Fourie v Le Roux and Others

( )

THE DEPUTY JUDGE:

Introduction

This is an application by the respondents to discharge a freezing order. The respondents have raised two fundamental questions as to jurisdiction. I have heard argument on those issues over two days, the hearing having been given an estimate of two days, and it has been agreed that I should give judgment on these issues so that the parties can consider the next step which they should take.

The applicant, John Louis Carter Fourie, is a South African provisional liquidator of two South African companies, Herlan Edmunds Investment Holdings Ltd ("HEI") and its wholly owned subsidiary, Herlan Edmunds Engineering PTY Ltd ("HEE"). The applicant was appointed provisional liquidator of those companies on 15 June 2004. The business of HEE was the manufacturing and sale of alloy wheels for motorcars.

On 9 July 2004, at a without notice hearing, Park J granted the applicant a freezing injunction against all the respondents. That injunction was extended to 1 December 2004 by His Honour Judge Norris QC on 26 July 2004 without prejudice to the present application to discharge.

The two issues which I was asked to determine are (a) whether the applicant had locus standi to apply to the South African court for the issue of the letter of request to the English Court upon which the injunction is founded; (b) whether the English Court had jurisdiction to grant the injunction.

Background

It is necessary to set out a little of the background. The petitioning creditor, who applied for the appointment of the applicant on 15 June 2004, was Dorbil Limited ("Dorbil") a South African company. In 2001 Dorbil owned Gaestro Wills PTY Limited ("Gaestro"), which was then known as Smith Wheels PTY Limited. On 5 March 2001, the first respondent, Mr Le Roux, acquired the entire share capital of Fintrade Investments Limited ("Fintrade Investments"). Mr Le Roux is the majority shareholder in HEI which owns HEE. He is a former director of HEE and HEI. Mr Le Roux is also a director and said to control the third to eleventh respondents.

The second respondent is an undischarged bankrupt in South Africa, but was involved in the business of HEE. He also held one share in Fintrade on trust for Mr Le Roux. The third to eleventh respondents are all English registered companies, having as their registered office the same office as Fintrade Investments in Rochester, Kent, England.

On 30 March 2001, HEE acquired the Smith Wheels business from Gaestro. As I have said, its business was the manufacture and sale of motorcar wheels, which it conducted from premises at Germiston in South Africa. By an agreement dated 5 April 2001 between Fintrade Investments and HEE ("the Distribution Agreement") HEE appointed Fintrade Investments as its distributor of Smith Wheel products. Of particular note were provisions enabling Fintrade Investments to re-sell products to its customers at a profit, and to take the benefit of certain rebates provided by the Government of South Africa in relation to exports and known as MIDP rebates. The applicant claims that this document is a forgery because he says it was created at a much later date. This is hotly disputed by the respondents, in particular Mr Le Roux, who claims there are documents showing that the auditor saw the Distribution Agreement on at least two occasions before it is alleged to have been backdated. There is evidence to support that suggestion.

On 29 June 2001, Westbank, which is a division of First Rand Bank Limited, agreed to finance certain equipment of HEE and by way of security it took a pledge over that equipment. On 28 (May) 2002, a provisional liquidator, Mr Hans Clopper, was appointed over HEE on the application of Gaestro. On 1 September 2002 Mr Le Roux purchased Westbank's rights under the 29 June 2000 agreement for the face value of 3,823,776 Rands. This is not disputed by the applicant, but he says that he does not know the source of Mr Le Roux's monies.

On 23 September 2002 the provisional liquidation was discharged after the debts were paid by Fintrade and Mr Le Roux. Again this is not disputed by the applicant, but again he says he does not know the source of Mr Le Roux's money. The applicant has a suspicion that this is money which has simply gone round in a circle but is unable to prove this.

On 29 September 2002 there was an amendment agreement between HEE and Fintrade Investments ("the Amendment Agreement") whereby Fintrade Investments agreed to advance money to settle HEE's debts. It was also agreed that HEE's products and the proceeds of sale would belong to another company, Fintrade Technologies Limited ("Fintrade Technologies"), which is an English trustee company and which formerly controlled the pension fund for Fintrade Technologies. There was also pledged further assets of HEE in favour of Fintrade Technologies. The applicant again alleges that the Amendment Agreement is a forgery, although again the evidence discloses that the auditor of HEE became aware of the document before it is alleged by the applicant to have been created.

On 29 September 2002, a deed of assignment was made between HEE, HEI and Fintrade Investments ("the Deed of Assignment") whereby Fintrade Investments and HEE agreed to set off certain obligations and Fintrade Investments acquired trademarks from HEE. This is again alleged by the applicant to be a forgery, but it is again shown to have been in the auditor's papers before it is alleged to have been forged.

On 3 November 2003, Mr Le Roux and Fintrade Investments, commenced proceedings before the Magistrates' Court in Germiston, seeking, on the part of Mr Le Roux, the attachment of the Westbank equipment pursuant to the Westbank agreement, and on the part of Fintrade Investments, the enforcement of its pledge over the assets of HEE. An order was made entitling Mr Le Roux and Fintrade Investments to take possession of the plant and equipment of HEE ("the Germiston order"). The Fintrade Investments named in those proceedings was a company called Fintrade Investments Plc. It is suggested that no such entity in fact exists.

On 15 June 2004, Dorbil, who had been involved in arbitration proceedings with HEE and HEI in respect of unpaid rent at the Germiston proceedings, applied and obtained the appointment of the applicant as provisional liquidator.

On 2 July 2004 the applicant moved a without notice motion in the High Court of South Africa, Transvaal Provisional Division, naming as respondents, Mr Le Roux, the second respondent, Mr Vermaak, and Mr Van der Grippe and Smith Wheels Sales and Marketing PTY Limited ("SWS&M"), who are not respondents in the English proceedings. On that day, the South African High Court made a letter of request to the English court, and an order nisi returnable on 3 August 2004 requiring the respondents to show cause why a final order should not be made which would allow the sheriff to attach the plant and equipment, which was by now at SWS&M's premises, and an order setting aside the Germiston order.

It is worth noting the terms of the letter of request issued by the High Court dated 2 July 2004. The first request was that the High Court of England should recognise the winding up of HEE and HEI and the appointment of the applicant as their provisional liquidator. Second, it sought that by recognising the rights, powers and title of the applicant, that he should institute such legal proceedings in the High Court as may be necessary. Third, it was said that by making such an order as the High Court considered just and appropriate, in assisting the High Court of South Africa in achieving the most effective administration of HEE and HEI in the winding up, that that would be to the benefit of its creditors.

On 9 July 2004, the applicant without notice applied to Park J for a freezing order against the respondents and on 12 July 2004 Park J granted the order sought with a return date of 23 July. Later in this judgment I will have to look at what occurred at that hearing so as to determine the basis upon which the order was made. The only undertaking given to Park J in relation to the issue of proceedings was that undertaking 3 of the order, which provided that as soon as practical the applicant would issue and serve an originating application in the form of the draft produced to the court claiming the appropriate relief. This originating application was issued on 12 July, but the only relief which it sought was the freezing order, together with the provision of information. It made no claim for substantive relief.

On 20 July 2004, the South African High Court made an order for a Commission of Enquiry to be conducted by a retired High Court Judge, and it issued a further letter of request in relation to the provision of records and documents. Despite that second letter of request, the applicant has in fact taken no steps in England in relation to that second letter of request.

The hearing of the originating application came on before His Honour Judge Norris QC, sitting as a Judge of the Chancery Division, on 23 July 2004 which was a Friday. His Honour Judge Norris then heard further submissions on the afternoon of Monday, 26 July. The respondents had not at that stage applied to...