Edition: June / Aug 2017
Editorials

CURATORSHIPS

Nash v Mostert v Nash

On and on it goes.
Just as it’s hoped that one judgment will bring an aspect of the multi-million
rand dispute over the Sable Industries pension fund to some sort of closure,
along comes another judgment. True to form, appeals are being prepared.

Aficionados of the old MAD magazine will recall its regular Spy v Spy comic strip. Two spies, one dressed in black and the other in white, were forever conniving for the other’s downfall. So it seemingly goes too with endless arguments between curator Tony Mostert and businessman Simon Nash over the Sable and Cadac pension funds.

In March there were two Gauteng court judgments, one in favour of Nash (to be appealed by Mostert) and the other in favour of Mostert (to be appealed by Nash). The former is perhaps the more significant because, dealing with the legitimacy of contingency fees, it could have broader implications specifically for curator's and generally for lawyers as well as their clients.

Contingency fees are where the lawyer – in this case, the curator – is not paid at an hourly rate but goes on risk for amounts recovered. Where there are no recoveries, there are no payments. Conversely, the higher the recoveries the higher the payments.

In the Pretoria High Court:

Nash had applied for the contingency fees, agreed between Mostert and the Financial Services Board for the Sable fund, to be set aside as invalid. Nash won.

Central to the case, noted Justice Neil Tuchten, were specific words in the April 2006 order of Justice Ntsikelelo Poswa that placed the Sable fund under Mostert’s provisional curatorship: “The curator shall be entitled to periodical remuneration in accordance with the norms of the attorney's profession, as agreed with the (FSB), such remuneration to be paid from the assets owned, administered or held by or on behalf of the (Sable) fund, on a preferential basis, after consultation with the (FSB).”

In essence, Nash had asked that Mostert and his law firm be required to repay the Sable fund all the payments they’d received from Sable’s curatorship. He contended that the payments had been made as contingency fees, not “in accordance with the norms of the attorney's profession”.

For his part, Mostert countered amongst other things that Nash could not bring the application because he did not have “clean hands” in having unlawfully stripped R36m from the surplus of the Sable fund. Nash’s criminal trial continues into its sixth year or thereabouts; it’s easy to lose count, given all the litigation that’s interrupted it.

On the facts of this matter, said Judge Tuchten, the alleged connection between the conduct imputed to (Nash) and the plundering of the Sable fund cannot be made. Mostert could not suggest why it would be necessary for Nash to form relationships with the Sable fund for the purpose of plundering it. In any event, the relationships preceded the plundering scheme.

Thus Nash had standing as member and principal employer (through Midmacor Industries) in the Sable fund. He was not seeking to review a decision but to set aside the contingency-fee contract.

The court held that contingency-fee agreements are against public policy for broadly the same reasons that they are against public policy in relation to litigious work. Norms and laws are not separate categories hermetically sealed from one another. A norm given the force of law remains a norm because the force of law reinforces the character of a norm as something usual, typical or standard.

In terms of the Poswa order, said Tuchten, the FSB and Mostert may only conclude an agreement which accords with the norms of the attorney's profession. If the Contingency Fees Act created a norm for the attorney's profession, there was no reason that the FSB and Mostert should not have legitimately concluded a remuneration agreement that complied in substance with the CFA and thereby brought themselves within the norm.

Accordingly, Tuchten held the contingency-fee agreement between the FSB and Mostert to be unlawful and invalid. In setting it aside, he considered the hardship that would allegedly be caused to have been overstated: hardship to members of the Sable fund whose entitlements would have to be recalculated; and hardship to Mostert “who suggests that he did not keep records which would enable him to calculate a reasonable remuneration”.

Mostert was directed to render an account, supported by vouchers of all curator’s fees debited or received on behalf of the Sable fund, from the date of his 2006 appointment to the date on which the account was produced.

In his application for leave to appeal, grounds cited by Mostert include that Tuchten had erred in finding that Nash’s application was not precluded by the “clean hands” doctrine. Further, it should have been considered that Nash was abusing the court process to achieve an unlawful end because his primary aim was to obstruct the exercise by the curator of lawful powers. The judge had also erred in stating that the question of whether contingency-fee agreements between attorney's and clients in non-litigious matters had not yet been decided.

  • Mostert is the curator of all pension funds in the so-called ‘Ghavalas Option’ for surplus stripping. Without researching the precise wording in the court order for each curatorship appointment, it cannot be ascertained whether the Sable judgment establishes a precedent for other funds. Having originally published a schedule of all these curatorships and their fees bases, with moneys collected against disbursements to the curator and law firms engaged (TT Sept-Nov ’11), FSB executive officer Dube Tshidi has consistently refused to supply an updated schedule (TT Sept-Nov ’14). Again asked for this information following the Sable judgment, he has ignored the request.

In the Johannesburg High Court:

Heard by Justice Margie Victor, the Financial Services Board and Pension Funds Registrar had sought to review and set aside the 1995 approval of the Registrar for the business, members and pensioners of the Sable pension fund to be transferred to the Lifecare Group pension fund. The Sable fund, under Tony Mostert’s curatorship, supported the relief. Simon Nash, of Sable fund employer Midmacor Industries, opposed it. In effect, Mostert won.

There was a clearly established principle, the judge stated, that the Registrar has the right to apply to court for a certificate wrongly granted to be set aside. She disallowed the filing by Nash of new affidavits which related to evidence procured at his criminal trial, one being the “changed version” of key state witness Peter Ghavalas on the transaction between the Sable and Lifecare funds.

The crisp issue was whether the intended purpose of the R36m surplus in the Sable fund had been disclosed to the Registrar, Victor said: “It is clear the Registrar was not advised that the assets of the Sable fund would be applied to pay for shares sold in terms of an historic agreement.”

In other words, she continued, the purchase price had already been paid before the application for the Registrar’s approval had been submitted. The application did not disclose – because Nash had concealed it – any intention to pay for the shares from the proceeds of the pension-fund transfer.

According to Mostert, the particular commercial transaction – presented as the basis for the amalgamation of two pension funds – was not implemented. A different transaction, which had not been approved, was implemented. The Lifecare fund was simply used as a channel for the removal of R36m from a pension-fund environment to pay for shares in a dormant company without the Registrar’s approval.

“If the application for the certificate had disclosed that R36m would be used for the payment of shares in a dormant company, the certificate would not have been granted,” the judge held. “It became apparent that, after implementation of the transaction, the purchaser of the shares did not pay for it. Instead, the Lifecare fund paid for it with the Sable fund’s assets. This is in direct contradiction with the terms of the agreement submitted to the Registrar and the actual use of the Sable assets which was not disclosed to the Registrar.”

Nash and Mostert . . . win some, lose some

None of the disputes raised by Nash and Midmacor detract from the fact that what was placed before the Registrar, in obtaining the transfer approval, was clearly misleading and false. Accordingly, Victor ruled that “the continuing attempts by Nash and Midmacor to perpetuate the consequences of the grant of the licence based on demonstrably false facts” justified a punitive costs order against them.

Mostert comments: The significance of the Victor judgment is that an eight-year saga, where Nash has prevented the Sable fund from proceeding against him, has now been lifted. It will result in the Sable fund instituting action against Nash for tens of millions of rand (calculating the R36m in 1998 at today’s value). Nash had tried to prevent this action by having brought a vindictive application before Justice Tuchten. Further significance of the Victor judgment is a finding against Nash for fraud and surplus stripping.

Nash intends to apply for leave to appeal. His attorney says that, apart from the written judgment dated March 6 (reported above), there had also been an oral judgment by Judge Victor in which she had dismissed with costs (against Nash) two separate supplementary affidavits. One of them contained “crucial evidence” from a hearing in another court 10 days previously. The evidence of these witnesses, on which Nash relied, contradicted evidence before Victor.

In addition, a provisional application for leave to appeal had been made on Nash’s behalf. The judge was requested to provide the written judgment. To date, according to Nash attorney Lennard Cowan, three conflicting documents purporting to be the written judgment have been provided. These documents are all signed by Judge Victor.

So far, says Cowan, Judge Victor has provided no reason for the three conflicting judgments: “Her actions and failures in refusing to admit at least the latest of the two supplementary affidavits, and producing three different judgments, is wholly unacceptable.”

He has requested from Judge Victor that Nash’s legal team be entitled to listen to the tape recording of the oral judgment on which the third judgment was apparently prepared. Although there’d been an undertaking that the tape recording would be available within a week, more than six weeks had passed and the recording had not yet been provided.

The tape will need to be heard before the application for leave to appeal can proceed. “Our view is that the judge erred in numerous respects,” Cowan adds.