BACKGROUND AND SUMMARY
Mr. Alister James Forsyth (the “Applicant”) made an application to the High Court of South Africa, Western Cape Division, Cape Town (the “Court”), for the consolidation of two actions instituted by the Applicant against different defendants in terms of Rule 11 of the Uniform Rules of Court.
The Applicant, who is the plaintiff in both of the aforementioned actions, claimed damages from Mr. David Botha (“Botha”) in his personal capacity arising from his conduct as the director of two investment companies, both of which have been placed under business rescue. The investment companies operated in an investment scheme in which the Applicant placed funds.
The Applicant alleged that Botha breached his duties as a director, which conduct caused the Applicant losses and, furthermore, occasioned Botha’s personal liability in terms of sections 22(1), 76(3) and 218(2) of the Companies Act No. 71 of 2008.
The defendants are Mr. Liebenberg and the two companies of which he is a director (the “Liebenberg Defendants”).
The Applicant alleged that the Liebenberg Defendants, in addition to proffering investment advice, represented that they would provide certain supervisory and monitoring services to ensure the security of the Applicant’s investments, while under the control of Botha and the investment companies managed by him. Furthermore, the Applicant alleged that the Liebenberg Defendants failed to scrutinise, analyse and monitor the investment scheme and permitted or acquiesced in conduct, which breached the investment companies’ obligation to the Applicant.
The Applicant, in terms of Rule 11 of the Uniform Rules of Court, launched an application for the consolidation of the actions against Botha and the Liebenberg Defendants, respectively, on the basis that it would be convenient to consolidate the two actions so that the issues in common between them, which are substantially similar, may be tried together so as to avoid a multiplicity of actions.
The Applicant contended that the same underlying facts gave rise to both claims and that, if the matters are not consolidated, the Applicant would have to prove these issues twice in two separate hearings. Furthermore, this would result in the same witnesses giving evidence twice, the same documents would be entered into evidence twice and two different courts would be required to decide on the same issues on separate occasions.
Finally, the Applicant argued that any successful judgment would be required to take into account that Botha and the Liebenberg Defendant’s would be jointly and severally liable to the Applicant.
Botha did not oppose the application for consolidation.
The Liebenberg Defendants opposed the consolidation application on the basis that it would not be convenient or appropriate and it would occasion them substantial prejudice.
The Liebenberg Defendants conceded that there are overlapping elements between the two actions, however, they attempted to emphasise the differences between the claims.
Further, the Liebenberg Defendants raised concerns that they would be tainted by the fraud allegations against Botha.
In addition, it was contended by the Liebenberg Defendants that, upon consolidation of the actions, they would be subjected to increased legal costs as a result of the duration of their trial would be extended by the inclusion of evidence pertaining to the proof of the claim against Botha.
Finally, the Liebenberg Defendants argued that it was the Applicant’s initial election to institute two separate actions and, as such, he is precluded from asking for the consolidation of the separately instituted actions.
The Court applied the general approach in exercising its discretion as to whether to grant or refuse the order for consolidation, in terms of which the Court considered whether or not there was a likelihood of a multiplicity of actions and the costs attendant upon more than one trial.
The Court found that, in the circumstances, it was apparent that several of the same issues would arise for decision in both matter and would require evidence from the same witnesses using the same documents.
In addition to the wasted resources, the Court held that the courts should not be placed in a position where there is a possibility if conflicting orders being granted by different courts on the same issues.
The Court noted that convenience is the primary consideration for consolidation. Accordingly, the Court held that, in the circumstances, not only will it be convenient to the parties, but a consolidated trial requiring one judgment will prove to be convenient for the Court as well.
Having regard to the alleged prejudice that would be suffered by the Liebenberg Defendants in the event of consolidation of the actions; the Court held that consolidation would occasion no greater reputational prejudice to the Liebenberg Defendants than would separate hearings. As such, the Court found that there would be no substantial prejudice occasioned to the Liebenberg Defendants should the action be consolidated.
Accordingly, the Court granted the application for consolidation.
Convenience is the primary consideration for consolidation.
A party opposing an application for consolidation on the basis of prejudice must show substantial prejudice.
Written by Saul Mayers and Kerry Theunissen