Lewcor Holdings (Pty) Ltd v Spergebiet Diamond Mining (Pty) Ltd (HC-MD-CIV-MOT-GEN-2024/00005) [2024] NAHCMD 39 (9 February 2024)

Facts 

The respondent operates and owns a diamond mine called Elizabeth Bay Mine. It appeared there were some problems that developed, and the mining of diamonds went on intermittently between 2018 and 2023. The respondent’s major shareholding, it appeared, was acquired by RZ Muzorewa Holdings Ltd, a company incorporated in terms of the laws of the British Virgin Islands. 

It was contended by the applicants that the first applicant holds 17% of the issued capital in the respondent. It was the applicants’ case that the mine had not operated profitably for some time, as had been hoped. It stopped operations in April 2023. It further appeared that the respondent was heavily indebted to some creditors. 

In February 2023, it recorded a loss of N$118 million. Furthermore, there was an operational loss of N$204 538 083 and electricity supply to the mine, was terminated in May 2023. The respondent, in view of the bleak performance, opted to retrench employees and operations ceased, as from April 2023.

The applicants claimed that they received information from a whistle blower that the respondent intended removing some machinery from the mine to Zimbabwe. It was the applicants’ case that the removal of the machinery, which is critical for running a mine, would result in all the machinery at the mine being relocated, thus leaving little or no items of value as residue. 

Should mining restart, and a new operator takes over, the new operator of the mine would find the mine hollow, with little or nothing to work with as critical equipment was due to be removed to Zimbabwe.

The applicants further stated that although the respondent appeared to allege that the items due for removal were being sold to a subsidiary or a company related to RZM, there were no bank details provided in proof of the sale alleged. It was alleged that the sale did not appear to be at arm’s length in any event. 

It was the applicants’ case that in the event the machinery was removed from the mine, and transported to Zimbabwe, the money received therefrom, would not take into account the devaluing effect of the removal of the assets on the mine. Furthermore, the money received from the sale and paid out by the respondent to its creditor, would have the ominous effect of preferring some creditors over others and that this would be an undesirable development that should be avoided.

The applicants approached the court on an urgent basis seeking an order that the matter be heard as one of urgency, in terms of rule 73. Furthermore, and more importantly, they sought an order interdicting and restraining the respondent from removing certain mine assets and/or machinery owned or possessed by the respondent and recorded in an annexure to the founding affidavit, pending the outcome of an action instituted by the applicants against the respondent under case number HC-MD-CIV-ACT-OTH-2023/05467. This action, it must be mentioned, is for the liquidation of the respondent into the hands of the Master of the High Court.

The applicants further sought an order interdicting and restraining the respondent from removing any mine assets and equipment which would fall under the authority of the liquidator, once appointed. Last, but by no means least, the applicants sought costs consequent upon the employment of one instructing and one instructed legal practitioner.

The respondent opposed the relief sought. First, the urgency of the matter was contested by the respondent. The respondent further contended the interim interdict should not be granted in this matter. 

In relation to urgency, it was the applicants’ case that there have been some communications between the parties regarding the removal of the assets to Zimbabwe. What appeared to have triggered this application, was the presence of a truck at the mine on 8 January 2024, with a driver. It had come to remove the items which weighed 33 tons, earmarked for transportation to Zimbabwe. 

The applicants claimed further that the Ministry of Mines and Energy, was not informed about the impending removal of the machinery from the mine and that this was in violation of the provisions of the Diamond Mining Act 13 of 1999.

Issues for determination

The court had to determine two quintessential questions:

The first one was whether this was a matter that should be heard by the court on an urgent basis. The second, should the first question be decided in the affirmative, was whether this was a proper case for the court to grant an interim interdict in favour of the applicants.

Should the court find that the first question was answered in favour of the respondent, namely, that the matter was not one deserving to be disposed of on an urgent basis, the application was to be to be struck from the roll. In that event, the applicants would have a choice, if so advised, to continue with the application in the ordinary course.

Discussion

MASUKU J considered the matter as follows:

‘Urgency 

[24] What I must first point out, is that it is trite that in urgent applications, the court must proceed on the basis that the allegations set out by the applicant, are correct. This accordingly places the applicant on a much firmer path than a respondent, in urgent applications.

[27] The issue that in my considered opinion, renders the matter particularly urgent, is not to be determined in relation to the previous correspondence exchanged inter partes, about the removal of the plant and equipment. It was the ominous fact that in a matter of hours, if not minutes, the truck was about to depart from the shores of this Republic, leaving in its wake, a possibly hollow order, should the court be eventually minded to grant the prayer for liquidation sought in the action referred to above.

[28] I am, in the circumstances, fortified, that this is a proper case in which to deal with this matter as one of urgency….

[29] I am accordingly of the considered opinion that this is a matter that must be dealt with on an urgent basis as the requisites of rule 73 have been met by the applicants, to the court’s satisfaction.

Interim interdict 

[30] As foreshadowed earlier, the applicants seek an interim interdict. A party, seeking the granting of an interim interdict must satisfy the court of certain requisites. These were eloquently articulated by Corbett J in Boshoff Investments (Pty) Ltd v Cape Town Municipality. The judge said:

‘Briefly these requisites are that the applicant for such temporary relief must show-

(a) that the right which is the subject matter of the main action and which he seeks to protect by means of interim relief is clear or, if not clear, is prima facie established, though open to some doubt;

(b) that, if the right is only prima facie established, there is a well-grounded apprehension of irreparable harm to the applicant if the interim relief is not granted and he ultimately succeeds in establishing his right;

(c) that the balance of convenience favours the granting of the interim relief; and

(d) that the applicant has no other satisfactory remedy.’

[33] Regarding the first requirement of the interim interdict,... What the applicant must show is that it has a prima facie right, even if open to some doubt. The right in this case, I find, is prima facie established by the fact that the liquidation of the respondent has been sought before this court.

[36] I am also of the considered opinion that the applicants and the other creditors of the respondent would suffer irreparable harm if the order is not granted. I am alive to the fact that if the liquidation order is eventually granted, a process may be embarked upon in respect of which the property in question, could possibly be recovered. That, however, is a process that is likely to be tedious and would take a considerable amount of money and time, as the liquidator would have to institute proceedings in Zimbabwe, for recovery. There is also no guarantee that the assets would be in existence and available for recovery at that time. I find that this would certainly harm the concursus creditorium, the applicants included.

[37] I now turn to the balance of convenience. In this regard, the court is required to consider the harm and possible consequences to the parties if the order is granted or not granted. There is no allegation made on oath regarding the harm that the respondent might suffer if the interim relief is granted. I am aware that the respondent alleges that the property was sold to a third party. There is scant information, let alone proof in support of this allegation. If anything, the alleged buyer would be entitled, to bring a vindicatory application before this court at the appropriate time. As matters stand, that is a mere allegation, devoid of any independent proof, which in my considered view, shows that the balance of convenience, favours the applicants in this case.

[38] Turning to the last requirement, namely, that of no other alternative remedy, I am of the considered opinion that should the property be taken out of this jurisdiction to Zimbabwe, the applicants and the body of creditors of the respondent, are likely to suffer irretrievable loss. There is no guarantee that the assets will be kept in good shape and can be returned in good order, once the liquidation order is refused. As intimated earlier, the fact of the matter is that the applicants would have to litigate in Zimbabwe, at great expense to have the property returned. It must not be lost that this is a temporary order. It is not a final order in nature or effect.

Determination

Held:  It is trite that in urgent applications, the court must proceed on the basis that the allegations set out by the applicant, are correct. This accordingly places the applicant on a much firmer path than a respondent, in urgent applications.

Held that: A party seeking the granting of an interim interdict must satisfy the court of certain requisites. These were eloquently articulated by Corbett J in Boshoff Investments (Pty) Ltd v Cape Town Municipality.

Held further that: Regarding the first requirement of the interim interdict, the applicant must not convince the court that it has a clear right. That requirement applies where the party seeks a final interdict. What the applicant must show is that it has a prima facie right, even if open to some doubt.

Held: That the applicants had met the requirements for urgency and that the granting of an interim interdict, was, in the circumstances, justified.

Court order

In the premised, the application was heard as one of urgency as contemplated in rule 73, and any non-compliance with the rules relating to forms, time periods and service, was condoned. Pending the outcome of the action instituted, the respondent was interdicted and restraint from removing from the Elizabeth Bay Mine any of the assets and/or machinery and/or equipment listed in the scheduled items to be sent to Zimbabwe Mines.

The respondent was interdicted and restrained from removing from the mine any assets and/or machinery and/or equipment owned or possessed by the respondent, or which would fall under the authority of the liquidator of the respondent, once appointed.

The respondent was ordered to pay the costs of this application consequent upon the employment of one instructing and one instructed legal practitioner.

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