NPA Hit with Massive Legal Bill After Botched Banxso Case

The National Prosecuting Authority has been ordered to pay a costs order approaching half a million rand after their attempt to freeze Banxso's funds collapsed on appeal, leaving South African taxpayers to shoulder the financial burden of what legal experts describe as a fundamentally flawed strategy.

The costly legal defeat began when the NPA secured what appeared to be a straightforward victory through an ex parte application. This legal procedure allows only one party to present their case to the court without the opposing side being present or having an opportunity to respond.

"Ex parte applications are supposed to be reserved for genuine emergencies where there's a real risk of assets disappearing overnight," explained a senior legal practitioner. "The fact that this preservation order was successfully overturned on appeal suggests the original application may not have met the stringent requirements for such urgent relief."

Banxso successfully challenged the preservation order through a Reconsideration Application, resulting in the court not only overturning the original ruling but imposing substantial legal costs on the NPA.

Liquidation Proceedings Present Far Greater Risk

The NPA's financial setback, whilst significant, represents only a fraction of the potential costs exposure facing applicants in the ongoing liquidation proceedings. The main liquidation case, which has been progressing through the courts since October 2024, involves substantially more complex legal issues and protracted hearings.

Judge Le Grange heard the liquidation application in early May, but judgment remains pending. Legal sources suggest the extended timeline and complexity of liquidation proceedings could result in costs orders exponentially higher than the NPA's bill.

"When you're dealing with liquidation applications of this magnitude, costs can spiral very quickly," said a liquidation expert with extensive experience in commercial insolvencies.

"The NPA matter was relatively straightforward compared to what we're seeing in liquidation proceedings. If that resulted in costs approaching R500,000, we could be looking at exposure running into tens of millions for the main case."

The expert noted that liquidation proceedings typically involve multiple postponements, extensive documentation, and lengthy court hearings—all factors that contribute to escalating legal costs.

Strategic Legal Positioning

Banxso has requested that the court grant a de bonis propriis order against Mostert and Bosman Attorneys. This legal mechanism would make the attorneys personally liable for costs rather than their clients bearing the financial burden.

"A de bonis propriis order is a serious remedy that courts don't grant lightly," the legal source explained. "It essentially means the lawyers would pay costs out of their own pockets. Courts typically only make such orders where there's evidence of improper conduct or where attorneys are seen to be the real driving force behind litigation."

Banxso has consistently maintained that the applicants are being used by their legal representatives, who allegedly stand to benefit financially from liquidation proceedings regardless of the outcome for creditors.

This argument gained judicial attention when Judge Le Grange questioned why the applicants would reject Banxso's offer of security for their claims in favour of pursuing liquidation proceedings that would yield only 15 to 50 cents on the rand in the best-case scenario.

Section 381 Implications

During proceedings, Advocate Rudi van Rooyen, representing the applicants, referenced the possibility of a section 381 application. This provision would allow provisional liquidators to apply for extended powers equivalent to those of finally appointed liquidators, including authority to institute commissions of enquiry and appoint expensive legal teams.

"Section 381 applications can dramatically increase costs because they essentially give liquidators carte blanche to investigate and litigate using the company's own funds," the liquidation expert noted. "It's a powerful tool, but it can also be expensive for all concerned."

Judge Le Grange observed that such an application would effectively allow Banxso's money to be used to fund litigation against the company itself, reinforcing Banxso's argument that liquidation primarily benefits attorneys and liquidators rather than creditors.

Financial Consequences Mount

The NPA's substantial costs order will be paid from government coffers, adding to taxpayers' financial burden. The failed preservation strategy has resulted in the state bearing the cost of unsuccessful litigation whilst achieving none of its intended objectives.

Meanwhile, the applicants in the liquidation matter face potential personal liability for costs that could exceed the NPA's financial exposure by significant margins. Industry observers note that liquidation proceedings involving Mostert and Bosman have previously resulted in substantial legal fees being deducted from creditor payouts.

"The pattern we've seen in previous matters suggests that legal costs can consume a significant portion of available funds," the liquidation expert observed. "Creditors often end up receiving much less than anticipated because of the fees involved in the liquidation process."

Financial disclosures from the Mirror Trading International liquidation revealed that Mostert and Bosman had levied legal costs exceeding R24 million by September 2023, with creditors still awaiting dividend payments and a second Liquidation and Distribution account remaining unpublished. 

Pending Judgment

The contrast between the NPA's failed strategy and Banxso's defensive approach has become increasingly apparent. Whilst the state prosecution authority faces a substantial costs order for unsuccessful litigation, Banxso continues defending its position and seeking to protect client interests through the judicial process.

As the legal community awaits Judge Le Grange's judgement, the NPA's costly defeat stands as a stark reminder of the financial consequences when aggressive legal strategies backfire in the commercial courts.