CASE
NO. A 194/07

IN
THE HIGH COURT OF NAMIBIA

In the matter between:

THE
REGISTRAR OF FRIENDLY SOCIETY APPLICANT

and

LIBERTY
FRIENDLY SOCIETY 1^ST
RESPONDENT

AUGUST
MALETZKY 2^ND
RESPONDENT

CORAM: FRANK,
A.J.

Heard
on: 2008.07.07

Delivered
on: 2008.07.07 (Ex
Tempore)

_______________________________________________________________

JUDGMENT

FRANK,
A.J.:

[1] This
is the return day of a rule
nisi
coupled with an interim interdict that was issued on the 31^st
of September 2007. In terms of this rule
nisi
the first respondent was placed under curatorship in terms of the
Financial Institutions Act no. 38 of 1984. Because of the duration
of this interim curatorship the Court is also in possession of
interim reports by the curator coupled with reports of chartered
accountants as well as an actuary as far as the business of the first
respondent is concerned. I mention this because as will become
evident I am of the view that if regard is had to these reports it is
not necessary to deal with the other factual averments and counter
averments and even factual disputes raised on the papers to make my
decision in this matter.

[2] Before
I however deal with the merits of the application and as to whether I
should confirm the rule or not it’s necessary to deal with
certain aspects raised by the second respondent who appeared in
person. These proceedings commenced with the notice of motion filed
with the Registrar of this Court on the 25^th
of July 2007. This notice of motion sought a rule
nisi
on an ex
parte
basis. This notice of motion was signed on the face thereof by a Mr
Philander an attorney describing himself as one of the attorneys
practising under the name and style of LorentzAngula Inc.

[3] On
the day the matter was set down for hearing the then presiding judge
apparently indicated that he was not satisfied to deal with the
matter on an ex
parte
basis, and directed that a notice of motion be served on the
respondents allowing them an opportunity to respond to the relief
sought. As a consequence another notice of motion was issued out of
the Registrar’s office two days later, namely on the 27^th
of July 2007. This notice of motion is in similar terms to the
previous one except that it indicates a different date for the
hearing and it makes provision at the back thereof, at the last page
thereof, for service on the two respondents. This notice of motion
on the face thereof was signed by someone on behalf of Mr Philander
of LorentzAngula. It has since transpired that the person who signed
this notice of motion was in fact a legal practitioner, duly enrolled
and admitted as such, but who was in the employ of the applicant. I
must indicate that as is evident from the signature on this notice of
motion, this employee did sign the notice of motion indicating that
he was signing it on behalf of Mr Philander by affixing the letters
“pp” in front of his signature. The second respondent
submits that this renders the whole application in irregular
proceeding and on the basis of this irregularity seeks an order
discharging the rule
nisi.

[4] The
second respondent referred to a number of cases in which it was held
that where a legal person acts in this Court it can only do so
through a legal practitioner duly admitted and enrolled as such. I
have no quarrel with this principle, save for stating there is recent
change in that where such a legal person is wholly owned by a single
natural person, in certain circumstances, such person may act for
such natural person. That example however is not applicable in the
present matter.

[5] The
problem with this submission is that it is common cause that the
person who signed on behalf of the applicant is in fact a duly
admitted and enrolled legal practitioner. In this regard I refer to
a very old decision which deals with the matter in my view, and it’s
a decision of Donovan
v Bevan,
1909 TS 723. It’s a decision of the full bench of that
division a judgment of Innes CJ at page 725:

“Rule
9 (b) provides that notices regarding petitions and applications, and
this was a petition, shall be in writing signed by the attorney
issuing the same. This rule of course is intended primarily to apply
to cases (and they are a great majority) in which the litigant is
represented by an attorney. Clearly, if he appears in person he can
sign a notice himself. But in my opinion he cannot employ someone
else to sign it for him unless that other is a professional man
qualified to conduct a case. If he could appoint a non professional
man as in this case then he could appoint a non professional man to
sign summons for him, because the language employed in Rule 12 is
very much the same as that used in Rule 9; and clearly he could not
do that. Here the notice is signed by one Brandt, p.p. Donovan. It
is said that this is the signature of Donovan. It is not the
signature of Donovan, within the meaning of the rule and of our
practice. It means that Brandt was acting for Donovan, and
purporting to do what otherwise Donovan would have done himself. But
Brandt is not a professional man therefore he cannot do so.”

[6] As
is evident from the Donovan case and the reasoning thereof, one legal
practitioner may approach another legal practitioner to sign on his
behalf. What he cannot do is approach a lay person who wouldn’t
be qualified or wouldn’t be duly admitted and enrolled as such.
It follows from the aforegoing that the point raised relating to the
signature itself thus cannot be sustained.

[7] There
is however another aspect to this issue which I need to mention, and
that is the point raised by the second respondent that one should not
allow an employee of one of the litigants to sign on behalf of the
instructed legal practitioner, and that this itself would be an
irregular way of doing things.

In
view of what is set out by Innes CJ above in the quotation which I
referred to, I cannot accept that this is a vitiating irregularity.
I do however agree that it is highly undesirable practice, and I am
not sure whether it is professional or ethical conduct in terms of
the rules of the Law Society. The papers in front of me however do
indicate that a complaint had been laid in this regard with the Law
Society and with that as a fait accompli I leave the matter at that.
I only wish to mention that, even if it was an irregularity, but not
a vitiating irregularity, I would have had the power to condone that
irregularity. Thus for example a Court may even condone a document
that was not signed at all by legal practitioners. See Fortune
v Fortune
1996 (2) SA 550 (C) and specifically the cases referred to at 552
A-B.

[8] It
is clear from this matter and from the history that I have sketched
briefly that the original notice of motion launched was signed by a
legal practitioner of the firm LorentzAngula, that the relief sought
in that application is in fact the relief sought now, that the second
notice of motion was purely to facilitate notice to the respondents
of the application sought and that the relief that would be sought
was not amended or effected at all. It is also clear from the
further conducting of the proceedings that it is in fact the
applicant and no one else that is proceeding with this application.
So there is no question that the applicant can turn around and
dispute the authority of persons acting on their behalf and that it
is applicant in fact that are seeking the relief which forms the
basis of this application.

[9] Together
with this point that I have dealt with the second respondent sought
to introduce an affidavit under cover of a document filed under the
heading of, “Notice of Application To Submit Supplementary
Affidavits” dated the 3^rd
of July 2008. In his submissions to this Court respondent indicated
that the reason for these additional documents being filed was to
counter averments by the legal practitioner employee of the applicant
setting out the circumstances under which he signed the second Notice
of Motion, and to indicate to the Court that he was in fact acting,
as it were, as the legal practitioner of the applicant and that the
applicant’s attorneys of record were just basically a post box
that he used to further his application. In this regard an affidavit
of a Mr Hewat Beukes was filed together with a report relating to
some matter in which a Company by the name of Inscon was involved as
well as an affidavit of a Mr Hendrick Christiaan. Mr Christiaan’s
affidavit refers to the complaint launched with the Law Society in
connection with this conduct of the legal practitioner in the employ
of applicant. The complaint to the Law Society however which is also
annexed is in the form of another affidavit by Mr Christiaan to which
he annexes a notice of intention to defend which was likewise signed
by the legal practitioner employee of applicant on behalf of Mr
Philander of LorentzAngula.

[10] Mr
Coleman, as I understood him, opposed this application to submit
these affidavits on the basis that they were not relevant. I must
state that, except for the affidavit referring the matter to the Law
Society and also annexing a copy of the notice of intention to defend
which was likewise signed, not by Mr Philander nor by any attorney
practising in that firm of LorentzAngula, but once again by the legal
practitioner in the employ of the applicant, the other documents are
indeed irrelevant and in fact are mostly vexatious and scurrilous and
could have serve no other purpose but to try and blacken the name of
the applicant in this matter. I thus, as far as the “Notice of
Application to Submit Supplementary Affidavits” is concerned,
do admit the notice itself as well as the affidavit of Mr Christiaans
in which he laid the complaint to the Law Society. I do appreciate
that even in that affidavit there may be some controversial
allegations but that is for the Law Society to deal with and I am of
the view that the Law Society should seriously consider this
complaint and if it is not in the rules already come out with some
rules where lawyers are not allowed to get other people who are not
attached to their firms to sign documents on their behalf, and
specifically where that person is acting for the client instructing
the legal practitioner in that specific instance, because in such
case the problems that arises, and the perception that arises are
exactly those that the second respondent mentioned to this Court.

[11] Be
that as it may, it follows from what I have stated so far that
whereas I also have my doubts as to the propriety of an employee of
the applicant signing documents on behalf of the applicant’s
lawyers, the fact is that this activity was not in my view of such a
nature that it can be described as a vitiating irregularity and in
any event it caused no prejudice in the legal sense to the
respondents, and that point I cannot upheld.

[11] I
interpose here very briefly to state that this point was taken in the
context of a Rule 30 application. I make no ruling as to whether a
Rule 30 application was the correct procedure to take this point or
whether it should have been raised in
limine
in the answering affidavits. The point is that all the relevant
facts were placed before this Court and in those circumstances to try
and become very technical to either dismiss or to fit it into some
kind of legal label, in my view would serve no purpose and hence I
dealt with it on the basis of facts placed before Court and that it
needed to be addressed.

[12] That
brings me to the question as to what I should do with the rule
nisi,
i.e. whether I should discharge it or whether I should confirm it.
As I have mentioned earlier because of the time that elapsed, and I
am not blaming any of the parties for it, but just as a fact because
of the time that certain information is now available to this Court
which would not have been available had the matter been dealt with in
the normal course and without such a long delay. From that
information which I referred to, namely the curator’s report,
the actuarial report as well as the supporting auditors report it is
clear that the first respondent is insolvent. It is clear that the
first respondent cannot continue on its current basis. I must here
also note that the fact that the public was warned through
advertisements not to make further payments to the first respondent
of course also had a role to play, and I will accept for the purposes
of this judgment that in fact the position has worsen over a period
of time under curatorship because of the fact that there was no
inflow or income.

[14] The
fact of the matter is that even on the financial statements provided
to the applicant prior to this curatorship the society, that is the
first respondent, was financially in dire straits and on those
financial statements in fact also insolvent. That the first
respondent was in dire straits is not really disputed, and in fact it
is admitted by the second respondent that at the time there were
discussions as how to go forward with the first respondent, and there
was even an approach to the members of first respondent to make their
views known. Furthermore a legal opinion was sought as to the way
forward. The financial constraints under which the respondent
operated also necessitated at one stage limiting benefits in a sense
that benefits were paid in installments and not as was originally
stipulated; namely, in lump sums, as and when those benefits became
payable.

[15] Because
of the dire financial straits and the matters I have already
mentioned the applicant, who is admittedly the overall supervisory
body in respect of certain financial entities such as the first
respondent, was entitled to investigate the matter further. In any
such investigation the financial record and accounting systems of the
first respondents would obviously be of relevance. In this regard,
there was further factor, namely the flow of funds as between the
first respondent and second respondent, and even the second
respondent’s family were such that it in my view justified an
inspection.

[16] I
am fully aware of the fact that there are allegations that some
financial documentation were forwarded to applicant in response to
its enquiries, and there is some dispute as to the full nature of the
documents so made available and whether those documents were
sufficient. Be that as it may as I have indicated, the result was
that a rule
nisi
was granted, including the appointing of a provisional curator as a
result whereof certain further information came to the fore.

[17] The
second respondent admits that the first respondent is in dire straits
but submitted that an order akin to a judicial management order
should be given, so as to create a possibility for the first
respondent to get back on its feet again and to start operating
profitably again. In conjunction therewith he also states that this
Court must consider the fact that instead of the regulator, i.e. the
first applicant, applying for a curatorship it should have granted or
given directives to the first respondent to put things in place so as
to rectify whatever it felt was not correctly done at first
respondent.

[18] In
respect of both these options the fallacy in those suggestions or
those submissions in my view lies in equating the process of putting
a company under curaship with that of the process of liquidation. In
this regard I refer to the decision of ABP
4 x 4 Motor Dealers (Pty) Ltd v IGI Insurance Company Ltd
1999 (3) SA 924 (SCA), and I refer to page 933 and I quote from
paragraph 20 which also goes over the page to 934. In that case
Marais JA dealt with the matter as follows:

“I
turn to the submission that artificial personae under curatorship are
in substantially the same position as a company under judicial
management and were therefore intended to be treated no differently
in regard to a prescription. A company under judicial management
enjoys no protection against the running of prescription against it.
There are at least two answers to the submission. First, judicial
management is a creation of the Legislature which has no counterpart
in the common law. That it resembles a curatorship in some respects
does not make it anything other than what it is: a concept which is
sui
generis
and has its own legislatively determined field of application and its
own special name. There is no more warrant for forcing the concept
of judicial management into the mould of curatorship then there is
for forcing the concept of curatorship into the mould of judicial
management. The fact that, when enacting statutes providing for the
placing of certain institutions under curatorship the Legislator has
sometimes made it possible for such curators to have the same powers
as judicial manager does not detract from the existence of the two
phenomena as separate and distinct conceptions in law. Secondly,
there are many instances to be found in South African statutes of the
Legislature referring to those phenomena by the respective names in a
way which shows that it does not regard them as capable of being
described by one and the same generic name. I content myself will
referring to section 4(2)(b)(ii) and (iii) of the Stock Exchanges
Control Act 1 of 1995; s 57 (7)(c) and (d) of the Mutual Bank’s
Act 124 of 1993 and s 5(6)(a)(ii) and (iii) of the Financial Markets
Control Act 55 of 1989. Stegman J embarked upon a meticulous
examination of the provisions of these and other statutes in order to
demonstrate the correctness of the proposition set out above. There
is no need to repeat it; I consider that it does indeed bear them
out.”

[19] From
the aforegoing case it follows that I cannot equate an application
for curatorship with an application for judicial management or for a
provisional liquidation. These aspects may come to the fore
depending on the final recommendation of the curator, but for the
moment I am not able to equate them for any purposes as far as this
application is concerned.

[20] The
next question relates to the issue of the internal mechanisms which
the respondent submitted should have been put in place to rectify the
problems applicant encountered with the first respondent. In this
regard the second respondent referred me to the matter of Makhuva
v Likoto Bus Service (Pty) Ltd
1987 (3) SA 376 (VSC), and the passage at page 393 B-D. It should at
the outset be noticed that once again this case is cited in the
context of a judicial management application and in a context of
proceedings in terms of the Insolvency law. I further point out that
in that case, there was no question of the company being sought to be
placed on the judicial management suffering any financial problems or
being under financial stress. The order was sought on a basis of it
being just and equitable because the majority shareholders had
problems with the minority shareholder or with the management. The
Court in that matter held that there were enough internal remedies in
terms of the way to operate a company and for the majority to enforce
its will on the company to rectify the position and that it would not
be just and equitable in those circumstances to grant the order
sought.

[21] In
my view the case, although distinguishable, is of relevance in the
sense that had it not been for the fact that the first respondent was
in fact insolvent the principle stipulated in the decision will be
applicable to affairs of such as those of the first respondent. To
place an entity under curatorship is a drastic step and where
internal remedies such as directives and such like which is available
to the applicant can be used to remedy certain defective procedures
or a lapse in bookkeeping this may become relevant. However, the
regulator cannot tolerate any situation where a concern is actually
trading in insolvent circumstances because what the regulator cannot
do is to allow any entity to act or to conduct business contrary to
the law, and to allow a business to continue operating under
insolvent circumstances would be to allow such an entity to act
contrary to law.

[22] Once
it came to the regulator’s notice that there was a real
possibility of an entity within it’s jurisdiction operating in
insolvent circumstances it was in my view the duty of the regulator
to investigate such entity. And, if need be and if the records are
not available or even destroyed, to have the power and capacity to
enable it to investigate the situation properly, and to pre-empt or
to try and limit any damage or potential damage to the stakeholders
in that entity. On this basis the regulator was entitled to apply
for a curatorship, and in my view it was indeed desirable that it did
so as provided for in section 6 of the Act. This being so and taking
cognisance of the later reports flowing from the curatorship I am of
the view that a case has been made out for the rule to be confirmed.
What however needs to be done is that the matter cannot be left in
the air, and the curator should, obviously with notice to the other
parties, file his final report with his final recommendations as to
what should be done in this matter to this Court by the 8^th
of August 2008, and depending on those recommendations one will take
the matter from there.

[23] In
the result the Rule is confirmed. The curator is ordered to file his
final report and recommendations by 8 August 2008.

FRANK,
A.J.

ON
BEHALF OF APPLICANT Adv G Coleman

Instructed
by: LorentzAngula Inc

ON
BEHALF OF FIRST RESPONDENT Mr A Maletzky

Instructed
by:

ON
BEHALF OF SECOND RESPONDENT In Person