Judge orders lawyers to refund fees in botched liquidation case

A judge of the KwaZulu-Natal High Court has issued a stinging rebuke to legal representatives on both sides of a long-running liquidation dispute, ordering them to refund all fees to their clients after finding that the case should never have been before the court. In a sharply worded judgment, Judge Rob Mossop discharged a provisional liquidation order and struck the application from the roll, ruling that the close corporation at the centre of the dispute had been deregistered nearly 15 years before the proceedings were launched. The matter involved a dispute between brothers-in-law, Krishna Naidoo and Govindsamy Naidoo, linked through their joint membership of Gayregina Investments CC.

The court found the litigation had become a costly and pointless exercise because lawyers failed to perform basic checks. The judge described having to reconstruct the matter’s history from “an appallingly maintained physical court file”, stating it was the applicant’s attorneys’ duty to ensure proper records. In that regard, he said, “they have spectacularly failed.” Central to the ruling was the fact that the company had been finally deregistered in 2011.

Once deregistered, a company ceases to exist as a legal person and cannot be liquidated. “It cannot therefore be wound up, as the applicant entreats the court to do, for there is nothing to wind up,” Judge Mossop said. Despite this, the case appeared on the court roll nine times over two years.

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The judge said that had the applicant’s attorneys “paused and thought for a moment and thoroughly researched the matter”, they would have realised the application “was moribund and could never… have led finally to the result that the applicant desired.” He was equally critical of the second respondent’s legal team, noting that multiple affidavits were filed without proper leave and that the deregistration issue was never raised. Confirming a company’s existence is a basic first step. Checking the CIPC records as a first step is such an elementary proposition that it hardly bears mentioning. Yet, in this instance, that elementary step was not taken.

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