Leech and Others v Farber NO and Others

• Jurisdiction: South Africa
• Judge: Nugent J
• Judgment Date: 26 February 1998
• Citation: 2000 (2) SA 444 (W)
• Docket Number: 97/30472
• Hearing Date: 09 February 1998
• Counsel: D Unterhalter for the applicants. No appearance for the first, third and fourth respondents. Andre Gautschi SC (with him M J Sawyer) for the second respondent (ABSA Bank Ltd).
• Court: Witwatersrand Local Division

Nugent J:

During the course of last year a company known as Needwood (Pty) Ltd was placed in liquidation. Its sole shareholder and director was a certain Mr Konrad Leech, who has been sequestrated. The petitioning creditor in each case was ABSA Bank Ltd, which had lent the company approximately R54 million. D

ABSA Bank, supported by the liquidator, applied to the Master of the High Court for an enquiry to be held into the affairs of the company in terms of ss 417 and 418 of the Companies Act 61 of 1973. In its application ABSA Bank said that the money had been lent to the company for the purpose of financing a residential development, but that some E of it had been diverted to other entities or persons associated with Mr Leech. It said that the residential development was expected to realise no more than R30 million and it wanted an enquiry to be held in order to attempt to establish what had happened to the balance of the money. F

The Master authorised the holding of an enquiry and appointed a commissioner for that purpose as provided for in s 418 of the Act. The commissioner duly summoned the applicants to attend and be examined at the enquiry and to produce documents relating to the affairs of the company.

At the commencement of the enquiry, and before any witnesses had been G examined, the applicants' attorney requested the commissioner to make a ruling in the following terms: 'That the relevant representatives of ABSA produce at the enquiry all of the documentation, statements, affidavits and other information at ABSA's disposal relating to ABSA's auditors, forensic accountants, valuers, quantity surveyors, consulting engineers, attorneys and counsel, as also all of ABSA's internal and inter-departmental reports and memoranda regarding Needwood which ABSA intends to use for the purposes of the enquiry and to state, in detail, the allegations that ABSA will be making at the enquiry so as to enable the witnesses represented by attorney Allan Levin to consult fully and meaningfully with him in order that the witnesses in question might deal appropriately therewith in the knowledge of the case which they will be called upon to meet.'

The commissioner declined to make that ruling, which has prompted the present proceedings. Not all the relief which was sought in the notice of J

Nugent J

motion has been pursued. The relief which is now sought falls into A three broad categories which I will deal with separately.

The Master's decision

The applicants have asked this Court to review and set aside the B decision of the Master to convene the enquiry in the first place. The Master has not formally opposed the application, but has submitted a brief report in which he indicated that he would abide the decision of the Court.

The various grounds relied upon in the founding affidavit in support of this relief have not all been pursued. In argument the applicants' C counsel confined himself to the submission that ABSA Bank's application to the Master was insufficiently substantiated to support a decision to authorise an enquiry.

In my view, there is no merit in that submission. The Master has a discretion to authorise the holding of an enquiry. In cases relating to D the equivalent section of the 1926 Companies Act it was held that, for an enquiry to be authorised, it was sufficient if there was a 'fair ground for suspicion and that the person proposed to be examined can probably give information about what is suspected' (Ex parte Brivik 1950 (3) SA 790 (W); Katz v Colonial Realty Trust (Pty) Ltd 1954 (4) SA 302 (W)). Under the present Act, as amended E by the Companies Amendment Act 29 of 1985, the discretion to authorise an enquiry has been extended to the Master, but, in my view, the grounds upon which that discretion is to be exercised are no different to those which applied under the former legislation.

It is not for this Court to decide whether an enquiry should have F been authorised, but only whether it has been shown that the Master improperly exercised his discretion to do so. The extent of the information which was before him is relevant only insofar as it may justify the inference that he could not properly have exercised his discretion. In my view, that inference is certainly not justified in the present case. On the contrary, in my view, the information placed G before the Master provided ample grounds for him to authorise an enquiry and provides no reason to doubt the Master's assertion that he properly and honestly applied his mind to the exercise of his discretion. I can see no grounds upon which to set aside his decision. H

The commissioner's ruling

The applicants have also asked this Court to review and set aside the ruling made by the commissioner to which I have already referred.

In the course of conducting an enquiry there will be many matters I upon which a commissioner will from time to time be called upon to exercise a discretion. So, for example, he may be called upon to decide what witnesses should be summoned; what documents should be produced; what questions should be allowed; and generally how the enquiry should be conducted. As in other cases where discretionary powers are exercised, a Court will not generally interfere if the person J

Nugent J

concerned has acted within the terms of his authority and has applied his A mind to the proper exercise of his discretion.

In the present case there has been no suggestion that in making his ruling the commissioner did not properly exercise any discretion which he might have had. The applicants' submission, as I understand it, was rather that he had no discretion in the matter and was bound as a matter of law to rule in their favour. For this submission they relied B upon various provisions of the Bill of Rights incorporated in the Constitution of the Republic of South Africa Act 108 of 1996.

The ruling which was sought from the commissioner comprised two distinct parts. What was sought was disclosure of the 'allegations which would be made by ABSA' in the course of the examination of witnesses; and the disclosure of all ABSA's documents which were C relevant to the enquiry.

With regard to the first aspect, I had some difficulty understanding precisely what it was that was required to be disclosed and that difficulty has not been entirely resolved. The purpose of an enquiry in terms of s 417 is, after all, to elicit information from witnesses D rather than to establish a case against any of them. Counsel for the applicants distanced himself from any suggestion that the applicants wanted to...