CASE LAW UPDATE

Facts: The first respondent (Van Eeden) has been employed with the applicant (OHM) in various positions since 2016, until his resignation at the end of 2023. At the time of his resignation, he held the position of general manager at the applicant and has minority shareholding in the company. This dual role not only establishes contractual obligation but also statutory duties, thereby assigning fiduciary responsibilities to the first respondent. The question is whether the evidence will show if these obligations have been breached to his and the second respondent’s (Electrical’s) advantage and to the detriment of the applicant. The applicant attached four handwritten affidavits of its employees to the founding affidavit. Mr Vilakazi stated that Van Eeden takes “two invoices” to clients of OHM and one invoice is from OHM and the other one is from Electrical, which quotes a lesser price than the OHM price. Mr Siphiwe stated that Van Eeden was always using the applicant’s tools on Electrical’s sites. Mr Ledwaba stated that Van Eeden gives clients different quotes. Mr Malembi stated that sometimes when they were supposed to go home from the applicant, Van Eeden would take them to his jobs to work. The content of the affidavits materially substantiates a prima facie case against the respondents.

Application: This is an opposed Anton Piller application wherein the applicant seeks that the rule nisi issued in November 2023 be made final. The issues to be determined are whether the applicant has complied with the condition contained in the Anton Piller order that action be instituted within one month from the date of grant of the Anton Piller order; whether the applicant has made out a proper case for the Anton Piller application to be granted; and has complied with the interim order.

Discussion: As a result of Van Eeden’s employment and shareholding in the plaintiff business, Van Eeden has acquired a comprehensive understanding of various aspects of the plaintiff’s business, including the complete scope of its operations, client details, the business requirements of its clients, the business model, marketing strategy, pricing structure and quoting model. Employees of the plaintiff reported that Van Eeden not only offered them employment but also engaged in discussions with them about salaries. By engaging in the described actions, Van Eeden intentionally disseminates this information about the plaintiff aiming to attract and allure employees to join Electrical at the expense of the plaintiff. Van Eeden wrongfully leveraged the resources, tools and expertise of the plaintiff to conduct the operations of Electrical in competition of the plaintiff, thereby providing Electrical with unjust, unfair and unlawfully advantage. The actions of Van Eeden not only offends his fiduciary duties towards the plaintiff, but also offends the general public sense of fairness and honesty. The applicant’s objective is not to hinder competition, but to address the alleged illegal activities conducted by the respondents, during Van Eeden’s tenure with the applicant.

Findings: The applicant, confronted with compelling evidence, reasonably believed that the respondents were engaging in illicit competition against them. This belief led to the initiation of the ex parte application. Following the implementation of the Anton Piller order, the applicant’s initial concerns were substantiated, as substantial incriminating evidence was reportedly discovered in the possession of the first respondent. This evidence indicated that the respondents had violated contractual, statutory and common law obligations owed to the applicant. The respondents’ opposing submissions are neither real, genuine nor bona fide. There has been no deviation from the established rules governing Anton Piller applications. The evidence suggests that the application was made to preserve evidence rather than to escalate suspicions. The respondents attempt to evade accountability by raising vague and evasive allegations. In addition, the applicant detailed the damages claim. The applicant’s founding papers reveals facts, that if accepted by the trial court, would reveal a substantive cause of action, let alone a prima facie case. Van Eeden, acting through the intermediary of Electrical, is engaging in unlawful competition with the applicant. The applicant has successfully complied with the principles for an Anton Piller order.

Order: The interim order is confirmed.

MATSEMELA AJ

Facts: The first and second respondents’ marriage of some 28 years was dissolved by an order granted by court together with an order simpliciter for division of the joint estate. Attempts by the erstwhile spouses to agree on a division of the joint estate were unsuccessful and the appellant was appointed as the liquidator or receiver of the joint estate. Having done a preliminary investigation into the assets and liabilities of the joint estate, the appellant became aware of a family trust, known as the Ludan Trust, of which the erstwhile spouses and their three now major children are the beneficiaries. The appellant established that a loan account in the trust, in favour of both the erstwhile spouses, existed and after an investigation and consideration of the financial position of the trust, concluded that it was insolvent. The appellant thereupon launched an application to this court, principally for the sequestration of the trust, which was opposed in essence, by the second respondent.

Appeal: The matter came up for hearing before the court a quo, and after having heard argument, the court dismissed the application with costs. The appeal is against that judgment and order and is with leave of the court a quo. The issue in this appeal concerns the fate of the family trust in the liquidation and division of the joint estate pursuant to the order of divorce.

Discussion: The appellant relies on section 8(c) of the Insolvency Act 24 of 1936 for the submission that the trust’s attempt to dispose of the properties with the intention to prejudice the trust’s creditors, and more particularly the joint estate, constituted an act of insolvency. Section 8(c) of the Act stipulates that a debtor commits an act of insolvency if he makes or attempts to make a disposition of any property which has or would have the effect of prejudicing his creditors or preferring one creditor above another. Counsel for the second respondent submitted that the passing of a resolution, which is then withdrawn, does not constitute a disposition, nor an "attempted" disposition. The court disagrees. An analysis of the conduct of the second respondent, who was always the controlling mind of the trust, reveals certain features preceding the signing of the resolution. The peculiar stratagem he devised obviously required careful planning. A prior meeting, as referred to in the heading of the resolution, was held and the proposal, one must assume, was tabled and discussed, resulting in the resolution being taken. The execution of the operative parts of the resolution was entrusted to Mashabane attorneys, from which the inference that some prior communication between them had been conducted, is justified.

Findings: The totality of the events warrants the inescapable inference, reasonably to be drawn, in the absence of either a response thereto, or explanation as to the second respondent’s intention in procuring the resolution, that an attempted disposition occurred, which would have prejudiced the creditors of the trust. All the requirements of the section have accordingly been satisfied. In finding that the trust was not insolvent, the court a quo did not consider the act of insolvency having been committed by the trust, which as counsel for the appellant correctly pointed out, had a fundamental impact on the determination of the application. The appellant has discharged the onus of prima facie proving factual insolvency and the trust’s inability to pay its debts. The approach adopted by the learned judge a quo, and the reasoning in support thereof, is unsustainable. The appellant established that the concurrent creditors, following upon the sequestration of the trust, would receive 80 cents in the Rand. The refusal of a sequestration order, would in the absence of another viable remedy, preclude the joint estate from recovering the loan or portion thereof from the joint estate, and will simply add yet another stumbling block in effecting and finalising the liquidation and distribution of the joint estate.

Order: The appeal is upheld. The order of the court a quo is set aside and replaced. A provisional sequestration order, placing The Ludan Trust in the hands of the Master of the High Court, is granted. The Ludan Trust and/or any interested party are called upon to advance reasons to court, if any, why the final sequestration of the Ludan Trust should not be ordered.

VAN OOSTEN J (MODIBA J and BOOYSEN AJ concurring)

Facts: The appellant is a legal practitioner, practising as an advocate. She is a member of the Pan African Bar Association of South Africa. The appellant appeared as counsel for the Department of Justice in proceedings by the Department to stay the execution of an arbitration award. The matter came before Sethene AJ by way of urgent proceedings. The Labour Court determined that the application was “absolutely hopeless”, to the knowledge of the appellant. The court made an adverse order against the appellant and held that the appellant, as an officer of the court, had a fiduciary responsibility to the court. The court ordered that the appellant was not to charge any fee for legal services rendered. If she has already been paid, she was ordered to reimburse Justice Department. The State Attorney was ordered to investigate the conduct of the instructing attorney who acted on behalf of the Justice Department. See University of South Africa v Socikwa [2023] ZALCJHB 172.

Appeal: Against the orders of the Labour Court. The appellant contends that there was no support for the trenchant criticism against her by the Labour Court, including the finding that the appellant prosecuted proceedings for pecuniary reasons as opposed to the best interest of her client. She further contends that the application was not hopeless as the sheriff had removed vehicles belonging to the Department and that the sheriff undertook to remove additional vehicles.

Discussion: The judgement by the Labour Court received wide publicity. The commentary was unfavourable towards the legal practitioners. Statements by a court as regards conduct by a legal practitioner carry enormous weight. Such statements can make or break the reputation of a legal practitioner. This power requires restraint by a court when passing judgment on the conduct of a practitioner. The courts have, at various points, mentioned that a practitioner cannot be saddled with an adverse finding without a hearing. The Labour Court did not meet this injunction. The appellant pointed out that the Department was entitled to approach the court for relief and that she, in turn, performed her duties as counsel when she moved the application on behalf of her client.

“Hopeless” case: Fundamental to the criticism by the Labour Court is that the appellant knowingly prosecuted an application that was “hopeless”. The record does not support such a finding. The Labour Court stated that the application in which the appellant was counsel was triggered by “the alleged attendance of the sheriffs to the respective premises of the applicants”. This remark is a surprise, given that it is not disputed in the papers that the sheriff had removed vehicles belonging to the Department. The application to stay the enforcement of the award was precisely to prevent further removals by the sheriff. There is no support for the suggestion that the appellant was aware, when she accepted the brief and drew the papers, that the application to stay the award was “hopeless”. This is demonstrated by the appellant, following the exchange with the court, conceding that the review had lapsed and conceding costs.

Order: The appeal succeeds with no order as to costs. Paragraph 6 of the order of the Labour Court is set aside.

MOOKI AJA (MOLAHLEHI AJP and MUSI AJA concurring)

Facts: The respondent (Mr Dlongolo) was employed by the appellant (the University) as Director: Physical Planning. Following death threats due to his role in implementing the University’s insourcing process, and a period of absence from work, Mr Dlongolo, who was only 57 years of age at the time, requested permission to take early retirement. Various discussions ensued. Given the unusual circumstances, the University indicated that it was prepared to deviate from standard practice. It was willing to compensate Mr Dlongolo for “pension penalties” imposed by the University’s pension fund as a result of the early retirement. An offer and acceptance by email resulted in the ensuing dispute. In effect, Mr Dlongolo elected to withdraw from the fund so that he received his full account balance of R5,1 million, without any penalty deduction being imposed by the fund. The University subsequently refused to make any payment to Mr Dlongolo on the basis that he had opted to withdraw from the fund rather than select voluntary early retirement in terms of the fund rules.

Appeal: The Labour Court determined the dispute on the basis of quasi-mutual assent, also referred to as the reliance theory. The court found that the applicant was misled to believe that he would be compensated by the University, irrespective of which option he exercised on his retirement. The question to be answered in this appeal is whether the parties concluded a contract on the terms suggested by Mr Dlongolo, or based on quasi-mutual assent, in which event he would be entitled to the contractual damages, interest and costs awarded by the Labour Court, based on the university’s repudiation.

Discussion: Mr Dlongolo’s case is based on acceptance of an offer made by Mr Ngcobo, on behalf of the University. The offer in question is contained in an email sent by Mr Ngcobo. See para [9]. The rules were attached to this correspondence. The record reveals that the parties each intended to make a contract, but on different sets of terms. Mr Dlongolo wanted to leave the University’s service early, withdraw from the fund and personally receive the early retirement penalty contribution promised by the University. Despite the purported acceptance of the offer, there remained dissensus in respect of the intended obligations. There was therefore no agreement between the parties and, on the standard theory, Mr Dlongolo failed to prove the contract on which he relied.

Quasi-mutual assent: Mr Ngcobo’s main error was to include in the offer the “full withdrawal” amount from the fund (in the amount of R5,1 million), as received from ABSA, as an option linked to early retirement with penalties. That was contrary to the rules, which were provided to Mr Dlongolo, which made it clear that withdrawal from the fund was treated differently to retirement. Including that option was unintended and amounted to a material mistake on the part of the University. The decisive question is whether the University, whose actual intention did not conform to the common intention expressed in its offer, led Mr Dlongolo, as a reasonable person, to believe that the declared intention represented its actual intention. A reasonable person would have read the offer in its entirety, noting the cross-reference to clause 4.3 of the rules. Considering that clause, the contrast between receipt of an annual benefit as opposed to a lump-sum withdrawal was glaring and a reasonable person would have realised the real possibility of a mistake in the framing of the offer. Mr Dlongolo snatched at a bargain in circumstances where a reasonable person would have acted more carefully by enquiring into the matter, having realised the real possibility of a mistake in the framing of the offer. There was, therefore, no consensus, actual or imputed and, reading Mr Dlongolo’s pleadings generously, the alleged contract is of no effect.

Order: The appeal is upheld and the order of the court below substituted with and order dismissing the applicant’s claim.

GOVINDJEE AJA (SAVAGE ADJP and VAN NIEKERK JA concurring.)