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[2018] ZAWCHC 39
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De Wet and Another v R G and Associates (9406/2017) [2018] ZAWCHC 39 (26 February 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case Number:
9406/2017
In
the matter between:
G.L.S
DE WET N.O.
First
Applicant
K.R.
VENGADESAN N.O.
Second
Applicant
and
R
G & ASSOCIATES
Respondent
Heard:
21 February 2018
Delivered:
26 February 2018
JUDGMENT
BOQWANA,
J
Factual
matrix
[1]
The
applicants approached this Court seeking a declarator that payments
totalling R240 427.85, made to the respondent, a firm
of
attorneys, were impeachable dispositions and that the respondent must
be ordered to pay it back to the estate of Solodor 42
CC (in
liquidation (“Solodor”)), together with interest thereon.
[2]
Solodor
was
placed in final liquidation on 22 May 2015. The applicants are
the joint liquidators of its insolvent estate. Prior to
the
liquidation of the company it had two members, Ronald Lipman
(“Lipman”) with 20% members’ interest and Pieter
Gabriel Van Staden (“Van Staden Jnr”) holding 80% of
members’ interest.
[3]
Van
Staden Jnr signed a document purporting to be a Power of Attorney in
terms of which he authorized his father, Johannes Erasmus
Van Staden
(“Van Staden Snr”), to be his agent and to act in his
stead with regard to all matters pertaining to the
day to day
business and operations of Solodor.
[4]
According
to the applicants, Solodor provided crayfish to Lobster Harvest to
the value of R240 427.85 during March 2015. Solodor
delivered
two invoices to Lobster Harvest, both dated 23 March 2015, in the
amounts of R132 478.34 and R107 949.51 respectively.
Lobster Harvest paid the amounts on 23 March 2015 and on 2
5
March
2015 respectively totalling a sum of R240 427.85, by means of
direct payments into the respondent’s account.
Payment
confirmation history is attached to the founding affidavit, as proof
of these payments.
[5]
At
the time of these transactions, Van Staden Snr faced 572 criminal
charges of fraud, with the South African Revenue Service (‘SARS’)
as a complainant. Mr R G, a sole proprietor of the respondent,
represented him.
[6]
According
to the applicants, Mr G testified during an enquiry held on 23
February 2017, at the Master of the High Court, Johannesburg,
(‘Master’) that the respondent received payment due to
Solodor, in the amount of R240 427.85, from Lobster Harvest.
The first applicant claims that he was involved in that enquiry and
directed questions to Mr G.
[7]
According
to him, Mr G testified that Van Staden Snr had instructed that the
payments be made to the respondent, for payment of
the account of
legal services rendered to him by the respondent.
[8]
Mr
G
further deposed to an affidavit on 27 August 2015, wherein he again
stated that Van Staden Snr arranged for the amount due to
Solodor to
be paid into the respondent’s Trust account.
[9]
The
applicants contend that such payment did not represent a payment for
services rendered to Solodor, or related to it and/or its
business in
any manner whatsoever.
[10]
According
to them, the criminal proceedings against Van Staden Snr did not
relate to the day-to-day business of Solodor in any manner
whatsoever, and the Power of Attorney provided to Van Staden Snr did
not extend to dealing with the income (or other assets) of
Solodor
beyond matters pertaining to the day-to-day business of Solodor. Van
Staden Snr was therefore not entitled to authorise
payment of his
personal legal bills with the income of Solodor.
[11]
Furthermore,
neither Van Staden Snr nor the respondent, was a creditor of Solodor
at any time. Therefore, payment to the respondent
for services
rendered to Van Staden Snr, with Solodor’s funds, constituted
invalid transactions that needed to be set aside
by this Court.
[12]
The
applicants contend that these payments resulted in the respondent
being enriched to the detriment of Solodor’s creditors
and that
the respondent must be ordered to repay the money to the applicants,
which he has refused to do.
[13]
In
answer to the applicants’ allegations, the respondent first
raises a point
in
limine
alleging that a number of parties needed to be before this Court
before this matter can be adjudicated. He refers to a joinder
application which I have not seen.
[14]
He
further alleges that the only reason he helped his client, Van Staden
Snr, to use his trust account facilities, was because he
(Van Staden
Snr) had no choice of where to bank, as Lipman (minority member of
Solodor) had taken control of Solodor’s account;
Van Staden Snr
was acting out of necessity, albeit on behalf of and under the
instructions from the majority member of Solodor,
his son Van Staden
Jnr.
[15]
According
to the respondent, Van Staden Snr’s resources were restrained
by the State and placed under the control of a curator,
in terms of a
Court order dated 8 December 2008, with Van Staden Snr having been
left without income or means to defend himself
in court proceedings
and to support his dependant wife and grandchild. Mr G states
that he is now being held liable for money
which Van Staden Snr was,
of necessity, forced to use to support himself and his family.
[16]
The
respondent further alleges that this is not the first attempt the
applicants have made to reclaim money from him. There had
been an
earlier application, brought by Lipman, to recover monies which he
received on behalf of Van Staden Snr. In that application,
he applied
to join the applicants, but the applicants did not participate.
Lipman brought another application against Van
Staden Snr wherein he
sought an order directing Van Staden Snr to deliver certain
documentation to the creditors.
[17]
These
two applications served before Yekiso J, who mentioned that there
were serious disputes of fact with regard to both forms
of relief
sought by Lipman. Yekiso J found that the matter was not
capable of being resolved solely on the basis of the papers.
He
remarked that ‘
[t]hey
are the kind of disputes which, I am of the view, can only be
resolved by way of viva voce evidence
.’
In those matters, Lipman was found to have lacked
locus
standi
and a rule
nisi
that
had been issued in respect thereof was accordingly discharged.
[18]
The
respondent contends that Lipman and the applicants had acted in
concert in a conspiracy intended to extort funds from him.
[19]
He
alleges that he had intended to join Lipman to this application, but
had been unable to effect service on him, as all registered
mails
sent to Lipman’s address were returned as undelivered.
Point
in limine
[20]
The
point
in
limine
relating to the joinder of other parties was not raised in oral
argument before me by
Mr
Callaghan, on behalf of the
respondent. I will, therefore, not spend much time on it, save to say
that no application was brought
by the respondent to join any other
party to these proceedings, although reference was made in the
answering affidavit to an application
for joinder. It is
further not explained what purpose those parties (who are not
mentioned other than a scant reference to
an intention to join
Lipman) would serve in these proceedings. I, therefore, need
not take that point any further.
The
disputes of fact point
[21]
Similarly, the
point relating to disputes of fact raised in the answering affidavit
was not argued by Mr Callaghan. As Mr
Montzinger, who appeared
for the applicants, argued, and as appears in the judgment by Yekiso
J, the application before him was
brought by Lipman, whilst the
company was in liquidation. Yekiso J decided the applications
purely on the issue that Lipman
had no
locus
standi
to bring the
applications, correctly so. The applications were purportedly brought
in terms of s 362 (1) of the Companies Act 61
of 1973 (‘the
1973 Companies Act’).
The
matter before is brought by the liquidators in terms of ss 26 and 29
of the Insolvency Act 24 of 1936 (“the Act”),
which call
for certain requirements to be met before dispositions can be set
aside, if the requirements are met by the applicants,
on the papers
before me, that is the end of the matter. The respondent did not
demonstrate, nor clearly identify before this Court,
what disputes of
fact existed on the papers before me or even press on to apply for
the matter to be referred to oral evidence.
In any event, as it shall
be demonstrated below, the matter is determinable on the papers.
Does
the transaction constitute an impeachable disposition?
[22]
Mr
Montzinger
submitted that, whilst not stated categorically in the founding
papers, the applicants relied on s 26 read with s 29
of the Act. He
did refer to other sections, such as ss 30 and 31, submitting that
those also could easily fit the circumstances
of this case.
[23]
Section
26 (1) provides that:
‘
26. Disposition without
value.
-(1) Every
disposition
of property
not
made for value
may be set aside by
the court if such disposition was made by an insolvent–
(a) more than two years before the
sequestration of his estate, and it is proved that, immediately after
the disposition was made,
the liabilities of the insolvent exceeded
his assets;
(b)
within two years of the sequestration of
his estate, and the person claiming under or benefited by the
disposition is unable to
prove that, immediately after the
disposition was made, the assets of the insolvent exceeded his
liabilities:
Provided
that if it is proved that the liabilities of the insolvent at any
time after the making of the disposition exceeded his
assets by less
than the value of the property disposed of, it may be set aside only
to the extent of such excess.’
(Underlined
for emphasis)
[24]
Section
29 (1) provides that:
‘
29.
Voidable preferences.
-(1)
Every
disposition of his property made by a debtor not more than six months
before the sequestration of his estate
or, if he is deceased and his estate is insolvent, before his death,
which has had the effect of
preferring one of his creditors above another
,
may be set aside by the Court
if
immediately after the making of such disposition the liabilities of
the debtor exceeded the value of his assets
,
unless the person in whose favour the disposition was made proves
that the disposition was made in the ordinary course of business
and
that it was not intended thereby to prefer one creditor above
another.’
(Underlined
for emphasis)
[25]
Section
2 of the Act defines disposition as:
‘…any transfer or abandonment of
rights to property and includes a sale, lease, mortgage, pledge,
delivery, payment,
release, compromise, donation or any contract
therefor, but does not include a disposition in compliance with an
order of the court;
and ‘
dispose
’ has a
corresponding meaning.’
[26]
The
definition is so wide as to cover the broadest range of dispositions
of property conceivable. The use of ‘any’
broadens
the scope of instances that may constitute disposition within the
meaning of the Act. In
Reynolds
and Others NNO v Mercantile Bank Ltd
2004 (5) SA 220
(SCA) at 224H, the court observed that ‘
[g]iven
the wide definition of ‘disposition’ in the
Insolvency
Act it
is clear that the payments [of two cheques deposited by
Makrides (a managing director of Duchini (Pty) Ltd, a company in
liquidation)
in favour of Mercantile Bank Limited] were
‘dispositions
’.
In that case liquidators of a company called Duchini (Pty) Ltd
(‘Duchini’), which was placed in final
liquidation,
brought an action claiming payment of two amounts they alleged were
dispositions without value within the meaning
of s 26 (1) (b) of the
Act. On the date the cheques were deposited, Duchini was not indebted
to Mercantile Bank Ltd (‘Mercantile
Bank’). The amount of
each cheque was debited to the loan account of Makrides in the books
of Duchini. All of the said
payments took place within two
years of the winding up of Duchini. The Court there held that
the two cheques deposited to
Mercantile Bank had the effect of giving
the bank an immediate benefit. Secondly, it was able to reduce
the debt which was
owed to it by Makrides. The Court held that
‘[
i
]
n
essence, leaving aside the mechanics employed, Duchini paid Makrides’
debt to the defendant
.’
(at 226A)
[27]
In this case, the
respondent does not dispute the fact that an amount of R240 427.85
was paid by Lobster Harvest, a creditor
of Solodor, directly to his
trust account, on the instruction of Van Staden Snr. In his
answering affidavit, the respondent
raises a number of defences as
reasons why the money was paid to his trust account. In one
instance he alleges that the amount
was paid to the trust account
out of necessity, because Van Staden Snr’s resources had
been restrained and that he
was forced to use the amount in question
to sustain himself and his family.
[28]
Having said that, Mr G,
the deponent, then goes on to state that Van Staden Snr instructed
him to receive the payments totalling
R240 427.85 from Lobster
Harvest, because at that time, in late March 2016 [sic], he was
informed by Van Staden Snr, and which
he verily believed, that there
was a real risk that Lipman, the minority shareholder, and two other
investors, would take the money,
thereby preferring themselves over
other creditors. This was because Lipman had sole control over
Solodor’s bank account.
[29]
Mr G denies that the
money was paid to the respondent for the services he rendered for Van
Staden Snr in criminal proceedings, contrary
to an opposing affidavit
which he attested to, to that effect, in paragraph 29 thereof, in a
matter with Case number 11773/2016,
dated 05 August 2015, wherein he
stated as follows:
“29. I concede that Lobster Harvest as a result of the dispute
between Applicant and ‘van Staden Snr’ might have
been
provided by ‘van Staden Snr’ with the details of my Trust
bank account for a sum if money[sic] was paid into such
account
during March 2015 which was intended to be used for disbursements in
connection with ‘van Staden Snr’s criminal
defence and
part of my fees outstanding in connection with work done at the
instance of ‘van Staden Snr’ on his behalf,
which was
done as an attorney acting qua attorney
.”
(Underlined
for emphasis)
[30]
The applicants have also
attached an extract of an affidavit dated 27 August 2015 allegedly
deposed to by Mr G wherein, he stated
that Van Staden Snr ‘arranged’
that ‘a sum of money’ of Solodor be paid into the
respondent’s trust
account, which the respondent knew
represented funds belonging to Solodor and such funds were
utilised for Van Staden Snr’s
personal expenses and the
‘rest’ was paid to Van Staden Snr. The respondent did not
deny this allegation, he simply
noted it and stated that its source
is not identified and put the applicants to the proof
thereof.
[31]
In the current matter,
Mr G further states that he disposed of the money the
respondent received from Lobster Harvest on 23
March 2015 and 26
March 2015 respectively, by paying : (a) wages to the employees of
Solodor on 2 April 2016; (b) one ‘Stringer’
for the
repair of Solodor’s vehicle; (c) Van Staden Snr’s
salary; (d) Advocate C Viljoen (although it is not
clear what that
was for) - no dates are advanced in respect of those payments; (e)
Advocate C Viljoen again on 25 March 2016 and
on 07 April 2016; (f)
the respondent on 24 March 2016 and on 17 April 2016; and finally
bank charges (no date is advanced for that
payment either).
Significantly, no proof is attached in respect of any of these
payments.
[32]
Nevertheless, the
applicants have been able to establish the following:
(a)
Solodor rendered services
to Lobster Harvest;
(b)
Lobster Harvest paid for
those services on 23 March 2015 and 25 March 2015, to the total
amount of R240 427.85, into the respondent’s
trust
account;
(c)
The respondent received
money from Lobster Harvest; All this is not disputed.
(d)
The respondent was not a
creditor of Solodor;
(e)
Solodor was placed into
provisional liquidation on 8 April 2015, which was made final on 22
May 2015;
(f)
The respondent utilised
the money he received from Lobster Harvest to pay for legal services
he rendered to Van Staden Snr. Mr
Callaghan was at pains to
submit to the Court that Van Staden Snr was an employee of Solodor,
that he was owed money by Solodor
and therefore it was permissible
for the money to be paid to the respondent, and be utilised for legal
services rendered by the
respondent on behalf of Van Staden Snr. Not
only is this not in the papers, it contradicts the respondent’s
denials
that the money was used for that purpose. In any event, the
respondent contradicts himself also, because on the list he gave,
some
of the money was paid to himself, for reasons not stated. The
fact that the respondent now lists how he disposed of the amount
paid
is neither here nor there; it not only lacks substance but appears to
be unlawful on other bases. Lastly, the Power of Attorney
authorising
Van Staden Snr to act in Van Staden Jnr’s stead, in all matters
pertaining to the day to day business and running
of Solodor cannot
be stretched to cover the utilisation of Solodor’s money for
services or matters not related to Solodor.
[33]
From
this, it is clear that there was a disposition of property, made by
Solodor, or on its behalf with the use of a Power of Attorney
by Van
Staden Snr, in the form of payments to the respondent’s trust
account by Solodor’s creditor. This disposition
was made
just over a week before Solodor was provisionally liquidated. The
respondent benefited from this payment in that the money
was used to
pay for legal services he rendered to Van Staden Snr. The version
that the money, or part thereof, was used to pay
Solodor’s
employees’ salaries and Solodor’s other related
activities, is far-fetched and untenable and must therefore
be
rejected on the papers. Not only does it contradict what Mr G
had stated under oath in an opposing affidavit in an application
before Yekiso J, it is untenable because those payments were made in
2016, at a time when Solodor was already in liquidation. The
respondent accordingly had no authority to make payments on behalf of
Solodor. When this was pointed out to Mr Callaghan,
he simply
suggested that these were typographical errors, the dates should have
read as 2015. Apart from the fact that no
affidavit was filed
to explain the errors, it is inconceivable that an error would be
repeated six times, when strangely, the dates
on which payments were
received from Lobster Harvest are correctly stated right above the
itemisation of how the sum was disbursed.
Furthermore, if those
payments were made in 2015, one of the payments would have been made
after Solodor was placed in liquidation
and others shortly before
that. If those disbursements were made in the manner the
respondent says they were, that would,
in any event, have had the
effect of preferring a creditor above another as envisaged in s 29
(1) of the Act.
[34]
The
respondent has brought no evidence to show that immediately after the
making of the dispositions to him, Solodor’s assets
exceeded
its liabilities, as stated in s 26 (1) (b) of the Act. Neither
was any evidence brought to the effect that Solodor’s
liabilities exceeded its assets by less than the value disposed of,
so that the disposition may only be set aside to the extent
of such
excess.
[35]
The
Power of Attorney does not assist the respondent, because the
dispositions made were not for the benefit of Solodor. They
were without value and would have preferred the respondent above
other creditors, had he been a creditor of Solodor (which he has
not
been able to show), or connected to it in the manner suggested on his
behalf.
[36]
For
those reasons, I am satisfied that the applicants have met the
requirements of s 26 (1) (b) read with section 29 of the Act.
[37]
I
asked Mr Callaghan whether it would have been appropriate for an
attorney’s trust account to be utilised to pay for salaries
of
employees, and other activities attributed to Solodor, such as the
repair of vehicles. Mr Callaghan submitted that the
respondent
was obliged to act in accordance with the instructions of his client.
[38]
These
allegations as well as different versions proffered by the respondent
under oath, unavoidably, place a duty upon this Court
to direct that
a copy of this judgment be sent to the Law Society, to investigate
the conduct of the respondent in relation to
these transactions.
[39]
In
the result, the following order is made:
1.
It
is declared that payments in the amounts of R 132 478.34 and
R107 949.51 totalling R 240 427.51 made to the respondent’s
trust account are
impeachable
dispositions by Solodor 42 CC (in liquidation) to the respondent and
are accordingly set aside;
2.
The
respondent is ordered to pay back to the estate of Solodor 42 CC (in
liquidation) the amount of R240 427.85, together with
interest
thereon
a
tempore
morae
at 9% per annum;
3.
The
respondent is ordered to pay the costs of this application.
4.
It
is directed that a copy of this judgment be sent to the Law Society
to investigate the conduct of the respondent.
_____________________
N P BOQWANA
Judge
of the High Court