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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, JOHANNESBURG

CASE NUMBER: 40681/2019

CASE NUMBER: 41368/2019

CASE NUMBER: 526/2020

CASE NUMBER: 13811/2020

CASE NUMBER: 12492/2020

In the matter between

KLEIN, NORMAN N.O                                                                             1^st Applicant

VAN DER MERWE, LIEBENBERG

DAWID RYK N.O                                                                                     2^nd Applicant

NIEZEL, TARYN JANE N.O                                                                    3^rd Applicant

NDYAMARA, AVIWE NTANDAZO N.O                                                   4^th Applicant

NDUNA, SIBUSISO N.O                                                                          5^th Applicant

And

LEVICK, LEIGH ANNE                                                                        1^stRespondent

LEVICK, TANNAH                                                                             2^nd Respondent

THE MASTER OF THE HIGH COURT,

JOHANNESBURG                                                                            3^Rd Respondent

NETSHITAHAME, NTUWISENI N.O                                                  4^th Respondent

 

In re the various applications between: -

LEVICK, LEIGH ANNE                                                                            1^st Applicant

LEVICK, TANNAH                                                                                  2^nd Applicant

And

THE MASTER OF THE HIGH COURT,

JOHANNESBURG                                                                              1^st Respondent

NETSHITAHAME, NTUWISENI N.O                                                  2^nd Respondent

KLEIN, NORMAN N.O                                                                        3^rd Respondent

VAN DER MERWE, KIEBENBERG

DAWID RYK N.O                                                                                4^th Respondent

NIEZEL, TARYN JANE N.O                                                                5^th Respondent

NDYAMARA, AVIWE NTANDAZO N.O                                              6^th Respondent

NDUNA, SIBUSISO N.O                                                                     7^th Respondent

 

JUDGMENT

 

DIPPENAAR J:

 

Delivered: This judgment was prepared and authored by the Judge whose name is reflected and is handed down electronically by circulation to the parties’ legal representatives by e-mail. The date and time for hand-down is deemed to be 10h00 on the 23^rd November 2020.

[1] The applicants, the joint provisional trustees (“the trustees” or “the provisional trustees”) of the insolvent estate of Mr Martin Ashley Levick (“the insolvent”), seek authority under s18(3) of the Insolvency Act[1] (“the Act”) to litigate in five pending review applications and any other litigation that may take place between the applicants and the first and second respondents (collectively referred to as “the witnesses”) in relation to their attendance at an enquiry under s152(2) of the Act into the insolvent’s affairs (“the enquiry”). The first respondent is the wife of the insolvent and the second respondent is his daughter. Both opposed the application. The Master has not opposed the application.

[2] The background to the application is not contentious. The insolvent’s estate was sequestrated, provisionally on 23 April 2019 and finally on 4 June 2019. The provisional trustees were appointed on 3 May 2019. Pursuant to a request by two creditors of the insolvent, the Master convened the s152 enquiry on 27 May 2019 and on 7 June 2019, issued summonses requiring the witnesses to attend the enquiry.

[3] The Master extended the trustees’ powers on 16 August 2019 in terms of s73(1) of the Act to “obtain legal services as per paragraph 7 of the application”. I interpret that to mean the power to engage the services of legal representatives. As the full application to the Master has not been placed before me and the majority of the application has been redacted, it cannot be ascertained what paragraph 7 of the application referred to.

[4] Various challenges were made by the witnesses regarding their attendance at the enquiry, resulting in the Master making various rulings. Pursuant thereto, the five pending review applications were launched by the witnesses challenging various decisions made by the Master’s representative, the fourth respondent, in relation to their attendance at the enquiry. In the last review application, launched on 26 June 2020 under case number 12492/2020, the witnesses seek, inter alia, to review and set aside the entire enquiry and a declaratory order that consequent thereupon the meetings which were convened and held in relation to the enquiry are invalid and of no legal force and effect.

[5] The trustees are cited in respondents in all the review proceedings. In the review applications under case number 41368/2019, the trustees have launched a counter application aimed at securing the appearance and co-operation of the witnesses at the enquiry (“the counter application”). The witnesses have challenged the authority of the trustees in all the pending main applications, resulting in the launching of the present application.

[6] The central issue to be determined is whether the trustees have made out a proper case for the granting of authority. It was common cause that the onus rested on the trustees and that a court may grant authority to the trustees ex post facto and after commencement of their participation in the proceedings.[2]

[7] The trustees’ case was that good cause had been shown for the granting of authority to them to oppose the various review proceedings and institute the counter application, whereas the witnesses contended that no good cause was established. The trustees challenged the locus standi of the witnesses to oppose the application. A debate also ensued between the parties regarding the purpose of s18(3) and what the consequences would be if authority was not granted to the trustees.

[8] The starting point is s18(3) of the Act, the relevant portion of which provides:

“A provisional trustee shall have the powers and duties of a trustee, as provided in this Act, except that without the authority of the court or for the purpose of obtaining such authority he shall not bring or defendant any legal proceedings …”.

[9] It has not strenuously been disputed that the main purpose of s18(3) is to protect creditors against liability for costs incurred and dissipation of assets caused by a trustee’s ill-conceived litigation[3]. It was common cause that authority can be granted after the commencement of the trustees’ participation in the litigation, thus ex post facto[4].

[10] Both parties relied on the judgment of Van Oosten J in this division in Warricker and Another NNO v Liberty Life Association of Africa Ltd[5] (“Warricker”), where provisional trustees of an insolvent estate sought leave under s18(3) of the Act to institute proceedings against an insurance company to claim the death benefits of three life insurance policies issued to the insolvent. Regarding s18(3), Van Oosten J held[6]:

“The main aim of this provision has been described by Van Zyl in Lane and Another NNO v Dabelstein and Others (Lane and Another NNO Intervening) 1999 (3) SA 150 (C[7]) at 163B as ‘probably to protect creditors against liability for costs incurred and dissipation of assets caused by a trustee’s ill-conceived litigation’. The subsection, clearly, was enacted to protect the interests of creditors of the insolvent estate. It does not afford an applicant an open sesame to the relief provided for. An applicant seeking the authority of the Court in terms of the subsection must satisfy the Court, on good cause shown, that a departure from the normal course of events provided for in the Act is warranted. Where the institution of proceedings to enforce a claim is contemplated, to be entitled to an order the applicant must satisfy the Court, first, that some degree of urgency exists; secondly, that the cause of action which is to become the subject matter of the proceedings is prima facie enforceable; and, thirdly, that the interests of creditors in the insolvent estate will not be prejudiced by the earlier institution of proceedings”[8]

[11] This dictum was cited with approval by Binns-Ward J in Van Zyl NNO v Kaye NO and Others[9] (“Van Zyl”). In both Warricker and Van Zyl, the central issue to be determined was whether the provisional trustees had illustrated an enforceable cause of action and leave was sought to institute proceedings against third parties. Both applications were dismissed based on the trustees’ failure to establish a prima facie enforceable claim.

[12] Prior to considering the central issue of good cause, it is apposite to deal with the trustees’ challenge to the locus standi of the witnesses to oppose this application. This challenge was predicated on an argument pertaining to the purpose of s18(3) and the consequences of a failure by provisional trustees to obtain authority, which, it was contended, resulted in the trustees being personally exposed to the litigation costs. Reliance was placed on Patel v Paruk’s Trustee[10] (“Patel”) wherein Tindall JA held, in relation to s73(1) of the Act, that the provision prohibiting a trustee from initiating or defending any legal proceedings without the prescribed consent, was enacted as between the trustee and the creditors, in order to protect the estate from being dissipated in litigation. It was argued that on this basis, the witnesses, who were not creditors of the insolvent estate, lacked locus standi to oppose the trustees in seeking authority.

[13] I agree with the argument advanced by the witnesses that Patel is distinguishable as it pertained to trustees who were finally appointed rather than provisional trustees and considering the differences in language in the provisions of s73(1) and 18(3) of the Act. S18(3) specifically requires the sanction of a court and thus judicial oversight. Moreover, in both Warricker and Van Zyl, it was accepted that it was open to third parties who were not creditors of the insolvent estate, but rather potential debtors, to oppose provisional trustees’ request for authority under s18(3), although it appears that their locus standi to do so was not expressly challenged in those proceedings.

[14] Considering the challenges raised by the witnesses in the main review proceedings to the authority of the provisional trustees, in my view they have a sufficient interest in the present application to oppose it. It follows that the trustees’ challenge to their locus standi in this application must fail.

[15] Returning to whether the trustees have established good cause for the authority sought, the question here is what would constitute good cause in the context, not only of the institution of legal proceedings by the introduction of a counter claim, but also in the context of opposing review proceedings instituted against provisional trustees wherein they are cited as parties. I intend to apply the requirements enunciated in Warricker adapted, where necessary, to fit the present context. The present application must be considered in the context of all its peculiar facts and taking into consideration all relevant facts and factors which contribute to a proper exercise of the discretion afforded.

[16] I am fortified in this view by the approach adopted by our courts in the context of illustrating “good cause” for purposes of condonation under uniform r27 in consistently refraining from attempting to formulate an exhaustive definition of what constitutes “good cause” because to do so would unnecessarily hamper the exercise of the wide discretion afforded to a court.[11]

[17] This application arises in circumstances where the trustees have not sought to enforce claims of the insolvent estate against third parties, but where witnesses summonsed to an enquiry convened by the Master have sought to review various decisions made by the Master in relation thereto, including the setting aside of the entire enquiry. From the witnesses’ perspective, the proceedings are aimed at excusing their attendance from the enquiry. From the perspective of the trustees, their opposition to the review applications and their counter application are aimed at securing the witnesses’ attendance and co-operation at the enquiry. It was undisputed that the evidence of the witnesses would be relevant to an investigation of the insolvent’s affairs.

[18] The review proceedings were instituted at a time when only provisional trustees had been appointed and no first meeting of creditors has been held. It is common cause that such meeting is to be convened by the Master. The trustees have explained the reasons why it has not been possible for the first meeting of creditors to be held, despite some fourteen attempts on their behalf to prevail on the Master to convene such meeting. The delays which occurred were occasioned by errors and problems at the Master’s office and delays attributable to the consequences of the National State of Disaster due to the COVID 19 pandemic. The witnesses have not strenuously challenged these averments or produced cogent evidence controverting the trustees’ evidence. At present, there is no clarity regarding when the first meeting of creditors will be held and final trustees appointed.

[19] There is further merit in the trustees’ contention that if authority is not granted, the review applications may proceed on a default basis, more so as the Master has in the reports filed of record indicated that he will abide the court’s decision.

[20] On the facts, I am satisfied that the trustees have illustrated a necessary degree of urgency and it cannot be said that in these circumstances the trustees should wait until trustees are finally appointed before steps are taken in relation to the pending review proceedings.

[21] The next issue which requires consideration is “prima facie enforceability”. Related thereto is a consideration of whether the interests of creditors would not be prejudiced by the earlier institution of the proceedings. It is necessary to adapt the criteria enunciated in Warricker to match the present factual matrix. Here, there are five pending review proceedings and one counter application in which the trustees seek to obtain novel relief invoking ss165 and 166 of the Constitution to obtain judicial oversight as a process in aid to ensure the witnesses’ attendance and co-operation at the enquiry.

[22] The merits and demerits of the various applications will be fully canvassed and determined in the main review proceedings and it would be inappropriate to predetermine such issues in the present application. In the present proceedings, this court has not had the benefit of the substantial affidavits filed in the main review applications, nor of full argument on all the issues raised therein. What must be determined is whether the trustees have illustrated, prima facie, that they have reasonable grounds for their opposition of the review proceedings and a justifiable basis for their counterapplication with some prospects of success.

[23] The trustees argued that they have met this threshold. The witnesses on the other hand argued that the trustees have not illustrated any good cause for their opposition and no prospects of success in relation to their counterclaim.

[24] The witnesses’ argument pertaining to the trustees’ opposition of the review proceedings was predicated on the contention that the nature of the enquiry under s152 was a Master’s enquiry, who controls, regulates and conducts it. It was argued that it was incumbent on the Master to defend the review proceedings, with the trustees having no place in doing so as the review applications did not pertain to their conduct, but rather to the conduct and rulings of the Master. It was argued that the roll of the trustees was thus limited to interrogating witnesses after the Master had completed his examination of the witnesses and thus there could not be any good reason or good cause for the trustees to oppose the review proceedings and it could not be in the interest of the insolvent estate to do so.

[25] The decisions under review were made by the Master after due consideration of the facts and are valid until set aside[12]. Prima facie, it cannot be stated on the facts that those decisions are invalid and the trustees have reasonable grounds to oppose the setting aside of the Master’s decisions and the costs orders sought against the insolvent estate.

[26] An important consideration is that the review proceedings were initiated, not by the trustees, but by the witnesses. The witnesses recognised that the trustees may have an interest in the review proceedings and cited them as respondent parties therein.

[27] In three of the review proceedings, substantive relief in the form of certain costs orders were sought against the insolvent estate. The witnesses belatedly and after full opposition by the trustees, shortly before the present hearing sought to abandon the costs order sought in the application under case number 40681/2019. I agree with the trustees that this belated abandonment of one of the costs orders does not assist the witnesses.

[28] As parties to the application the trustees are further entitled to participate in the review proceedings. As stated by the Supreme Court of Appeal in Van Staden NO v Pro- Wiz (Pty) Ltd[13]:

“Furthermore, as a matter of principle, where a party is cited in legal proceedings it is entitled without more to participate in those proceedings. The fact that it was cited as a party gives it that right. Here the liquidators were cited and decided to resist the application. They were entitled to do so by the mere fact of their joinder as parties”.

[29] There is merit in the argument advanced by the witnesses that the right to participate in the review proceedings does not automatically clothe the trustees with the authority to do so or excuse them from obtaining the requisite authority. Their participation must however be effective.

[30] These are weighty factors requiring consideration in determining whether authority to oppose the proceedings should be granted. It is not for present purposes necessary to determine whether these are self-standing factors requiring consideration or whether they form part of the enquiry pertaining to the “prima facie enforcement” criteria enunciated in Warricker.

[31] In terms of s152(4) of the Act, the trustees or their agents are authorised to interrogate a person summonsed in regard to any matter relating to the insolvent or his estate or the administration of the estate. It matters not whether such entitlement arises after any interrogation by the Master of such witness. The trustees thus have a statutory entitlement to interrogate the witnesses.

[32] Moreover, in terms of s151 of the Act any persons whose interests are affected by review proceedings are entitled to notice. Notice to the trustees is deemed to be notice to all creditors of the estate. The trustees are enjoined to protect the interests of the body of creditors of the insolvent estate. The trustees thus have an interest in the review proceedings and prima facie in the interrogation of the witnesses, factors which operate in favour of granting the authority sought.

[33] Turning to whether the creditors of the insolvent estate would be prejudiced by the opposition of the review proceedings, there is merit in the trustees’ contention that their opposition to the review proceedings advanced the interests of the insolvent estate’s body of creditors, considering the wide range of relief sought in the various review applications, aimed at shielding the witnesses from the enquiry and the setting aside of the entire enquiry and all which occurred in relation thereto.

[34] The witnesses further objected to the granting of authority to conduct further litigation aimed at securing their attendance at the enquiry on the basis that was too wide and constituted an “open sesame” for relief, warned against by Van Oosten J in Warricker. In my view, the argument lacks merit.

[35] The authority sought by the trustees is not open ended and is exclusively aimed at any litigation pertaining to the attendance of the witnesses at the enquiry. Considering the undisputed facts and the history of litigation between the parties, I am persuaded that it would be in the interests of the insolvent estate’s body of creditors to grant the relief sought as ultimately the costs of any further applications for authority would affect their interests.

[36] For these reasons I am persuaded that the trustees have shown good cause for the authority sought to oppose the review proceedings.

[37] The authority sought to institute the counter application under case number 41368/2019 stands on a slightly different footing. Therein, the trustees raise novel and complex issues invoking constitutional principles in order to secure the attendance and cooperation of the witnesses at the enquiry and seek to invoke the provisions of ss165 and 166 of the Constitution.

[38] The witnesses argued that the counter application had no prospects of success and that the trustees could not seek, nor a court grant, the relief sought therein as no provision of the Insolvency Act or the common claw empowered the trustees to seek the relief claimed. Reliance was placed on Schulte v Van den Berg and Others NNO[14] in arguing that no prima facie enforceable case was made out by the trustees.

[39] On this basis the witnesses sought not only refusal of the authority sought but also dismissal of the counter application, which it was argued “were consequences which flow naturally from a refusal of the authority sought”. This relief was raised for the first time in the heads of argument filed on behalf of the witnesses and was not raised or foreshadowed in their answering papers, enabling the trustees to respond thereto.

[40] The approach adopted by the witnesses by belatedly and unexpectedly seeking dismissal of the counter application in the present proceedings is inappropriate and the contention that it should follow as a “natural consequence” of a refusal of authority, lacks merit. Refusal of authority in the present application, would not be dispositive of the counter application. Authority may be obtained in due course once a first meeting of creditors is held and trustees are finally appointed. Moreover, a dismissal of the counter application at this stage would effectively result in a piecemeal determination of those review proceedings and a final determination on important issues without any consideration of the application papers filed in the main review proceedings.

[41] I turn to a consideration of whether authority for the institution of the counter application should be granted. There is merit in the trustees’ contention that it would be convenient to deal with the counter application that is directed at securing the witnesses’ attendance and cooperation at the enquiry as part of the main review proceedings. For reasons already stated, I am satisfied that the trustees have illustrated the requisite urgency. The issue is whether the trustees have illustrated sufficient prima facie prospects of success.

[42] Whilst there is merit in the legal arguments advanced by the witnesses pertaining to the common law and the provisions of the Act, the issues which arise in the counter application are not “ordinary” in the sense of simple legal issues, a concept to which I later return.

[43] The trustees’ case is that they have made out a prima facie case with some prospects of success as they seek relief in circumstances where the presiding officer at the enquiry is not a judicial officer and cannot issue a warrant of committal in terms of s66(2) as read with s152(6) of the Act. The Master ruled that one of the witnesses, Mrs Levick failed to attend the enquiry on 20 November 2019 without a reasonable excuse. That ruling is the subject matter of one of the review applications. No warrant of committal was issued as it would have been constitutionally invalid. The trustees placed reliance on the recognition by the Constitutional Court in De Lange v Smuts NO[15](“De Lange”) that a committal to prison in terms of s66 is a legitimate form of process in aid to ensure that the legitimate goals of insolvency laws are achieved and creditors protected.[16] Reliance was further placed on the finding of the majority in De Lange that the issue of a warrant would not unconstitutionally infringe a witnesses’ substantive right of freedom and security of person under s12 of the Constitution, but that the procedural protection afforded by the right to freedom, which guarantees in s12(1)(b) that there be no detention without a fair trial, required that the presiding officer who issued the warrant be a judicial officer so that judicial oversight could be exercised.[17] The trustees argued that it is not only a magistrate who would be able to issue a warrant of committal but that the High Court can be approached to perform the judicial oversight necessary to achieve the procedural protection guaranteed in s12(1)(b of the Constitution by way of due process. The counter application is aimed at such relief as a process in aid.

[44] It is thus clear that the counter application raises complex and novel issues which require a full and nuanced debate before its merits can be properly determined, with the benefit of all the papers filed of record.

[45] It is apposite to refer to the approach adopted by Malan J (as he then was) in Johannesburg Municipal Pension Fund v City of Johannesburg[18] wherein,[19] albeit in the context of interim interdictory relief pending review proceedings adopted the following reasoning[20]: “All the issues referred to involve difficult questions of law and none of them can be described as ordinary. Nor is it desirable to rule at this interim stage that there is no prospect of success on any of these bases of review. The issues are simply too involved (‘a serious question to be tried’) and of such gravity that they cannot be, and should not be, disposed of in these interim proceedings”.

[46] Although the relief presently sought is not interim, the principles are apposite in considering whether the authority sought should be granted. It cannot be concluded that the counter application has no prospects of success. What can be safely concluded is that the counter application is not frivolous or vexatious and that there is a serious question to be tried. In my view, the trustees have met the threshold of showing a prima facie enforceable claim, at the very least on the basis of it constituting a triable issue, although its ultimate prospects of success can only be determined in the main review proceedings.

[47] I am further persuaded that the interests of creditors of the insolvent estate will not be prejudiced by the institution of the counter application. Prima facie their interests would be advanced if the witnesses’ attendance and cooperation at the enquiry is obtained. Although the granting of authority would shield the trustees from personal liability for costs, an appropriate costs order de bonis propriis may be granted in the main review proceedings if it is appropriate to do so. When considered in the context of the main aim of s18(3) of the Act, being to protect creditors against liability for costs and the dissipation of assets caused by a trustee’s ill-conceived litigation, such aim will not be thwarted by the granting of authority to institute the counter application. Considering that the Act was enacted well before the Constitution, it would not be in the interests of justice to deprive the trustees from authority to pursue relief which would advance the interests of the body of creditors of the insolvent’s estate.

[48] For these reasons I am persuaded that the trustees have shown good cause for the granting of the authority sought. It follows that the application must succeed.

[49] In light of the conclusion reached it is not necessary to determine the remaining issues raised, which only required consideration in the event that the authority was refused.

[50] Albeit that the witnesses’ opposition to the application was unsuccessful, it would not be appropriate to direct them to pay the costs of opposition, as sought by the trustees, considering that the trustees’ challenge to their locus standi was unsuccessful. In my view, the costs of the application should be costs in the cause in the various review applications.

[51] I grant the following order:

[1]  The applicants are authorised in terms of s18(3) of the Insolvency Act, 24 of 1936, as amended, to have litigated and to continue to litigate in the legal proceedings under case numbers 40681/2019, 41368/2019, 526/2020, 13811/2020 and 12492/2020 and such other litigation that may take place between the applicants and the first and/or second respondents in relation to the attendance of the first and/or second respondents at the inquiry into the affairs of Martin Ashley Levick (Master’s Reference G474/2019) and any related or ancillary litigation.

[2]  The costs of the application are to be costs in the cause in the main proceedings under the above case numbers.

 

 

EF DIPPENAAR

JUDGE OF THE HIGH COURT

GAUTENG DIVISION OF THE HIGH COURT

JOHANNESBURG

Electronically submitted therefore unsigned

 

 

APPEARANCES

 

DATES OF HEARING     :         19 November 2020

 

DATE OF JUDGMENT   :         23 November 2020

APPLICANT’S COUNSEL        :         Adv. BM Gilbert

APPLICANT’S ATTORNEYS:  :         Fluxmans Inc

 

1^st and 2^nd RESPONDENT’S COUNSEL     :         Adv. L. Hollander

1^st and 2^nd RESPONDENT’S ATTORNEYS          :         Joseph John Finlay Cameron

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