CIV/APN/325/87
IN THE HIGH COURT OF LESOTHO
In the Application of
HENDRIK JACOBUS FREDERIK STEYN N.O. Applicant
(IN HIS CAPACITY AS PROVISIONAL TRUSTEE Petitioner
OF THE ESTATE GUISEPPE FLORIO)
and
LESOTHO HOTELS INTERNATIONAL (PTY) LTD 1st Respondent
MACHACHE DIAMOND CUTTING WORKS (PTY) LTD 2nd Respondent
LESOTHO QUALITY AGGREGATE INDUSTRIES (PTY) LTD 3rd Respondent
MACHACHE PROPERTIES (PTY) LTD 4th Respondent
C J C (PTY) LTD (BOCCACCIO RESTAURANT 5th Respondent
MACHACHE HOLDINGS (PTY) LTD 6th Respondent
MOUNTAIN VIEW HOTEL (PTY) LTD 7th Respondent
MALIBAMATSO MINING (PTY) LTD 8th Respondent
MACHACHE DRILLING (PTY) LTD 9th Responsdent
STONE CRUSHERS (PTY) LTD 10th Respondent
JUDGMENT
Delivered by the Honourable Mr. Justice J.L. Kheola on the 18th day of November, 1988.
This is an application that the respondent companies be placed under provisional compulsory liquidation in the hands of the Master of the High Court of Lesotho. On the 19th October, 1988 the applicant/ petitioner was appointed as provisional trustee of the insolvent
estate of Guiseppe Florio.
The respondents are all companies registered as such in terms of the Companies Act 1967 of the Kingdom of Lesotho and are carrying or, business variously as such within the Kingdom of Lesotho.
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The intention of the applicant/petitioner was to move this application on the 21st October, 1988 as an ex parte application but Mr. Buys of the firm of attorneys named Du Preez, Liebetrau & Co. got wind of the fact that Mr. G. Florio had been provisionally sequestrated and that an application was to be made to obtain a provisional compulsory liquidation of the respondent companies. He approached the applicant/petitioner and Mr Pick, counsel for applicant/petitioner, but they refused to give him any information concerning the applications.
On the 21st October, 1988 I made an order in the following terms:
The petitioner must serve the respondent companies with the Notice of Motion and the accompanying documents on or before the 26th October, 1988;
The respondents must file their opposing papers on or before the 31st October, 1988;
The petitioner shall file replying papers on or before the 2nd November, 1988;
Service shall be made on the respondent companies either at their respective registered head office addresses, or at their principal place of business;
The matter shall be heard on the 4th November, 1988 at 9.30 a.m.;
Costs shall be costs in the cause.
The application has been withdrawn and the only issue to be decided is that of costs. Rule 43 (1) (a) of the High Court Rules 1080 reads as follows:
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"7 (a) A person instituting any proceedings may at any time before the matter has been set down and thereafter by consent of the parties or by leave of the court, withdraw such proceedings."
On the 4th November, 1988 the question of costs was argued before me by Mr. Edeling, counsel for the respondents and Mr. Lubbe, counsel for the applicant/petitioner. It will be necessary to set out correspondence between the parties' counsel after the order of sequestration of the estate of Mr. G. Florio was obtained.
The first letter was written by Mr. Buys to Messrs Harley & Morris and reads as follows:
"Dear Sirs,
PROVISIONAL SEQUESTRATION: G A M FLORIO
YOUR CLIENT: D.W. FRIEDMAN
This letter servos to inform you that we act on behalf of Mr. Florio as well as on behalf of the companies mentioned in the schedule annexed hereto.
The Petition in terms o whereof you obtained a Provisional Order of Sequestration against Mr. Florio, has now come to hand and we have had the opportunity to peruse the documents.
We note from the Court Order that Mr. Steyn has been appointed as the Provisional Trustee herein. We hereby inform you that we have
instructions to represent Mr. Florio in this matter and all other affairs affecting him and give you notice that Mr. Steyn should
communicate with the writer hereof in any matter relating to this estate or to Mr. Florio.
We also request Mr. Steyn to contact the writer hereof before he takes any actions against the insolvent or before carrying out any investigations in the estate due to the fact that the affairs of Mr. Florio are very complex and are, most of the time, not as they appear from the outside. \We hereby tender our fullest co-operation and assistance to the Provisional Trustee in carrying out his duties.
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The reason why we request you to communicate with us in all the matters relating to the affairs of cur client, is specifically because of the following:
At about G.45 p.m. on the 20th day of October 1988 and at the Maseru Cabanas, the writer hereof approached Mr. Steyn in the gambling hall and asked him whether it was true that an Order for Provisional Sequestration was granted against Mr. Florio and that he was . involved. Mr. Steyn emphatically denied this fact and in fact said that he knew nothing of the sequestration. It has now become clear that this was a blatant lie as Mr. Steyn signed an affidavit on 19th October, 1988 consenting to be appointed as the Provisional Trustee in the estate of Mr. Florio.
At the same occasion the writer hereof approached Advocate Pick of Bloemfontein, also in the gambling hall, whether he was involved in the application that was moved against Mr. Florio. At first he denied any knowledge of this fact but after the writer hereof
confronted him that he was not telling the truth, ho said that it might be the truth. He also declined to give further information and said that "the men might not like it."
It was quite clear to the writer hereof that both these gentlemen were not prepared to disclose any fact or to be helpful in any way but, in fact, tried everything to not disclose any matters relating to this sequestration.
In view of the fact that the Court Order is dated 20th October 1988, Mr. Steyn was already the Provisional Trustee. He therefore lied to the writer hereof who was representing Mr. Florio. Although Mr. Steyn did not, at that stage, know that the writer hereof was acting on behalf of Mr. Florio, he should have clarified the . writer's involvement in the matter and thereafter state that he was not prepared to release any information or to co-operate with him.
If there is going to be a situation where the Provisonal Trustee withholds Information, it can only prejudice . the affairs of Mr. Florio and all parties involved.
We tried on two occasions during this morning to make contact with Mr. Steyn but were, on both occasions, advised that Mr. Steyn is busy, in consultation, and not able to talk to the writer, He, however, undertook to return the call but has, to the time of delivery hereof, not done so.
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It is clear from the papers that you intend to involve the affairs of the companies where Mr. Florio is involved, in his personal affairs. We hereby give you notice that you should not interfere with the companies or with the business activities of those companies as they do not form part of the estate of Mr. Florio and should not be prejudiced in any way.
Take further notice that if you do, in fact, intorefere in the affairs of the companies, we reserve the right to approach the Court fur relief and to claim damages should the companies sustain any damages as a result of your interference.
We also hereby give you notice that the writer hereof will not be in office from 1.00 p.m. today but all matters can be communicated to Mr. Koornnof of this office.
Also take notice that if you intend to bring any further proceedings either against our client or against any of the companies, prior and adequate notice should be given to this office.
Yours faithfully, -
DU PREES. LIEBETRAU & CO. "
The reply to the above letter reads:
"Dear Sir,
We acknowledge receipt of your letter dated the 21st October 1988 and note the contents thereof.
The liquidation proceedings of the Respondent Companies under Civil Application 325/33 will not be proceeded with at the present time, pending what emerges from a meeting proposed between the Trustee of Florio's Insolvent Estate, your Mr. S.C. Buys and Mr. Florio, tomorrow at 2.30 p.m. at your offices in Ladybrand.
Consequently, we hereby file a Notice of Withdrawal from the-Rolls and in the meantime this application will not be moved until the Trustee has completed his investigations with your Mr. Buys and Mr. Florio as per paragraph 4 in your letter under reply. We went to give you the opportunity to make full disclosure of your Client affairs.
Yours faithfully
HARLEY & MORRIS."
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On the 28th'October, 1988 the respondents' attorney wrote a letter to applicant's attorneys which reads as follows:
D. FRIEDMAN / G.A.M. FL0RIO
We refer to your letter dated 25th October 1988 and noted the contents thereof.
We wish to advise you that we intend to keep strictly to the Order made by His Honourable Mr. Justice Kheola on the 24th instant, and also to comply with the time limits set out therein.
We hereby place on record that you have not served the papers in terms of the Court Order and that wo intend to include this aspect in our opposing papers.
We do not understand what effect the discussions you mention in your letter, can have on the liquidation application.
We confirm that we have the discussions with Mr. Steyn and it did not change the situation at all.
Yours faithfully,
DU PREEZ, LIEBETRAU & CO."
The Notice of Withdrawal from the Rolls reads as follows:
"Kindly note that the above mentioned matter, previously set down for hearing on Friday the 4th day of November 1988 on an urgent basis, be and is hereby withdrawn from the Rolls for hearing on that date, and may be reinstated for hearing at a date to be arranged by the Registrar and and the Attorneys acting for the other side."
It is dated the 25th October, 1988.
Oh the 26th October, 1988 respondents' attorney filed a Notice of Application in terms of Rule 30 (1) indicating that on the
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4th November, 1988 an application would be made for the setting aside of the Notice of Withdrawal from the Rolls on the ground that it was an irregular and improper step inasmuch as the date of hearing was fixed by an order of Court and it followed that any proposed withdrawal from the Roll required leave of the Court. It was further noted that the Withdrawal was a unilateral attempt by the applicant to postpone the matter sine die without a tender of costs and without leave of the Court or the consent of the respondents.
The respondents noted that they intended to abide by and to comply with the abovementioned order of the Court.
On the 1st November, 1988 the applicant's attorneys filed a Notice of Withdrawal in which the application was withdrawn against the respondent companies and a tender of taxed party and party costs was made to the respondents.
Mr. Lubbe conceded that the application is fatally defective because the petitioner had no authority to institute these proceedings in terms of section 18 (3) of the Insolvency Proclamation No. 51 of 1957 which provides that without the authority of the High Court a trustee shall not bring or defend any legal proceedings. However, he submitted that there was no need for the respondents to file a lengthy opposing affidavit on the 31st October, 1988 because on the 25th October, 1988 applicant's attorneys clearly indicated that the application would not be heard on the 4th November as it was being withdrawn from the Roll.
Mr. Edeling argued that the Notice of Withdrawal from the Roll was irregular in that it was a unilateral attempt by the applicant
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to postpone the matter sine die. I agree with Mr. Edeling that in terms of Rule 43 (1) (a) the applicant was bound to obtain the consent of the respondents or leave of the Court to withdraw the application. He never approached the respondents' attorneys about the withdrawal nor did he indicate that leave of the Court would be sought. In any case the so-called Notice of Withdrawal from the Roll was not at all a withdrawal of the matter as contemplated by Rule 43. It was an attempt to postpone the matter sine die as the applicant made it quite clear that the matter "may be reinstated for hearing at a date to be arranged by the Registrar and the Attorneys acting for the other side."
It seems to me that the matter was not actually withdrawn by the Notice of Withdrawal dated the 25th October, 1988 and that ' the respondents could not take any chance and neglect to file opposing affidavits. On the day the matter was reinstated they would probably be barred from filing it. The Court Order made it quite clear that they must file their opposing affidavits on or before the 31st October, 1988.
The applicant has indirectly admitted that the Notice of Withdrawal from the Rolls dated the 25th October was not a proper withdrawal because on the 1st November, 1988 he filed a proper Notice of Withdrawal in which costs on party and party scale were tendered. The submission that the respondents unnecessarily incurred expenses by filing a lengthy affidavit is untenable inasmuch as the withdrawal was equivocal.
I am satisfied that the respondents were entitled to file the opposing affidavits because the application was withdrawn after the
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31st October which was the date on which the Court Order required them to file their opposing affidavits. I therefore come to the conclusion that the costs must include the opposing affidavits and appearance of counsel on the 4th November' to move application in terms of Rule 30 (1). The Notice of Withdrawal dated the 1st November was also defective and was an irregular and improper step. The applicant could withdraw the matter only with the consent of the respondents or by leave of the Court, neither of which has been obtained.
The next question to decide is whether the applicant should pay respondents' cost on party and party scale or on attorney and client scale, de bonis propriis. In the case of In Re Alluvial Creek, LTD. it was held that an order against a party to pay attorney and client costs may be made by the Court not only where there has been something in the conduct of that party such as malice or misleading the Court Which merits punishment but also where the proceedings are vexatious, by which is meant that the proceedings have the effect of being vexatious although the intent may not have been that they should be vexatious.
The case of Schlesinger v. Schlesinger, 1979 (4) S.A. 342 is is authority for the proposition that attorney and client costs are awarded if there is proof that the applicant and the legal advisers had brought the application with a reckless disregard for the full and true facts in an effort to obtain some tactical advantage of the respondents.
It is also authority that the non-disclosure or suppression of facts need not be willful or mala fide to incur the penalty of
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rescission and that a litigant who approaches a Court ex parte is not entitled to omit a fact or attitude of his opponent which is relevant to the point in issue merely because he is not prepared to accept the correctness thereof.
In Real Estate & Trust Corporation v. Central India Estates, LTD 1923 W.L.D, 121 an application for the liquidation of a company was withdrawn on the return day, and the Court being satisfied that the applicant acted in a reckless, vexatious and malicious manner, ordered him to pay respondent's attorney and client costs.
It is clear from the cases quoted above that attorney and client costs are awarded where the applicant acted in a reckless, vexatious and malicious manner. In the letter of the 21st October, 1986 addressed to applicant's attorneys, Mr. Buys made it quite clear in the first paragraph that they (i.e. Du Preez, Liobetrau & Co.) were acting on behalf of all respondents except the 4th and 6th respondents. Mr. Buys specifically stated in the last paragraph of the letter that if the applicant's attorneys intend to bring any further proceedings cither against Mr. Florio or against any of the companies prior and adequate notice should be given to his office. He also mentions in paragraph 4 that, the affairs of Mr. Florio are complex and tendered his fullest co-operation and assistance to the provisional trustee (applicant) in carrying out his duties.
The applicant and his attorneys and counsel refused to give notice to the respondents' attorneys and decided to move this application on ex parte basis. On the 24th October I ordered that
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the respondents must be served with the Notice of Motion. Mr. Fick had argued that Mr. Koornhof had no locus standi yet he had not been given chance to prove that he had locus standi. In his affidavit supporting liquidation of the respondents the applicant omits to mention that respondents' attorneys had requested prior service and that the affairs of Florio wore very complex and that Mr. Buys offered his fullest cooperation and assistance. This information had to be disclosed to the Court even if the applicant did not accept its correctness.
On the 21st October, 1988 an advertisement appeared in the "Lesotho Today" and reads as follows:
"Various business and commercial buildings for sale: We have various businesses i.e. butchery, restaurant, lodge, hotel and
commercial premises for sale. Only serious buyers please."
The advertisement was made by Mr. Buys. In the addendum to the petition the applicant suddenly came to the conclusion that the properties
advertised were the assets of the respondents; he said the advertisement ironically confirmed what he had previously informed this Court, both in CIV/APN/325/88 and CIV/APN/323/88 and verified what Mr. Telford had indicated in his affidavits in regard to the disposal of these assets. The petitioner had made no inquiry.:; concerning the properties advertised, he merely assumed that they were respondents' assets. It has now turned out that the advertisement concerned entirely different properties which had nothing to do with the respondents.
It seems to me that the applicant did not make proper
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investigations by contacting Mr. Buys and establishing exactly which businesses were involved. Ho was reckless and wanted to snatch an order at all costs. As a provisional trustee of the insolvent estate of Mr. Florio, the applicant had a duty to this Court and to the Master of the High Court to make a proper investigation of the affairs of the insolvent and his companies so that he could bo in a position to make a proper report. He alleges that he has analysed the situation, and consulted extensively and that he has an intimate knowledge of Florio's affairs, which are inter-mixed inextricably with the affairs of the respondent companies. In making this bold statement the applicant was relying mostly on what he had been told by Mr. Telford. He had taken no steps to seek corroboration of Mr. Telford's story. He could have gone to head offices of the respondents to check if it were true that no books wore kept. He refused to contact Mr. Buys who had shown his willingness to cooperate with him in the investigations.
Again I am of the view that the petitioner was reckless and misled the Court by alleging that he had made extensive investigations As a lawyer the applicant knows very well how dangerous it is to rely on hearsay evidence. Mr. Telford did not have any books or letters to confirm his stories. He had been an employee of Mr. Florio; the applicant ought to have obtained corroboration of his story because ho might have left Mr. Florio's employment because of a misunderstanding between them.
I agree that the applicant's attorneys and counsel behaved in a manner that leaves much to be desired by refusing to serve the-respondents'
attorneys and by trying by all means to get an order in the
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case where the interested party opposing an ex parte application which had come to his notice fortuitously or by informal notice. Be that as it may, I am not of the view that applicant's attorney and counsel have to be punished by an order that they pay costs de bonis propriis.
As far as the applicant is concerned it was common cause ' that he must pay costs de bonis propriis because he hod no authority to bring these proceedings, hence the insolvent estate cannot be burdened with costs incurred without proper authority. I have found that ho was reckless and that these proceedings were vexatious.
The order of the Court is that the applicant/petitioner must pay respondents' attorney and client costs which costs shall include the opposing affidavit filed on the 31st October, 1983.
(J.L. KHEOLA '
JUDGE
18th November, 1988.
For the Applicant/Petitioner - Mr. Fick
For the Respondents - Mr. Edeling.
