Registrar of Friendly Society v Liberty Friendly Society and Another (Case No. A 194/07 ) [2008] NAHC 106 (07 July 2008);

Group

Full judgment
CASE NO


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 1ST RESPONDENT

AUGUST MALETZKY 2ND 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 31st 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 25th 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 27th 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 3rd 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 8th 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

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