Fourie v Le Roux and Others (Further hearing on Freezing Order)

Hearing dates : 19 th to 22 nd, 25th and 26 th October 2004

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Hon Mr Justice Blackburne

Introduction

This is an application to continue until trial or further order in the meantime a freezing order made by Mr John Jarvis QC (sitting as a deputy judge of this Division) on the afternoon of 30 September 2004 but with the amount frozen increased from £1 million (the limit specified in the order made) to £3.4 million. The order was made on the application of the first three claimants for whom (together with the fourth claimant) Mr Selwyn Bloch QC and Mr Leon Kuschke appear. It is opposed by the two defendants against whom it was made and for whom Mr Stuart Isaacs QC and Mr Jeremy Goldring appear. The hearing before me has lasted five and a half days. It is the latest episode in litigation between the parties which began in early July of this year.

The first three claimants are the provisional liquidators of the fourth claimant, Herlan Edmunds Engineering (Pty) Ltd. For convenience I shall refer to the first three claimants as the liquidators and to the company in liquidation as HEE.

HEE is registered in South Africa. It carried on there the business of manufacturing and selling alloy wheels for cars. It ceased trading sometime in about July 200I was told that it was placed in liquidation by the order of Preller J in the South African High Court (Transvaal Provincial Division) on 15 June 2004. The liquidators are styled provisional liquidators in the sense that they remain provisionally in office until confirmed (or replaced by others) at the first or a subsequent meeting of HEE's creditors. Until I gave permission for HEE to be added as a claimant on the second day of the hearing, the liquidators were the sole claimants.

There were initially three defendants to the claim. As no relief is claimed against the person originally named as second defendant, Gerhardus Vermaak (Mr Vermaak), the proceedings have been amended by deleting him from the record. That has left as defendants Allan Le Roux (Mr Le Roux) and Fintrade Investments Ltd (Fintrade). It was against those two that the freezing order was granted on 30 September.

Mr Le Roux and Mr Vermaak are South African businessmen, domiciled and resident in South Africa. All of the witness statements of Mr Le Roux to which I have been taken (and several have been filed) state his address as being in Guateng, South Africa. It is common ground, however, that he owns a flat in this country.

At all material times HEE has been the wholly owned subsidiary of another South African company, Herlan Edmunds Investment Holdings Ltd (HEI), of which Mr Le Roux has been the majority shareholder. It is common ground that at all material times he has been in control of both companies and that, at least until June 2003, when he claims to have resigned, Mr Le Roux was a director of HEE. He was also a director of HEI which is also now in liquidation.

Fintrade was incorporated in this country. Its registered office is in Rochester, Kent. Mr Le Roux is the registered owner of 99 of the 100 issued shares in Fintrade. Mr Vermaak is the registered owner of the remaining share which he holds on trust for Mr Le Roux. Mr Le Roux is a director of Fintrade. So also (according to its printed notepaper) are Mr Vermaak and —from late March 2003 —a Mr Petrus Van der Grijp, who is a South African lawyer. The notepaper names three other directors, two at least of whom are based in this country. The notepaper refers to three executive directors, including Mr Le Roux and Mr Vermaak.

The application to continue the freezing order is opposed by Mr Le Roux and Fintrade. They do so on several grounds: (1) lack of jurisdiction in this court to entertain the claims ("the jurisdiction argument"); (2) the inappropriateness of granting a second or further freezing order ("the inappropriateness argument"); (3) material non-disclosure at the hearing before Mr Jarvis ("the material non-disclosure argument"); (4) the absence of a sufficiently strongly arguable case against the defendants ("the strength of claim argument"); (5) the absence of any real risk of dissipation ("the risk of dissipation argument") and (6) the absence of any satisfactory evidence of quantum ("the quantum argument").

Before coming to those matters I should say something about the background to the dispute and the claims that are made and also about the various steps taken by the liquidators culminating in the hearing before me.

Background

Until March 2001, the business of Smiths Wheels —a well-known make of car wheel —was owned by Smiths Wheels (Pty) Ltd, a South African company which was itself wholly owned by a South African engineering company called Dorbyl Ltd. On 30 March 2001 the business was sold to HEE. Smith Wheels (Pty) Ltd, the former owner, changed its name to Guestro Wheels (Pty) Ltd (Guestro). As part of the transaction HEE entered into a sub-letting arrangement of the factory in Germiston (in South Africa) at which the business was carried out with the result that HEE became Guestro's sub-tenant.

From or shortly after its takeover of the business, HEE began the practice of invoicing Fintrade in respect of its sales of wheels to overseas customers, leaving it to Fintrade to enter into the sale to the underlying customer to whom HEE effected delivery of the wheels in question. Fintrade had been acquired by Mr Le Roux shortly before HEE's acquisition of the business. HEE's dealings with Fintrade were purportedly regulated by a so-called Distribution Agreement said to have been entered into in early April 2001. Under that agreement HEE appointed Fintrade its exclusive distributor worldwide of its wheels and related accessories other than in South Africa and certain neighbouring states. The relationship between HEE and Fintrade is stated to be that of seller and purchaser.

There is a dispute over the validity of that agreement: two versions of it have been produced in evidence. The liquidators claim, but the defendants deny, that the version on which the defendants rely was drawn up long after the event and backdated to give the impression that it was entered into on the date (5 April 2001) which it bears. It is one of several documents which the liquidators claim were brought into existence and backdated to give the impression that they were entered into on the dates that they respectively bear. In so claiming the liquidators rely on the evidence of a Ms Tanja Button who says she was employed as a personal assistant to a Ms Das Neves by Caspian Financial Services (Pty) Ltd ("Caspian") between 18 November 2002 and sometime in or after late July of this year. According to Ms Button, Ms Das Neves was herself an assistant to Mr Le Roux. Caspian, it appears, is another South African company owned or controlled by Mr Le Roux. Ms Button states that Caspian conducted its business from 49 Florence Road, Bedfordview, Guateng from which, from approximately March 2004, Mr Van der Grijp conducted his legal practice. It is also the address given on each of Mr Le Roux's affidavits. In her affidavit Ms Button says that she typed the Distribution Agreement on the instructions of (and based on handwritten notes provided by) Mr Van der Grijp although she cannot recall quite when.

On 28 May 2002 HEE was placed in liquidation on an application by Guestro after falling into arrears with its rent. A Mr J F Klopper was appointed provisional liquidator. The order made, I understand, was in the nature of an order nisi to interested parties to show cause why the order should not be made final. The provisional liquidation order was continued from time to time until 23 September 2002 when it was discharged as a result of HEE's debts being paid or otherwise provided for. I am told that during the provisional liquidation HEE had continued trading but not with overseas customers. At all events trading, including sales to overseas customers, was resumed after 23 September 2002. It continued until July 2003 at which point HEE abandoned its factory premises at Germiston. The records available to the liquidators suggest that in early 2003 HEE stopped invoicing Fintrade for exported wheels and, instead, began to invoice a separate company called Fintrade Technologies Ltd (another UK company). Fintrade Technologies is now in administration.

The liquidators say that Fintrade systematically underpaid what it owed HEE for the wheels exported from South Africa and for which HEE invoiced it. They also say that between January and July 2003 HEE's dies (used in the manufacture of the alloy wheels) were shipped out from South Africa to England and that, upon HEE's cessation of trading, a South African company, also controlled by Mr Le Roux and called Smiths Wheels Sales & Marketing (Pty) Ltd ("SWSM"), took over without payment some or all of HEE's remaining plant and equipment.

In October 2003, Dorbyl and Guestro began arbitration proceedings against HEE and HEI over HEE's abandonment of its Germiston factory premises. The arbitration resulted in an award on 1 June 2004 against HEE and HEI...