In the matter between:

and

JUDGMENT

ELOFF, AJ:

1] In terms of paragraph 5.1 thereof, the curators were, pending the return date of the provision order, authorised to take immediate control of, to manage and to investigate the business and operations of and concerning the companies which include Fidentia Holdings (Pty) Limited, together with all their assets and interests.

2] In terms of paragraph 5.2 thereof, the curators were vested with all executive powers which would ordinarily be vested in and exercised by the Board of Directors or members of the companies,

3] In terms of paragraph 5.3 of the provisional order, the curators were directed to give consideration to the best interests of the investors in the companies who had entrusted monies to the companies or whose monies had been invested with the companies or were being managed or administered by/or on instruction of the companies.

4] In terms of paragraph 5.8 of the provisional order, the curators were authorised to incur such reasonable expenses and costs as would be necessary or expedient for the curatorship in control of the business and operations of the companies, and to pay same from the assets held, administered or under the control of the companies.

5] In terms of paragraph 5.9 of the order, the curators were permitted to engage such assistance of a legal, accounting, administrative, or other professional or technical nature, as they might reasonably deem necessary for the performance of their duties in terms of the provisional order, and to defray reasonable charges and expenses thus incurred from the assets held or under control of the companies.

6] In terms of paragraph 5.10 of the provisional order, the curators were authorised to institute or prosecute any legal proceedings on behalf of the companies and to defend any litigation against the companies.
7] In terms of paragraph 9 of the provisional order, the curators would be remunerated in accordance with the norms of the Attorneys and Auditors profession respectively, as agreed with the Registrar, such remuneration to be paid from the assets of, held by or under the control of the companies on a preferential basis.

Subsequent to the commencement of the curatorship status, the two plaintiffs in this action instituted various sets of proceedings, including sequestration applications against various persons. In such proceedings, the curators appointed a firm of attorneys previously known as Hofmeyr, Herbstein, Gihwala and, subsequent to a recent merger, now known as Cliffe Dekker Hofmeyer Inc. It is common cause that the first plaintiff is the Chairman of this firm.

"I have been in Motion Court for the past two days, and I haven't been in Motion Court for some time, and I have seen at least three matters involving Brown where Hofmeyers are the attorneys dealing with those ... They are dealing for those whose monies are involved, workers whose monies are involved and litigation is exhausting these funds. Shouldn't the litigation be conducted at arm's length ... and conducted with the curator keeping an eye on the litigator. In this case, Mr Gihwala is the Chairman of Hofmeyers, the curator and litigator are one and the same ... The curator is appointed   in  the  public interest  for an interest that is pubic he is to keep an eye to make sure that nothing gets out of hand. How can he supervise litigation if he benefits from the litigation, that is my point."

The defendant has also raised a point of non-joinder of Brown Brothers Holdings, but the withdrawal by the plaintiffs of their third claim in the action has effectively stripped this point of its substance, assuming that it had any validity.

"Any person, on good cause shown, may make application to the Court to set aside or alter any decision made, or action taken, by the curator, or the registrar, with regard to any matter arising out of, or in connection with, the control and management of the business or of an institution which has been placed under curatorship."

"Insofar as plaintiffs participate in these proceedings as statutory curators the plaintiffs are precluded from being represented by their attorneys of record because first plaintiff is the Chairperson of Hofmeyer, Herbsfein and Gihwala Inc."

"The substance of the objection is that as a matter of Jaw (not simply ethics) plaintiffs may not proceed while the first joint curator has an interest in profiting in his personal capacity from this litigation. To do so would be illegal."

I accept for purposes hereof that the appointment by the first plaintiff of Cliffe Dekker Hofmeyer Inc En circumstances where he stands to share in the profits that may be earned from the conduct of this litigation, and without declaring his interests to the FSB the registrar of the Court, will place him in a conflict situation, which he was and is duty bound to avoid.

Two questions arise for determination;

[1] Is Mr Gihwala to share in the profits that may arise from the conduct of this action, and has he made any disclosure thereof;

[2] What is the legal consequence if Mr Gihwala stands to share in the profits to be earned by Cliffe Dekker Hofmeyer from this litigation in circumstances where he made no disclosure of his position.

"The powers of fixing the terms of the permit and of acting under those terms are all statutory powers. In exercising the power to grant or renew, or to refuse to grant or renew, the permit, the Minister acts as a State official and not as a private owner, who need listen to no representations and is entitled to act as arbitrarily as he pleases, so long as he breaks no contract. For no reason or the worst of reasons the private owner can exciude whom he wills from his property and eject anyone to whom he has given merely precarious permission to be there. But the Minister has no such free hand. He receives his powers directly or indirectly from the Statute alone and can only act within its limitations, express or implied. If the exercise of his powers under the sub-section is challenged, the Courts must interpret the provision including its implications and any lawfully made regulations, in order to decide whether the powers have been lawfully exercised."

As has been pointed out, the origin of the curators' power to appoint attorneys to conduct litigation on their behalf, is to be found in the paragraphs of the provisional order quoted earlier herein.

"The acts of a trustee who is also a beneficiary and acts so as to benefit himself or herself at the expense of other beneficiaries, will be narrowly scrutinised and are unlikely to be confirmed by the Court. A trustee, even though innocent, whose position involves a conflict of interest and duty may be removed from office by the Court.

Many of the cases cited above concern executors, agents and other persons who are not trustees in a strict sense. This is because the 'no profit' principle extends to ah those in fiduciary positions, to trustees of all kinds - executors, trustees of estates, solicitors, confidential agents.

In general 'no transaction where interest and duty conflict should be recognised or countenanced by the law'. Legal transactions that contravene this principle are in genera! voidable, not void. This is true even of a sale or loan by trustees to themselves in a private capacity, for the trust estate is separate from the trustees private estate.   Similarly a sale

through an intermediary, while not void, will be carefully scrutinised in view of its surreptitious character. The same is true of the purchase by a trustee of trust property, with the concurrence of the other trustees, though in general a co-owner may validly purchase the shares of fellow owners. A sale by a trustee to a juristic person of which he or she is an officer or director is not automatically void".

Was the appointment of Cliffe Dekker Hofmeyer Inc to act in the conduct of the current action prejudicial to the interests of investors and other interested parties? Without conducting a full investigation, one cannot say. It is therefore not possible to predict whether a Court faced with all the relevant circumstances will set the appointment aside. I am certainfy not in a position to do so, and there is no substantive application before me to do so.