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

CASE NO:								6657/10

DATE:									15 March 2011

In the matter between:

and

JUDGMENT

BOZALEK. J

In this interlocutory application first to third respondents, being Fidentia Asset Management (Pty) Limited, a company under curatorship in the Fidentia Group and the two curators of the Fidentia Group of Companies, seek an order compelling the applicant, namely the trustees for the time being of the Antheru Beleggings Trust to provide security for their costs in the main application in which applicant seeks a provisional winding up order against the first respondent. The fourth respondent in the main application is the executive officer of the Financial Services Board, but that party plays no role in this interlocutory application.
The main application is set down for hearing on 24 March 2011 although the indications are that it may not proceed on that day since the applicant is yet to file its replying affidavits and has given notice of intention to move an application to compel further discovery. The main application was originally one of three brought as matters of urgency in April 2010, the other two seeking the same principal relief, namely a provisional liquidation order against two other companies in the Fidentia stable, Bramber Alternative (Pty) Limited and Fidentia Holdings (Pty) Limited, which are also under curatorship with the same curators.

In April 2010 the respondents filed a notice in terms of Rule 47 calling upon the applicant to file security for their costs. When, by June 2010. no answer was forthcoming the respondents launched this interlocutory application seeking security for their costs totalling R450 000 in the three matters Two of the main applications having been dismissed they now seek only R150 000 in respect of the remaining application. Opposing and replying affidavits have been filed in which are sought to be incorporated large tracts of the voluminous papers in the main application. It is in my view neither necessary nor practical to refer to those papers in any detail for the purpose of determining this application.

The curatorship orders were granted in terms of the Financial Institutions (Protection of Funds) Act 28 of 2001, which I shall refer to as the Fl Act. Sections 5(8) and 5(9) of that Act provide respectively as follows:

"Any person on good cause shown may make an application to the Court to set aside or alter any decision made or any 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 of an institution which has been placed under curatorship."

"A Court may on good cause shown cancel the appointment of the curator at any time,"

Although it is common cause that the first respondent is hopelessly insolvent the applicant seeks its winding up principally on the ground that in terms of Section 344(h) of the Companies Act "it would be just and equitable to do so™. The applicant's case in this regard is, broadly speaking, that the second and third respondents have been disposing of the first respondent's businesses and assets for considerably less than their value, they have failed to promptly furnish the applicants with relevant information in this regard and, in respect of yet other assets, they have not properly reported to the Registrar as required by the curatorship orders.

On the applicant's behalf it is conceded that none of these sales can be undone however, they say, if the provisional liquidation order is granted the liquidators will be able to investigate whether the curators have fulfilled their duties responsibly and in that manner it will be ascertained whether the creditors of the first respondent have a claim against the curators for non or malperformance of their duties.

It is of significance in this regard that on 13 March 2008 the attorneys acting for the applicant, for a Mr Z Brown and a Mr Arthur Brown wrote to the second and third respondents in response to their joint reports to the Registrar dated 16 March 2007 and 14 November 2007. In this letter, which runs to some 46 pages, scores of questions are posed to the second and third respondents relating to their disposal of various assets and businesses in the Fidentia Group. Many of these sales and related questions are echoed in the papers in the present main liquidation application. One of the culminating paragraphs in the letter records the following:

'Unless all the above information and undertakings are received at our offices by not later than 4 pm on the 17th of   March   2008   our   clients   reserve   the   right   to immediately move the High Court for the necessary relief including:
(a) interdicting the curators of (sic) selling any of the assets of Fidentia;
(b) compelling them to furnish all required information."

No such application was brought and instead these proceedings were launched two years later in April 2010

"A trust should only be required to furnish its opponent with security for the latter's costs where the action which the trust has launched is either vexatious or reckless or amounts to an abuse of the Court's process. The fact that the trust is. for all practical purposes, insolvent and will never be able to pay any part of its opponent's costs should the trust prove unsuccessful and have costs ordered against it is not, in the absence of anything more, a ground for requiring it to furnish security for costs."

Clearly a similar rationale operates in respect of trusts and thus in proceedings such as these the financial position of the trust will be relevant.   In this regard it suffices to say in the present matter that I am satisfied that the trust will, in all probability, be unable to meet any costs order which may be made against it in the present litigation. The applicant has declined to furnish any information relating to its financial affairs and in my view if the applicant had the resources to meet a costs award this would have been readily disclosed.

The key question is however whether the application is vexatious, reckless or an abuse of the process of court. It is clear that the applicant sees the primary purpose and benefit of a provisional liquidation order as enabling the provisional or final liquidators to investigate what was done by the second and third respondents during their curatorship. Whether the liquidators will see their function in this same light and that they need to conduct a commission of enquiry into the curatorship of the first respondent is an entirely different question. Certainly the applicant has failed to demonstrate that any other creditors share its concerns regarding the sales of the assets or their desire for an investigation of these sales. The applicant speaks of the possibility of an increased dividend to creditors but has offered no analysis of the cost implications of discharging the curatorship orders relating to the first respondent and replacing them with a provisional liquidation order.
The applicant will ultimately have to persuade the Court which hears the main application to exercise its discretion in favour of granting the provisional order. The factors which I have mentioned above will not make its task an easy one. It must be noted too that the applicant is hardly an impartial figure in the entire Fidentia saga. It was closely involved in the business of the Fidentia Group and if it does not at least indirectly represent the interests of Mr Arthur Brown he is nonetheless an important source of information to it in this matter regarding the views which it expresses concerning the value of the assets and businesses sold.

More fundamentally, in the particular circumstances of this matter it can be argued very strongly that the applicant has misconceived its remedies. If, at it seems clear, it has been unhappy for years with the manner in which the second and third respondents have been discharging their duties in terms of the curatorship orders, it could at a much earlier stage have either interdicted them from disposing of the first respondent's various assets or businesses or it could have approached court in terms of Section 5{8) or 5(9) of the Fl Act to cancel the appointment of the curators or to set aside or alter any decisions made or action taken by the curators with regard to the management or control of the first respondent's business. The applicant has not furnished any good reasons why these steps were not taken and why there has been such lengthy delay in taking any action at all.

There are other troubling aspects in relation to the merits of the main application. One of the two trustees of the applicant, Heydenrych, has had his license as a key individual of the trust revoked in terms of Section 9 of the Financial Advisory and Intermediary Services Act. No 37 of 2002 by the Financial Services Board. Furthermore, he has played such a minimal role in these proceedings that one wonders whether as a trustee the application indeed carries his support Secondly the applicant's papers are replete with very serious and far-reaching allegations relating to the expertise of one or both of the curators and the probity of their actions in giving effect to their duties under the curatorship. A good number of these allegations, on the face of it, appear overstated in relation to the substantiation provided therefor. Thirdly, at an earlier stage the applicant took up the position that if all three companies in the group were not wound up then by virtue of the intermingling of their assets no point would be served in placing only one into provisional liquidation. Now that the applications in respect of the other two companies have been dismissed the applicant appears unaccountably to have backtracked on this stance, and nevertheless, continues to seek  an  order  of provisional  liquidation  against the first respondent alone.

Having regard to all these factors, and other factors which have not necessarily been mentioned, I am of the view that the main application can indeed be described as falling into the category of litigation which is "vexatious, reckless or an abuse of the process of court", and which therefore justifies an order compelling the applicant to furnish security for the first and third respondents costs.

In the result the following order is made:

2. In the event of the respondent failing to comply with the provisions of paragraph 1 above within five court days after the date of this order, or a determination by the Registrar, as the case may be, the first, second and third applicants may apply on the same papers, duly supplemented if need be, for an order dismissing the respondents main application with such ancillary relief as may be required.

3. The respondent will pay the costs of this application.

/ds
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