(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No. 11529/11
In the matter between:
AN TARES INTERNATIONAL LTD 			First Applicant
ARNALDO RENATO MATTEO LA SCALA	       Second Applicant
and

LOUW COETZEE & MALAN INC 		        First Respondent 
SILVER FALCON TRADING 288 (PTY) LTD        Second Respondent

For the Applicant: 	Adv J Mutter (SC) et Adv M Harrington
As instructed by:	Norman Wink and Stevens Attorneys

IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No. 11529/2011

In the matter between:

and

JUDGMENT

ROGERS AJ

Introduction

1. The first applicant in this matter, Antarcs International Ltd ("AIL"), was incorporated as a company under the laws of Guernsey. Prior to the launching of the present application AIL was struck from the register of companies in Guernsey. The second applicant, Arnaldo La Scala ("La Scala"), was AIL's sole director and also a shareholder and alleged creditor of the company.   ITie first respondent, Louw Coetzee & Malan Inc ("LCM"), is a firm of attorneys in Cape Town who previously acted for AIL. The second respondent. Silver Falcon Trading 288 (Pry) Ltd ("SFT"), is the lessee of premises in Gordon's Bay at which two helicopters arc currently under attachment in litigation between LCM and AIL.

3. On 5 July 2010 LCM issued summons for recovery of the amount allegedly owing. AIL defended the action and brought a counterclaim. The pleadings have undergone various amendments. It appears that LCM's claim is currently for about R2.7 million, being the balance allegedly owing from its taxed bill of R4 832 065 after deducting payments made by AIL. 'llie latter alleges that nothing further is owing to LCM and that LCM was guilty of overreaching and has billed for unmandated attendances. The action was set down for trial on 29 August 2011, the same day on which the present application served before me.
4. On 11 April 2011 LCM issued an application to compel AIL to furnish security for costs in the action.

5. On 12 April 2011 AIL was struck off the register of companies in Guernsey in terms of s355(2) read with s355(l)(b) of the Companies (Guernsey) Law 2008 ("the Guernsey Law''), apparently because its registered office was no longer effective. The striking-off resulted in AIL's dissolution. That this had occurred appears not to have come immediately to the notice of the parties in this matter. However, LCM evidently ascertained this fact in early June 2011. This led to an exchange of correspondence between LCM and AIL's attorneys, Norman Wink & Stephens ("NWS"), on 6 and 7 June 2011.
6. LCM stated in its first letter of 6 June 2011 thai it had ascertained that AIL had been dissolved; that LCM would thus be unable to continue with the application to compel security in the action and that in all probability the trial scheduled to start on 29 August 2011 would not be able to proceed. They continued:

"This unfortunate state of affairs has put us in a position that we will not be able to recover from your client what is due and payable to us.

We have spent considerable time re-evaluating our position and have decided to do the following:
1. The two helicopters currently in our possession and under attachment will be sold immediately;
2. The sale of the helicopters notwithstanding, the helicopters will not be released from attachment, pending further advices.

We maintain that the helicopters are of limited monetary value, and should your client or any interested party wish to apply to court to prohibit the sale and release of the helicopters, we will again apply for security for costs, this time coupled with an order, to which we will be entitled, for the security of the value of your client's, or that interested party's, claim in an amount equal to the value of the helicopters. "
7. In reply NWS disputed LCM's right to dispose of the helicopters and said that if LCM did not intend to proceed with the security application it should file a notice of withdrawal. LCM replied (still on 6 June 2011) that the helicopters had been sold. They requested NWS to provide proof of its authority to act for AIL in the security application. NWS responded with a further letter, professing shock at the sale and demanding particulars thereof and of LCM's authorisation to conclude the sale. An undertaking that the helicopters would not be removed was demanded. Further correspondence followed on 6 and 7 June 2011 in which NWS again sought an undertaking and in which LCM continued to question NWS' mandate. No details of the sale and no undertaking were forthcoming.
8. On 8 June 2011 AIL and La Scala launched the present interdict application for hearing at 14hl5 on the same day. Their notice of motion sought orders |a| directing LCM to provide particulars of the sale [bj interdicting LCM or SFT from removing the helicopters from SFT's premises pending the final determination of the action [c] a punitive costs order against LCM. In the founding affidavit (made for reasons of urgency by Ms Carson of NWS) the applicants stated that their intention was to launch an application in Guernsey for the restoration of AIL to the register of companies as a matter of urgency and to give the necessary instructions to their legal representatives within the next few days. LCM opposed the application which was then postponed to 22 June 2011 with a timetable for papers and with a recordal of an interim undertaking that pending final determination of the application the respondents would ensure that the two helicopters were not removed from SFT's premises.

10. The applicants filed their replying affidavits on 20 June 2011. These included an affidavit by Mr Friedlander. an advocate of the Royal Court of Guernsey and a partner in the firm Carey Olsen of Guernsey. He furnished his expert opinion on the law relating to AIL's dissolution and possible restoration to the register. lie stated that in terms of s369 of the Guernsey Law the two helicopters currently belonged to the Crown represented by Her Majesty's Receiver-General. This was so even though the helicopters were situated in South Africa. If AIL were restored to the register in terms of 8371, the company would be deemed by s371(7) to have continued in existence and its property would then be restored to it in terms of s372. lie also staled lhat his firm had received instructions to represent AIL in an application for its restoration but lhat he had not yet been able to consult with La Scala in lhat regard.
11. On 21 June 2011 the applicants delivered a notice of amendment, indicating their intention to supplement the relief claimed in the interdict application by asking for orders [a] interdicting LCM from selling, alienating or disposing of the helicopters without obtaining a court order authorising them to do so [b| directing that any process for obtaining such an order be served on the applicants' attorneys of record. This amended relief was prompted by the disclosure in the answering papers that the previous sale had been cancelled.
12. The interdict application served again before this court on 22 June 2011. The application was postponed to 29 August 2011. The parties were directed to file supplementary affidavits dealing with the status of AJL's restoration to the register of companies - the applicants to file their supplementary affidavit by 1 August 2011 and LCM by 8 August 2011.

14. In the meanwhile LCM had sought security from L,a Scala for its costs in opposing the interdict application. (No security was sought from AIL, presumably because it had been dissolved.) On 17 August 2011 an order was made, apparently by agreement, that La Scala furnish such security in an amount ofR200 000.
15. LCM's counsel filed their heads of argument on 22 August 2011 even though the applicants had failed timeously to file their heads. On 24 August 2011 NWS gave notice of its withdrawal as attorneys for AIL. NWS has continued to represent La Scala. On the same day NWS filed a condonation application in respect of the late filing of La Scala's heads and his failure to file his supplementary affidavit on 1 August 2011. The explanation, contained in an affidavit by Ms Carson of NWS. was in essence that NWS had only been put in funds on 12 August 2011 and that thereafter there had been some delay in getting instructions from La Scala and in settling papers long-distance (La Scala being resident in Switzerland).

17. In his affidavit La Scala also said lhat the interdict application should be postponed pending [a] the joinder of HM's Receiver-General and/or lb] the restoration of AIL to the register of companies in Guernsey, with the temporary interdict of 8 June 2011 to continue in force in the meanwhile. Alternatively, he asked that the interdict application be granted with costs.

The hearins on 29 August 2011

La Scala's position
18. In his heads of argument Mr Harrington for La Scala submitted that the application should either be postponed or granted as claimed by La Scala in his affidavit just mentioned.

21. During oral argument Mr Harrington's primary position was that the interdict application should be granted rather than postponed.

LCM's position

24. In short supplementary heads, tiled the day before the hearing. LCM's counsel submitted that LCM's previously expressed view, to the effect that the trial could not proceed on 29 August 2011 given AIL's dissolution, was erroneous. At the commencement of the hearing before me Mr Joubert argued that LCM was entitled to ask for judgment by default and then to execute against the helicopters. He submitted that this would render the interdict application moot.
25. During the course of oral argument, and when it appeared that the court was unlikely to accede to request to hear the action on a default basis. Mr Joubert submitted that the interdict application should be postponed for about one month so that the attitude of the Receiver-General in regard to the helicopters could be established. I lis client was apparently of the view that the Receiver-General would probably have no interest in asserting ownership of the helicopters and this, so it was suggested, would be relevant to the interdict.    In the alternative, he maintained lhat theapplication should be dismissed, given the applicants* failure to dale to issue a restoration application.

The fate of the trial
26. I informed counsel at the outset that the matter had been allocated to me on the basis that only the application was proceeding and that owing to a part-heard trial resuming the next day I was available for only one day. Counsel's practice note, I may add. recorded that the parties were agreed that the trial could not proceed.

The interdict application

42. The Court of Appeal overturned this decision. After reviewing various authorities. Roch IJ (with whom the other two members of the court concurred) said the following (my emphasis):

43. Mr Friedlander opined in his affidavit that the Guernsey courts would probably follow this judgment in dealing with the similar provisions of the Guernsey law.

49. The circumstances of the present case are unusual but I consider that on similar principles a South African court has the power to come to AIL's aid (assuming it retains the requisite corporate existence) in order to protect its prospective ownership of its erstwhile assets where such assets temporarily vest in the Crown hut would upon restoration be revested in the company. Such protection could be granted pending the determination of restoration by the court in Guernsey. (Upon such restoration the company, now as owner, would he entitled to obtain a final interdict if the unlawful conduct were still threatened, though from a practical perspective that might well no longer be necessary.)

53. The applicants knew by 6 June 2011 at the latest that AIL had been struck from the register. They claimed in their founding papers of 8 June 2011 that they intended to bring a restoration application as a matter of urgency. This court's order of 22 June 2011, with its provision for supplementary affidavits to be filed on the question of the progress of the restoration application, was a reminder of the importance of this aspect. Yet more than two and a half months later a restoration application has still not been issued. It appears from the affidavits of La Scala and his South African attorney dated 24 August 2011 that the applicants have had cash flow difficulties and have thus struggled to put their South African attorneys in funds to enable them properly lo represent AIL and La Scala in the pending action, the security application and the interdict application. La Scala has also allegedly battled to find the money for the restoration application in Guernsey. He has not said when he learnt that the anticipated costs would exceed £30 000 and for how long he has been trying lo raise the money. He has also not disclosed what reasons he was given by his lawyers for the increased cost nor is there any further affidavit from Mr Fricdlandcr in that regard.
54. Although La Scala now claims to have secured the finance, he says he is still waiting for it lo be credited to him. He has provided no details of the source of the funding or why it has not yet been received. I would have expected him to do so, particularly given the serious allegations levelled at him by LCM regarding his alleged deception and unreliability in connection with their fees. Those allegations have not yet been tested at trial, but in the light of the distrust and acrimony between the parties La Scala could have been expected to provide corroborative evidence that his latest version is truthful and that he is not merely playing for lime. And even on La Scala's own version there is no undertaking that the restoration application will be instituted in the very near future. He seems to envisage that it might take a few months before the application is launched.
55. In short, the applicants have not provided satisfactory evidence of a genuine and concerted intention to pursue a restoration application for which they have the requisite funds. Then there is the further consideration that restoration is not simply there ibr the asking. Notice of the application has to be given to the Registrar of Companies in Guernsey, HM's Procureur and HM's Receiver-General. The Guernsey court will be entitled to give other persons, including creditors, an opportunity lo make representations. In terms of s371(3) of the Guernsey Law the court, in deciding whether to restore a company, is enjoined to have regard lo whether the restored company would satisfy the solvency test; the circumstances in which it was struck off; whether there were persistent or gross violations of the Guernsey Law in respect of the company; whether the company was used for fraudulent purposes; whether restoration would jeopardise Guernsey's reputation as a financial centre; and whether in general it would be just and equitable to restore the company to the register.
56. Mr Friedlander, whose firm is apparently to be engaged in the restoration application, said in his affidavit of 20 June 2011 that he had not yet consulted with La Scala. Such a consultation was planned for the very-near future but there is no evidence as to whether in the event it took place. Mr Friedlandcr stated that until he consulted he could not give a firm indication of the merits of the proposed restoration application or the time it would take. lie said thai full disclosure of all relevant facts would have to be made to the Guernsey court. It appears from the papers in the present matter that in March 2010 La Scala was arrested or at least questioned in Italy in regard to the suspected use of AIL's aircraft in arms trafficking. LCM has intimated its intention to make adverse representations in any restoration application lhat All. might bring, llie restoration application, if it is brought, would thus seem to be far from run-of-the-mill. The papers in the present case do not provide a proper basis for assessing the strength of the proposed application.

59. As noted earlier, the applicants' attitude in La Scala's latest affidavit and through counsel at the hearing was that the interdict application should be postponed so that HM's Receiver-General could he joined. Mr I larrington did not press this point at the hearing. If the applicants considered that the Receiver-General should have been joined they should long-since have taken steps to effect the joinder. They and not LCM arc the applicants. Mr Friedlander's affidavit of 20 June 2011, which they themselves filed, stated that the helicopters vested in the Crown represented by the Receiver-General. The refusal of the applicants* application does not impair the Crown's rights in any way. The Crown through the Receiver-General is at liberty lo initiate whatever proceedings it might think necessary to protect its ownership of the helicopters. (Since I have in any event decided to refuse the application, it is unnecessary to decide whether the Crown's joinder would have been necessary for the granting of the interdict, though I doubt that such joinder would have been necessary: the mere preservation of the helicopters under an existing attachment authorized by the court would not appear to have any potential to prejudice the Crown's rights.)

Conclusion
60. On 30 August 2011. i.e. the day following argument, there was delivered to my chambers an affidavit by a Mr Fox on behalf of the SFT (the second respondent) regarding proceedings in which SFT is being sued tor rental and eviction from the Gordon's Bay property where the helicopters arc being stored. This affidavit appears to have been designed to persuade me that it would be unjust to grant an interdict in the terms sought by the applicants. In the light of the order I intend to make it is not necessary to say more than that I do not sec any justification for the late submission of Mr Fox's affidavit.

62. LCM has intimated its intention to oppose AIL's restoration in Guernsey. LCM is free to act as it thinks best. I should observe, though, that if AIL is not restored to the register the consequence would appear to me to be that LCM will not be able to obtain a judgment against AIL in the action or levy execution on the helicopters (though as noted earlier I do not finally decide that question). The attached helicopters would have to be returned to their lawful owner (whether the Crown or the South African Government). From LCM's perspective this strikes me as somewhat counter-productive.

63. If in due course il becomes apparent for any reason thai ihe action cannot be pursued to finality and that the reason for the attachment has fallen away, the sheriff will, if there is uncertainty as to who is entitled to be placed in possession of the helicopters, be free to issue an interpleader summons or approach the court for directions.
64. Although 1 intend to refuse the application, 1 do not think in the peculiar circumstances of this case that LCM should be granted costs against the applicants. Although in the event the applicants have failed to establish their own right to obtain relief, their application has brought to the court's attention a threatened violation of an attachment authorised by an earlier order of this court. LCM had no right to sell or threaten to sell the aircraft. Given that LCM's unlawful conduct precipitated the application and that this judgment is likely to have a salutary effect in reminding LCM and the sheriff of their respective rights and duties, I think it would be just that the parlies bear their own costs.
65. I thus make the following order:

(a) The application is dismissed.
(b) The parties are lo bear their own costs, including all costs reserved in the earlier orders made in this application.
(c) The registrar is directed to bring this judgment to the attention of the sheriff so that the latter may take such steps as he considers appropriate to ensure that the helicopters attached under this court's order of 10 June 2010 remain under his effective attachment.

ROGERS AJ
2 SEPTEMBER 2011