Wishart and Others v Blieden NO and Others

• Jurisdiction: South Africa
• Judge: Gorven J
• Judgment Date: 15 November 2012
• Citation: 2013 (6) SA 59 (KZP)
• Docket Number: 7136/2011
• Hearing Date: 28 September 2012
• Counsel: CJ Hartzenberg SC (with LE Combrink) for the applicants. No appearance for the first, sixth and seventh respondents. WH Trengove SC (with K Hofmeyr) for the second to fifth respondents.
• Court: KwaZulu-Natal High Court, Pietermaritzburg

Gorven J: D

[1] The three applicants were summonsed to appear before the first respondent on 20 July 2011 in an enquiry convened under s 417 of the Companies Act 61 of 1973 (the Act). The enquiry relates to Avstar Aviation (Pty) Ltd (Avstar). The second and third respondents are advocates practising at the Johannesburg Bar. The fourth respondent is E an attorney. The applicants do not want to be examined at the enquiry by the second, third and fourth respondents. They did not attend the enquiry. Their present attorney of record appeared instead. He submitted that the first respondent should not allow these respondents to represent the fifth respondent (Billiton) in the enquiry. The first F respondent declined to make such a ruling. This application resulted. Part of the relief sought was to review and set aside this decision. That relief is no longer pursued. The application moves to interdict the second, third and fourth respondents from examining the applicants in the enquiry. Unless further particularity is necessary, the second, third and fourth respondents shall be referred to jointly in this judgment as the G respondents. The second to fifth respondents are the only ones who have opposed the application.

[2] The applicants say that it would be improper for the respondents to participate in the examination of the applicants. They raise a fundamental objection ad hominem. This is the nub of the interdict application. H The applicants say that the respondents are subject to a conflict of interests and are privy to confidential information. This is said to have been disclosed to them during consultations.

[3] It is necessary to set out the facts in some detail so as to assess these contentions. Most of the facts set out below are uncontested. I shall in I due course indicate those which attract a challenge.

[4] There are three other companies which feature in this application. They are Eurocoal (Pty) Ltd (in liquidation) (Eurocoal), Rietspruit Crushers (Pty) Ltd (Rietspruit) and Colt Mining (Pty) Ltd (Colt). The first applicant is the sole director of Avstar and Eurocoal. All of the J

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A applicants are directors of Rietspruit. The second applicant is the sole director of Colt and the father of the first applicant. In addition to being a director of Rietspruit, the third applicant is the financial manager of Rietspruit and Colt. Billiton has proved claims in insolvency against both Eurocoal and Avstar. The claim against Eurocoal resulted from arbitration B proceedings which took place between 26 September and 5 October 2007. The fourth respondent has at all material times represented Billiton, including in the arbitration proceedings. The first applicant was present every day of the arbitration and was fully aware of the fourth respondent's position. The arbitrator made an award in favour of C Billiton.

[5] In an attempt to settle Billiton's claim, a meeting was held on 7 March 2008 (the settlement meeting). The fourth respondent represented Billiton in those negotiations. The persons who represented D Eurocoal included the first applicant and one Rory Loader (Loader). Loader was, at the time, a director of Avstar. He was also the 'legal manager' of Avstar and of many of its associated companies. In 1997 the fourth respondent came to know Loader. At the time he was a candidate attorney and Loader was practising at the Johannesburg Bar. The fourth respondent briefed Loader both then and later. At the settlement E meeting a proposal was put to Billiton by Loader and the first applicant on behalf of Eurocoal. In response, at the settlement meeting, the fourth respondent indicated that Eurocoal must deliver coal to Billiton under their agreement. If it did not, Billiton would consider taking a number of steps. It would pursue a substantial damages claim against Eurocoal. If that claim was not satisfied, it would bring an application for the F liquidation of Eurocoal. It would then move for an enquiry to be convened under s 417 of the Act and thereafter pursue a claim under s 424 of the Act against the first applicant. Loader responded that this route would not be likely to yield any substantial commercial benefit to Billiton. The first applicant says he does not recall any such conversation. G He does not deny that it took place or that he was present. He merely says that he was confident that the matter between Eurocoal and Billiton would settle and things would not progress that far. He also says that he does not consider that any action taken against him under s 424 of the Act would be well founded because he has done nothing H wrong.

[6] Three days after the settlement meeting, the fourth respondent briefed the second respondent to represent Billiton in the dispute with Eurocoal. On 13 March 2008 the second and fourth respondents discussed with the in-house counsel of Billiton the strategy to be I employed in this dispute. They agreed to attempt to wind up Eurocoal to force it to honour the award made against it in the arbitration. On 13 June 2008 the third respondent was briefed on behalf of Billiton. An application was prepared between 16 and 20 June 2008 for the arbitrator's award against Eurocoal to be made an order of court. An answering affidavit was delivered prior to 25 August 2008 which took a legal point J and, as a result, all that was sought against Eurocoal was the costs of the

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arbitration. On 25 September 2008 an order was granted by consent A requiring Eurocoal to pay those costs.

[7] During that period, one or more of the respondents represented Avstar, Rietspruit and Colt in specific disputes. This came about as follows. Shortly after the settlement meeting, Loader telephoned the B fourth respondent and asked whether he would be prepared to act for Avstar. The fourth respondent agreed to do so. He had no knowledge at the time as to the identity of Avstar's directors. The dispute was between Avstar and 1-Time over aircraft leased by Avstar to 1-Time. Two engines had failed and had been replaced by engines leased at R500 000 per month per engine. 1-Time looked to Avstar for these costs and for those C to repair the failed engines. As a result, 1-Time had withheld the monthly lease payments to Avstar. After certain consultations were held over this matter, Loader indicated that the assistance of the fourth respondent would no longer be needed. Whilst instructed in the matter, the fourth respondent informally mentioned to the second respondent the nature of the dispute. He thought he might need to brief him. This D need did not arise. Loader says that the decision to instruct the fourth respondent was taken by him and the first applicant because this access to the fourth respondent might facilitate a settlement of the Eurocoal dispute. The first applicant denies any such intention saying that, because he had been employed at Billiton, he knew the key people to talk to and was confident he could settle the matter without assistance. E

[8] Shortly thereafter Loader contacted the fourth respondent and indicated that Colt and Rietspruit had received letters sent in terms of s 345(1)(a)(i) of the Act. These letters claimed that they each owed Safair (Pty) Ltd (Safair) more than R37 million. They clearly foreshadowed F liquidation applications on the basis that they would be deemed to be unable to pay their debts. Loader told the fourth respondent that these matters were totally unrelated to the dispute between Billiton and Eurocoal and that there could be no conflict of interest. He requested him to assist. The fourth respondent agreed to do so and briefed the F second respondent for a consultation to be held on 24 April 2008. He told him what Loader had said about the matters in no way impacting the Billiton dispute with Eurocoal. The facts and underlying disputes between Safair and each of the two companies were, to all intents and purposes, identical.

[9] The consultation on 24 April involved the second and fourth H respondents. The fourth respondent instructed the second respondent that the companies disputed the debts claimed by Safair. They agreed to request documentation and evidence relevant to the dispute, including the most recent annual financial statements of Rietspruit and Colt. The disputed debts formed the main focus of a possible application to I interdict the bringing of liquidation applications by Safair. As a precaution, the second respondent began to prepare interdict applications on 5 May 2008. On 6 May 2008 it became known that bonds of security had been taken out for liquidation applications against Rietspruit and Colt. The second and fourth respondents met that day. A letter was sent disputing the indebtedness, indicating that both Colt and Rietspruit J

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A were solvent, trading companies and requesting an undertaking that no liquidation applications would be brought. In case this was not forthcoming, the second respondent requested that the fourth respondent arrange a consultation with Loader on 7 May 2008. The second respondent met Loader for the first time on 7 May 2008 at the consultation. Loader's only involvement with, and knowledge of, Rietspruit B and Colt related to this litigation.

[10] Between 5 and 8 May 2008, therefore, the second respondent settled a letter and drafted papers for applications to be launched by Rietspruit and Colt. He charged for three days of consultations. He C consulted mainly with the fourth respondent but also with Loader and even less with the first applicant. Very few facts were elicited from Loader and the first applicant. Those elicited related to the terms of the agreements in question and the facts underlying the dispute with Safair. The second respondent was informed that Rietspruit was controlled by D the second applicant. He was told that the second applicant had...