In the high court of south africa

Unitrans Botswana v NW Transport

IN THE HIGH COURT OF SOUTH AFRICA

(BOPHUTHATSWANA PROVINCIAL DIVISION)

CASE NO.: 1216/04
In the matter between:
UNITRANS BOTSWANA (PTY) LTD APPLICANT
and
NORTH WEST TRANSPORT INVESTMENT

(PTY) LTD

(UNDER JUDICIAL MANAGEMENT) FIRST RESPONDENT

A DLAMINI, NO SECOND ESPONDENT

F ZONDAGH, NO THIRD RESPONDENT

B ST CLAIR COOPER, NO FOURTH RESPONDENT


JUDGMENT

LANDMAN J:

1. 
   Unitrans Botswana (Pty) Ltd (Unitrans), the applicant, seeks the leave of this court to proceed with a counter claim which it has instituted in the Witwatersrand Provincial Division against North West Transport Investment (Pty) Ltd (Under Judicial Management) (NWT), the first respondent and the judicial managers A Dlamini, F Zondagh, and B St Clair Cooper as the second, third and fourth respondents.
   

2. 
   On 7 September 1998 a collision occurred between a bus belonging to NWT and a horse and trailer belonging to Unitrans. NWT was placed under judicial management by order of this court dated 12^th August 1999. The judicial managers believed that the bus belonged to NWT and that the driver, who drove it at the time, was its employee.
   

3. 
   The judicial managers instituted action in the Witwatersrand Local Division on 23 June 1999 against Unitrans to recover damages of R150 000 to its bus. The summons did not disclose that NWT was under judicial management as required by s 49(5) of the Companies Act 61 of 1973. Unitrans instituted a counterclaim. At a pre-trial conference NWT admitted that it was the owner of the bus that collided with Unitrans’s horse and trailer and that the driver was employed by it and driving in the course and scope of his employment.
   

4. 
   However, in May 2002 NWT disclosed to Unitrans that it was under judicial management; that the bus involved in the collision was owned not by itself, but by North West Star (Pty) Limited (Under Judicial Management) (NW Star); and that the driver of the bus in question was employed by NW Star. NTW relies for this on the letter of appointment of the driver by the Bophuthatswana Transport Holdings (Pty) Ltd that changed its name to North West Star (Pty) Ltd on 19 October 1994. NWT also relies on a letter under cover of which NW Star paid funeral benefits for the deceased driver.
   

5. 
   The circumstances under which the error was made are dealt with in affidavits by one Jordan Naidoo and the deponent to the answering affidavit.
   

6. 
   The error under which NWT’s representatives laboured, it is alleged, had the effect that the claim for damages arising from the collision instituted by NWT against the Applicant in the Witwatersrand Local Division has prescribed.
   

7. 
   NWT advised Unitrans that it would seek to withdraw the admissions erroneously made, and to plead the appropriate and correct state of affairs in the event that Unitrans should decide to proceed with the counterclaim against it.
   

8. 
   The proceedings in the WLD were halted as the Unitrans required the leave of this court, in terms of the order for judicial management to proceed with its counter claim. On 29 September 2004 Unitrans launched an application for such leave. NWT and the judicial managers oppose the application.
   

9. 
   The matter came before me on 9 June 2005. At the commencement of proceedings, Mr Van Vuuren, who appeared for Unitrans, stated that he did not persist with his objection to the authority of the deponent to the answering affidavit. It was common cause between the parties, contrary to previous indications, that the NWT’s objection was not based on the effect that a potential judgment by the WLD might have on the financial situation of the company.
   

10. 
    The particular paragraph which the parties believe prohibits the institution of the counterclaim reads as follows:
    

“While the Respondent is under judicial Management all actions, proceedings, the execution of all writs, summonses and other processes against the Respondent be stayed and be not proceeded with without the leave of this Court being had and obtained (sic).”

This paragraph read purposefully has the effect of prohibiting the counterclaim.

11. 
    Mr Van Vuuren, in his heads, submitted that the relevant issues that need to be considered by this court in the exercise of its discretion to grant to or refuse Unitrans leave to proceed with its counter claim or to institute a fresh action are the following.
    

(a) the duration of NWT’s judicial management;

(b) the effect that a judgment and the execution thereof will have upon the financial stability and rehabilitation of NWT; and

(c) the interests of the creditor or claimant.

12. 
    The main goal of a judicial management order is to provide a company with sufficient time to make a financial recovery and so avoid its liquidation. Here it is common cause that a judgment following on the continuation of the counter claim or the institution an action will not adversely affect NWT’s financial position. There is no justification for denying Unitrans the right to establish and recover its damages.
    

13. 
    Ms Grenfell, who appeared on behalf of NWT, submitted that there were other considerations applicable that should be taken into account:
    

(a) This application was launched by Unitrans on 29 September 2004, some two years and four months after being advised that NWT was under judicial management, and being placed in possession of a copy of such order;
(b) Unitrans’s complaint that it was not timeously advised of the judicial management of NWT and NW Star, was dealt with pursuant to the costs order granted against the NWT when the matter was postponed by De Jager J in the WLD on 2 June 2002. NWT’s mistake or neglect in the process of placing the issues on record was met with a fitting punishment. It was mulcted in the wasted costs.
(c) The facts communicated to Unitrans as early as May 2002 are borne out by independent facts, known to it;
(d) Subject to an order for costs, there is no reason why such an amendment should not be effected. It was submitted that this court should not exercise its discretion in favour of a non-suited party, where such leave will result in ill-fated protracted litigation; and

5. 
   It is artificial to argue that the “defences” of the
   

respondents are best left to be dealt with by the WLD, as same is a material consideration in the determination of whether leave should be granted.
However, Ms Grenfell in making her oral submissions changed her stance as regards the fact or weight that I should give to the merits of the counterclaim. She aligned herself with the submission of Mr Van Tonder who submitted that I should not be concerned about the merits of the claim saying that the object of judicial management was to provide a struggling company with more time and not to protect it against bad claims. It said to me that this is correct approach in the context of this case. But there will be instances where the merits of a claim may be taken into account. At its lowest there must at least be a serious claim as opposed to a frivolous one.

14. 
    The authorities and general principles enjoin me to take the following into account in exercising this type of discretion:
    

1. 
   The discretion must be exercised judicially;
   
2. 
   The discretion must be exercised within the limits of the empowering direction or order;
   
3. 
   The applicant must have a claim against the company. It is irrelevant whether the claim arose before or after the company was put under judicial management. See Samuel Osborn (SA) Ltd v United Stone Crushing Co (Pty) Ltd (Under Judicial Management) 1938 WLD 229
   

4. 
   The court has a discretion in all cases to grant leave to sue. See Ross v Northern Machinery and Irrigation (Pty) Ltd 1940 TPD 119 and LAWSA Vol 4 First Reissue Part 3 para 371.
   

5. 
   The court is bound by the judicial management order but it may take into account all relevant facts including those facts which were not known to the judges who granted the order but is known to this court. See Samuel Osborn at 233 and SA Hyde (Pty) Ltd v Neumann NO and Another 1970 (4) SA 55 (O) at 57A-58A. The facts will usually be case specific as was the case in the two cases mentioned earlier.
   

6. 
   The discretion is unlimited as to the scope of the proceedings. It is a question of discretion in all cases. See LAWSA (supra) para 371 and Samuel Osborne at 235.
   

7. 
   The discretion is informed by the discretion exercised in the granting of the judicial management order. It should not be exercised so as to wreck the prospects of the successful issue of the judicial manager’s administration, unless it was clear that this administration was doomed to failure. See Samuel Osborne at 235.
   

8. 
   The court may take into account the prospects of the success of the judicial management. See Samuel Osborne at 233.
   

9. 
   The court must take into account public policy considerations. Eg the court should not aid on illegality. See Samuel Osborne at 237.
   

10. 
    The court may be swayed by equitable considerations. Greenberg JP said in Samuel Osborne at 235.
    

“There is, however, great force in the contention advanced on behalf of the applicant that it is inequitable that by the refusal of leave, the applicant should be deprived of the possession and use of the property, with at least the potential risk of depreciation, for the benefit of creditors, of whom it is not one, when the applicant stands to gain nothing by the eventual success of the judicial management.”

11. 
    The conduct of the judicial managers may be relevant.
    

12. 
    The discretion must be exercised in the light of the objects of the statute concerned. See Baker AJ in Millman NO v Swartland Huis Meubeleerders (Edms) Bpk: Repfin Acceptances Ltd Intervening, 1972 (1) SA 741 (C) at 744B.
    

“The objectives of a judicial management order are to postpone a liquidation of a company which is in difficulties and to provide a moratorium for that company for a period long enough (it can be either a period fixed by the court or an indefinite period) to enable that company to meet its obligations and to become successful concern.” And see Western Bank v Laurie Fossati Construction (Pty) Ltd (Under Judicial Management) 1974 (4) SA 607 (E) at 611.

13. 
    The onus of satisfying court that it should allow the institution of processing an execution of a judgment rests upon the applicant.
    

15. 
    I believe that the considerations mentioned above all indicate that that Unitrans should be granted permission to commence litigation against NWT. The absence of a complaint that the judicial management of NWT will be prejudiced financially by the claim weighs the heaviest with me. I need not concern myself with the merits of the claim. This is best left to the WLD to decide. There is also no merit in the complaint that this application was launched 2 years and some months after the status of NWT was disclosed. The delay in seeking relief (if there be delay) is in keeping with the aims of the concept of judicial management which is to grant the distressed company a moratorium in order to extricate itself from financial difficulties.
    

16. 
    The paragraph in question does not expressly cater for the situation where action has already been instituted while the moratorium has been in place. But it seems to me that its falls within the compass of the paragraph to permit the counter claim to continue. It was instituted as a result of the negligence of the judicial managers in failing to identify NTW as a company under judicial management.
    

17. 
    The cost order that I will make, will have the effect of removing any prejudice to NWT which may flow from an unmeritorious claim but favour Unitrans in the event of it being successful in the WLD.
    

18. 
    In the premises I make the following order:
    

1. The applicant is granted leave to proceed with its counterclaim for damages and costs and further or alternative relief instituted against the first respondent in matter 99/15588 pending in the Witwatersrand Division of the High court of South Africa.

2. The costs of this application are to be costs in the counterclaim in matter 99/15588.

__________________

A. A. LANDMAN

JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING: 09 JUNE 2005

DATE OF JUDGMENT: 21 JUNE 2005
COUNSEL FOR APPLICANTS: ADV. P H J VAN VUUREN

ATTORNEY FOR APPLICANTS: VAN ROOYEN TLHAPI WESSELS INC

COUNSEL FOR RESPONDENTS: ADV. L M GRENFELL

ATTORNEY FOR RESPONDENTS: SMIT STANTON