About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2017
>>
[2017] ZAWCHC 81
|
|
Sass NO v Nenus Investments Corporation and Others (A488/2016) [2017] ZAWCHC 81 (15 August 2017)
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Reportable
CASE
NO: A 488/2016
In the matter
between:
JOSEPH SASS NO
Appellant
and
NENUS
INVESTMENTS CORPORATION
First
Respondent
JIREH STEEL
TRADING
Second
Respondent
W NAIDOO
Third
Respondent
ERNA
ROSENSTRAUCH
Fourth
Respondent
ELMARI DOS
SANTOS
Fifth
Respondent
MALCOLM LEE
MOUTON
Sixth
Respondent
JERMAIN ALCASTER
Seventh
Respondent
STEVEN NUNES
Eight
Respondent
M J VERMEULEN
Ninth
Respondent
DAVID BUYS
Tenth
Respondent
CARLOS DOS
SANTOS
Eleventh
Respondent
ADRIANO DOS
SANTOS
Twelfth
Respondent
EUSEBIO DOS
SANTOS
Thirteenth
Respondent
MAGISTRATE JJ
VAN REENEN, BELLVILLE MAGISTRATE’S COURT
Fourteenth
Respondent
THE MASTER OF
THE HIGH COURT
Fifteenth
Respondent
JUDGMENT: 15 August 2017
DAVIS J
Introduction
[1]
This
appeal concerns the implications of a finding that payments from a
corporation to third parties were made contrary to s 341
(2) of the
Companies Act 61 of 1973 (‘the Act’).
[2]
This
question is triggered by the following facts: CEMA Roller Shutter
Doors CC (‘CC’) was finally liquidated on 18
December
2012. Initially, Messrs Daniel Terblanche and Leonard Mart were
appointed as liquidators by the Master of the High
Court on 29
November 2012. Appellant was then appointed as a third liquidator on
12 April 2013. On 27 March 2014, the Master
authorised a
holding of a commission of enquiry into the affairs of the CC in
terms of s 417 of the Act. On 10 May 2015 the initial
two liquidators
were removed from office by the Master and the appellant was
appointed as the sole liquidator of the CC.
[3]
From
the records of the CC, it transpired that a range of dispositions
were made after the commencement of the liquidation proceedings
against the CC which were not repaid. I shall examine the
details thereof presently.
[4]
However,
to return to the chronology: on 11 December 2014 a settlement and
sale agreement (‘the settlement agreement’)
was entered
into in respect of the sale of business and assets of the CC.
The parties to this agreement were the three liquidators
acting on
behalf of the CC, including the appellant, a new company AA Roller
Shutter Doors (Pty) Ltd (‘AA’) being
the purchaser
and the eleventh, twelfth and thirteenth respondents who were former
members of the CC and were described in the
agreement as the settling
parties.
[5]
The
agreement provided for a total settlement amount of R 848 259,
00 to be paid to the liquidators which was made up of the
sale to AA
of the CC’s assets for a R 150 000, 00 the sale of
vehicles for R 341 623, 34, payment of the liquidators
realisation costs in the amount of R 55 050, 83 and R 28 279,60
and payment of the sum of R 273 305,24 which was
the sum
remaining in the CC’s bank account as at 30 October 2012.
The latter payment was made in terms of clause 4
of the settlement
agreement which, inter alia read, that subject to the provisions of
this agreement, the purchaser and the settling
parties agreed to pay
the sellers an amount of R 273 305, 24. Clause 10.1
of the agreement is of particular significance.
It reads:
‘
This
Agreement constitutes full and final statement of any claims which
the Corporation and the Sellers may or may in the future
have against
the Purchaser and the Settling Parties on condition that all
information and representations that it has received
from the members
of Cema Roller Shutter Doors CC pertaining to the corporation’s
affairs is accurate and up-to-date
.’
[6]
Subsequent
to the conclusion of this settlement agreement, the appellant applied
to the court
a
quo
for certain dispositions to be declared void in terms of s 341 (2) of
the Act and a further order that these dispositions be repaid
by
those respondents who had received payment thereof together with
interest
a
tempore mora
to the date of payment. Appellant also prayed for an order that
the eleventh, twelfth and thirteenth respondents, who were
the former
members of the CC, be declared jointly and severally liable with the
other respondents, being the recipients, to the
appellant for the
indebtedness so claimed.
[7]
For
the purposes of this appeal the two key payments were an amount of R
250 000.00 made to the first respondent on 5 November
2012 and a
payment of R 70 000 to the third respondent on 2 November 2012.
There were other payments made, which were
the subject of the
application before Savage J sitting in the court
a
quo
.
Although the application in respect thereof did not prove successful,
these claims appeared to have been settled.
Accordingly, the
issue before this court is an appeal against the following part of
the order granted by the court
a
quo
:
‘
3.
The disposition in the amount of R 250 000,00 made by CEMA
Roller Shutter Doors CC to the second respondent, Nenus Investments
CC (first respondent in this appeal), on 05 November 2012 is declared
to be void in terms of the provisions of s 341 (2) of the
Companies
Act 61 of 1973.
4.
The disposition in the amount of R 70 000,00 made by CEMA Roller
Shutter Doors CC to the second respondent, Mrs W Naidoo
(third
respondent in the appeal), on 2 November 2012 is declared to be void
in terms of the provisions of s 341 (2) of the Companies
Act 61 of
1973.
5.
No order is made for repayment of the sums set out in paragraphs 3
and 4 above.
6.
The application against the twenty second to twenty fourth
respondents (eleven to thirteenth respondent in this appeal) is
refused
with costs.’
The judgment of the court
a quo
[8]
The
court a quo found that neither the first nor the third respondents
were party to the settlement agreement and hence the appellant’s
claim in respect of these payments had not been settled. The
court found that initially loans had been made to former members
of
the CC by first and third respondents respectively who then lent the
monies to the CC. Accordingly, the legal relationship
involving
the first and third respondents were with the former members, eleven
to thirteen respondents. These former
members were the
true debtors. In a separate legal transaction they used the loaned
money in an attempt to refinance the CC.
[9]
For
this reason, the court
a
quo
found that there was no legal obligation which the CC owed pursuant
to these loans to either first or third respondents.
Thus
the repayment by the CC of these loans to first and third respondents
respectively in the circumstances meant that the
payments fell foul
of s 341 (2) of the Companies Act and were void.
[10]
However
the court went on to say:
‘
On
the material before this Court, I am unable to determine whether and
to what extent full or part-payment has made by way of the
payment
made by the former members under the terms of the settlement
agreement. It follows that no determination is capable
of being
made as to amount to be repaid by the second and eleventh respondent
o the current papers.’
[11]
It is
against the order made pursuant to this finding, namely that no order
was made to repay the moneys received from the CC that
the appellant
has approached this court on appeal with the leave of the court
a
quo
.
The implications of s 341 (2) of
the Act
[12]
Section
341 (2) of the Act reads thus:
‘
341
Disposition and share transfers after winding-up void
(1)
…
(2)
Every
disposition of its property (including rights of action) by any
company being wound-up and unable to pay its debts made after
the
commencement of the winding-up, shall be void unless the Court
otherwise orders
.’
[13]
Relying
on a passage from Blackman
et
al
Commentary
on the Companies Act
at 14-15, Mr Ferreira who appeared on behalf of first, third and
eleventh to thirteenth respondents, submitted that impeaching
a
transaction in terms of s 341 (2) of the Act and the subsequent
vindication of the property concerned are two distinct steps
in the
process of recovery of the relevant assets. In this
connection Blackman
et
al
write:
‘
The
section does not provide for recovery of the property. It
merely renders the disposition void, and gives the court a
discretionary power to order otherwise, i.e. to validate the
disposition. Thus, the appropriate remedy in respect of the
invalidated disposition is a mater not regulated by the section and
has to be determined by the general law
.’
[14]
Thus
Mr Ferreira submitted that the appellant had made no case in his
founding affidavit that entitled him to repayment on the basis
of a
specific cause of action, for example enrichment or another common
law ground. Accordingly, appellant was not entitled
to claim
repayment of the disposition merely because of a declaration of
invalidity in terms of s 341 (2).
[15]
This
argument was sourced in a decision of the Chancery Division in the
United Kingdom
In
Re Leslie Engineers Co Ltd (in liquidation)
[1976] 1 WLR 292
where Oliver J said of s 227 of the English
Companies Act of 1948 (the equivalent of s 341 (2) of the Act) that
the section ‘says
nothing about recovery; it merely avoids
dispositions…’ at 298
[16]
The
learned judge went on to say:
‘
What
is the appropriate remedy in respect of the invalidated disposition
is a matter not regulated by the statute and that has to
be
determined by the general law. In order to succeed against the
respondents, the liquidator does not necessarily have to
demonstrate
a transaction invalidated by s 227 for there may be claims to recover
moneys paid on other grounds. He does,
however, have to show a
right of recovery …’
[17]
Following
upon this decision, in
Herrigel
NA v Bond Roads Construction Co (Pty) Ltd and another
1980
(4) SA 669
(SWA) Lichtenberg J said at 680:
‘
It
is true that s 341 (2) says nothing about the recovery of the void
disposition but merely avoids the disposition itself.
The
invalidation of a disposition of the company’s property and the
recovery of the property disposed of are logically two
distinct
matters’
[18]
Significantly
this case dealt with the question of whether a void disposition,
where a liquidator sought to recover payment from
the recipient,
ought to be validated. Thus, the court was required to weigh up
factors in favour of the validation of the
disposition as well as
considerations which dictated to the contrary. Having
considered these various factors, the court
concluded thus:
‘
In
my judgment plaintiff is entitled to the repayment of the void
disposition, this being the relief claimed by him in this action,
and
such repayment must be ordered against first defendant.
Inasmuch as I have found that the disposition was and is void
and
have not, in the exercise of my discretion in terms of s 341 (2) of
the Companies Act, “ordered otherwise”, it,
in my view,
follows as a necessary corollary that the order prayed for in the
action for the repayment of the void disposition
must be made.
The case of action set out in the particulars of plaintiff’s
claim, as amended, is that the disposition
is void by virtue of the
provisions of s 341 (2) of the Companies Act and that, therefore,
first defendant, having received the
disposition, is liable to repay
it to plaintiff. In view of my findings in this judgment
plaintiff is, therefore, entitled
to such repayment and it must,
accordingly, be so ordered.’
[19]
In
Sackstein
v Proudfoot SA (Pty) Ltd
2003 (4) SA 348
(SCA) the court referred to the
Herrigel
decision,
supra
and noted ‘
similar
to the English provision, s 341 (2) of our Companies Act gives the
Court a discretion not to declare a disposition made
after the
commencement of winding up proceedings void’
.
(at 360)
[20]
However,
there is a further finding in
Herrigel
which is at 681 B – D which is of particular relevance to the
present dispute:
‘
In
my judgment plaintiff is entitled to the repayment of the void
disposition, this being the relief claimed by him in this action,
and
such repayment must be ordered against first defendant. Inasmuch as I
have found that the disposition was and is void and have
not, in the
exercise of my discretion in terms of s 341 (2) of the Companies Act
“ordered otherwise”, it, in my view,
follows as a
necessary corollary that the order prayed for in the action for the
repayment of the void disposition must be made.’
This finding finds favour in
Excellent
Petroleum (Pty) Ltd (in liquidation) v Brent Oil (Pty) Ltd
2012
(5) SA 407
(GNP) at para s 79 and 82, namely, absent a case for the
validation of a transaction which has been declared void in breach of
s 341(2) of the Act, a court should order repayment.
Evaluation
[21]
In
summary, the cases cited by Mr Ferreira deal with the question of
whether a court should validate a disposition held to be void
in
terms of s 341 (2) of the Act. The wording of s 341 (2) of the
Act clearly provides for such a discretionary power.
It follows
that, absent a discretion exercised in favour of validation, a
transaction found to be void should hold the consequence
that
repayment must be made. A court’s discretion is
controlled only by the general principles which apply to
every kind
of judicial discretion; the court must decide what would be just and
fair in the circumstances of the case bearing in
mind the purposes of
the subsection. See
Henochsberg
on the
Companies Act
71 of 2008
at APPI/24.
[22]
In
general, a court would ordinarily refuse to validate a disposition
where it was made, for example, with the object to securing
an
advantage to a particular creditor in the winding up which otherwise
he or she would not have enjoyed or with the intention
of giving a
particular creditor a preference. In the present dispute,
it is clear that money was lent by the first
and third respondents to
the eleventh to thirteenth respondents, who then entered into a
separate contract of loan with the CC.
[23]
Clearly
the eleventh to thirteenth respondents owed R 250 000 and R
70 000 to first and third respondents respectively.
These obligations could not be discharged on their behalf by the CC.
By causing the CC to discharge these obligations, it
concluded
transactions which were in breach of s 341 (2) of the Act.
There is no basis offered by the Court
a
quo
to exercise a discretion which would have validated these
transactions and accordingly have resulted in an order by which
repayment
did not have to be made by first and third respondents
respectively, nor, on these papers, could such a discretion have been
exercised
in favour of validation. It is clear that the
dispositions to first and third respondent made by the CC were
exclusively
for the benefit of the former members and thus in
palpable breach of s 341 (2) of the Act. No possible basis for
validation
was or could be offered by first and third respondents.
The settlement with the former
members
[24]
The
second component of the appeal to this Court concerns the relief
sought by the appellant as set out in his founding affidavit
thus:
‘
The
relief I seek against [the former members] is that they be declared
jointly and severally liable to me with the first and third
respondents
’
by
virtue of the fact that they cause payment which are here in claim.
In his replying affidavit, appellant develops his case:
‘
Respondents
act of unlawfully and intentionally alternatively negligently and are
liable jointly and severally to repay these monies…
’
[25]
Central
to this claim by the appellant is the nature of the settlement
agreement. Respondent claim that appellant was empowered
to
compromise any claim in terms of s 386 (4) (b) of the Act. By
entering into the settlement agreement, a compromise was
affected,
the agreement was enforceable and any indebtedness which the former
member may have had against the CC was waived.
As I have
noted, clause 10.1 of the settlement agreement provided that ‘
this
agreement constitutes full and final settlement with any claims…
’
Only in the
replying affidavit does the applicant attempt to develop an answer to
this problem. He states in respect of clause 10.1:
‘
This
term as to full and final nature of the settlement was conditional,
it providing further that that it was concluded by the
Sellers “on
condition that all information and representations that it has
received from the members of Cema Roller Shutter
Doors CC pertaining
to the Corporation’s affairs is accurate and up-to-date.”
The members of Cema Roller Shutter
Doors CC are the respondents.
On the basis of the facts of this matter, which included the plethora
of post liquidation payments
made under the control and auspices of
the respondents, respondents failed to disclose material information
concerning the identity
and contact details for many of the
recipients of these post-liquidation payments. In fact, much of
the information received
from the members (respondents) was neither
accurate, nor complete and up-to-date. Consequently, the
condition for the settlement
being full and final was clearly not
satisfied and accordingly there was no full and final settlement.
More particularly,
this inaccuracy and incompleteness arose from the
respondents’ failure to provide me and/or my Johannesburg
attorney of record,
the said hacker, with information relating to the
identity and addresses of the recipients of a large number of
payments reflected
in Annexure “JS4” to the Founding
Affidavit, for inclusion, either in letters of demand or in the
Founding Affidavit.’
[26]
This
averment was clearly developed in response to twelfth respondent’s
answering affidavit in which he said ‘I have
been advised …
that any liability the former members may have had as a result of the
payments made from the corporations
banking account has been repaid
to the corporation as agreed with the liquidators including the
applicant therein.’
This was a reference to the
amount of R 273 305.24 which was paid by the former members.
It is trite that a person in
a position of the appellant should make
out a case in the founding affidavit. That was hardly done with
the respect to this
claim against eleventh to thirteenth
respondents. But, even if I take account of the passages to
which I have made reference
in the replying affidavit, there is
hardly a basis, on the probabilities, to justify a conclusion that
the settlement agreement
did not cover these claims.
[27]
Furthermore,
as noted above, on 27 March 2014 the Master authorised the holding of
a commission of enquiry in terms of s 470 of
the Act. The
appellant in his founding affidavit, states that ‘
the
facts herein disposed by me emerge from an on-going Commission of
Enquiry being held in the Corporation pursuant to the provisions
of s
418 as read with
s 417
of the
Companies Act…
’
It
was surely
incumbent upon the appellant to utilise this commission of enquiry to
gain information as to the nature and scope of
the settlement
agreement and hence as to whether payment of R 273 305.24 made
pursuant to clause 4 of the settlement agreement
covered his claim
against eleventh to thirteenth respondents. Without any
additional information there is no justification
for the court to
disturb the finding of the court
a
quo
in respect of appellant’s claim against these respondents, for
it cannot be said on the basis of these papers that, on the
probabilities, appellant has shown that the agreement did not settle
this claim.
Conclusion
[28]
In
the result;
1.
The
appeal against clause 5 of the order of the court
a
quo
is set aside and is replaced with the following:
5.1 Second respondent is to pay the
amount of R 250 000 to the applicant together with interest
thereon from 05 November 2011,
together with costs.
5.2 The eleventh respondent is to pay
the amount of R 70 000 to applicant together with interest
thereon from 02 November
2011, together with costs.
2.
First
and third respondents, jointly and severally, are ordered to pay the
appellant’s cost of appeal in respect of the appeal
against
clause 5 of the order of the court
a
quo
.
3.
The
appeal against paragraph 6 of the order of the court
a
quo
is dismissed with costs.
______________
DAVIS J
SALDANHA and STEYN JJ concur