Tuhf Ltd v Farber and Others (2024/27703) [2024] ZAGPJHC 329 (29 March 2024)

The case involves a dispute over a loan agreement between TUHF Ltd (the applicant) and Mark Morris Farber (the first respondent) and his company, 28 Esselen Street Hillbrow CC (the second respondent). The loan was for the amount of R9,980,700 and was secured by suretyships provided by three other companies, including Hillbrow Consolidated Investments CC (the third respondent) and a mortgage bond over a building known as Waldorf Heights.

The applicant initially launched an application in March 2020 to enforce the suretyships, but this was dismissed by Senyatsi J. The applicant successfully appealed this decision, and the respondents applied for special leave to appeal to the Supreme Court of Appeal, which was referred to oral argument in April 2023.

In the first application, the respondents argued that the suretyships were void due to non-compliance with section 45 of the Companies Act, which relates to financial assistance to directors.

In a separate application (the 44393 application), Senyatsi J ordered the respondents to pay the applicant R9,198,953.70, plus interest and costs, and authorised the applicant to take cession of rental amounts payable by tenants of Waldorf Heights. The respondents were also ordered to provide certain information and documentation to the applicant and to sign documents to facilitate the cession.

The respondents failed to comply with the 44393 order, and the applicant launched the current application seeking to hold the respondents in contempt of court and for other relief.

The respondents based their refusal to comply with the 44393 order on a pending rule 45A application, which sought to suspend the execution of the order. They also argued that the suretyships were void and that the applicant was preferring itself above other creditors.

The applicant argued that the application was urgent as rental was due on 1 April 2024 and the respondents had indicated their intention to continue collecting rental in disregard of the 44393 order.

The court found that the respondents were in contempt of court and granted the relief sought by the applicant, including a punitive cost order against the respondents.

The core legal principle underlying the decision in this case is the concept of contempt of court and the consequences of failing to comply with a court order. The court found that the respondents were in contempt of court by willfully disregarding the existing 44393 order, despite their belief that the order was wrong and should be rescinded based on a pending related case.

The court emphasised that court orders must be obeyed even if a party believes them to be incorrect. A party cannot unilaterally decide to ignore a court order simply because they disagree with it. The respondents' argument that they could ignore the 44393 order because they anticipated a favorable judgment in a separate matter before the Supreme Court of Appeal was rejected.

The court applied the legal standard for contempt of court, requiring proof beyond a reasonable doubt that the respondents wilfully and in bad faith disobeyed the court order. The respondents' conduct was found to meet this standard, and the court granted the applicant's request for contempt of court and other relief.

Additionally, the court addressed the issue of urgency, finding that the applicant had valid reasons for bringing the urgent application, as there was a risk of ongoing non-compliance with the 44393 order and potential financial harm to the applicant.

Here is a summary of the case law relied on by the court in its reasoning:

- Nelson Mandela Metropolitan Municipality v Greyvenouw CC: This case was cited to emphasize the need for an applicant in an urgent application to provide cogent reasons for any delay in bringing the application.

- Transnet Ltd v Rubinstein: This case was referenced for its discussion on not penalizing applicants who attempt to resolve disputes before launching urgent applications.

- Fakie NO v CCII Systems (Pty) Ltd: This case defines contempt of court and outlines the evidentiary burden for proving contempt. The court noted the criminal nature of contempt and the requirement to prove it beyond a reasonable doubt.

- HEG Consulting Enterprises (Pty) Ltd and Others v Siegwart and Others: This case discusses the required state of mind for contempt, stating that "dolus eventualis is sufficient, and dolus directus or indirectus need not be proved."

- Department of Transport and Others v Tasima (Pty) Ltd: This case addresses the situation where a party is in contempt of a court order that is believed to be wrong. The court noted that a party cannot unilaterally decide to ignore a court order, even if they subjectively believe it to be incorrect.

- CTP LTD and Others v Argus Holdings Ltd and Another; CTP Ltd and Others v Independent Newspapers Holdings Ltd: These cases were relied on by the respondents to argue for the potential rescission of the 44393 order based on subsequent changes in circumstances. However, the court distinguished these cases, which involved restraint of trade agreements, from the present matter.

- MEC, Department of Public Works and Others v Ikamva Architects and Others: This case was referenced for its discussion of Rule 45A, which allows a court to suspend the operation and execution of any order for a specific period.