Dr L Jamjam and Partner Incorporated and Another v Mbalekwa and Another

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: B Hartle J
• Judgment Date: 22 September 2022
• Docket Number: EL 1474/2022
• Hearing Date: 09 September 2022
• Court: East London Circuit Local Division
• Citation: 2022 JDR 2784 (ECGEL)

Hartle J:

[1]

The second applicant approached this court on an urgent basis seeking interim relief pending the institution of an application to wind up the first applicant ("the company"). He does so both in his personal capacity and as a director of the company acting in furtherance of his fiduciary responsibilities towards it.

[2]

The second applicant and the first respondent are medical doctors and co-directors of the first applicant who have conducted their professional association under its auspices. The first applicant is a private liability company.

[3]

There is clearly an acrimonious history between the doctors that has been coming since June 2022. What or who caused the division or the reasons for it are not the court's concern for present purposes. They appear to accept that their relationship has irretrievably broken down and that it is imperative that the company be liquidated.

[4]

Negotiations were underway to conclude their association on appropriate terms with the assistance of their separate legal representatives. For reasons that remain unclear - although the first respondent appears to have complained mid-August that "the lawyers are not fast enough", he went off track and unilaterally appropriated to himself an amount of R1 970 000.00 which he withdrew from the company's bank account held with the second respondent on 31 August 2022. This amount (short of R15 000.00 or so) represents approximately 50% of the total funds in the company's bank account as at the date of the electronic transfer. On 1 September 2022 he withdrew a further sum of R30 000.00 from the account (although this only came to the attention of the second applicant after the launch of

2022 JDR 2784 p3

Hartle J

the present application), bringing the total of claimed unauthorized withdrawals to R2 000 000.00. [1]

[5]

The second applicant complained in his founding affidavit that the first withdrawal (this was all he had knowledge of at the time) was unexpected since the parties had agreed through their legal representatives to attempt to end their professional association in an amicable manner, subject to an appropriate agreement reached. The second applicant sought to reverse the transaction after his discovery but was unsuccessful.

[6]

This evidently prompted the launch of the current application inter alia seeking repayment of the first sum withdrawn but not before the first respondent was placed on terms to provide an undertaking to repay the company by 1 September 2022 pending the finalization of the now inevitable liquidation proceedings.

[7]

Underpinning the necessity for the additional remedy claimed was the applicants' (valid as it turns out) concern that given the first respondent's unilateral withdrawal of the R1 970 000.00 he would re access the bank account and withdraw more money. A further fear was voiced that he would follow through on a prior threat made to disrupt the medical practice, prejudicing the company, its creditors, staff, and patients in the process. The second applicant foresaw that he might remove, encumber, or alienate the company's other assets as well. Indeed, the first respondent did not challenge the second applicant's averment made in a supplementary affidavit filed on 5 September 2022 in which he revealed that not

2022 JDR 2784 p4

Hartle J

only had the first respondent appropriated the second sum of R 30 000.00 to himself after being placed on terms to repay the first amount withdrawn, but that he had also attempted to remove half of the furniture from the company's leased premises on 2 September 2022 coinciding with his relocation to new premises.

[8]

Unbeknown to the applicants, between placing the first respondent on terms and the first appearance of the application on the unopposed motion court roll on 6 September 2022, his erstwhile legal representatives, Messrs. Tunzi Attorneys had responded to the demand. Their email is dated 1 September 2022, but only came to the attention of the applicants' attorneys after the delivery of the first respondent's answering affidavit on 8 September 2022. It transpired that it had been sent by his then attorneys to the applicants' attorney's offices, to an e-mail address of a secretary who was on sick leave at the time. The letter, which was only accessed after the fact, states as follows:

"In response to your e-mail of 31st August 2022 our client wishes to state that he has only transferred the funds to his personal account to save them, has no intentions to use or (embezzle) them, other than to protect them after realizing that your client continues to make withdrawals from the business account despite having been advised to stop in our previous correspondence." [2]

[9]

If the email had been brought to the notice of the applicants' attorneys prior to the launch of the present application this may have rendered it superfluous or have impacted what remedy or relief was then still necessary or appropriate, but the matter took a somewhat strange turn thereafter.

2022 JDR 2784 p5

Hartle J

[10]

When the application was first called on 6 September 2022 amidst a busy motion court roll and upon the indication given that the first respondent wished to oppose and indeed launch a counter application, counsel who appeared for the first respondent was evidently quite reluctant to furnish any undertaking at all on his behalf to safeguard the funds pending the hearing of the urgent application for interim relief. Since the parties wished to file additional papers, I considered that it was necessary pending the exchange of these that it be established where the monies were at that point and that the court receive an undertaking that the funds ostensibly taken by the first respondent not be utilized (and the bank account not be accessed further) until I could hear counsel on the ensuing Friday. I accordingly prevailed upon the parties to adopt some form of consensus in this respect.

[11]

In consequence of this expectation an undertaking was given by the first respondent, but also by the second applicant, that the company's funds would be out of reach for until I could hear the matter.

[12]

The undertaking given by the first respondent, which I incorporated in the order I granted postponing the matter until 9 September 2022 (and which I consequently extended pending the delivery of this judgment), was stated thus:

"The first respondent undertakes not to access or utilize the R1 970...