] The plaintiff contends that the underlying asset value of the PNG shares at a value of R1.20 per PNG share is not discrete and separable from the remaining issues on the pleadings and is directly intertwined with paragraph 25 of the defendant’s counterclaim.

[44] With regards to the underlying asset value of the PNG shares at a value of R1.20 per PNG share, the defendant claims that it would necessitate the leading of extensive evidence with the result that if separated it will save considerable time.

[45] This court is of the view that this enquiry is more akin to an assessment of the defendant’s quantum of damages than the merits. The issue is, therefore, not inextricably linked with the merits and may be conveniently decided together with the defendant’s quantum of damages, if the enquiry reaches that stage. This issue may, accordingly, be separated.

[46] Paragraph 63 states;

“63. In the premises the Defendant suffered damages in the amount of R1,064,315,905 or such lesser amount as the Plaintiff’s claim may be reduced by as pleaded in paragraph 62 above.”

[47] This enquiry becomes relevant only after the defendant has proved the merits of its counterclaim and should be separated.

CONCLUSION

[48] This court considers that the areas of separation approved of above will not only shorten proceedings, but will also curtail the expenses that both parties will incur should the plaintiff prevail on the merits of the defendant’s counterclaim.

[49] It is clear both parties want to know as soon as possible where they stand in respect to the merits. A protracted trial dealing with issues pertaining to quantum, which ultimately will become unnecessary should the plaintiff succeed on the merits of the counterclaim, goes against the interests of an expeditious trial.

[50] This trial appears to be somewhat complicated with intricate issues. It is this court’s task to curtail unnecessary proceedings as far as possible.

[51] In the premises, the following order is made;

1. The application for separation is granted in respect to paragraphs 56, 58, 61 and 63 and is refused in respect to paragraphs 59 and 60 .

2. Costs in the cause.

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D. DOSIO

ACTING JUDGE OF THE SOUTH GAUTENG

HIGH COURT, JOHANNESBURG

APPEARANCES:

COUNSEL FOR THE PLAINTIFF: ADV. J. DU TOIT SC

INSTRUCTED BY: VENEZIANO INC.

COUNSEL FOR THE DEFENDANT: ADV. L.N HARRIS SC

ADV. F. ISMAIL

INSTRUCTED BY: WEBBER WENTZEL

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