Lennie the Liquidator faces R500,000 defamation suit

After losing his cool when his fees were questioned

When veteran Cape Town insolvency practitioner Eileen Fey ventured to suggest to attorney Leonard Katz of law firm ENS that his bill of R422,871.57 to defend a matter in the Wynberg Magistrates Court seemed “extremely high” and would he please draft a bill for taxation*, Katz went ballistic.

“This request is outrageous. You have a full narrative. I am not taxing my bill,” was the furious and immediate response of South Africa’s most controversial insolvency lawyer, widely known as Lennie the Liquidator. Katz declared that Fey’s request for his bill to be taxed was “dishonest” and his firm would do no more work on the matter. “Furthermore, I will do whatever is necessary to ensure that you are removed as a trustee in this estate,” ran the attorney’s email. “You are dishonest and a disgrace to the profession.”

In his fury, Katz copied his “you are dishonest” email to eight prominent members of the insolvency world, including the Deputy Master of the Western Cape high court Irma Dick. And in a separate email to Cata Silile, the court’s Assistant Master, Katz wrote: “I am going to be lodging a formal complaint against Ms Fey. In my view, she is dishonest, does not act in the interests of creditors and should be removed forthwith.” Katz copied this second email to the recipients of his first one, adding in an insolvency practitioner at KPMG.

While this flurry of emails took place on 5 April 2017, it is only now that they have come to light, after Eileen Fey launched a belated and unreported R500,000 defamation action against Leonard Katz this March – just in time to beat the three-year prescription deadline. She claims that his statements about her were defamatory and false.

Taxation documents attached to Fey’s replying affidavit support her claim of excessive fee-charging by Katz.

They reveal that when Leonard Katz finally drafted and presented two ENS bills for the taxing master, and a further bill for non-litigious work [work not involving a court case] to the Cape Law Society, a total of R290,520.59, or 41% of fees charged by ENS, was struck off.

Bills dealt with by the taxing master totalled R581,745.66, of which fees comprised R578,677. The taxing master “taxed off” or struck off R241,363.79 of those fees.

The bill to be adjudicated by the Cape Law Society [as it then was] totalled R131,646.50, of which R120,042 comprised fees. The Law Society struck R49,156.80 off those fees.

Which left Fey feeling justified in asking Katz to submit his bills for taxation.

The irony is that in his accusatory 5 April 2017 email to her, Katz’s final sentence was a plaintive: “I charged less than 50 per cent of my rate.”

Back then, Fey and another liquidator named Abie Moollajie were appointed joint provisional trustees of the insolvent estate of Mohamed Ismail Patel, a colourful Cape Town lawyer and liquidator who had been sequestrated. Patel had been accused of misappropriating R9.3m from the insolvent estate of the Coe Family Trust, of which he had been the trustee, and for stealing R8.7m from the estate’s bank account. In addition he was struck off the roll of attorneys by the Cape Law Society for lying about a BProc qualification.

Fey, an insolvency practitioner for some 27 years, has previously been a director of Coopers and Lybrand Trust and of Price Waterhouse Coopers Business Recovery and Insolvency.

She has been trustee/liquidator in hundreds of insolvent estates, and has been appointed curator bonis for the Asset Forfeiture Unit. “I have in the process over many years built up a reputation as an insolvency practitioner of integrity,” she states in her founding affidvit.

As provisional trustees of Patel’s insolvent estate, the task of Fey and Moollajie was to track down and take possession of all Patel’s assets. To assist them, they retained the services of Katz and ENS.

Katz is director, insolvency, business rescue and debt recovery at Edward Nathan Sonnenbergs (ENSafrica), self-proclaimed as “Africa’s largest law firm”. Acting for Absa, the only secured creditor of the Coe Family Trust, Katz had already had Patel removed as trustee of that trust. In his answering affidavit to Fey’s defamation claim, Katz states it had been established that Patel had stolen all the proceeds of realisation and there was nothing left in the Coe trust’s bank account. Absa, his client, required as much as possible to be recovered from Patel’s insolvent estate.

So, when Abie Moollajie asked him in December 2016 if he would act for the provisional trustees of Patel’s estate, he somewhat reluctantly accepted the mandate. “I was initially not keen to do so as many years previously I had had an unhappy experience with the applicant (Eileen Fey) which caused me to withdraw as her attorney,” he states in his affidavit.

Katz then explains how he overcame his initial reservations. At the time he was already acting for several creditors of Patel’s estate, including Absa, Standard Bank and Safie Insurance. “After discussions with several interested parties […] I decided that it would be advisable for me to act for the provisional trustees as this would enable me to try and moderate [Fey’s] approach to the interests of my clients.”

(Fey notes in her replying affidavit: “If true, it would evidence inherent duplicity in Mr Katz’s conduct towards me as a client and an abject [obvious?] conflict of interest, and would raise ethical questions regarding his conduct.”)

Back in January 2017, Katz was on holiday in Israel when Fey called to seek his professsional assistance – for which he agreed to charge “a substantially reduced rate of R2,500/hour”. In a subsequent letter he stated that his associates would be charged at the same R2,500/hour rate and candidate attorneys at R1,300/hour.

The insolvent, Patel owned the property where he lived in Cape Town’s Rylands, but subsequent to his sequestration [and hurried departure for Dubai] one of his sons, Yusuf and his family moved in as caretakers. In his affidavit Katz alleges that the provisional trustees (Fey and Moollajie) had “unlawfully gained access [to Patel’s house], forcing open a locked door without the consent of the occupiers and removed moveable assets and placed them in storage.”

Fey, he adds, had not obtained a search warrant from a magistrate, which was “standard practice in insolvency matters”.  As a result Patel’s son Yusuf then rushed to court and obtained a spoliation order against the provisional trustees allowing him to take back all the assets they had seized.

Katz had had to cut short his holiday in Israel to deal with this in Wynberg Magistrates Court, where he got the spoliation order set aside on the basis of falsehoods and non-disclosures in Yusuf’s founding affidavit. He had also attended to matters regarding Patel’s yacht and appeared in Wynberg Magistrates Court to have Yusuf’s application for a harassment interdict struck from the roll.

Katz claims that if Fey and Moollajie had obtained a search warrant the spoliation proceedings would have been avoided. Creditors of Patel’s insolvent estate were prejudiced due to legal costs opposing the action, due to “the reckless and unlawful conduct of the provisional trustees”.

“The bulk of the free residue which would have been paid to creditors has been frittered away by the provisional trustees,” says Katz. “Had they merely realised Patel’s immovable properties, there would have been sufficient free residue to pay a significant dividend of approximately 20 cents in the rand to concurrent creditors.”

Fey and Moollajiehad also recovered vehicles that did not vest in Patel’s insolvent estate, but which belonged to other estates or entities where Patel had been the trustee or liquidator before being removed. Fey and Moollajie had no locus standi to seize these vehicles, Katz declared.

Of Eileen Fey’s 5 April 2017 email about his “extremely high” charge to defend the spoliation matter in Wynberg Magistrates Court, Katz says he was distressed at its tone and content. “In essence, the applicant (Fey) was accusing me of overreaching, which upset me.”

He maintains that his response to her email was “factually correct and justified. I remain of this view.”

Replying on 6 April 2017 to a letter from Fey, Katz wrote: “If you were bona fide and not vindictive you would have called me to discuss the ‘few items’ on this invoice. This is how normal professionals operate. Your letter illustrates your lack of knowledge of insolvency procedure and your vindictive and malicious nature.

“I do not think I could have treated you more decently. My team has been at your beck and call dealing with all your issues as a matter of urgency. We have funded disbursements on your behalf and worked at reduced rates. In return, you treat us disgracefully.”

Responding to Katz’s claim that her access to Patel’s Rylands property was unlawful, Fey states that the Chief Master of the high court ordered the sheriff to attach Patel’s moveable assets. “The Chief Master felt it imperative that I and Mr Moollajie immediately take all moveable assets into our possession [as directed by the court in the sequestration order].

He was concerned that Patel would dissipate his moveable assets, records and computers, before the return date of the provisional order.

“This is what Mr Moollajie and I did on 23 December 2016 and we acted responsibly and lawfully in doing so.”

The sheriff, says Fey, engaged a locksmith to open the property’s security gate. Patel’s son Yusuf, who had falsely told them he was at Langebaan, appeared at the house’s front door and refused to open the security gate to let them in. The sheriff contacted SAPS for assistance and the locksmith opened the front door and attached and made an inventory of the moveable assets. Fey and Moollajie then loaded some of these assets onto trucks and removed them to storage.

“These facts are what actually happened,” says Fey. “He (Katz) knew then, as he knows now, that there was no basis to contend that our actions were reckless or unlawful. It is astounding that, knowing the true facts, Mr Katz now contends that I ‘broke into’/forced open a locked door at Rylands without the consent of the occupants.”

On the search warrant issue, Fey says: “A warrant is only required if trustees have reason to believe that assets are being ‘concealed’ or ‘otherwise unlawfully withheld’ from them. Neither was the case on 23 December 2016.

“It was only after Yusuf clandestinely obtained the interim order and had removed the moveable assets from storage on 31 December 2016 that any necessity to obtain a warrant arose, because Yusuf (aided by his brothers and Patel’s wife) had taken the moveable assets to various undisclosed locations to prevent us from finding them. At such point such moveable asserts were being concealed and withheld from us.”

Fey says that as investigations advanced it appeared that some of the vehicles may have been appropriated by Patel from other insolvent estates in which he had been the liquidator. “We deemed it in the interests of the creditors of the Patel estate that we also took such misappropriated vehicles into our possession so as to enable us to deliver them to new liquidators of the respective estates. This is what we did.

“Mr Katz’s criticism of our actions is misguided and without justification. Mr Katz has sought to create disputes of facts, but his averments are either entirely irrelevant to the issues herein or to the extent that they are relevant they do no bear scrutiny and fly in the face of objective facts.”

In his answering affidavit, which he signed on June 4 this year, Katz contends that Eileen Fey’s launching of her defamation action this March “coincides with other proceedings before the court in which I am claiming substantial damages from Mr Martin Welz and the publishers of the magazine Noseweek.”

Katz is suing Welz and Noseweek over an article and editorial in the July 2014 issue of Nose177, which claimed, inter alia, that Katz stood out above the rest of the ENS directors and senior partners “in his aggressive fee charging and disregard for his victims and the law”. Katz is claiming R1m for defamation and the still-running trial began in the Cape high court on February 24. After the latest postponement, it is due to resume on August 31.

Katz describes Noseweek as “a somewhat sensationalist magazine” which had untruthfully alleged that he had conducted himself “improperly and dishonestly and impugning my professional reputation and integrity.”

Katz says that Martin Welz called Eileen Fey as a witness as part of his case and she began testifying on February 25. “In her evidence in chief she sought to testify about the invoices presented by me in 2007,” he says. “Following an objection by my counsel (Brendan Manca SC,) the court ruled that the evidence she was seeking to present was irrelevant and refused to admit such evidence.

“Applicant (Fey) was visibly upset by this ruling.”

It seemed, claimed Katz, that Fey “was intending to use her evidence at the Welz defamation trial to vindictively attempt to besmirch my reputation and integrity. Within a month of the court ruling that she could not give this evidence and that it was irrelevant to the [Noseweek] defamation proceedings, she launched the motion proceedings (her defamation action) now before the court.

“Her actions are vindictive and, it seems, actuated by the fact that she was upset that the court refused to allow her to use the Welz defamation claim as a platform to vindictively assail my reputation.”
In her replying affidavit Eileen Fey says: “The ground for Mr Katz’s objection was that anything that took place after the date on which Noseweek published the allegedly defamatory statements about him was not relevant [to their defence] and was not admissible.

“The court upheld Mr Katz’s objection. His averment that I was ‘visibly upset’ at the ruling is simply untrue.”

Besides all the arguments back and forth, it seems a client is simply not permitted, it seems, to sue ENSafrica or any of its directors.

In support of this contention, Katz in his defence to Fey’s defamation action quotes Clause 16.2 from the firm’s 13 pages of terms and conditions that she was required to accept when appointing him as the provisional trustees’ attorney. The referenced clause states: “You waive any claim of whatsoever nature howsoever arising whether in contract or delict…which you may have against any of the directors…by reason of any negligent act or omission on the part of any director.”

Katz gives notice that “argument will be addressed to this Honourable Court that the provisions of this clause preclude the Applicant [Fey] from instituting legal proceedings against me.”

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