Ben-Tovim v Ben-Tovim and Others

• Jurisdiction: South Africa
• Judge: van Heerden J
• Judgment Date: 23 March 2000
• Citation: 2000 (3) SA 325 (C)
• Docket Number: 1435/00
• Hearing Date: 13 March 2000
• Counsel: P B Hodes SC (with him E Fagan) for the applicant. R P Hoffman SC (with him S C Goddard) for the first to third respondents. G Dickerson SC for the fourth respondent.
• Court: Cape Provincial Division

Van Heerden J:

Introduction

On the extended return day of a provisional order of judicial management in respect of the second respondent (hereinafter H referred to as GAL), the applicant (hereinafter referred to as Sara) applied for the discharge of the provisional order and for certain ancillary relief. The fourth respondent, the provisional judicial manager at the time of this application (hereinafter referred to as I Petersen) abides the decision of this Court as to whether or not to discharge the provisional order of judicial management. Petersen has, however, also brought a conditional counter-application, to take effect only in the event that the provisional order of judicial management is not discharged by this Court. In terms of this counter-application, Petersen seeks a declaratory order clarifying J

Van Heerden J

certain of the powers conferred upon him by the order whereby GAL was A placed under provisional judicial management. In the alternative to this declaratory order, Petersen seeks an order, in terms of s 428(2)(c), read together with s 428(3), of the Companies Act 61 of 1973, varying the terms of the provisional order of judicial management so as expressly to confer the relevant powers upon him in his capacity as provisional judicial manager. B

The first respondent (hereinafter referred to as Gershon) opposes Sara's application, supports Petersen's conditional counter-application and, by way of a prayer contained in the final paragraph of the answering affidavit deposed to by him in this matter, applies for an order extending the provisional judicial management order until 3 April 2000. C

Factual background

Sara and Gershon are married to each other in community of property and according to the laws of Israel. Gershon left the common home in early 1999, allegedly because the marriage relationship between the D parties had broken down irretrievably. Subsequently, Gershon instituted divorce proceedings against Sara both in this Court and in Israel. These divorce proceedings are being defended by Sara.

Sara and Gershon are the only two directors of both GAL and of the third respondent (hereinafter referred to as YAM). They are also E the sole shareholders of both GAL and YAM, each holding 50% of the issued shares in these two companies. GAL is a South African company, having its principal place of business in Paarden Eiland, Cape Town. While YAM is a company incorporated in Namibia, its business is managed from the premises of GAL's principal place of business, which premises F also serve as YAM's administrative centre for all its business operations.

It is common cause that, although GAL and YAM are separate corporate entities, they have always been administered jointly. More specifically, GAL has at all times managed the operations of YAM (in the main, diamond mining operations in Namibia), such management including the administration of the operation of the ships chartered by G YAM, the purchase of and payment for supplies for such ships, the payment of the costs of maintenance for these ships, of repairs,ss chandlery, spare parts and of the crews. It is not disputed that the main business of GAL is its administration of the operations and the financial affairs of YAM and that 'the receipt, administration and the disbursement of YAM's earnings were and are an integral part of H GAL's day-to-day operations' (see paras 15 and 16 of the affidavit deposed to by Petersen in support of his counter-application).

It would appear that, prior to the provisional judicial management of GAL, the modus operandi of the two companies was as follows: YAM's income from its diamond mining operations in Namibia (conducted I pursuant to an agreement with Namdeb Diamond Corporation (Pty) Ltd) was paid by the latter company directly into YAM's banking account. Seventy-five per cent of this income was then transferred to a call account operated by GAL, which company used these funds to pay all the costs incurred by GAL (on YAM's behalf) in the course of GAL's J

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administration of the operations of YAM. The remaining 25% of YAM's A income was utilised (apparently also by GAL) to pay certain 'direct creditors' of YAM.

It appears from the papers placed before this Court that, commencing at the latest in early 1999, Sara and Gershon have been involved in a series of extremely acrimonious disputes with each other, largely concerning the management of the affairs of GAL and YAM and, in B particular, the extent of Sara's involvement in such management. The level of acrimony between the parties and the frequency of the disputes between them appear to have been greatly exacerbated by the separation of the parties and the ongoing divorce proceedings.

In December 1999, Sara brought an application (under case No C 13038/99) against Gershon, GAL and YAM, seeking, inter alia, 'access to all such information, including documentary information, as is reasonably required by her in the exercise of her functions as executive director of' GAL and YAM. This application was due to be heard by this Court on 19 January 2000. D

On 17 January 2000 Gershon launched an application (under case No 234/2000) for an order placing GAL under provisional judicial management, the proposed return day being 10 February 2000. Sara initially opposed this application. However, after negotiations between the parties relating to both the abovementioned applications, an order E pertaining to both applications was granted on 18 January 2000 by Blignault J, apparently by agreement between the parties and without the benefit of argument on the matter. This order placed GAL under provisional judicial management, with a rule nisi calling upon interested parties to show cause, on 22 February 2000, why the order should not be made final. In addition, in terms of this F order, Sara's application under case No 13038/99 was postponed sine die, while some of the relief sought by her in that application was granted, as follows:

'10.

Gershon agrees that he will not conclude any contracts on behalf of or concerning or in any way affecting the assets or financial interests of Yam Diamond Recovery (Pty) Ltd ("Yam") and/or its G subsidiaries without first having disclosed to Sara:

10.1

the identity of the other contracting party or parties;

10.2

the purpose and subject-matter of the contractual negotiations;

10.3

the potential liability of Yam in the event that any contract H is concluded pursuant to such negotiations;

10.4

the potential benefits to Yam in the event that any contract is concluded pursuant to such negotiations; and

10.5

drafts of any such contracts or the material terms thereof in the case of an oral contract.

11.

Gershon will give Sara access to all such information, including documentary information, as is reasonably required by her in I the exercise of her functions as director of Yam.

12.

Gershon and Sara agree that directors' meetings will be held on at least a fortnightly basis in Yam. Such meetings shall be chaired by Mr Jack Tworetzky or his nominee and shall be attended by J

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Gershon and Sara, who may also require the attendance of an attorney and/or an A accountant, the costs whereof will be borne by Yam.'

Paragraphs 13 and 14 of the order granted by Blignault J, which form the subject of Petersen's counter-application in the proceedings now before this Court, read as follows: B

'13.

All moneys presently held, and all moneys received in future, by Yam or any of its subsidiaries, will be placed in a bank account, which account shall be subject to the control of the judicial manager/managers to be appointed by the Master in respect of Gal, which judicial manager/managers shall have sole signing powers in respect of the said account. C

14.

Gershon and Sara shall forthwith in writing authorise Yam's bankers to give effect to para 13 above.'

The two joint provisional judicial managers appointed by the present fifth respondent pursuant to the order of 18 January 2000 (Messrs Gore and Bester) encountered 'seemingly insurmountable problems . . . in regard to the proper and effective administration D of the affairs and business operations' of GAL, to the extent that they were unable to fulfil...