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[2020] ZAWCHC 100
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Bester NO and Others v Legato Versorgingsoord CC (465/20) [2020] ZAWCHC 100 (22 May 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No.: 465/20
In
the matter between:
CHRISTIAN
FINDLAY BESTER
N.O.
First
Applicant
HANLIE
HENNING
N.O.
Second
Applicant
PULENG
FELICITY BODIBE
N.O.
Third
Applicant
In
their capacities as the duly appointed joint trustees
of
the Insolvent Estate of Calitz Family Trust, IT 2422/94
and
LEGATO
VERSORGINGSOORD
CC
Respondent
JUDGMENT
: HANDED DOWN ELECTRONICALLY ON 22 MAY 2020
HOCKEY,
AJ
Introduction
[1]
This
is an application brought by the joint trustees of the insolvent
estate of the Calitz Family Trust, IT2422/94 (‘the Trust”)
for the provisional liquidation of Legato Versorgingsoord CC (“the
respondent”). I shall refer to the joint trustees
of the
insolvent estate of the Trust jointly as “the applicant”
herein.
[2]
The application is brought in terms of provisions of the Companies
Act 61 of 1973 (the 1973 Act”), specifically the provisions
found under chapter XIV of that Act which remains applicable in
matters such as these in terms of provisional arrangements of the
Companies Act 71 0f 2008, and section 66 read with section 69 of the
Close Corporation Act 69 of 1984. (See
Firstrand
Bank Ltd v Lodhi 5 Properties Investments CC
2013 (3) SA
212
GNP at 221, and also
Firstrand
Bank Ltd v Mahem Verhurings CC
(91998/2015)
[2016] ZAGPPHC 1076 (15 December 2016) for an elucidation of the
current law relating to the liquidation of close corporations.)
[3]
The applicant is represented herein by Mr R.B. Engela of the Cape
Bar, instructed by De Klerk and Van Gend Incorporated. The
respondent
was represented by VGV Incorporated who withdrew as attorneys of
record on 18 May 2020. From then onwards, Mr Charles
Frederick Calitz
(“Mr Calitz”), a member of the respondent represented the
respondent. I granted leave to the respondent
to file its heads of
argument late, which was received on the day of the hearing. Such
late filing is accordingly condoned.
[4]
Since this matter was set down for hearing during the period that our
country was in lockdown in terms of provisions of the
Disaster
Management Act, 2002
and the regulations issued under
section 27(2)
of that Act, the applicant in its practice note proposed that the
matter be dealt with on the papers filed. Mr Calitz also corresponded
with the court expressing his risk and health related concerns about
attending court and I, having considered the papers filed
on record
and the prevailing conditions and circumstances of the parties,
accordingly directed that the matter be dealt with on
the papers
filed in accordance with item 10.1 of the Directives issued by the
Chief Justice dated 2 May 2020, read with the Directives
issued by
the Judge President of this Division of the High Court dated 11 May
2020.
[5]
The applicant contends that the respondent is unable to pay its
debts, and furthermore that it is just and equitable for the
respondent to be would-up.
[6]
The respondent, is one of several entities forming part of the
so-called Calitz Family group, which operates businesses in the
healthcare industry by operating frail care centres for senior and
retired persons by providing them with residential and nursing
facilities. Several of the entities within the group have been or are
in the process of being wound up.
[7]
The Trust has been sequestrated out of this court at the instance of
the trustees of Skyscape Investments 101 CC (“Skyscape”),
a close corporation which is part of the Calitz Family group of
entities.
[8]
The applicant bases this application on a loan it contends is owing
to the Trust by the respondent in the amount of R14 994 343.00
(“the loan amount” or “the debt”) which was
ceded to the Trust by Skyscape.
[9]
On 18 December 2019, the applicant, via its attorneys sent a letter
of demand to the respondent for payment of the loan amount.
The
respondent failed to accede to the demand.
The
Applicant’s Case
[10]
The three applicants are the joint trustees of the insolvent estate
of the Trust.
[11]
The applicant’s case is based on the financial statements of
the respondent, in terms whereof it appears, as at 31 July
2016, that
the respondent was indebted to Skyscape in the loan amount. The debt
was ceded by Skyscape duly represented by its joint
liquidators to
the Trust. The respondent is therefore indebted to the Trust in the
sum of the loan amount.
[12]
A letter of demand for payment of the loan amount was sent on behalf
of the applicant to the respondent on 18 December 2019.
The
respondent failed to make any payment in terms thereof. The loan
amount therefore became due and payable.
[13]
The respondent is dormant and ceased trading since 31 July 2016. It
appears from the financial statements of the respondent,
which bears
the same date 31 July 2016, that it had liabilities of R15 469 343.00
consisting mainly of the loan amount.
The
Respondent’s Case
[14]
The respondent disputes that the loan amount is due and payable and
contends that the loan amount was part of inter-company
loans which
were non-interest bearing and which were payable when sufficient
funds became available.
[15]
The respondent furthermore claims that the applicant fails to take
account of the “true legal relationship” between
the
Trust, Skyscape, and the respondent in respect of any debt owed by
the respondent to Skyscape as documented in the financial
statements
of Skyscape and the respondent, namely that of a loan account. Mr
Calitz states in paragraph 5 of his answering affidavit
that:
“…
the
said relationship must be seen in the context of the business
operations of the respondent and its inter-relationship with other
entities controlled by the Calitz family. The Applicant did not even
try to do so and treated the operations of the Trust, Skyscape
and
respondent as if they are not part of a group of entities that fall
under the control of members of the Calitz family
”.
[16]
Further, in paragraph 8 of the answering affidavit, Mr Calitz states
that:
“
It
is important to note that all debts owed by or to any of the two
entities, i.e. Skyscape and respondent (and the Trust) by agreement,
were treated by all the trustees, members and directors as loans
granted against the favourable terms referred to hereinabove.
As
stated hereinabove, it was agreed that all loans would only be
repayable if and when it would advance the business purposes
and
objectives of the Calitz family group as a whole. This means the
loans would not be enforced in a way which may harm or prejudice
the
Calitz family group as a whole.”
[17]
Mr Calitz further states that the Mr Bester, who deposed to the
founding affidavit on behalf the applicant, “
refers
to
an amount of R14 994 343.00 that was allegedly due as at 31
July 2016, approximately four years ago.”
And
further, in paragraph 10:
“
The
Calitz group had a turnover of more than R100 000.00 since that
date. It is therefore important to note that financial
statements of
each entity [must be] brought up to date to determine the correct
amount (if any) still due by the respondent to
the applicants.”
The
law and evaluation on evidence
[18]
It is trite that in opposed applications for the provisional winding
up of companies, the applicant must establish a prima
facie case on a
balance of probabilities of the evidence before it
(
see
Kalil
v Decotex (Pty) Ltd and Another
1988
(1)
SA 943
at 976 C and further, and also the judgment of Rogers J in
Orestisol
ve
v
NDFT Holdings
2015
(4) SA 449
at 453I-J.)
[19]
The applicant must establish that it has a claim on a prima facie
basis. Without this, the applicant has no locus standi. In
the
present matter, the financial statements of the respondent, which was
approved and signed off by its members, reflect and indebtedness
of
the loaned amount to Skyscape. This debt was ceded to the applicant
who demanded settlement thereof on 18 December 2019. The
debt thus
became due and payable from that date.
[20]
If the debt relied upon by the applicant is disputed on bona fide and
reasonable grounds, the court will refuse the granting
of a
winding-up order, as per the so-called “Badehorst rule”.
This rule was confirmed by the Supreme Court of Appeal
per Fourie AJA
in
Freshvest
(Pty) Ltd v Marabeng (Pty) Ltd
(1030/2015)
[2016] ZASCA 168
(24 November 2016), where it was held
that:
“
In
essence, the matter serves as a stark reminder that winding-up
proceedings are not designed for the enforcement of a debt that
the
debtor-company disputes on a bona fide and reasonable grounds. This
has become known as the ‘Badenhorst rule ’after
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956
(2) SA 346
(T) at 347-348.”
[21]
I am not persuaded that the respondent contests the debt on which the
applicant relies on bona fide and reasonable grounds.
The respondent
does not dispute that the relevant entries in its financial
statements were made (and approved by its members),
but merely states
that “
the
members did not realise the implication of these entries.”
[22]
The respondent now, almost four years later, contends that the
journal entries by its auditors who attended to the various
financial
statements must be re-assessed. It states this despite the fact that
the respondent has been dormant since the date of
the financial
statements of 31 July 2016.
[23]
I agree with the applicant that the financial statements had tax
implications and what the respondent is now suggesting is
that it
must go back 4, 5 maybe 6 years to “
unscramble
to proverbial egg, and re-engineer or re-constitute the financial
statements of all of the entities in the Calitz family
group.”
[24]
What is concerning about Mr Calitz’s contention relating to the
re-assessment of financial statements is that most of
the entities in
the group have been wound-up or is in the process of being wound-up.
It is therefore not for Mr Calitz himself,
or for the auditors that
he may appoint to attend to the financial statements of these
entities to attend to re-assessment of such
entities. These are in
the hands of the liquidators, whose responsibilities include the
preparation of the liquidation and distribution
accounts.
[25]
The Agreement relied upon by Mr Calitz, namely that the inter-company
loans would only become repayable if and when it would
advance the
business purposes and objectives of the Calitz family group as a
whole and that these debts would not be enforced in
a way which may
harm or prejudice the Calitz family group, is also problematic. I
agree with counsel for the applicant that in
the circumstances where
the entities in the Calitz group is either dormant or have been
liquidated, the indebtedness of the entities
will never become
payable and can never be enforced. I agree furthermore with his
argument that the “
agreement
”
relied upon by Mr Calitz falls within any or all the four classes of
agreements that are void for vagueness as mentioned
in
Levenstein
v Levenstein
1955 (3) SA 625
at 619, where it is stated:
“
Firstly,
… in such cases the so-called contract is not enforceable
because the promise is ‘dependant on a condition
which in fact
reserves an unlimited option to the promissor’…Secondly,
where the vague and uncertain language justifies
the implication that
the parties were never ad idem … Thirdly, where there is no
concluded contract as in the case …’
…of
continuing negotiations broken off in medio’…In all
these cases the element of uncertainty is fatal to
the existence of
the so-called contract; in the first class because there is
uncertainty as to whether the promisor will ever acknowledge
the
existence of an obligation, in the second, there is uncertainty as to
whether he has acknowledged as being his obligation,
and in the third
class there is uncertainty as to the subject matter which has still
to be agreed. The fourth class concerns those
cases where the
unspecified details of the contract ar questions of fact capable of
determination by evidence.”
The
Grounds For Winding-Up And Discretion
[26]
This application is brought on the basis that the respondent is
unable to pay its debts and that it appears just and equitable
that
the respondent should be wound-up.
[27]
It is trite that the court must exercise its discretion judicially in
opposed applications such as this matter. Once the respondent’s
indebtedness has prima facie been established, the onus is on it to
show that this indebtedness is disputed on bona fide and reasonable
grounds. The discretion of the court not to grant a winding-up order
in such circumstances of an unpaid creditor is a narrow one
(see
Afgri
Operations Ltd c Hamba Fleet (Pty) Ltd
(542/2016)
[2017] ZASCA 24
(24 March 2017)). In the Afgri matter it
was held by the Supreme Court of Appeal in paragraph 12 that:
“
Notwithstanding
its awareness of the fact that its discretion must be exercised
judicially, the court a quo did not keep in view
the specific
principle that, generally speaking, an unpaid creditor has a right,
ex debito justitiae, to a winding-up order against
the respondent
company that has not discharged that debt…. The court a quo
also did not heed the principle that, in practice,
the discretion of
a court to refuse to grant a winding-up order where an unpaid
creditor applies therefor is a ‘very narrow
one’ that is
rarely exercised and in special or unusual circumstances only.”
[28]
It appears from the financial statements of the respondent that as at
31 July 2016, it had accumulated losses of R77 355.00
and that
its total liabilities exceeded its assets by R77 255.00. It had
not traded since 31 July 2016. This is a clear indication
that it is
unable to pay its debts amounting to R15 469 158, which
consist largely of the loaned amount.
[29]
In the result, I am of the, since the respondent is not disputing the
loaned amount on bona fide and reasonable grounds, the
applicant has
clearly demonstrated its locus standi in bringing this application,
the respondent is clearly not in a financial
position to pay its
debts, that it is just and equitable for the respondent to be
provisionally wound-up.
I
accordingly make the following order:
1.
The
respondent is placed under provisional liquidation;
2.
A
rule nisi is issued, calling on all persons interested to appear and
show cause, if any, to this court on a date to be fixed as
to why;
2.1
the
respondent should not be placed under final liquidation; and
2.2
the
costs of this application should not be costs in the liquidation.
3.
Service
of this order is to be effected by;
3.1
the
Sheriff on the respondent at its registered address;
3.2
the
Sheriff on the South African Revenue Service; and
3.3
one
publication in each of the Cape Times and Die Burger newspapers.
_________________________
S
HOCKEY
Acting
Judge of the High Court